Avon Rubber forecasts loss in first half due to contract delays

ERJ staff report (DS)

London Avon Rubber PLC said it expects to report a loss in the first half of 2008, following delays in the signing of a critical contract. Once the contract is signed, however, the company forecasts that it will return to profit in the second half and be in profit for the full year.

Avon has been expecting confirmation of the multi-year contract for the new M50 US military respirator for some time, but the US Government has taken longer than expected to complete its legal and administrative checks.

The company issued a statement on 21 April saying, "We are however now in final contract negotiations with the Department of Defense for this 5-year contract worth in excess of US$100million." It added, "A follow-on requirements option to cover significant additional demand over a period of up to 10 years will be executed at the same time. In the interim, government funding has already been committed for long lead items to allow us to commence production immediately under this programme."

The company said, "The effect has been to delay sales on the main production contract into the second half of the year. This will mean that the Group will incur a loss for the half year. Once the multi-year contract is received however, it will provide the basis for increased turnover and a return to profitability in the second half of the year making a profit for the year as a whole. The 2009 financial year should reflect the full benefit of this new business.

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Press release from Avon Rubber