Avon Rubber announced this morning an order for 47,000 M50 mask systems for the US Department of Defense (DoD) worth $12.6m. Following an M50 order from the US DoD in December last year, this order displays the momentum in the business while building order book visibility. Management’s new strategy is delivering.
After a confident FY17 report, we highlighted that Avon was in encouraging negotiations with the US DoD, as the M50 10-year sole-source contract ends in 2018. The company received an order for 53,000 M50 masks in early December. Combined with the order book of 49,000 M50 masks at the end of September, this fully underpins our FY18 delivery forecasts. Today’s order of 47,000 M50 masks will contribute towards building the FY19 order book, hence we will not be adjusting our forecasts at this time. However, today’s order builds in further visibility.
Partnerships are key to Avon Rubber, not least the long-term, multi-level relationship with the US DoD. Both parties are in active dialogue to determine the size and shape of Avon’s future supplier role to the DoD in the M50 replenishment phase, which should extend for another 15 years. In addition, Avon continues to work with the DoD on some potentially significant platform programmes. This is in line with the company’s new, threefold growth strategy. The overall approach is to grow the core, add selective product development and make value-enhancing acquisitions to accelerate growth.