MELKSHAM, England—Shares in Avon Rubber P.L.C. are recovering after the company disclosed Dec. 17 that product-approval issues would delay its delivery of ballistic protection contracts to the U.S.
Avon shares subsequently fell by almost 20 percent to reach $4.06 on Dec. 21, before recovering slightly to $4.23 on Dec. 22—perhaps reflecting investor confidence in the positive business outlook presented in the company's trading update.
Processes to approve "enhanced small arms protective inserts" (DLA ESAPI) for the U.S. Defense Logistics Agency and "vital torso protection" (VTP) body armor plates for the U.S. Army were to conclude in the first half of Avon's fiscal year 2021—ended Sept. 30.
However, the U.K. manufacturer said Dec. 17 that "disappointingly, these approval processes have been delayed as a result of a failure encountered in first article testing."
While it is working with customers to expedite the approvals, Avon said the initial delay meant that initial deliveries under the contracts would not occur until the first half of its 2022 financial year.
"We are working collaboratively with our customers to resolve the delays to product approval for the DLA ESAPI and VTP contracts as quickly as possible," Avon Rubber CEO Paul McDonald said.
Separately, Avon revealed that a protest had been made against a contract, disclosed Sept. 24, to supply the U.S. Army's "next generation integrated head protection system."
"Whilst the delay created by this protest is unwelcome, its outcome is not currently expected to have any material impact on Group expectations for FY21," the company said.
Trading update
The contract delays were announced alongside a business update stating that trading had "continued as expected in the first quarter of FY21, with good order intake across our portfolio of life critical personal protection systems for the world's militaries and first responders."
Within the military business, Avon added that it had received first orders under the NATO Support & Procurement Agency Contract totaling $33 million.
There were also follow-on orders from the U.S. Department of Defense under a mask and powered air system contract in addition to continued strong demand for spares and accessories from the DOD and rest-of-world military customers.
So, while the contract-delivery delays "will reduce overall expectations for FY21," Avon said it is "confident in achieving its medium-term expectations given the momentum we are seeing across the business."
