Avon will breathe easier in 2009

Chief executive Peter Slabbert said 2008 proved to be a difficult year for the Group. However, Avon’s dairy business remained successful – it manufactures liners and tubing for the automated milking process – and its 10 year contract to provide the US Government with its Chemical, Biological, Radiological and Nuclear (CBRN) M50 respirators would provide strong and consistent future sales volumes contributing to a return to profitability in the company’s Protection & Defence business. The transition to full rate production at Avon’s new US respirator facility in Cadillac, Michigan had incurred higher than expected costs and markets for non military respiratory protection products had been weaker than expected, he added. “Despite the challenges, we start 2009 in a significantly better position. A new management team is in place and the Group is now finally, after three years of change, positioned exclusively in its chosen markets of Protection & Defence and Dairy,” Slabbert said. Avon had already exited its loss making mixing and aerosol gasket businesses and had now decided to dispose of its US Engineered Fabrications business. The award of the five year, $112 million US Government production contract for the M50 respirator, together with their exercise of the "requirements" option under this contract which allows for total quantities of up to 300,000 mask systems a year for a period of up to 10 years, were major achievements for the Group. The orders together with “a dramatically improved” capability and reduced cost of production in the Cadillac facility had returned this operation to profitability in the final quarter of the financial year. In the year ended 30 September revenue was £54.6 million (2007: £48.7m) although it incurred pre-tax losses of £12.4 million (2007: £1.6m profit).