Avon Protection Share Discussion Threads

[jeffian] 29/3/2022 18:49

I agree that share buybacks are a waste of time but the reason they have 'surplus cash' is that, since re-inventing themselves as a protection equipment company they have been generating cash and can't find anything else to do with it. Initially, they invested heavily in getting the supply chain right including establishing manufacturing facilities in the Americas, but debts have been repaid and cash was building up on the balance sheet. Their attempts to do what you suggest and 'invest for growth' have been a disaster in the case of the body armour business, with £m's being written off within only a year or two of purchase and the decision to sell Milkrite - which may have looked right strategically to focus purely on defence items - may have been a mistake financially as farm-related businesses are getting a boost from the realisation that food security is an issue.

So I agree that the share buyback programme is a waste of resources but I do not trust this management to 'invest' my money better than I can, so if they have 'surplus cash' I would like it back as increased dividends, a Special Dividend or a Return of Capital, please, and I'll decide what to do with for myself.

[p1nkfish] 29/3/2022 18:40

How do you propose they grow faster?

[conwyrebel] 29/3/2022 17:44

There is nothing inspired about wasting money on this share buy back. It’s a total waste of money and should be used to drive the revenues and profit of the business. The ONLY thing moving the share price is the over done recent decline and the most important factor behind the recent rise is the Russian invasion of Ukraine and increased military spend. The share buy back is a waste of time, effort and money. They should be using that money to grow faster..

[c0cky] 29/3/2022 17:27

Pressure building towards trading update and interims. The buyback beginning to look inspired!

[devilsprofessor] 28/3/2022 17:16

Perfect and much appreciated thank you.

[devilsprofessor] 28/3/2022 17:16

Goodness no. Yes I've been active since 2010 but I've only really been investing the last couple of years so consider myself a novice. I was simply looking for some insight on those more seasoned than I.

[ch1ck] 28/3/2022 08:38

This will fly as news comes through of Mask shipments to the US

[conwyrebel] 25/3/2022 10:56

If USA giving chemical and biological equipment support to Ukraine one can only expect the order to Avon to increase for their respirators etc??

[mikeh30] 24/3/2022 14:19

Hahhahahahhahahah

[dixienormas] 24/3/2022 14:15

Because they can't buy 18.5 million quids worth of shares in one day

[devilsprofessor] 17/3/2022 08:42

Morning all. I realise a company buying its own shares back is usually a good thing but can anyway shed light on why this is happening day after day and what this could mean?

[conwyrebel] 16/3/2022 20:28

USA sending 25k helmets to Ukraine. Logical to conclude the order from Avon P might increase..

[ch1ck] 11/3/2022 08:45

DooThe company will supply existing orders for the existing body armour but there will be no trials or expense on the development of the new armour plates.The business they bought off 3M had more than just ballistic body armour so the experience, expertise and technology has been integrated into the company already and there are very exciting developments in the Team Wendy side of the business.If you check out most footage on Utube etc most special forces and funnily are enough journalists seem to be wearing Team Wendy helmets

[p1nkfish] 09/3/2022 15:29

Doobz, no closure yet. I forget the timescale for wind down.

[lomcovaks] 09/3/2022 15:03

Recent good article in the Chronic Investor -


Could Avon Protection go the way of Ultra Electronics?
A new US contract could provide reassurance over the relationship with the US Department of Defense
Could Avon Protection go the way of Ultra Electronics?
February 10, 2022
By Taking Stock


Midway through 2020, Avon Protection (AVON) hived off its Milkrite InterPuls business to DeLaval Holding for around £180mn on a cash and debt-free basis. Bosses had determined that a move away from the production of artificial ruminant teats would enable the group to become further entrenched in military and first responder markets, aided by an intensified focus on respiratory and ballistic protection. They may have had a point. Military contracts are generally predictable, multi-year affairs, providing greater clarity on sales and cash flows. Higher-tech kit usually generates decent margins and the US military doesn’t usually scrimp on protective gear for its service personnel.

The Wiltshire-based group has been trading for 137 years, ironically coming into existence in the same year that Gottlieb Daimler was granted a German patent for his single-cylinder water-cooled engine design, and King Leopold II of Belgium established the Congo Free State as a personal possession, both of which were highly significant developments for the rubber industry. At various points along the way, Avon has manufactured everything from conveyor belts to diving suits, so the move could be viewed as part of an evolutionary process – companies have always repurposed their manufacturing capabilities to suit end-markets. And you could even say that Avon’s central input over the years had provided a degree of flexibility.

Avon has determined that its growth prospects are best served by the military alone, but in the age of specialisms it’s sometimes worth remembering that having different products can spread risk between markets. At the end of last year, the board took the decision to shut down the body armour business following news that its Vital Torso Protection plates had failed initial US Army tests.

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The closure fed through to a $46.8mn (£35.3mn) impairment in its full-year 2021 accounts, and a consequent net earnings loss, so the shares duly headed south. You can now pick them up at about a third of their 12-month high of 3,660p recorded in April 2021. Nonetheless, it would be dishonest to suggest that the decision to streamline the business model was wholly ill-conceived, especially given that it came on the heels of two new contracts from the US Department of Defense worth in the region of $66mn.

The Milkrite InterPuls arm had generated 28 per cent of sales in the group’s half-year results published shortly before the decision to divest. It also accounted for the entire statutory half-year operating profit of £3m, after the Protection segment was lumbered with increased depreciation and amortisation charges. Perhaps the rationale may become clearer when you consider that the Protection order backlog was 22 times larger than that of the dairy-supply business, although that is largely attributable to the nature of the typical contractual arrangements for both segments.

Whatever the reasoning behind the move, it has been a sobering experience for investors. But respite is at hand – or at least partial respite. Avon Protection has announced the award of a contract to supply the US Defense Logistics Agency with the second-generation Advanced Combat Helmet. It is worth a maximum of $204mn over a five-year period, being a one-year base period with a maximum value of $46mn plus four further one-year extension options. As mentioned, the typical long-dated nature of these deals is certainly a plus point, and analysts at Jefferies believe that it “will also (hopefully) put to bed any concerns that investors will have surrounding Avon's relationship with the US Department of Defense”. The broker does not expect any change to consensus, but the contract “helps to underpin longer-term forecasts”.

If anything, the failure of the Vital Torso Protection plates could highlight the dangers of being a small fish in a very capital-intensive pond. It is not as if the likes of BAE Systems (BA.) and Lockheed Martin (US: LMT) don’t botch defence contracts from time to time. Yet they are better able to wear set-backs simply due to their scale – not too many eggs in one basket, to mix in another unwanted metaphor.

Jefferies may be right about investor perceptions over Avon’s relationship with the Pentagon, but that could open it up to the attentions of bigger pond dwellers. The recent experience of Ultra Electronics (ULE) and, indeed, Cobham before it, show that UK contractors remain on the menu. Avon’s share price cratered once doubts over body armour business emerged, but it closed out FY 2021 with net cash (ex-lease liabilities) of $26.8mn and a residual order book of $117mn. You have got to imagine that it’s in play.

[doobz] 09/3/2022 14:40

Thanks P1nkfish, am I right in saying they've now closed that failed acquisition down?

[p1nkfish] 09/3/2022 14:06

Supply issues & test failures in body armour meaning they did a poor acquisition. That's enough to take air out of the ballon.

[doobz] 09/3/2022 13:52

Hi Avon holders, just looking at these. maybe a more clued up holder can tell me... Is the general rough time they've had largely due to Covid and supply chain issues. Potentially looking to build a position and trying to add up the recovery story for them. Looks well timed at lows with decent director buys and conflicts
Thanks

[c0cky] 25/2/2022 08:48

Products in demand! Sad but true.

[fuji99] 23/2/2022 16:10

When a director buys shares, it is definitely positive.

[fuji99] 23/2/2022 13:42

I would add that with the conflict with Russia going on with a possibility of worsening with time, AVON products will certainly be in great demand from NATO and other European armies and also from countries around the conflict zone. This is probably the best time and entry point to start a position or accumulate AVON and hold for 1/2 years - if not taken over by then. Just for a mere $635 million bid, we get £20+ a share ...