In Tuesday trading, the FTSE 250 continues to edge closer to early-May’s record peaks around 22,755 points. Progress is slow but Britain’s second-tier share index is still 33% higher from a year ago. The index’s fortunes in recent weeks couldn’t be much more different to those of Avon Rubber (LSE: AVON).
Avon Rubber — which manufactures safety masks and body armour for military and security purposes — is down 6% over the past 12 months. And the defence giant has sunk again today despite releasing a strong set of half-year financials.
At £29.80, the Avon Rubber share price is down 9% from last night’s close.
Avon Rubber sinks despite robust numbers
Avon Rubber has kept furnishing the market with solid trading numbers in recent months. And it was at it again on Tuesday. The defence firm advised that revenues were up 41% in the six months to March at $122m. As a consequence, adjusted pre-tax profit was up 23.1% year-on-year at $16m.
On top of this, Avon Rubber received orders worth a cumulative $167.9m in the first half of fiscal 2021. This was up a whopping 46.5% from the prior year. And the business ended the period with a closing order book of $156.6m, up 15.8% year-on-year.
Chief executive Paul McDonald commented that “we have made a strong start to 2021, continuing to deliver organic growth in orders and revenues, together with further progress against our strategic objectives”.
Avon Rubber sold off its milkrite | InterPuls dairy division last September to focus its attention solely on its protection business. It’s a change which has led the company to today announce its intention to rebrand as Avon Protection during the second half of the year.
A bright outlook
Avon Rubber noted that order levels from military and first responder customers were particularly strong in the first half. These were up 31.3% and 28.3% respectively from a year earlier. The company said that its Team Wendy helmet division had also “performed well” following its acquisition in late 2020.
Avon Rubber also advised that “we are making good progress to resolve the delays in product approval for our body armour programmes”. And it added that “[we] remain on track to commence shipments in the first half of our 2022 financial year”. The maskbuilder’s share price collapsed in December after it announced product approval delays on several US contracts.
Finally, the FTSE 250 business said today that it remains on course to meet full-year expectations. And it also commented that “our long-term contracts, strong order intake momentum and order book provide excellent revenue visibility going into 2022 and beyond”.
Today’s release underlines the excellent progress Avon Rubber is making across its core markets. But I’m afraid the company’s toppy valuation (it trades on a forward price-to-earnings ratio of 34 times) means I won’t buy this UK share just yet. I’m happy to sit on the sidelines until that valuation comes down.
