17th Dec 2020 09:39
(Alliance News) - Shares in Avon Rubber PLC dropped on Thursday as it noted delays in the awarding of ballistic protection contracts within its Military business in the US.
Shares in the Wiltshire-based respiratory protection equipment manufacturer was 14% lower at 3,212.56 pence, the worst performer in the FTSE 250 index.
Avon said that it had been awarded contracts for the US Defense Logistics Agency's enhanced small arms protective inserts and US Army's vital torso protection body-armour plates.
The group was in talk with the two US government customers to complete the necessary product approval processes, which was on-track to be completed in the first half of its 2021 financial year. However, due to a failure encountered in first article testing, the approval process has been delayed.
Now Avon expects first deliveries under the two contracts to start in the first half of its 2022 financial year.
Looking ahead, Avon said the delay in first deliveries under these contracts will reduce overall expectations; however the group remains confident in achieving its medium-term expectations.
Avon also noted that a protest has been made against the award of the US Army's next-generation integrated head protection system contract, which was first announced in late September.
"Whilst the delay created by this protest is unwelcome, its outcome is not currently expected to have any material impact on group expectations for FY21," the group stated.
Trading has remained in line with expectations in the first quarter to the end of December, with good order intake across Avon's portfolio of life-critical personal protection systems.
Also on Thursday, Avon said that its Protection business has received its first orders worth USD33 million under the NATO Support & Procurement agency contract.
Under these orders, Avon Protection will supply Norway, Finland and Belgium with its respiratory protection products, including FM50 mask systems, filters, spare parts and accessories. Deliveries are expected to start in the group's current financial year, and will contribute to Avon's Rest of World Military revenue.
"We are working collaboratively with our customers to resolve the delays to product approval for the DLA ESAPI and VTP contracts as quickly as possible. These contracts remain an important part of the ballistic protection portfolio and will be a significant contributor to the group over the medium term," said Chief Executive Officer Paul McDonald.
"The business continues to perform strongly, and our 2021 financial year will see further significant progress as a result of continued growth as well as the contribution from the recent Team Wendy acquisition," McDonald added.
By Dayo Laniyan; [email protected]
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