Small talk: Avon Rubber mixes defence with dairy to engineer growth

It's been a busy couple of years for Avon Rubber, the engineering group which issued half-yearly results last week. Once known for making tyres, today the company bills itself as leader in the design and manufacture of hi-tech gas masks and related accessories to buyers from the military, law enforcement agencies and the like.

The tough image is tempered by the company's dairy – yes, dairy – business, which supplies liners and tubing that come in handy for milking cows. Last week's results showed that revenues at the dairy arm were up a healthy 16 per cent over the six months to March, with the business benefiting from improving market trends, although it did have to deal with rising raw material costs.

Defence and protection revenues were lower, with the figures being hit by the timing of filter spares shipments and lower revenues at its Avon Engineered Fabrications arm in the US, which makes flexible storage tanks and skirt systems for hovercraft. Things should improve over the second half, however, as the recently agreed US defence budget is expected to support activity.

John Cummins, an analyst at Altium Securities, dates the change in Avon's fortunes to 2000, when it secured a development contract with the US Department of Defence (DoD) to design and manufacture gas masks for the army, navy, air force and the special forces.

"This was the first time all the US armed forces came under a single contract," he said. "After a number of false starts, in 2008, Avon secured a full rate production contract with the DoD worth $112m (£68.4m) over a five-year period for 100,000 masks per annum, with an option for this to rise to a total of 300,000 masks over a 10-year period. This option was invoked in 2009, meaning that a significant proportion of the currently forecast protection and defence revenue is underpinned to at least 2017."

Not bad. But while the defence business is more eye-catching, Mr Cummins said investors should also take note of the potential for the company's dairy arm, which he suggests is "more than just a cash cow". Indeed.

"The new dairy lines brought to market provides farmers with the ability to increase milk production, and has been proved to reduce the infection rate in cows from the milking processes," he explained.

"This not only attracts a higher selling price, but also subsequent margin improvement for Avon." Besides, the company has ample scope for growth, with three quarters of the world's cows still being milked manually.

The picture is a good one, and should support sentiment as the company gears up to welcome a new chairman. David Evans, the former chief executive of Chemring, will shortly step up to take over from Sir Richard Needham, who is to stand down at the next annual meeting. Given the positive buzz around Avon he seems to have found an opportune time to move in.

HaloSource strikes another India deal

A couple of weeks ago, we looked at Origo Partners, the China-focused private equity firm whose investments span everything from electric batteries to mining to clean water technologies of the kind promoted by HaloSource, the AIM-listed group which unveiled a major deal with India's Bajaj Electricals last week. Origo owns 4.3 per cent of HaloSource, which has invested heavily in ways to purify drinking water. And although that business currently accounts for a relatively small proportion of overall revenues, the company's finance chief James Thompson says HaloSource is focused on growing its activities in the area to capitalise on the opportunities in emerging markets such as India and China.

The rationale is straightforward. Countries like India boast an increasingly affluent urban middle class which is often wary of drinking water straight from the tap. Urban households often install water filters, and in many cases boil tap water before drinking.

HaloSource offers what it calls a breakthrough technology that doesn't simply filter out visible impurities but also purifies the water of harmful viruses and bacteria without depending on electricity. Its gravity-driven HaloPure cartridges cleanse the water of micro-organisms such as poliovirus and rotavirus, all the while boasting low operating costs.

"Purifying drinking water at very low cost has been identified by many consumer appliance OEMS [original equipment manufacturers] around the world as a major growth market opportunity," Liberum Capital said in a report ahead of the company's listing on AIM in October last year.

The technology meets both the safety and disinfection guidelines laid down by the World Health Organisation, and the standards of the US Environmental Protection Agency. The latter is notable, as it leaves HaloPure well placed to meet rising regulatory standards in its target markets.

"Outside of HaloPure, the principal appliances that address waterborne diseases are categorised as ultraviolet light and reverse osmosis devices," Liberum explained. "However, these devices commonly cost several hundred US dollars."

HaloPure devices, in contrast, are available in the $40 (£24) to $50 range, according to Mr Thompson, with replacement cartridges costing around $7 apiece, making them far more affordable than the alternatives. The group has made significant inroads in India, forging agreements with Bajaj and Eureka Forbes, both of whom are major players and know the local market extremely well.

The Bajaj relationship began last year, and last week's announcement marks HaloSource's second supply agreement with the group.

HaloSource will supply Bajaj with its HaloPure Waterbird gravity water purifiers, which will be branded the Bajaj XTP 21 and XTP 21 DX. The company will also supply replacement cartridges for the devices, which are expected to be launched later this month.

Although India dominates for now, the company is also targeting Brazil and is set to sell its products in China, where it is awaiting regulatory approval. Once it has all the requisite clearances, Mr Thompson says HaloSource has a number of partners in mind to roll out the products across the country.

Start your day with The Independent, sign up for daily news emails
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Bradford City's reward for their memorable win over Chelsea is a trip to face either Sunderland or Fulham (Getty)
Lars Andersen took up archery in his mid thirties
Focus E15 Mothers led a protest to highlight the lack of affordable housing in London
voicesLondon’s housing crisis amounts to an abuse of human rights, says Grace Dent
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea