Pre-close highlights
Avon Rubber's (AVON.LSE) pre-close reinforced our view that performance in FY14 will continue to progress as the benefits of the group’s strategy come through and is likely to accelerate in FY15. We are maintaining our top-of-the-range forecasts with management guiding towards the top end of consensus. We see our forecasts as well supported with orders from the US DoD, a new $4m US Homeland Security order and progress across Dairy, with potential upside if additional contracts are won. Given mix and timing, we anticipate FY14 results to be H1 weighted with interims due on 30 April.
Avon’s statement highlighted that the consistent strategy continues to deliver positive results across both divisions:
Protection & Defence saw strong H1 trading with good, high-margin non-DoD revenues delivered. New orders in Q2 included an 85,000 mask systems release from the DoD and the group’s largest single US Homeland Security order of $4m. Strategic progress was demonstrated yet again, with positive order intake from South America and orders for the new Deltair fire SCBA, which passed all required tests for regulatory approval, which could potentially be achieved as early as April.
Dairy showed promising signs that consumable buying patterns had normalised as animal feed costs returned to more traditional levels. Results are forecast to show modest growth in H1 due to the strong Q113 comparator, although Dairy is well positioned to deliver further progress in H2. The strategy continues with ImpulseAir sales progressing in Europe and the cluster exchange service being well received in the US and Europe, both of which should provide incremental opportunities in H2 and beyond.
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