UK Edition
Army equipment manufacturer Avon Rubber looks to spend its £200m war chest
Avon Rubber, the Wiltshire-based company which supplies gas masks and respirators to armed forces around the world, is seeking fresh acquisition targets.
The main-market-listed company is currently waiting security approval for its $91m August purchase of US-based body armour business Ceradyne from 3M.
However, Avon chief executive Paul McDonald said he is seeking further deals as the company builds up a £200m war chest in an attempt to increase its exposure to the security sector.
“We already had masks and respirators, and Ceradyne means with helmets and body armour we protect soldiers from the waist up,” he said. “We’re looking at how technology can integrate that, such as displays on visors so soldiers are better informed about their surroundings.”
He said that building up the security arm of Avon – which can trace its history back to 1885 when it made tyres and milking machines – would help it tap an estimated £4bn market.
Growth of sales to militaries is “making it more and more likely” that at some point in the future Avon’s dairy business – which represents 30pc of revenues – could be sold.
Mr McDonald made the prediction as the company reported full-year pre-tax profits for the year to the end of September fell by a third to £13.7m – despite sales being 8.3pc better at £179m.
The profits drop was down to one-off items including acquisition and pension costs, and Avon's decision to exit its respirator system for the fire services.
The final dividend was raised by 30pc to 13.89p, taking the full-year payout to 20.83p.
Avon said it closed the year with an order book of £40.4m, up 6.9pc on the last time round. The news lifted Avon shares 0.5pc to £19.
Peel Hunt analysts said the results showed a “transformational year” for Avon, with “long-term contracts awarded in three of its flagship new products and the Ceradyne acquisition marking a major strategic step".