Avon Protection - Unmasking its growth potential

Avon Protection’s capital markets day highlighted its continued focus on medium-term margin expansion (targeting operating margin of 14–16%), concentrating on its core business of respirators and head protection. The unwinding of the armour business, alongside the consolidation of Team Wendy (acquired in H220) should enable Avon to benefit from rising global defence spending. Its strong relationship with the US DoD, and organic growth opportunities with recurring revenue from necessary product r

Avon Protection (AVON LN) - Initiation: plenty of potential

Avon Protection is now on the right path strategically, focused on core body protection systems. We initiate coverage with a valuation of 1,100p against a current share price of 916p (+20%). The investment case is finely balanced. Global defence stocks have outperformed with rising conflict and bigger government budgets. We may now see a period of reflection for the sector as investors refocus on pipeline conversion and margins. Avon has performed well but somewhat lagged the global sector. The

Avon Protection - Termination of coverage

Edison Investment Research is terminating coverage on Avon Protection (AVON), Osirium Technologies (OSI), IQE (IQE), Kopy Goldfields (KOBY) and RhoVac (ROHVAC). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.

Avon Protection - Refocused Protection set to resume growth

Avon Protection should be well positioned to recover strongly following the value destruction caused by the relatively small Armor activity, which now faces a managed closure over the next two years. Future growth rates are diminished by the exit but remain healthy in the further focused core of Respiratory and Head Protection. Management needs to restore investor confidence as it continues with its growth strategy, in order to regain the historical premium rating to its UK defence peers. In thi

Avon Protection - Sentiment needs restoring to access value

The reaction to the latest product approval delays and the strategic review in the body armour business appears to more than discount the likely financial impact and does not reflect solid progress in the core of the group involved in respirators and helmets. While the full ramifications of the delays and the strategic review are yet to be quantified by management, we assume a $40m reduction in FY22e revenue, affecting our FY22e EPS by 19%. We anticipate a strong recovery in FY23 EPS due to loss

Avon Protection - Confirming the growth path

Avon Protection has indicated that management guidance for FY21 revenue and EBITDA margin has been achieved before an additional one-off, non-cash inventory write-down of around $4m in ballistics. Cash generation was better than anticipated after record levels of investment and order intake remained strong despite previously indicated pandemic delays. The healthy opening backlog underpins strong growth in FY22 as ballistics revenues ramp up, Team Wendy makes a full year contribution and EBITDA m

Avon Protection - Pandemic disruption masks commercial progress

The impact of the pandemic on Avon Protection has intensified during H221. Despite a strong commercial performance management has lowered guidance significantly for FY21 and FY22 and we have reduced our estimates accordingly. The reduction comes on top of the previously announced deferrals to new ballistic protection contracts that remain on track for first delivery in FY22. We have lowered our FY21 and FY22 fully diluted adjusted EPS by 43% and 27% respectively to reflect the guidance. Manageme

Avon Rubber - Protection is the name of the game

The benefits of the three-pronged growth strategy are reflected in Avon Rubber’s H121 performance, which delivered strong overall growth in revenues and adjusted group profitability driven by a strong initial contribution from Team Wendy. The outlook for FY21 is maintained by management, which expects to meet market consensus expectations for adjusted PBT with the anticipated second-half weighting of revenues, despite the adverse impact of FX on costs. Strong order intake and backlog underpin me

Avon Rubber - Maintaining full-year consensus expectations

This morning Avon released its post-close trading statement for H121, which shows strong top-line growth and order intake. Trading continued to show progress, in line with management expectations for Q221, continuing the Q121 performance noted at the AGM. Management expects to meet FY21 consensus expectations, with growing momentum during H221 as new contract volumes build. We trim our above-consensus FY21 EPS estimate by 4% and maintain FY22, which are reported in US$ from the current year. Avo

Avon Rubber - Body Armor ramp up deferred to FY22

Delays to product approvals and a protest by a competitor have led to the anticipated incremental revenue in FY21 from body armour contracts signed in FY20 being deferred to FY22. As a result, our FY21 revenue estimates are reduced by $50m, dropping through to a reduction in FY21 EPS of 19%. We expect the contracts to deliver as previously expected in FY22. The rest of Avon Rubber continues to trade as anticipated and has experienced good order intake during Q121. FY22 is currently unchanged and

Avon Rubber - Focused on growth in critical personal protection

FY20 has been a transformational year for Avon Rubber as it exited from dairy and recycled the proceeds into higher-return businesses with better growth prospects to further strengthen Avon Protection. The redeployment of capital to form a more focused group should enhance value creation for shareholders. The $91m acquisition of Helmets & Armor on 2 January 2020 was joined by Team Wendy from 2 November 2020. Overall, our FY21 EPS estimate falls by 2% in FY21, although this still represents stron

Warpaint London+ (W7L, House Stock at 470p) - Outstanding FY23A - Upgrades!

Shield Therapeutics - Termination of coverage

Edison Investment Research is terminating coverage on ABC Arbitrage (ABCA), paragon (PGN), Foresight Solar Fund (FSFL), Kendrion (KENDR), Lithium Power International (LPI), Triple Point Energy Transition (TENT), 4iG (4IG), e-therapeutics (ETX), Pharnext (ALPHA) and Shield Therapeutics (STX). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our web

Cambridge Nutritional Sciences - Operational efficiencies; adjusted EBITDA profi

Cambridge Nutritional Sciences (CNS) has provided a trading update for the 12 months to 31 March 2024, noting that a combination of strong sales growth and significant margin improvements, driven by operational efficiencies, have played key factors in the group’s expectation of being adjusted EBITDA positive in FY 2024. Revenues are expected to be £9.8m (30% YoY growth), ahead of our £9.0m forecast, with gross profits expected to exceed £6m, which is again ahead of our year-end forecast of £5.6m

Creo Medical Group - Speedboat savings validated

An official NHS Supply Chain case study has quantified the savings made by an NHS Trust from adopting Creo Medical’s Speedboat device to perform Speedboat Submucosal Dissection (SSD) in comparison to surgical alternatives. In total, the net cash saving from 130 SSD procedures for the NHS Trust was calculated at £687k, including savings from reduced length of hospital stay and reduced theatre costs. Notably, these savings did not include the patient and financial benefits associated with reduced

Morning Note – 24 April 2024

Destiny Pharma plc+ (DEST, House Stock at 22p) - All eyes on XF-73

Warpaint London+ (W7L, House Stock at 375p) - Trading ahead of expectations - +10% upgrade implied

Hybridan Small Cap Feast - 24 April 24

24th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Hybridan Small Cap Feast - 22 April 2024

22nd April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Cambridge Nutritional Sciences - H1 2024 interims: Executing a newly focussed st

Cambridge Nutritional Sciences (CNS) has published its H1 2024 results to end September 2023. Group revenues grew 44% to £4.9m and gross profits increased by 63% to £3.1m, with the company benefitting from newfound operational efficiencies. With its now streamlined strategy focussing on the core Health & Nutrition business and the initial signs of an encouraging uptick in sales momentum, we believe the company is well positioned for growth that will help create future value for shareholders. We

e-therapeutics - Termination of coverage

Edison Investment Research is terminating coverage on ABC Arbitrage (ABCA), paragon (PGN), Foresight Solar Fund (FSFL), Kendrion (KENDR), Lithium Power International (LPI), Triple Point Energy Transition (TENT), 4iG (4IG), e-therapeutics (ETX), Pharnext (ALPHA) and Shield Therapeutics (STX). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our web

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

Venture Life Group - Strong organic growth; focus on EBITDA

Venture Life has reported FY23 results to December 2023, following the February trading update. Revenues grew 17% in the year to £51.4m (our est. £50.7m) and adjusted EBITDA was £11.6m (our est. £11.6m). Cash conversion was 85%, generating £9.8m of cash from operations. Cash generation and no M&A in 2023 allowed the company to de-lever, closing FY23 with net debt to adjusted EBITDA at 1.3x. Management have focused on growth with three therapy areas generating double-digit revenue growth and onli

Warpaint London (W7L, House Stock, 196p) - Strong foundation, even stronger upgrade momentum

Morning Note – 8 April 2024