Avon Rubber (LON:AVON) has delivered a solid set of results in a market that had several challenges, highlighting the strong position the group has created over the past eight years. With several FY17 growth tailwinds, we upgrade our FY17 PBT forecasts by 15%, while identifying further upside opportunities across both divisions. From this robust base, and with the previously announced departure of CFO Andrew Lewis, the group now moves into the next stage of development, with a further acceleration of growth the core remit of CEO Rob Rennie through both a continuation of the organic growth and a likely step-up in acquisition spend.
FY16 results demonstrate inbuilt resilience
Avon’s FY16 results demonstrated the group’s robust base, which can deliver even in a more challenging market environment. Revenues were up 6% driven by currency, which also contributed £1.4m to operating profit. This, combined with a continued focus on driving higher-margin activities and a clear focus on cost efficiency in FY16, drove an 8% improvement in operating profit and a 13% increase in EBITDA. With net financing costs broadly flat and the receipt of a £0.9m tax credit during the year, EPS advanced by 33% to 74.2p. Continued strong cash conversion allowed debt reduction following recent acquisitions to leave the group with net cash of £2.0m at year end, and the dividend was raised by a further 30%.
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