AVON RUBBER PLC
Well known in the past for its tyres and inflatable boats, Avon Rubber has completely re-focused. In recent years, heritage businesses have been sold off. The company is now driven by sales and engineering in two contrasting niche areas: respiratory protection and dairy equipment. It can claim world-leading products and world-wide sales in both.
Ten UKSA members visited its HQ / manufacturing facility in Melksham, Wiltshire on 19th September. We gained a terrific insight into both businesses, with presentations from Peter Slabbert (CEO), Andrew Lewis (Finance Director) and Paul Macdonald (Head of Dairy), demonstrations and a guided tour of the plant. Our thanks go to all involved, for a most interesting and instructive morning.
Respiratory protection equipment has its principal markets among military users, with the US Department of Defense a prime customer. Indeed some 90% of the business is in the USA, headquartered in Baltimore and with its largest manufacturing facility in Michigan.
Product development is centred on Melksham and Baltimore. We enjoyed a lively demonstration of the capabilities of the latest masks and could easily identify the practical advantages these confer over earlier models. All development has been organic. The full life cycle of such products is 25 to 30 years, with ongoing sales from replacement parts. Although originally developed for the military, products can also be used in first responder, fire and industrial safety and security. Avon is exploiting a wide range of opportunities with first responders.
The completely separate dairy business operates under the ‘Milk-Rite’ brand, and also provides replacement kit for OEMs. Its specialist niche is the ‘liner’ used in automated milking systems, i.e. the part that is fitted onto the cow’s teats. We were shown how small but significant design changes in liners have led to much improved udder health, which clearly improves the attraction of the product.
Having worked in this area for 85 years, Avon now undertakes product development, sales and marketing. All production is outsourced. The business sees its market position as analogous to a Kwik Fit among car makers.
They meet 60% of the world market for liners (70% in the USA). Huge potential is seen in the developing dairy industries of the BRIC countries, in the trend to global consumption of dairy products, and in the trend towards very large ‘farm’ sizes.
Further information (including recent reports and analyst coverage) can be found on Avon’s website at www.avon-rubber.com/Corporate/Investor Relations/investor-relations-corporate.htm
Alan Cane, 21 September 2011
DISCLAIMERS
•All meetings are organized and publications issued on behalf of the United Kingdom Shareholders Association Ltd., which is a company, limited by guarantee
• Views expressed in UKSA Ltd publications, by speakers at UKSA Ltd meetings and by members of UKSA Ltd and their guests in discussion are not necessarily the official views of UKSA Ltd.
•Nothing said in UKSA Ltd publications, by speakers at UKSA Ltd meetings and by members in discussion is intended to be or should be interpreted as being professional or investment advice.
ONLY persons authorized in accordance with the Financial Services Act, 1986 and subsequent legislation can give investment advice.
