Protective equipment outfit Avon Protection (AVON) dived 42.7% to £10.93 as it revealed fresh delays for its body armour division and announced a strategic review of the business.
Avon, which makes gas masks, protective head gear and body armour for a range of military, security and emergency services clients said the US Army Vital Torso Protection (VTP) ESAPI body armour plates have encountered a testing failure that will result in substantial delays to their approval.
Separately, final product approvals for the DLA ESAPI body armour plates, have been delayed until second quarter of the year ending 30 September 2022.
This is prompting a strategic review of the body armour unit and will see a delay in the release of results for the 12 months to 30 September 2021 - with the statement hinting there could be material impairments in the numbers. This is the latest in a series of setbacks which have seen the shares retreat to less than a quarter of the record highs achieved in October 2020.
REVENUE WARNING
Body armour revenue for the September 2022 financial year is expected be well below the previously guided $40 million.
Jefferies estimates that body armour accounts for around 15% of group sales and suggested up to 10%-to-15% of its forecast group earnings could be at risk in the September 2022 and September 2023 financial years.
The broker commented: ‘Whilst disappointing, the extent of this needs to be put into context at the group level, and management will address the cost base.’
AJ Bell investment director Russ Mould commented: ‘Trading on an elevated valuation left the business vulnerable to the slightest disappointment. And in Avon’s case the disappointments weren’t that slight.
‘Worryingly for management’s credibility, Avon had already updated on its full-year performance in trading update last month, post the period end. For the current financial year, it is a case of wait and see, but it’s hard to be too encouraged.’
Full year results, previously slated for 23 November, are now expected in early December. The company says it will update on forward guidance then.
