Avon Protection (AVON) £20.51

Loss to date: 22.1%

Original entry point: Buy at £26.94, 29 July 2021

Sometimes you have to hold your hands up. We called defence and protection kit maker Avon Protection (AVON) wrong.

We felt the recent issues the company had been facing were a blip. However, a damaging warning on 13 August proved we moved too early, even if we still think the long-term investment case intact.

Perhaps we should have heeded the observation in the original article about a second-half weighting to its results. The impact on performance has come as a result of order delays, supply chain issues and a tight labour market in the US.

The net result is that revenue guidance for the 12 months to 30 September 2021 is reduced to a range between $242 million and $260 million – the consensus estimate was for $277 million.

While the forecast for the September 2022 financial year has been trimmed to $320 million to $340 million (consensus $354.9 million), guidance for 2023 is unchanged for now.

This has the knock on effect of depressing margins to 17% to 18% and seeing cash conversion dip to around 50%.

SHARES SAYS: The current price doesn’t reflect the inherent strengths of the business and we think Avon can recover from these short-term issues.

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