Avon Protection warns on revenue due to order delays

The personal protection products company said it expected revenue to be in the range of $245m-$260m for the year to the end of September and reduced its guidance for 2022 revenue to $320m-$340m. Analysts had on average expected $282m revenue in 2021 and $357m in 2022.

The company left 2023 guidance unchanged. Cash conversion in 2021 is likely to be about 50% because of inventory build-ups and delayed receipts from customers. Avon said it was also affected by a tight US labour market.

Avon shares fell 26.6% to £21.90 at 08:27 BST.

The FTSE 250 group said there was strong demand for its products with an order book up 21% to $146m in the 10 months to the end of July. Avon said it was confident that delayed orders would be received in the coming months but that it expects supply chain disruption and US labour conditions to persist into the next financial year.

Paul McDonald, Avon's chief executive, said: "We have made considerable commercial progress over the last 18 months in building a broad portfolio of significant, multi-year contracts across the business, with the underlying demand momentum continuing, so the short-term disruption that we are seeing is unwelcome. These issues will be resolved over the coming months, but as they are affecting both our customers and suppliers simultaneously the situation has significantly limited our operating agility in the short term.”

The company said it had made “considerable further progress” on delayed product approvals in its military ballistic business.

"This update will be a source of frustration for investors, although this is being driven by a host of short-term challenges (not of Avon's making)," Andy Douglas, an analyst at Jefferies with a 'buy' rating on Avon, said. "The group's fundamentals are still strong, there are attractive top/bottom-line opportunities, and a balance sheet to play with. However, sentiment will be impacted and confidence in the new guidance will need to be rebuilt."