Avon Rubber (LON:AVON) has successfully secured another of its military sector prospects. The award of a $16.6m contract for C50 mask systems by a customer in the rest of the world segment will commence delivery in Q4 FY19, further securing growth expectations at Avon Protection for FY19. It also helps compensate for the flatter than an expected year at milkrite | Interpuls noted in the AGM statement. Added to the recent major DoD awards for M69 aircrew mask systems and M53A1 mask and powered air systems, it should ensure a strong basis for our forecast growth in FY20.
The military segment of Avon Protection has enjoyed an excellent year of order pipeline conversion. This would appear to secure growth into FY20 despite the as-yet unresolved long-term DoD sustainment contract for M50 mask systems, where ongoing supply at low volumes continues. The initial increase in mask systems delivered under the new contracts will also drive future demand for spares, filters and other accessories in addition to the natural longer-term system replacement cycles.
The growth from contracts secured this year builds on orders won in FY18 that also move into full production in H219, such as the UK General Service Respirator contract worth £16m over its five-year production phase.
Business description
Avon Rubber designs develops and manufactures products in the protection (70% of 2018 sales) and dairy (30%) sectors. Its major contracts are with national security organisations such as the US DoD. Over 70% of 2018 sales are from the US.