Avon Rubber sits in a clear niche leadership position in its chosen markets of respiratory protection and dairy milking equipment. With the forthcoming appointment of new CEO Rob Rennie, the group maintains continuity through Interim CEO Andrew Lewis, who has been instrumental in the transition of the group over the past seven years as CFO. The group continues its growth trajectory delivered through product innovation, market development and through the acquisition of InterPuls.
Avon has transformed over the past seven years from two divisions with limited products to a group with growing higher margin businesses with expanded high technology product ranges, market exposures and established and trusted brands. FY15 results have clearly demonstrated the benefits, with revenues up 8%, PBT up 20%, EPS up 28%, backed by a 30% uplift in the dividend. With good cash flow and a strong balance sheet even after the £21m acquisition spend during the year, the group is well positioned to continue its growth trajectory which has seen total shareholder returns of 2,872% since transformation commenced in January 2009.
With new CEO Rob Rennie due to commence his tenure on 1 December, we believe that Avon is well set with growth drivers in the short and medium-term. We would be surprised if there were any substantial alteration of this approach in the short-term with the extended management team remaining in-situ and owning the current plan. With key members bought into the strategy, we believe that focus will be on integrating recent acquisitions and delivering further value to shareholders.
Avon is positioned to continue its strategy to expand market reach through new product introductions, increasingly visible service revenues and continued export success. With acquisitions, in particular that of InterPuls, also providing new opportunities, we forecast FY16 PBT could rise by up to 23% from our current forecast as new contracts are won and revenue synergies are delivered. With a consistent track record of beating our conservative approach, this would imply an uplift of our fair value from 1,110p/share to 1,355p/share. While this equates to an FY16e EV/Sales multiple of c 3x, we note that in transaction terms, this level was achieved by Latchways in its takeover by MSA in September 2015, highlighting the attractiveness of the personal protection sector.