Avon Protection shares suffer as firm warns order delays will put revenues under pressure

August 13, 2021
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Shares in defence manufacturing group Avon Protection slumped by 25% this morning after it said its revenues are likely to be impacted for the next two years.

The Melksham-headquartered group, which specialises in protective gear, masks and breathing equipment for the military and first-responder markets, blamed a combination of factors, including delayed orders, for the problem. 

In a trading update to the London Stock Exchange, Avon Protection – known as Avon Rubber until recently – reduced its revenue forecasts to between $245m-$260m for the year ending September 3, down from an earlier estimate of $282m.

While Avon’s directors are confident that the delayed orders will be received over the coming months, they expect supply chain disruption and a tight labour market in the US to persist into next year.

As a result, they said revenue was likely to come in at $320m-$340m, down from prior analyst forecasts of $357m.

The warning spooked investors, pushing Avon’s share price down from its yesterday’s close of £29.50 to £21.07.75 within an hour of the trading statement’s release – its lowest since December 2019.

Avon said the problems included a delayed receipt of around $16m of expected orders under existing contracts, including a significant order for its M50 mask, as a result of procurement bottlenecks.

It also blamed extended lead times for predominantly electronic and textile components delaying the shipment of around $6m of deliveries under existing orders, and remaining uncertainties over the timing of receipt of other orders that it had expected to receive and ship before the end of the financial year.

Aside from these, the group said it had continued to see good commercial progress in the second half, with order intake in the 10 months to July 31 of $221m.

Chief executive officer Paul McDonald said: “We have made considerable commercial progress over the last 18 months in building a broad portfolio of significant, multi-year contracts across the business, with the underlying demand momentum continuing, so the short-term disruption that we are seeing is unwelcome.

“These issues will be resolved  over the coming months, but as they are affecting both our customers and suppliers simultaneously the situation has significantly limited our operating agility in the short term.

“We remain as confident as ever about the medium-term prospects of Avon Protection, underpinned by a record order book, a growing and visible contract pipeline and world-leading businesses and technologies.”

 

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