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On track to deliver strong results in a transformational year

Avon Rubber p.l.c. today issues the following trading update ahead of its year end close on 30 September 2019.

The Board is pleased to report that trading in the second half has continued in line with its expectations, as outlined in the Half Year results announcement on 1 May 2019. The Board therefore remains confident of achieving its revenue and adjusted profit before tax expectations for the full year.

As indicated at the half year, revenues are expected to grow by circa 4% on a constant currency basis with the adjusted EBITDA margin modestly ahead of last year. At current exchange rates, revenues will also benefit from a further tailwind of around 4%.

Avon Protection

Avon Protection has enjoyed a strong year, underpinned by the performance of our Military business. As expected, we have completed the planned initial deliveries of the M69 aircrew mask and the M53A1 mask and powered air system to the U.S. Department of Defense. We have also completed the $16.6m Rest of World Military mask system contract announced in April 2019.

Law Enforcement performance has been stronger in the second half of the year. However, as anticipated, the impact of delays resulting from the extended U.S. Government partial shutdown in the first half of the year will result in a year on year revenue decline against a strong prior year comparator.

Fire performance in the second half has been further impacted by continued delays in the NFPA industry-wide approval process for the new safety standard, which has prevented the launch of our upgraded Magnum SCBA. We now expect to launch Magnum in the first half of our 2020 financial year.

milkrite | InterPuls

The improved global dairy market conditions experienced in the second quarter have continued in the second half resulting in improved trading conditions. This has resulted, as expected, in milkrite | InterPuls returning to revenue growth in the second half across all business lines.

Taxation

Following the successful resolution of a number of prior year uncertain tax positions we anticipate the adjusted effective rate of tax for the full year to be around 11%, as a result of a non-cash provision release.

Financial position

The Group’s balance sheet remains strong and the business continues to be highly cash generative. Cash conversion for the year and the resulting year end cash position will be impacted by the timing of cash receipts in respect of the $16.6m Rest of World Military mask system contract, which given the timing of shipping goods we now expect to receive in the next financial year, and around £2m of costs incurred relating to the acquisition of 3M’s ballistic protection business.

Acquisition of 3M’s ballistic protection business

The U.S. regulatory approval process to acquire 3M’s ballistic protection business is ongoing, with U.S. anti-trust clearance successfully completed. We continue to expect the acquisition to complete in the first half of our 2020 financial year once all regulatory approvals have been received.

Commenting, Paul McDonald, Chief Executive Officer, said:

“We are on track to deliver a strong set of results in what has been a transformational year for Avon Rubber.

The U.S. DOD contract awards, totalling $340m, for the M53A1 and M69 mask systems and the acquisition of 3M’s Ballistic Protection business have significantly strengthened our medium-term outlook.

This leaves us well positioned to deliver further growth, both organic and M&A, in 2020 and beyond.”