Avon Protection Share Discussion Threads

[jeffian] 27/8/2021 19:01

There was quite a lot about Avon in today's Times Market Report. The basic line is that they can't afford any more slip-ups. Besides the issues of supply-chain problems and delayed orders slowing down deliveries, they particularly pick up on the importance of the failed body-armour test. I must admit my eyebrows shot up when that announcement was first made - it's a pretty fundamental requirement of armour that it should protect you and it's hard to understand how a product was developed and submitted to the client without meeting that basic need - and the danger that analysts are pointing out is that while the other problems affect cashflow and valuation, the reputational damage to Avon from any further failures would strike at the heart of the business and undermine client confidence. Although I continue to hold, I shall be watching further announcements like a hawk (particularly as their Trading Updates since these problems arose have not been as clear and open as they could have been), ready to bale out on more bad news.

[jeffian] 27/8/2021 16:31

#968,

PUGUGLY, I'm not sure US is withdrawing from "global responsibilty", just unwinnable long-term regional conflicts. Afghanistan is tribal and has been at war since the days of the British Empire and probably long before that, with almost every major super-power (except the Chinese so far) having tried to sort it out and failing.

The question is, is the US likely to reduce the size of its army or cut down on military procurement? Never mind the troublespots of the Middle East and Africa, can you see the US allowing the fast-growing China and a resurgent Russia to go unchallenged as they seek to expand their spheres of influence? I can't see it.

[mallorca 9] 27/8/2021 15:43

Looking to double (100% gain) from here within 12 months.

[ste1984] 27/8/2021 11:57

Gone in at 1882.

[ste1984] 27/8/2021 11:36

I am also going in on this today or tomorrow

[mallorca 9] 27/8/2021 09:14

I'm now in profit and I'm expecting a strong rise next week.

[pugugly] 27/8/2021 08:54

As some 70% of sales military and some 80% of group sales in US and with America First (knife your allies in the back Biden) withdrawing from global responsibility there could be a very significant headwind for future military sales - so might well be still over-valued at current share price of 1854 (mid)

[tex101] 26/8/2021 11:46

Seems to be some confusion about the PE ratio. I say USD44mill EBITDA is reduced by USD14mill Depn & Amort, USD3.5mill Finance Costs, and USD6mill taxation to give USD20.5mill net earnings. Using 31mill shares, I get 66c/share for year ending September 21.
With cost savings coming through next year on a higher sales revenue (of USD330mill), I get after tax earnings of USD39.0mill (eps USD1.26/share) and with revenues of USD370mill for 2023, I get eps of USD1.71. Clearly, the projected 2022 & 2023 earnings/share (and the underlying revenue growth which is driving these calculations) would support some significant uplift in the current share price. BUT, the CEO got the 2021 H2 drastically wrong in his announcement three months ago and even crowed about how visible the H2 revenue streams were. How much credibility do you now want to place upon his 2022 and 2023 revenue projections? The market is right to be highly sceptical for now.

[tex101] 26/8/2021 11:15

This stock could have a lot further to fall yet! The update issued on 13th August guides towards FY21 eps of only 66c/share which is nearly 30% down on previous year and implies that the additional USD38mill of yoy revenue was accompanied by an additional USD47mill of costs – hardly indicative of a stably growing business.
The CEO would have us believe that there have simply been some unavoidable delays in delivering circa USD30mill of orders this year. If that was the whole story, next year’s revenues should benefit from those orders slipping over into FY22. But, instead of the CEO advising such (which would have increased consensus revenue guidance approaching USD390mill) a FY22 guidance revenue of between USD320-USD340mill has been offered – some USD50-70mill shy. And remember, this USD330mill revenue guidance is benefitting from that USD30mill slip over – without which revenue FY22 would only be guided at USD300mill.
At GBP20/share it is trading on a 40+ PE ratio. With the current considerable uncertainties, it surely cannot sustain that rating – a slip towards GBP15 or even lower looks inevitable. At that level, it is then likely to slip out of the FTSE250 and forced tracker selling could then plunge it lower.
I’m with pipeline1 here in believing that the rhetoric used alongside slide 12 in the half year webcast was grossly inappropriate. If the CFO had not already indicated his desire to leave AP, he would most surely now be invited to do so.
This may still be a great company but, currently, there are too many uncertainties and, absent a bid development, the share price can only be headed south. Keep well away for now. DYOR.

[jeffian] 26/8/2021 10:04

#963,

Fair enough, but remember the full effect of recent acquisitions has yet to kick in, particularly Wendy will will have almost a full year's impact.

[mallorca 9] 26/8/2021 08:53

I will actually predict a strong rise.

With all the world uncertainty this is a critical business that would not be allowed to fail. Demand will only increase as will profit margins.
Becoming more of a takeover target every day.

I'm in at this level. When it turns, the daily rises will be steep.

[disc0dave45] 25/8/2021 20:32

Yep I had 75p'ish too, a PE of 25. Wouldn't disagree with the 2022 - 2023 numbers either but it's whether more profit warnings are around the corner.Held these previously but sold as getting hot and IMO their organic growth had slowed significantly anyway. So irrespective of their current issues their growth was never sustainable at such an elevated rating.If this drops to below say £14 I might re-enter but on its current rating and the risks around further warnings then happy to simply sit on my hands and watch.All the best.

[jeffian] 25/8/2021 18:42

What eps are you guys using for calculating PER? I haven't seen any analysts' forecasts but the figures put out by Avon in their profit warning (sorry, 'Trading Update'!) suggest current year revenues of $252.5m (mid), $44.2m EBITDA and, say, $32m net profit = $1.03/share = 75p/share. That's around 25.75 PER. That should recover to £1-£1.25/share in 2022 (depending on whether they can get the profit margin back from 17.5% to the previous 22%) giving a 2022 PER of 15-18 presumably falling again in 2023 (I don't know what their 'previous guidance' for that year was).

Given the uncertainties around solving the armour failure, supply chain issues and costs (if they are struggling to recruit staff), the market is unlikely to be forgiving in the short term and look too far ahead, but I would have thought the above (if I've got it right!) is a reasonably sound basis to support the share price around the current level and if they do recover to forecast figures by 2023, the share price should start to recover in due course. The other thing about this company, it has no debt and is cash-generative - a rarity in my experience.

[disc0dave45] 24/8/2021 21:22

I've got a forward PE of 25

[blueflex2] 24/8/2021 17:15

PE is approx. 25 based on the closing price divide by the adjusted earnings per share for the previous financial year. If it is calculated trailing month, PE ratio is approx 4.25. Anyone can shed light on the difference and have any thought on this value?

[disc0dave45] 24/8/2021 14:52

Agree, quick calcs and this is still on a PE of about 25, the FTSE allshare is on 17.Will keep watching!.

[walkernbudgie] 24/8/2021 13:39

I agree with what was said in the article about the complany though I felt that it implied that the price has gone down so much it will go up again because its a great company etc. What it did not mention was the historic valuation meant that some of the fundamental ratios were just off the scale. At the current price these ratios are still not attractive to some.

Goldmans and JP Morgan still shorting and Worldquant entered a new short position just a couple of days ago. Will be keeping an eye out for those dissapearing.

Interesting times for this stock, I suspect there are a few people with their finger on the trigger hopeful that it will return to previous levels.

[r2oo] 24/8/2021 10:48

Interesting article.Could this be the bottom of the dip and time to top up? Plenty of support on the chart here.This is a solid business and a great long term hold. IMOWould like to hear from some well informed Chartists though...

[bingaxu] 24/8/2021 00:03

https://www.economywatch.com/news/avon-protection-share-price-forecast-august-2021-time-to-buy-avon/

[12toes] 23/8/2021 09:16

Hey warren buffet The tool with the most inappropriate name BWAHAHAHA

[warrenbuffet73] 22/8/2021 19:07

12 Toes you’re such a funny guy. Lovely to hear from you again lol. It’s so positive to exchange views on here with people like here, an absolute pleasure and an education. Keep posting mate, it’s so entertaining

[p1nkfish] 22/8/2021 15:09

In all probability but how to value and how long before an offer.

If based on average share price plus premium it will be after it has settled for a fair few days - 30 days plus AFTER settling so there is some sensible average and due diligence?

Early 2022?

[conwyrebel] 22/8/2021 13:39

It’s a takeover tgt

[p1nkfish] 22/8/2021 12:29

When a company drops the ball like this, even if they recover results within a quarter, it usually takes 9-36 months for the share price to come back. This, imho, is > 9 months, no matter what gets posted here. Good chance this is 18 months plus and along the way a market correction is very possible.

There was a research report on recoveries some time back, sorry I don't remember where from, but I do remember the summary.

The other factor here is over valuation prior to dropping the ball that might also impact recovery time.

[dope007] 22/8/2021 11:57

At £19 and looking at past profits this still looks expensive, so maybe I am missing something on the growth potential side. Have them on my watch list but need to see them lower before taking a position