MARKET REPORT: Supply woes deal body blow to Avon

Avon Protection lost almost a quarter of its value after the body armour maker said disruptions in its supply chain would hammer turnover for the next two years. 

Around £260m was wiped off Avon’s market capitalisation as it slashed revenue forecasts to between £178m and £188m. 

This is significantly lower than City forecasts, which put it at more than £200m. 

The problems will also spill over into the next financial year. 

Revenues will be between £231m and £246m – lower than estimates of £258m. 

Although the trading updates did not spell out how this would affect profits, the fall in revenues means they will take a hit. 

Previously known as Avon Rubber, the company’s long history stretches back to the 19th century. It supplied 20m gas masks during the Second World War and floated on the London Stock Exchange in 1949. 

Its focus has evolved over the years and it now specialises in body armour and military helmets – as well as gas masks – after selling a dairy division that made tubes and systems to milk and monitor cows. 

The FTSE250 defence contractor and American armed forces supplier said there had been a series of order delays, supply chain disruptions and a ‘tight’ US labour market, which means employers are having to compete for workers. 

Hold-ups to a specific order – for M50 gas masks – were blamed on ‘procurement bottlenecks’. 

Investors also took badly to another warning that there are ‘remaining uncertainties’ as to when it will receive and ship other orders before the end of the financial year. 

Shares in Avon – which has been an outperformer on the stock market in recent years – nosedived by 27.7 per cent, or 818p, to 2132p last night. Avon’s day in the doldrums did little to hold back the wider mid-cap index, which rose 0.2 per cent, or 41.68 points, to 23788.45. 

The larger FTSE100 also made gains, advancing 0.4 per cent, or 25.48 points, to 7218.71. 

The rise saw the Footsie cap off its longest weekly winning streak since November. 

Oil prices held steady at $71 a barrel after slides triggered by fears of the spread of the Delta variant, which traders worry could lead to more lockdowns that will lessen demand. 

Goldman Sachs analysts said a recent call from the US for Opec nations to increase the amount of oil they produce is unlikely to be heeded in the short term. 

BP slipped 0.5 per cent, or 1.6p, to 305.35p, while Shell finished down 1.1 per cent, down 15.4p, to 1438.8p. 

Thungela Resources shot higher after turnover skyrocketed by 500 per cent to £490m in its maiden results as an independent company. The thermal coal group was spun off from Anglo American in June into a separate firm on the London and Johannesburg stock exchanges. It swung from a £6m loss in the first half of 2020 to a £17m profit in the same period of this year. Shares rose 6.5 per cent, or 14.7p, or 242.4p. 

Traders also snapped up BHP stock, which climbed 1.5 per cent, or 34p, to 2322.5p. 

The rise comes as anticipation in the City grows that the world’s largest mining company will deliver a verdict on the future of its petrol business in annual results next week. 

Elsewhere, Packaging company Essentra has hired Dupsy Abiola, a former Dragons’ Den contestant whose father once ran for president in Nigeria, as part of a new scheme of appointing a trainee to the company’s board. 

Abiola, 39, will sit in on the FTSE250 firm’s board meetings for the next 12 months and will be asked to contribute to discussions. The scheme is designed to encourage diversity at the top. Essentra shares rose 1.2 per cent, or 3.5p, to 289.5p.

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