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Avon Protection: Will re-built order book be enough to take this stock higher?

Avon Protection: Will re-built order book be enough to take this stock higher?

I’m afraid you really have to hunt around for a good healthcare/defence play in the London market at the moment, but Avon Protection LON:AVON might fit the bill. The only problem is its extremely high PE ratio. This does not seem to be deterring investors however, who have driven the stock up by 55% in the last year.

The big question for investors in Avon is whether it can keep this up?

I call Avon a healthcare company, but it has a wider reach than that, providing protective equipment to the military and first responders across Europe and the US. This includes escape hoods and thermal imaging cameras, supplied air, underwater systems and even radiological protection.

Investors were pleased with the company’s last set of results, which saw growth in revenue of 15.9%. There was also a very significant increase in earnings per share at +135.2% versus the same quarter in 2023. EBITDA margins are also up and should provide some support for Avon Protection shares this year. Revenues are now up to where they were in 2022.

Record order book with big US interest

In its last set of full year results management was keen to draw attention to its FY 24 closing order book of £225.2m which it said was a record. Strong order intake is being driven by US Department of Defence helmet orders. The company also reported a lower than expected effective tax rate, driven by one-off items it does not expect to recur in 2025.

Effiectively, Avon’s order book has doubled with demand also picking up for its re-breathers from the US DoD. The order book has been “re-built” in Avon’s words.

Debt is also coming down again, which is a good sign, but it could be lower. Book value per share is 5.61 at the moment. I also note that there is a marked increase of cash on the books which makes it no surprise then to see that the company has said it is increasing dividends.


Avon has also revised its earnings guidance for fiscal year 2024, saying that overall trading has continued to be strong in the second half of FY24. Management say they are seeing good momentum across a number of their strategic and financial KPIs. Revenue growth is now forecast at around 11% for the next financial year.

Prospective investors should also note that the shareholder register is heavily institutionally dominated. A total of eight investors currently control 52% of the share ownership. Hedge funds own about 18% of the stock.

What’s not to like about Avon Protection?

There’s a lot to like about the stock. My key concern would be the relatively expensive share price. This is the one thing making me shy away from the shares unfortunately. The financials as reported in December make the company look very solid and it is not surprise to see so many fund managers holding it.

The shares are well off their ATH but volumes have been dropping as we move through January and we have seen some share price slippage as a result. Shore Capital currently has Avon as a Hold (reiteration 19 November). Jefferies issued a Buy on the stock in May last year, although at that point the shares were well south of its target price.

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This article does not constitute investment advice.  Do your own research or consult a professional advisor.

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