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Defence giant Avon Protection faces body armour body blow

by LLB Reporter
12th Nov 21 10:59 am

It’s almost as if the last two-and-a-half years or so for defence business Avon Protection was some kind of fever dream, with the shares having raced up all the way to record highs above £46 last October before seeing an equally stratospheric fall to today trade at levels they were at in the summer of 2019.

As a result, a share price chart of Avon for the last few years looks like the sort of forbidding mountainous peak which would strike fear into the hearts of even the bravest climber and the stock has proved just as treacherous for shareholders.

“Clearly the market got carried away with the potential of its personal protection equipment – sold to the military and emergency services. This was particularly true when the company sold off its dairy products division, allowing investors to focus exclusively on the protection potential,” said AJ Bell’s Russ Mould.

“Trading on an elevated valuation left the business vulnerable to the slightest disappointment. And in Avon’s case the disappointments weren’t that slight. Body armour designed for use in the US coming up short in a crunch testing process and a competitor objection forcing a delay on the delivery of a head protection system for the US army were serious setbacks.

“The body armour issues are now so serious the company has launched a strategic review of this part of the business, signalling it could even be sold off entirely, while its full-year results for the year to 30 September have been delayed and are likely to see significant impairments, even if underlying performance will be in line with expectations.

“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.”


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