(Alliance News) - Avon Protection PLC on Friday said the US Army has extended its contract to develop and supply head protection equipment.
This is the first of two one-year extensions the US Defense Logistics Agency could grant Wiltshire-based Avon.
The extension gives the contract a maturity date of September 22 2022 with a minimum order value of USD19 million.
Formerly known as Avon Rubber, the company makes respiratory and ballistic protection equipment for use by military, police, industrial and fire service personnel.
Avon secured the contract worth up to USD87.6 million in September, where it pledged to develop and supply the US Army with head protection equipment for two years.
A further USD3 million of contingent consideration is payable to 3M Co by Avon due to the extension, under Avon's terms for acquiring 3M's Ceradyne ballistic protection business in 2019. Avon now has paid USD7 million in total in contingent consideration to 3M.
Further contingent considerations will be payable to 3M by Avon if Avon secures order values over GBP19 million. The maximum total contingent consideration payable is USD25 million.
Avon said product testing has been in line with its expectations and it now awaits formal approval from the US Army, which is expected in the first quarter of its 2022 financial year. Shipping should then commence in the second quarter.
"I am pleased with the progress the business has made since December to address the delays experienced in obtaining [US Army] product approval," said Chief Executive Paul McDonald.
"This contract extension demonstrates our ongoing position as a leading supplier of body armour to the US armed forces, as well as underpinning our FY22 body armour revenue expectations."
Avon Protection shares were up 3.3% early Friday in London at 1,990.84 pence.
By Josie O'Brien; josieobrien@alliancenews.com
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Avon Protection (AVON)