Shares in Avon Protection PLC (LSE:AVON) plummeted by 13% after the company announced that it will wind down its body and flat armour business over the next two years and focus on its respiratory and head protection operations.
The news accompanied Avon Protection’s results for the year to end-September 2021, which revealed a slide into the red, with a statutory pre-tax loss of US$35.6mln, compared with a profit of US$2.2mln in the previous year.
Adjusted pre-tax profits fell 47.6% to US$18.9mln on revenue up 16.2% at US$248.3mln.
The company raised it final dividend by 30% to 30.6 cents per share, resulting in a total pay-out for the year of 44.9 cents.
Chief executive Paul McDonald described 2021 as a “challenging year” for Avon Protection.
“Having conducted an in-depth strategic review of our armour business, we have concluded that an orderly wind-down of the body and flat armour business over the next two years to fulfil our existing body and flat armour customer commitments is in the best interest of our stakeholders as a whole,” he said.
Looking ahead to fiscal year 2022, McDonald said the company is taking a cautious view on the rate of growth, noting that the operating environment will be challenging due to ongoing supply chain disruption and customer order pattern volatility caused by the COVID-19 pandemic.
“However, with an opening order book of US$117mln excluding armour, we expect our respiratory and head protection businesses to deliver growth in FY22 and we remain confident in the medium-term prospects for a refocused Avon Protection," he said.
Revenues excluding armour in FY22 are expected to be in the range of US$260mln-US$290mln, representing growth of 8%-20%.
“We expect our adjusted EBITDA margin to recover materially in FY22 given operational leverage and the actions to address overheads,” the CEO said.
Shares fell almost 13% to 938p in midmorning trade.