Last checked at 6 Aug 2009 07:00
Strictly embargoed until 07:00 6 August 2009
AVON RUBBER p.l.c. ("Avon", the "Group" or the "Company")
Interim Management Statement for the period 1 April 2009 to 5 August 2009
Avon has continued to make good progress since the half year. The Group trading performance from continuing operations in the third quarter of our financial year was in line with that seen in the second quarter despite a weaker US dollar. Importantly we have won a further significant order from the US Department of Defence (DoD) valued at $22.3m for the delivery of filters and spares for the M50 mask.
Protection & Defence
Our Cadillac operation performed well in the period. Deliveries to the DoD were made to schedule and production performance improved. The UK Protection & Defence business continued to benefit from deliveries of S10 masks to the UK MoD under the current £4.5m contract.
Avon ISI is experiencing difficult market conditions. The cost reduction measures taken so far have been insufficient to eliminate operating losses in the quarter. A new General Manager with significant industry experience has been appointed to this business.
Dairy
Avon Dairy Solutions remains a profitable and cash generative part of the Group, despite difficult market conditions. Milk prices remain low with continued lower demand for our products as farmers change their liners less frequently.
Increasing market share for our own brand Milk-Rite products and lower overhead costs in our manufacturing facilities has, however, mitigated some of the impact of the volume reduction.
Operational changes in the UK
On 1 April 2009 we announced our intention to transfer the manufacturing operations for our European Dairy business from Hampton Park West in the UK to a subcontractor in the Czech Republic. This process is progressing well and we expect to recoup the cash costs of the project in approximately two years through annual overhead savings. Following consultation, 68 employees have agreed to take voluntary redundancy. The majority of these employees are expected to have left the Group by the end of the calendar year. The total cash cost of the project is expected to be between £1.5m and £2.0m.
In addition, the Company is implementing new employment terms for all remaining UK employees which includes the closure of the UK Defined Benefit Pension Scheme to future accrual of benefits.
Balance Sheet
Net debt as at 30 June 2009 was £15.0m (30 September 2008: £15.1m). The quarter end exchange rate of $1.63 (compared to $1.84 at the 2008 year end) means that £2.3m has been added to our reported net debt as a result of the translation of our US$ borrowings.
FTSE Sector Classification
Avon Rubber p.l.c. shares are currently listed under the General Industrials FTSE classification. Following the development of the Protection & Defence segment of the Group over the last 18 months, the Company and the FTSE have agreed that it is more appropriate for the Group to be classified as a Defence company within the Aerospace & Defence sector. This change will take effect from 21 September 2009.
Outlook
We are pleased with the Group's progress so far this year and remain confident the outturn for the full year will reflect that progress. Our Protection & Defence order book with the US DoD and UK MoD gives us good visibility of future revenue streams. The opportunity to sell our products in other areas of the world gives us the potential to further enhance revenues and profitability.
The strength of our Milk-Rite brand and the move of European dairy production to a lower cost location leave us well positioned to take advantage of the opportunities that any improvements in the dairy market will create.
The Rt. Hon. Sir Richard Needham Peter Slabbert
Chairman Chief Executive
6 August 2009 6 August 2009
Commenting on the results, Peter Slabbert, Chief Executive said: "Avon has continued to make good progress since the half year. Our Protection and Defence business won a further significant order from the US Department of Defence (DoD) and the strength of our Milk-Rite brand and the move of European dairy production to a lower cost location leave us well positioned to take advantage of the opportunities that any market improvements will create."
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For further enquiries, please contact:
| Avon Rubber p.l.c. | |
| Peter Slabbert, Chief Executive | 01225 896 831 |
| Andrew Lewis, Group Finance Director | 01225 896 830 |
| Fiona Stewart, Corporate Communications Executive | 01225 896 871 |
| Weber Shandwick Financial | |
| Nick Oborne | 020 7067 0700 |
| Clare Thomas | |
NOTES TO EDITORS: Avon Rubber p.l.c. is a world leader in the design, test and manufacture of advanced Chemical, Biological, Radiological and Nuclear (CBRN) respiratory protection solutions to the worlds military, law enforcement, first responder, emergency services, fire and industrial markets. Avon has a unique capability in CBRN protection based on a range of advanced CBRN technologies in respirator design, filtration and compressed air breathing apparatus. This enables Avon to develop specialised solutions that take full account of user requirements. Avon also owns a world leading dairy business manufacturing liners and tubing for the automated milking process. For further information please visit the Group's website www.avon-rubber.com.