(Alliance News) - Avon Protection PLC lowered its revenue and earnings guidance in a trading update on Friday as delayed deliveries and extended lead times offset a strong order book.
Shares in Avon Protection were trading down 25% at 2,210.65 pence each in London on Friday morning.
The Wiltshire, England-based company - formerly known as Avon Rubber - makes respiratory protection equipment for use by military, police, industrial and fire service personnel.
Avon Protection's businesses include its First Responder and Military Respiratory products alongside combat helmet maker Team Wendy.
Delays and widening lead times has forced the company to lower its revenue guidance to between USD245 million and USD260 million for financial 2021, which ends on September 30. Avon Protection reported revenue of GBP169.0 million, or around USD233.3 million, in financial 2020.
The company noted delayed receipt of around USD16 million in expected orders and extended lead times for USD6 million worth of deliveries.
"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," Chief Executive Paul McDonald said.
With cost overheads fixed for the time being, Avon Protection lowered its earnings before interest, tax, depreciation and amortisation margin guidance to between 17% and 18% for its current financial year. By comparison, the company reported an adjusted Ebidta margin of 23% in financial 2020.
Due to slower shipment, inventory build-up and delayed customer payments, cash conversion is expected to be around 50% for financial 2021, compared to 85% in financial 2020, the company said.
Though the company anticipates receipt of delayed orders over the coming months, supply chain issues and the "tight" US labour market are expected to continue into the next financial year.
As such, the protective equipment company also lowered its revenue guidance to between USD320 million to USD340 million for financial 2022. For now, Avon Protection has maintained its guidance for financial 2023.
Demand for its products remained high in the second half of its financial year, the company noted.
In the ten months that ended July 31, Avon Protection said its order intake reached USD221 million for an order book of USD146 million in the second half of financial 2021.
"This progress has been driven by good results from the Team Wendy, First Responder and Military Respiratory lines of business," the company added. Avon completed its USD130 million acquisition of helmet-maker Team Wendy in November of last year.
Avon Protection also noted advances in first article testing for its US Defense Logistics Agency Enhanced Small Arms Protective Inserts, with initial shipments expected in the first half of financial 2022.
A delivery order of USD9 million was received under its sole source first generation Integrated Head Protection System helmet contract, the company added.
"We remain as confident as ever about the medium-term prospects of Avon Protection, underpinned by a record order book, a growing and visible contract pipeline and world leading businesses and technologies. We will carry significant momentum into next year, which will also benefit from a strong ramp-up in the Ballistics business, and remain well set for growth in [financial 2022] and beyond," McDonald concluded.
By Scarlett Butler; scarlettbutler@alliancenews.com
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Avon Protection (AVON)