Avon Protection trades in line, launches £18.5m share buyback

Avon Protection said in an update on Friday that trading since the end of its last financial year had continued as expected, with organic revenues in the first quarter ahead of last year, as it announced a share buyback programme of more than £18m.

The London-listed firm, which was holding its annual general meeting, said supply chain disruptions, as it outlined last year, had continued, but were now “largely stable” with mitigating actions being taken.

It said it remained confident of achieving its expectations for the current financial year to 30 September.

“Customer demand continues to be robust, however given continued longer order lead times, we expect revenues to be weighted to the second half of the year,” the Avon board said in its statement.

“Overheads in the first half of the year are expected to be at a similar run rate to the second half of our 2021 financial year.

“Actions to reduce costs in light of the announced closure of the armour business have commenced, with the benefits of these first actions reducing the overhead run rate in the second half.”

Avon reported further progress with the NATO Framework Contract, saying that additional orders had been received from the initial six customers, with Latvia becoming the seventh country to order under the framework, and conversations with other nations over joining the programme ongoing.

It also reported success with its ‘MCM100’ underwater rebreather, with an initial order from Belgium following a competitive tender, bringing the total number of countries purchasing that product to seven.

The outcome of the United States Navy underwater rebreather tender process, meanwhile, was currently expected in the second quarter.

“We anticipate follow-on orders under our long-term US Department of Defense contracts during the first half of the 2022 financial year, and have good visibility of a wider pipeline of opportunities in the US and globally for both military and first responder customers.”

In head protection, Avon said delivery of the existing first-generation ‘Integrated Head Protection System’ (IHPS) helmet was ongoing, adding that it was “well advanced” in preparations to submit helmets for the first article testing for the next-generation IHPS during the second financial quarter.

“We continue to be pleased with the response from both military and first responder customers to our F90 mid-range helmet which was launched in the fourth quarter of our 2021 financial year after being developed in collaboration between Ceradyne and Team Wendy.

“We are actively pursuing a strong pipeline of opportunities in both the military and first responder markets for the F90 and Team Wendy EXFIL range of helmets.”

Finally, looking at its armour business, Avon said that following its announcement in December, detailed plans had been developed to complete the closure of the division during the 2023 financial year.

Discussions with customers to finalise order requirements and plan to transition to other supply sources were “continuing productively”, and actions to reduce the cost base of the business ahead of closure had started.

Progress was said to have been made in finalising the first article test approvals for the DLA ESAPI body armour product, and the company said it expected the approvals to complete during the second quarter.

Avon also announced that, following consultation with shareholders, it was launching a share buyback of up to £18.5m, or $25m.

“As previously announced, the board does not intend to initiate any major merger and acquisition activity in 2022 and given the strong financial position and expected cash generation, the purpose of this buyback is to maximise the efficiency of the balance sheet for shareholders' benefit.”

At 0941 GMT, shares in Avon Protection were down 0.87% at 1,038.9p.