MARKET REPORT: Shares in Avon Protection lose half their value

Shares in Avon Protection lost half their value after it admitted bullet-proof vests for US soldiers do not work. 

The stock fell 51 per cent, or 979p, to a five-year low of 928p as its status as a key supplier to the American military began to unravel. 

It is the second such disaster for the group’s body armour, which failed a similar test conducted by the US army last December. 

The setback means approval for the armour will be ‘significantly’ delayed, while other armour plates have also been held up in the approval process. Avon said it was reviewing its body armour business, as the failure meant revenues from the division will be ‘significantly reduced’. The move is likely to spark fears that it could sell the business entirely. 

The situation also meant it was forced to delay its full-year results to review the impact of the failure. The results had been scheduled for November 23. 

Boss Paul McDonald bought the body armour business from US conglomerate 3M in 2019 and has spearheaded Avon’s transformation from a tyre and cow-milking tube maker to a supplier to the army and police forces. 

The stock has lost around 78pc of its value since hitting a high of 4625p last December. ‘Clearly the market got carried away with the potential of [Avon’s] personal protection equipment,’ said AJ Bell investment director Russ Mould. 

‘It is a case of wait and see, but it’s hard to be too encouraged.’ 

The FTSE 100 dropped 0.49 per cent, or 36.27 points, to 7347.91 while the FTSE 250 dipped 0.07 per cent, or 16.53 points, to 23557.52. 

The drop means investors will need to wait a little while longer for the blue-chip index to reach the magic number of 7403, the level it closed at on February 21 last year before pandemic panic crashed global markets. 

Oil stocks were under pressure amid a drop in crude prices. Shell was down 1.1 per cent, or 18.8p, to 1657p while BP sank 1.2 per cent, or 4.25p, to 340.9p. There are fears rising inflation could cause the US government to release some oil reserves to bring down petrol prices. 

Land Securities Group rose 0.6 per cent, or 4.4p, to 706.4p after a deal to sell its Harbour Exchange building in London for £196.5m to US investment manager Blackstone. Construction group Galliford Try added 5.1 per cent, or 9.8p, to 202.6p following a solid update. 

The group’s operations were ‘performing well’ as it continued to manage supply chain and inflation challenges. Fund manager JTC was up 12 per cent, or 95p, at 887p after completing its acquisition of Sali, a US rival it agreed to buy for £176m last month. 

Mid-cap oil and gas rig owner Diversified Energy rose 0.6 per cent, or 0.6p, to 103.2p as it and co-investor Oaktree Capital agreed to sell 22,729 acres of land in the US state of Texas, for £54.3m – £27.8m of which will go to Diversified. 

Engineer and consultant John Wood sank 4.5 per cent, or 9.1p, to 191.9p after downgrading full-year expectations due to project delays caused by the pandemic. Revenue is expected to be £4.8billion, down from £4.9-£5.1billion. It is also reviewing its environmental risk consultancy to take advantage of trends in decarbonisation. 

Cookware retailer Procook got off to a solid start in its first day of dealings on the London Stock Exchange. Shares were at 159.75p, after listing at 145p.

It was also the first day for smallcap ethical lithium producer Firering Strategic Minerals, which saw its share rise to 14.5p, up 11.5 per cent on the float price of 13p. 

Over in the US, electric car maker Tesla continued to slide, dropping 3.2 per cent to $1,029.60 after Elon Musk, its boss and world’s richest man, dumped around £3.7billion worth of shares after a Twitter poll backed plans for him to sell 10pc of his stake. 

Since the poll last weekend, Tesla is down by more than 15 per cent.