Avon Rubber’s trading update highlighted that results are anticipated to be in line with market expectations, demonstrating the consistent track record that has been a hallmark of the company. A strong performance has been delivered across the group, despite the absence of the two large impact orders delivered in FY14 with the switch back to US DoD deliveries offsetting this as expected. With several high-value opportunities in the pipeline, we maintain our FY16 forecasts based upon continued underlying organic growth, acquisition contributions and an expected receipt of one large order. Any subsequent wins would lead to potential earnings upgrades. We maintain our 900p/share fair value.
Avon’s trading update confirmed continued strong H2 deliveries of mask systems to the US DoD, the first M61 filter order of the year and a good performance from nonDoD markets, despite the non-repeat of the two large orders received and delivered in FY14. With Dairy also continuing the positive momentum witnessed in H1 as Cluster Exchange take-up remains encouraging in both North America and Europe, Avon anticipates results to be in line with market expectations.
The update also highlighted that the development programme with the US Air Force for the JSAM MM53 aircrew mask has progressed well and a further 12-month development funding has been received, with a production contract anticipated thereafter. When coupled with the previously announced acquisitions of HUDstar Systems (June 2015, $5.1m) and InterPuls (August 2015, €29.75m), the drivers remain firmly in place to accelerate earnings progression from FY16 onwards.