REG - Avon Protection PLC - Interim Results
24/05/2022 07:16
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RNS Number : 5199M Avon Protection PLC 24 May 2022
AVON PROTECTION PLC
INTERIM RESULTS FOR THE HALF YEAR ENDED 2 APRIL 2022
AND BOARD UPDATE
Board Update
Bruce Thompson, Chair: "Today, we are announcing that, after 5 years as CEO
and 19 years with the company, Paul McDonald will be stepping down as CEO at
the end of this financial year. Beyond this date, he has agreed to make
himself available to support the transition to a new CEO.
Paul has been instrumental in the transformation of Avon Protection into a
world leader in respiratory and head protection technology, and I am grateful
for his dedication and commitment during his tenure. A search will be
initiated to identify a successor with the skill set to manage the complex
challenges and opportunities ahead and deliver value for all stakeholders, and
the Board will update the market at the appropriate time."
Interim Results
ADDRESSING CHALLENGES, OPPORTUNITIES AHEAD
Paul McDonald, Chief Executive Officer:
"The first six months of FY22 has seen both challenge and opportunity for the
Group.
While we have experienced some specific issues impacting profitability, they
have been identified. We are working proactively to address them.
The requirement for our world-leading, high-tech products has never been
stronger. Our global customers are adjusting to the structurally higher threat
environment and, against this backdrop, we remain confident in a return to
growth."
02 April 2022 03 April 2021 (restated) (3, 6) Organic Change (constant currency)(5)
Respiratory and Head Protection(2)
Orders received $113.6m $167.9m (33.8%)
Closing order book $110.7m $131.5m (15.3%)
Revenue $119.4m $118.1m (1.1%)
Adjusted(1) EBITDA $12.5m $22.5m (47.6%)
Adjusted(1) operating profit $5.1m $16.8m (72.6%)
Adjusted(1) profit before tax $3.6m $15.5m (80.0%)
Adjusted(1) basic earnings per share 9.1c 40.1c (80.6%)
Armor(2)
Revenue $2.5m $3.9m (35.9%)
Adjusted(1) operating loss ($6.3m) ($4.3m) (46.5%)
Adjusted(1) loss before tax ($6.4m) ($4.5m) (42.2%)
Group
Interim dividend per share 14.3c 14.3c -
Net debt excluding lease liabilities $56.6m $12.9m 338.8%
Statutory results
Revenue $121.9m $122.0m
Operating (loss)/profit(4) from continuing operations ($10.7m) $3.4m
(Loss)/profit before tax from continuing operations ($13.6m) $0.4m
Basic (losses) / earnings per share from continuing operations (34.9c) 1.6c
Net debt $83.3m $44.1m
Strategic and operational headlines
· Solid order intake of $113.6m in the first half, a reduction as
expected against the strong prior year comparable, and with continued delays
in U.S. DOD ordering
· Active engagement with European and North American customers
following the start of hostilities in Ukraine
o We expect to see a significant shift in demand in the short, medium and
longer term
· Next-generation Integrated Head Protection System (IHPS NG) helmet
submitted for first article testing in March
· Award of second-generation Advanced Combat Helmet (ACH GEN II)
contract for the U.S. DOD
· Corrective actions underway to address identified operational
challenges
o Improved forward ordering to anticipate future demand, now possible in
higher demand environment
o Implementation of the announced $15m overhead reduction programme on track
and additional $6m reduction now planned
Financial headlines
· Revenue broadly flat - despite headwinds of delayed U.S. Budget
approval and delayed expenditure in U.S. first responder market
· Adjusted EBITDA margin of 10.5%, down 860bps, reflecting a
combination (in broadly equal proportions) of product mix shift and
operational challenges, including supply chain issues
· Leverage of 2.6x EBITDA (on a bank covenant basis), under the 3.0x
covenant
o Leverage expected to reduce as receipts build and profit recovers
o Half of the announced £18.5m buy-back now completed, second half on hold to
enable further organic investment to meet elevated demand levels and to allow
for leverage stability
· Dividend of 14.3 cents per share reflects confidence in the medium
and long-term prospects of the Group
Outlook
FY22
· Opening order book of $111m provides good visibility into H2
· A very strong macro demand environment drives medium-term confidence,
but volatility of funding and timing of customer orders gives rise to risk to
the H2 outlook on revenue mix
· Revenue mix risk flows into margin expectations for the remainder of
the current year
· The work we have done in the last 2-3 months to protect ourselves
against extended supply chain delivery times, leaves us in good stead to
capitalise on the revenue opportunities as orders flow
· Additional near-term action to reduce overhead costs by $6m (on an
annualised basis), combined with the savings that will be delivered in H2 from
the already established $15m savings programme, will mitigate some of the
inefficiencies that impacted H1
· Effects of inflation are expected to present a headwind
· Expect EBITDA margin improvement H2-on-H1, with the scale of
improvement dependent on orders yet to be won
· Working capital and capex continue to be tightly managed
FY23 and beyond
· Fundamental shift in the European threat environment requiring higher
military spending
· We have a significant opportunity given the expansion of demand
· We have confidence in delivering growth into the medium and long-term
Notes:
(1) The Directors believe that adjusted measures provide a useful comparison
of business trends and performance. Adjusted results exclude exceptional items
and discontinued operations. The term adjusted is not defined under IFRS and
may not be comparable with similarly titled measures used by other companies.
(2) For more information regarding segmental reporting and detailed Armor
performance refer to note 2.2.
(3) The comparatives for the half year to 03 April 2021 have been restated to
reflect reclassification and phasing adjustments between H1 and H2 in the
prior year as disclosed in note 5.6.
(4) Reported operating loss includes $3.5m amortisation of acquired
intangibles, $3.8m impairment of non-current assets, $1.4m restructuring costs
and $0.8m transaction costs. See note 2.1 for full breakdown of adjustments
and comparatives.
(5) Organic constant currency measures are provided in note 2.1.
(6) The Group previously reported that the reporting date for the comparable
period was the 31 March 2021 and for the latest annual financial statements
was 30 September 2021, being the Company's accounting reference date. The
actual date to which the financial statements were drawn up was 03 April 2021
and 02 October 2021 respectively and therefore the headings in the interim
financial statements have been amended accordingly. This has no impact on
previously reported numbers.
For further enquiries, please contact:
Avon Protection p.l.c.
Paul McDonald, Chief Executive
Officer +44 1225
896 848
Rich Cashin, Chief Financial
Officer
Rachel Stevens, Director of Investor Relations
MHP Communications
Andrew Jaques
+44 7834 623 818
Charlie Barker
+44 7710 032 657
Peter
Lambie
avonprotection@mhpc.com (mailto:avonprotection@mhpc.com)
Analyst and investor webcast
Paul McDonald, Chief Executive Officer and Rich Cashin, Chief Financial
Officer, will host a presentation for analysts and investors at 9.00am this
morning, at Storey Club - 100 Liverpool Street, EC2M 2AT. The presentation
will also be broadcast live at:
https://webcasting.brrmedia.co.uk/broadcast/623b00125929033805715060
(https://webcasting.brrmedia.co.uk/broadcast/623b00125929033805715060)
A copy of the presentation for the webcast will be uploaded to
www.avon-protection-plc.com (http://www.avon-protection-plc.com) at 8:30am
this morning.
Legal Entity Identifier: 213800JM1AN62REBWA71
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
("MAR") EU no.596/2014. Upon the publication of this announcement via
Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.
Note to editors:
Avon Protection designs and produces life-critical personal protection
solutions for the world's militaries and first responders. With a portfolio
that includes Chemical, Biological, Radiological, Nuclear ("CBRN"),
respiratory and head protection products, our mission is to enhance the
performance, efficiency and capability of our customers whilst providing ever
increasing levels of protection.
Avon Protection operates from 6 sites employing approximately 1,000 people and
is listed on the London Stock Exchange (LSE: AVON).
For further information, please visit our website www.avon-protection-plc.com
(http://www.avon-protection-plc.com) .
CHIEF EXECUTIVE OFFICER'S REVIEW
The first six months of FY22 has seen both challenge and opportunity through
the period.
· Respiratory business continues to make good progress benefiting from
deliveries to NSPA customers
· Good progress in developing the helmets business
o IHPS NG helmet submitted for first article testing in March
o Award of U.S. DOD ACH GEN II contract in February
o In-sourcing of helmet shells for legacy Team Wendy products
· Integration of our helmet design and manufacturing capability, with
synergies to follow
· A review of the armor business in late calendar year 2021 led to the
decision to wind it down, as announced in December, following the test failure
of the vital torso protection body armor product.
· Delayed revenues, particularly from the U.S. DOD, combined with
operational issues, resulting in lower profit margin than originally expected
· We are undertaking cost-reduction actions to right-size our
overheads, which are progressing to plan
· Following the events in Ukraine, there has been a significant
increase in expression of interest in our products. We continue to work
proactively and at pace with our customers to confirm orders and maximise the
utilisation of our facilities.
A robust core business
Over the last twenty years, Avon Protection has established a position as the
sole-source provider to the U.S. DOD for general-purpose respirators, tactical
forces respirators, powered-air purifying respirators, tactical self-contained
breathing apparatus, and the M53A1 tactical mask. We have a long-standing
relationship with the U.K. MOD, and, in October 2020, were awarded the NATO
Support and Procurement Agency contract in relation to our full respiratory
range. The importance of these long-term partnerships has come to the fore in
recent months as the risk environment has increased and we are in detailed and
active engagement with our customers as they decide how to co-ordinate their
response to the Ukraine crisis.
Over the past two years, the acquisitions of 3M's ballistic protection
business and Team Wendy have added head protection to our portfolio, combining
world-leading technology in helmet shells and protective inserts. The
combination of the two has positioned Avon Protection as the leading helmet
provider to the U.S. DOD.
Our longer-term strategy aspirations are to sell a wider range of both
respirators and helmets to our global customer base. During this period, we
have taken further steps to integrate these two businesses, resulting in a
more streamlined organisation with significant opportunities for realising
commercial synergies that will drive longer term value creation for the Group.
Additional programme wins
Following the IHPS NG contract won in 2021, our product entered first article
testing in March 2022, as planned, and manufacturing will commence on receipt
of approval.
The award of the ACH GEN II contract in February 2022 is a demonstration of
the strength of our helmets business. The ACH GEN II contract with the U.S.
DLA is for a maximum of $204m over five years. It is a sole-source contract
with a second smaller tranche expected to be awarded at a later date,
effectively resulting in a dual-source arrangement for the DLA. Our ACH GEN II
helmet will be submitted for first article testing in FY23 with initial
revenue expected in FY24.
When IHPS NG and ACH GEN II enter service life with the U.S. DOD, this will
position Avon Protection as the leading helmet supplier to the U.S. DOD and
confirms the synergies of bringing the two helmet brands together.
In addition to the above, we continue to make progress with our MCM100
underwater rebreather, with further orders received in Europe.
Delivering for our customers
The events in Ukraine have elevated the priority of national security
awareness throughout Europe, resulting in a higher demand environment. These
opportunities can be seen as three distinct phases:
(1) Immediate support. Numerous countries are looking to procure and donate
military product for Ukraine. While we carry limited unallocated stocks, we
have sold some product on this basis
(2) Short-term response. Attention has focused on the quality and quantity
of equipment held by our customers, who are now looking to increase
inventories and improve preparedness. We have seen a growing level of
enquiries and are seeing increased short-term funding aligned to these orders
and requests.
(3) Longer term response. The European NATO border with Russia is likely to
become more militarised, driving demand for personal protective equipment into
the medium and long-term. This will likely result in upgrade programmes across
NATO for which we are well positioned.
In light of these drivers for growth, the sole-source framework respirator
contract with the NATO Support & Procurement Agency, which allows NATO and
associate members to order from our portfolio of respiratory products under
standard pre-negotiated terms, is an important route to market for us. The
benefits of this contract are ever-more evident in the current environment
where ease of ordering is paramount in a fast-moving situation. We are engaged
with seven NATO / NATO associate countries on this basis and in active
dialogue with three more.
Responding to challenges
The extended delay in the sign-off of the U.S. federal budget, has impacted
our customers dependent on federal funding, notably the U.S. DOD and our U.S.
first responder customers. The absence of an agreed budget has resulted in
orders being delayed, with consequences both for our order receipts and
revenue mix.
Profit margin in the half year was impacted by a combination of identified and
addressable issues, with the shortfall falling due to two impacts in broadly
even amounts, being (1) adverse product mix, and (2) inefficiencies due to
process and supply-chain issues. The adverse product mix was due to lower
sales of higher margin products, particularly first responder products which
are typically our highest margin business as well as fewer high-value product
systems to the U.S. DOD. This should gradually reverse in H2, given the
strength of demand, in part dependent on further orders that are expected to
be received in Q3. We will utilise our capacity with higher margin products,
and hence expect to revert to more normalised mix of product in this period.
The inefficiencies we have seen are a result of a combination of process
issues arising from lower utilisation, particularly in helmets, exacerbated by
supply chain challenges. We are addressing the supply chain challenges by
improving our forward ordering to anticipate future orders, which is now
possible in this high demand environment. We are now planning further cost
savings of $6m to limit margin downside, which will reach this run-rate by the
end of FY22.
We are on track to achieve our target overhead reduction of $15m. This is
broadly evenly split between overheads relating to armor (which will cease
when that business is closed) and those relating to the on-going business,
which had increased in anticipation of the increased size of business.
Approximately half the savings in the continuing business are now realised and
the remainder by the end of this financial year. This, combined with the
additional $6m savings announced today, will allow the business to rebalance
revenue and costs over the medium-term to improve profitability and margin.
Our people
Our people are at the heart of everything we do. The recent reorganisation to
integrate the two helmet businesses and streamline the Group has involved
difficult choices. We are grateful to our colleagues for their ongoing
commitment as we have aligned the business for future growth.
FINANCIAL REVIEW
Unless otherwise stated, figures and commentary relate to continuing
operations and exclude armor.
INCOME STATEMENT
Orders received in the period were $113.6m (HY21: $167.9m), down
period-on-period principally due to lower U.S. DOD orders and also due to
strong orders in the prior year, at the outset of the NSPA contract in October
2020. Accordingly, the closing order book of $110.7m (HY21: $131.5m) reflects
a 15.8% decrease on last half year.
Revenue
02 April 2022
Sub-total Avon Protection $m Total
Head Protection $m
Respiratory $m Armor
$m $m
U.S. DOD 24.0 19.5 43.5 2.5 46.0
Commercial Americas 17.7 13.0 30.7 - 30.7
U.K. & International 41.1 4.1 45.2 - 45.2
Total 82.8 36.6 119.4 2.5 121.9
03 April 2021(1)
Sub-total Avon Protection Total
Head Protection $m $m
Respiratory $m $m Armor
$m
U.S. DOD 48.4 16.0 64.4 3.9 68.3
Commercial Americas 18.7 9.3 28.0 - 28.0
U.K. & International 18.2 7.5 25.7 - 25.7
Total 85.3 32.8 118.1 3.9 122.0
(1) Following a re-organisation and further integration of Team Wendy, we are
classifying revenue into U.S. DOD (comprising all U.S. military revenue),
Commercial Americas (which includes U.S. first responder plus all revenue from
other parts of the Americas, including Team Wendy), and U.K. and International
(comprising all revenue outside North and South America). Prior year figures
have been re-classified to be presented on a consistent basis to current year
classifications.
Having started the year with a record order book, revenue was broadly as
expected, with growth of 1.1% to $119.4m (HY21: $118.1m), a decrease of 1.1%
on a constant currency basis, excluding the contribution of one additional
month versus the comparable period, from Team Wendy.
U.S. DOD revenue of $43.5m (HY21: $64.4m) was 32.5% lower versus last half
year, with order delays and ongoing supply chain challenges in sourcing key
components (notably electronics and fabrics) causing lower than expected
product deliveries in the earlier part of the period. We nevertheless continue
to see the benefit of the large installed base of two million M50 masks with
strong associated revenue from filters, spares and accessories, alongside
continued deliveries of the M53A1 and M69 masks. In head protection, our
contract for first-generation IHPS helmets is now largely complete, with the
follow-on NG IHPS expected to start this calendar year.
Commercial Americas revenue of $30.7m increased c. 10% year-on-year,
principally reflecting the additional month of Team Wendy ownership and
success with the helmets portfolio, partially offset by declines in
respiratory sales. We have raised prices on our commercial portfolio both in
October 2021 and in March 2022, reflecting rising input costs.
U.K. and International revenue of $45.2m grew 75.9% compared to $25.7m in the
first half for 2021, as the NSPA contract continued to expand, with orders
delivered to five countries in the half year period. We are building our sales
and marketing capability in this region in order to more fully capitalise on
the market opportunity from our world-leading products.
Adjusted EBITDA of $12.5m is down 47.6% versus last half year on an organic
constant-currency basis. The adjusted EBITDA margin of 10.5%, (HY21: 19.1%),
reflects the impact of adverse product mix combined with negative process and
supply chain issues, described above. Compared to the prior half year,
overheads increased, principally due to rising employee costs and sea freight
rates. The inflationary effect seen on freight costs will persist through the
balance of the year, and we expect other cost lines in the P&L to be
impacted as inflation levels in our key operating markets increase.
Adjusted operating profit decreased by 72.6% on an organic constant-currency
basis, to $5.1m (HY21: $16.8m) reflecting the drop-through effect of the lower
EBITDA combined with a higher depreciation and amortisation charge than the
prior year, reflective of greater investment in the business over the prior
years.
After an adjusted tax charge of $0.8m (HY21: $3.2m), the Group recorded an
adjusted profit after tax for the period of $2.8m (HY21: $12.3m).
Adjusted basic earnings per share decreased by 80.6% on an organic
constant-currency basis to 9.1c (HY21: 40.1c).
Armor business
In December 2021 we announced that the armor business would be wound down,
fulfilling existing contracts and then closed. The Board reached this decision
following a series of events including the test failure of a key body armor
product, which led to the conclusion that this was the best decision for
stakeholders. We are taking actions to reduce overheads and will wind the
business down once contracts are complete, expected to take c. 18 months. The
armor order book relates to the DLA ESAPI product; we are in the final stages
of formal first-article test approval and revenue will commence once this is
received.
HY22 Armor Respiratory & Head protection Total
Adjusted continuing operations $m $m $m
Orders received 0.3 113.6 113.9
Closing order book 24.4 110.7 135.1
Revenue 2.5 119.4 121.9
Adjusted EBITDA (6.3) 12.5 6.2
Adjusted EBITDA margin (252%) 10.4% 5.1%
Adjusted operating profit/(loss) (6.3) 5.1 (1.2)
On a reported continuing basis, statutory operating loss was $10.7m (HY21:
profit of $3.4m), reflecting an operating loss from armor of $7.3m and a loss
of $3.4m from the respiratory and head protection operations after adjusting
items of $9.5m.
The adjusting items (detailed in note 2.1) principally comprise the
amortisation of acquired intangibles ($3.5m) and an impairment of non-current
assets ($3.8m). The majority of the impairment losses ($2.9m) relate to the
General Service Respirator (GSR) with the balance relating to other
respiratory assets ($0.7m) and reclassified armor development ($0.2m).
Impairment losses resulted from changes in assumptions for future recoverable
amounts and as such they are considered unrelated to 2022 trading performance
(further details available in note 3.1).
Loss before tax was $13.6m (HY21: profit of $0.4m) and, after a tax credit of
$2.9m (HY21: credit of $0.1m), loss for the period was $10.7m (HY21: profit of
$0.5m). Basic losses per share were (34.9c) (HY21: earnings per share of
1.6c).
RESEARCH & DEVELOPMENT
In line with our strategy, we continue to invest in the next generation of
products and our total investment in research and development (capitalised and
expensed) amounted to $5.3m (HY21: $10.5m), with the reduction reflecting a
more focused investment strategy. The figures below include armor, of which
there was no capitalised expenditure in HY22 and $2.6m in HY21.
26 weeks to 27 weeks to
02 April 2022 03 April 2021
Total research and development expenditure $5.3m $10.5m
Less customer funded ($0.7m) ($0.9m)
Group expenditure $4.6m $9.6m
Capitalised ($2.7m) ($9.0m)
Income statement impact $1.9m $0.6m
Amortisation and impairment of development expenditure $3.7m $2.0m
Total income statement impact $5.6m $2.6m
Revenue $121.9m $122.0m
R&D spend as % of revenue 4.3% 8.6%
CASH FLOW AND NET DEBT(1)
26 weeks to 02 April 2022 27 weeks to 03 April 2021 (restated)(3)
$m
$m
Adjusted continuing EBITDA 6.2 19.1
Share-based payments and defined benefit pension scheme costs 1.2 1.1
Working Capital (2.2) (7.1)
Cash flow from continuing operations before exceptional items 5.2 13.1
Restructuring and acquisition costs paid (0.8) (4.4)
Cash flow from continuing operations 4.4 8.7
Cash flow from discontinued operations (0.6) (1.6)
Cash flow from operations 3.8 7.1
Finance costs (1.3) (0.5)
Payments to pension plan (2.6) -
Repayment of lease liability (2.1) (2.0)
Tax excluding capital gains tax on divestment(2) 0.6 (2.0)
Capital Expenditure (5.8) (14.7)
Acquisitions and divestments (3.2) (137.1)
Purchase of own shares - LTIP and share buyback (10.1) (4.3)
Dividends to shareholders (9.1) (7.7)
Foreign exchange - 0.6
Change in net debt (29.8) (160.6)
Opening net (debt)/cash, excluding lease liabilities (26.8) 147.7
Closing net debt, excluding lease liabilities (56.6) (12.9)
1 - For full Consolidated Cash Flow Statement under IFRS see p.19
2 - Cash flow from divestments in the prior period are shown net of $9.0
million capital gains tax paid. This is included in tax paid in the
Consolidated Cash Flow Statement.
3 - The comparatives for the half year to 03 April 2021 have been restated to
reflect reclassification and phasing adjustments between H1 and H2 in the
prior year as disclosed in note 5.6.
Cash flow from continuing operations before exceptional items was $5.2m (HY21:
$13.1m). Capital expenditure used in continuing operations was $5.8m (HY21:
$14.7m).
Dividends and purchases of own shares were $19.2m (HY21: $12.0m) reflecting
the final dividend and $10.1m (including costs) for the share buy-back. Tax
receipts were $0.6m, resulting from taxable losses in previous periods.
Cash flow from continuing operations as a percentage of adjusted continuing
EBITDA of 83.9% reflected lower accounts receivable offset by a build-up of
inventory both in advance of second half shipments but also to mitigate the
impact of longer material lead times. Net debt at the half year was $83.3m
(FY21: $55.9m), which includes lease liabilities of $26.7m (FY21: $29.1m).
Excluding lease liabilities, net debt was $56.6m (FY21 $26.8m). The increase
in net debt is principally due to shareholder returns from the dividend and
share buyback programme plus some continued build-up of working capital and
cash outflow relating to the armor business.
Net pension liabilities at the half year were $28.7m, down 58.0% since 02
October 2021 principally due to the change in liability discount rate
assumption, based on current rates. Based on the deficit recovery plan agreed
following the 31 March 2019 actuarial valuation, the Group will make payments
of $4.5m in FY22 and $4.7m in FY23 in respect of deficit recovery plan
payments and scheme expenses. The next triennial valuation is now underway,
based on the balance at the half year end, and the outcome of the process is
expected in May 2023.
DIVIDENDS AND SHARE BUY-BACK
The Board has declared an interim dividend of 14.3c per ordinary share (HY21:
14.3c) reflecting confidence in the medium and long-term prospects of the
Group. There remains a range of possible out-turns for full year performance,
and the annual dividend will be determined after the full year closes. The
interim dividend will be paid on 2 September 2022 to shareholders on the
register at close of business on 5 August 2022. The dividend amount will be
converted into pounds sterling for payment at the prevailing exchange rate
prior to payment.
Having executed the first half of the share buy-back, announced in January,
the Board have decided to put the second half on hold to enable further
organic investment to meet elevated demand levels and to ensure leverage
stability
BOARD UPDATE
After 5 years as CEO and 19 years with the company, Paul will be stepping down
as CEO at the end of this financial year. Beyond this date, he has agreed to
make himself available to support the transition to a new CEO. A search will
be initiated to identify a successor and the Board will update the market at
the appropriate time.
OUTLOOK
The opening order book of $111m provides good visibility into H2. A very
strong macro demand environment drives medium-term confidence, but volatility
of funding and timing of customer orders gives rise to risk to the H2 outlook
on revenue mix. In the short-term, the situation remains dynamic and complex,
such that order visibility is reduced and consequently we are taking a more
cautious view. This revenue mix risk flows to margin expectations for the
remainder of the current year.
The work we have done in the last 2-3 months to protect ourselves against
extended supply chain lead times leaves us in good stead to capitalise on the
revenue opportunities as orders flow.
We expect a benefit in H2 of c. $3-4m from the savings that will be delivered
from the already established $15m savings programme. This will mitigate the
costs of inefficiencies that impacted H1, although effects of rising inflation
are expected to present a headwind through the second half. As a consequence
of the cost savings, we continue to expect EBITDA margin improvement H2-on-H1,
with the scale of this improvement dictated by orders yet to be won. Working
capital and capital expenditure will continue to be tightly managed through
the balance of the year.
The armor business will remain loss-making until revenues commence on
finalisation of testing on the DLA ESAPI product, expected before the end of
this financial year. As such, it will be loss-making for the year as a whole.
In the medium-term, we have a significant opportunity given the expansion of
demand for our products. We are carefully considering how to manage that
demand in a disciplined way, to support our customers while optimising
returns.
Our world-leading products and solutions have a key role to play in protecting
service personnel in an increasingly unstable environment, and we have
confidence in delivering growth into the medium and long-term.
Paul McDonald Rich Cashin
Chief Executive Officer Chief Financial Officer
23 May 2022
23 May 2022
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that this condensed consolidated interim financial
information has been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting' as adopted by the United Kingdom,
and that the interim management report herein includes a true and fair review
of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the first
six months and their impact on the condensed consolidated interim financial
information, and a description of the principal risks and uncertainties for
the remaining six months of the financial year; and
· material related party transactions in the first six months and any
material changes in the related party transactions described in the last
annual report.
· A true and fair view of the assets, liabilities, financial position
and profit or loss of the undertakings included in the consolidation.
Miles Ingrey-Counter
Company Secretary
23 May 2022
FORWARD-LOOKING STATEMENTS
Certain statements in this half year report are forward‐looking. Although
the Group believes that the expectations reflected in these forward‐looking
statements are reasonable, we can give no assurance that these expectations
will prove to have been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward‐looking statements.
We undertake no obligation to update any forward‐looking statements whether
as a result of new information, future events or otherwise.
COMPANY WEBSITE
The half year report is available on the Company's website at
https://www.avon-protection-plc.com/ (https://www.avon-protection-plc.com/) .
The maintenance and integrity of the website is the responsibility of the
Directors. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
INDEPENDENT REVIEW REPORT TO AVON PROTECTION PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half yearly financial report for the 26-week period ended 02
April 2022 which comprises the Consolidated Statement of Comprehensive Income,
Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated
Statement of Changes in Equity and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half yearly
financial report for the 26-week period ended 02 April 2022 is not prepared,
in all material respects, in accordance with IAS 34 Interim Financial
Reporting as adopted for use in the U.K. and the Disclosure Guidance and
Transparency Rules ("the DTR") of the U.K.'s Financial Conduct Authority ("the
U.K. FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (U.K. and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the U.K.. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
We read the other information contained in the half yearly financial report
and consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (U.K.) and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
Whilst the Company has previously produced a half yearly report containing a
condensed set of financial statements, those financial statements have not
previously been subject to a review by an independent auditor. As a
consequence, the review procedures set out above have not been performed in
respect of the comparative period for the 27-week period ended 03 April 2021.
Directors' responsibilities
The half yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half yearly financial report in accordance with the DTR of the U.K. FCA.
The latest annual financial statements of the group were prepared in
accordance with International Financial Reporting Standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union and in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and the next annual financial
statements will be prepared in accordance with U.K.-adopted international
accounting standards. The directors are responsible for preparing the
condensed set of financial statements included in the half yearly financial
report in accordance with IAS 34 as adopted for use in the U.K.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half yearly financial report based on our
review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
U.K. FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Andrew Campbell-Orde
for and on behalf of KPMG LLP
Chartered Accountants
66 Queen Square
Bristol
BS1 4BE
23 May 2022
Consolidated Statement of Comprehensive Income for the 26 weeks ended 02 April
2022
26 weeks to 02 April 2022 27 weeks to 03 April 2021
(restated) (1, 2)
Adjusted Adjustments Total Adjusted Adjustments Total
$m $m $m $m $ $
m m
Note (Note 2.1) (
N
o
t
e
2
.
1
)
Continuing operations
Revenue 2.2 121.9 - 121.9 122.0 - 122.0
Cost of sales (87.6) - (87.6) (83.6) (2.4) (86.0)
Gross profit 34.3 - 34.3 38.4 (2.4) 36.0
Selling and distribution costs (12.8) - (12.8) (10.7) - (10.7)
General and administrative expenses (22.7) (9.5) (32.2) (15.2) (6.7) (21.9)
Operating (loss)/profit (1.2) (9.5) (10.7) 12.5 (9.1) 3.4
Finance costs 4.3 (1.6) (1.3) (2.9) (1.5) (1.5) (3.0)
(Loss)/profit before taxation (2.8) (10.8) (13.6) 11.0 (10.6) 0.4
Taxation 2.5 0.6 2.3 2.9 (2.3) 2.4 0.1
(Loss)/profit for the period from continuing operations (2.2) (8.5) (10.7) 8.7 (8.2) 0.5
Discontinued operations
Loss from discontinued operations 2.3 - (1.2) (1.2) - (1.4) (1.4)
Loss for the period (2.2) (9.7) (11.9) 8.7 (9.6) (0.9)
( )
(1) The comparatives for the 27 weeks to 03 April 2021 have been restated to
reflect reclassification and phasing adjustments between H1 and H2 in the
prior year as disclosed in note 5.6.
(2) The Group previously reported that the reporting date for the comparable
period was the 31 March 2021 and for the latest annual financial statements
was 30 September 2021, being the Company's accounting reference date. The
actual date to which the financial statements were drawn up was 03 April 2021
and 02 October 2021 respectively and therefore the headings in the interim
financial statements have been amended accordingly. This has no impact on
previously reported numbers.
Consolidated Statement of Comprehensive Income for the 26 weeks ended 02 April
2022 (Continued)
Note 26 weeks to 27 weeks to
02 April 2022 03 April
2021
$m (restated) (1, 2)
$m
Loss for the period (11.9) (0.9)
Other comprehensive income/(expense)
Items that are not subsequently reclassified to the income statement
Remeasurement profit/(loss) recognised on retirement benefit scheme 5.2 36.4 (9.0)
Deferred tax relating to retirement benefit scheme (9.3) 1.8
Items that may be subsequently reclassified to the income statement
Net exchange differences offset in reserves 0.4 2.4
Other comprehensive income/(expense) for the period 15.6 (4.8)
Total comprehensive income/(expense) for the period 3.7 (5.7)
Earnings per share (cents)
Basic (38.8c) (2.9c)
Diluted (38.5c) (2.9c)
Earnings per share from continuing operations (cents)
Basic (34.9c) 1.6c
Diluted (34.6c) 1.6c
Consolidated Balance Sheet
Note As at As at
02 April 02 Oct
2022 2021
$m $m (2)
Assets
Non-current assets
Intangible assets 3.1 175.9 181.0
Property, plant and equipment 3.2 43.7 48.6
Deferred tax assets 30.2 40.2
249.8 269.8
Current assets
Inventories 73.0 62.3
Trade and other receivables 33.9 44.7
Current tax receivables 10.6 7.8
Cash and cash equivalents 12.6 14.1
130.1 128.9
Liabilities
Current liabilities
Borrowings 4.1 4.1 4.0
Trade and other payables 41.3 40.0
Provisions for liabilities and charges 5.1 3.3 3.5
48.7 47.5
Net current assets 81.4 81.4
Non-current liabilities
Borrowings 4.1 91.8 66.0
Deferred tax liabilities 6.1 6.1
Retirement benefit obligations 5.2 28.7 68.3
Provisions for liabilities and charges 5.1 2.9 5.4
129.5 145.8
Net assets 201.7 205.4
Shareholders' equity
Ordinary shares 4.4 50.3 50.3
Share premium account 4.4 54.3 54.3
Other reserves (14.6) (15.0)
Retained earnings 111.7 115.8
Total equity 201.7 205.4
Consolidated Cash Flow Statement
26 weeks to 27 weeks to 03 April
02 April 2021
2022 (restated)(1, 2)
Note $m $m
Cash flow from operating activities
Cash flow from continuing operations 5.3 4.4 8.7
Cash flow used in discontinued operations 5.3 (0.6) (1.6)
Cash flow from operations 3.8 7.1
Retirement benefit deficit recovery contributions 5.2 (2.6) -
Tax receipts/(payments) 0.6 (11.0)
Net cash flow from / (used in) operating activities 1.8 (3.9)
Cash flow used in investing activities
Proceeds from disposal of discontinued operations - 3.4
Costs of divestment - (0.6)
Purchase of property, plant and equipment 3.2 (2.9) (2.1)
Capitalised development costs and computer software 3.1 (2.9) (12.6)
Acquisition of business 5.5 (3.2) (130.9)
Net cash used in investing activities (9.0) (142.8)
Cash flow used in financing activities
Proceeds from loan drawdowns 4.2 33.9 11.0
Loan repayments 4.2 (5.6) (39.5)
Finance costs paid in respect of bank loans and overdrafts 4.3 (0.8) (0.3)
Finance costs paid in respect of leases 4.3 (0.5) (0.2)
Repayment of lease liability (2.1) (2.0)
Dividends paid to shareholders 4.5 (9.1) (7.7)
Purchase of own shares - Long-term incentive plan 4.4 - (4.3)
Purchase of own shares - Share buyback programme 4.4 (10.1) -
Net cash from / (used in) financing activities 5.7 (43.0)
Net decrease in cash, cash equivalents and bank overdrafts (1.5) (189.7)
Cash, cash equivalents, and bank overdrafts at beginning of the period 14.1 187.2
Effects of exchange rate changes - 0.6
Cash, cash equivalents and bank overdrafts at end of the period 12.6 (1.9)
(1) The comparatives for the 27 weeks to 03 April 2021 have been restated to
reflect reclassification and phasing adjustments between H1 and H2 in the
prior year as disclosed in note 5.6.
(2) The Group previously reported that the reporting date for the comparable
period was the 31 March 2021 and for the latest annual financial statements
was 30 September 2021, being the Company's accounting reference date. The
actual date to which the financial statements were drawn up was 03 April 2021
and 02 October 2021 respectively and therefore the headings in the interim
financial statements have been amended accordingly. This has no impact on
previously reported numbers.
Consolidated Statement of Changes in Equity
Note Share Share premium Other reserves Retained earnings (restated)(1) Total equity
capital (restated)(1)
$m $m $m $m $m
At 26 September 2020 50.3 54.3 (15.6) 140.5 229.5
Loss for the period (restated)(1) - - - (0.9) (0.9)
Net exchange differences offset in reserves - - 2.4 - 2.4
Actuarial loss recognised on retirement benefit - - - (9.0) (9.0)
scheme
Deferred tax relating to retirement benefit scheme - - - 1.8 1.8
Total comprehensive income for the period (restated)(1) - - 2.4 (8.1) (5.7)
Dividends paid 4.5 - - - (7.7) (7.7)
Deferred tax relating to employee share scheme - - - (1.8) (1.8)
Own shares acquired - Long-term incentive plan 4.4 - - - (4.3) (4.3)
Fair value of share-based payments - - - 0.7 0.7
At 03 April 2021 (restated) (1) 50.3 54.3 (13.2) 119.3 210.7
Loss for the period (restated)(1) - - - (24.7) (24.7)
Net exchange differences offset in reserves - - (1.8) - (1.8)
Deferred tax relating to other temporary differences - - - 0.3 0.3
Actuarial gain recognised on retirement benefit scheme - - - 25.2 25.2
Deferred tax relating to retirement benefit scheme - - - (4.9) (4.9)
Deferred tax relating to change in tax rates - - - 4.1 4.1
Total comprehensive income for the period (restated)(1) - - (1.8) - (1.8)
Dividends paid 4.5 - - - (4.4) (4.4)
Fair value of share-based payments - - - (0.2) (0.2)
Current tax relating to employee share schemes - - - 1.2 1.2
Deferred tax relating to employee share schemes - - - (0.1) (0.1)
At 02 October 2021 50.3 54.3 (15.0) 115.8 205.4
Loss for the period - - - (11.9) (11.9)
Net exchange differences offset in reserves - - 0.4 - 0.4
Actuarial loss recognised on retirement benefit scheme - - - 36.4 36.4
Deferred tax relating to retirement benefit scheme - - - (9.3) (9.3)
Total comprehensive income for the period - - 0.4 15.2 15.6
Dividends paid 4.5 - - - (9.1) (9.1)
Own shares acquired - Share buyback programme 4.4 - - - (10.7) (10.7)
Fair value of share-based payments - - - 0.5 0.5
At 02 April 2022 50.3 54.3 (14.6) 111.7 201.7
(1) H1 and H2 losses in the prior year been restated to reflect phasing
adjustments as disclosed in note 5.6.
Other reserves consist of the capital redemption reserve of $0.6m (03 April
2021: $0.6m, 02 October 2021: $0.6m) and the translation reserve of ($15.2m)
(03 April 2021: ($13.8m), 02 October 2021: ($15.6m).
NOTES TO THE FINANCIAL STATEMENTS
Section 1: General Information and Basis of Preparation
The Company is a public limited Company incorporated in England and Wales and
domiciled in England with its ordinary shares being traded on the London Stock
Exchange. The address of its registered office is Hampton Park West, Semington
Road, Melksham, Wiltshire, SN12 6NB.
This unaudited condensed consolidated interim financial information was
approved for issue on 24 May 2022.
The financial period presents the 26 weeks ended 2 April 2022 (prior financial
period 27 weeks ended 3 April 2021, prior financial year 53 weeks ended 2
October 2021). The Company previously reported that the reporting date for the
comparable period was the 31 March 2021 and for the latest annual financial
statements was 30 September 2021, being the Company's accounting reference
date. The actual date to which the financial statements were drawn up was 03
April 2021 and 02 October 2021 respectively and therefore the headings in the
interim financial statements have been amended accordingly. This has no impact
on previously reported numbers.
The financial information set out in this document does not constitute the
Group's statutory accounts for the period or the full year. Statutory accounts
for the previous financial year were approved by the Board of Directors on 14
December 2021 and delivered to the Registrar of Companies.
The report of the auditors on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain any statement under
Section 498 of the Companies Act 2006.
This condensed consolidated interim financial information for the 26 weeks
ended 02 April 2022 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with IAS 34,
'Interim financial reporting' as adopted by the United Kingdom. These interim
financial results should be read in conjunction with the annual financial
statements for the year ended 02 October 2021, which have been prepared in
accordance with International Financial Reporting Standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union and in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006.
The financial information presented in this Interim Report has been prepared
in accordance with the accounting policies expected to be used in preparing
the 2022 Annual Report and Accounts which do not differ significantly from
those used in the preparation of the 2021 Annual Report and Accounts.
The Directors have prepared a going concern assessment covering the 12 month
period from the date of approval of these interim financial results. The
assessment indicates that the Group will have sufficient funds to meet its
liabilities as they fall due for that period, and therefore the interim
financial results have been prepared on a going concern basis.
As part of their assessment, the Directors considered the Group's base case,
and a severe but plausible downside scenario involving a 22% decline in
forecast bank-determined adjusted EBITDA against the base case, covering some
potential delays on revenue delivery as well as the potential for further
supply chain and manufacturing challenges. Even in this severe downside
scenario, the assessment indicates that the Group will have sufficient funds
to meet its liabilities as they fall due, and will continue to comply with its
loan covenants, throughout the forecast period. The Group has committed RCF
facilities of $200 million and related loan covenants include a limit of 3.0
times for the ratio of net debt, excluding lease liabilities, to
bank-determined adjusted EBITDA (leverage).
The recent developments in Ukraine have led to an increased demand for the
Group's product range, which will influence the order book and revenue
expectations. Given the business remains robust with good liquidity and
revenue visibility, the Directors are confident that the Group will continue
to operate on a going concern basis over the 12 month assessment period.
Section 2: Results for the Period
2.1 Adjusted performance measures
The Directors assess the operating performance of the Group based on adjusted
measures of EBITDA, operating profit, finance costs, taxation and earnings per
share (note 2.4), as well as other measures not defined under IFRS including
orders received, closing order book, EBITDA margin, cash conversion, and net
debt excluding lease liabilities (note 4.2). These measures are collectively
described as Adjusted Performance Measures (APMs).
The Directors believe that the APMs provide a useful comparison of business
trends and allow investors to understand the underlying performance of the
Group. The APMs exclude exceptional items considered unrelated to the
underlying trading performance of the Group and discontinued operations. APMs
also include constant currency and organic equivalent metrics. The term
adjusted is not defined under IFRS and may not be comparable with similarly
titled measures used by other companies.
Adjustments to operating profit
26 weeks to 27 weeks to
02 April 03 April
2022 2021
(restated)(1)
$m $m
Operating (loss)/profit (10.7) 3.4
Amortisation of acquired intangibles 3.5 7.0
Restructuring costs 1.4 -
Transaction costs 0.8 -
Impairment of non-current assets 3.8 -
Release of contingent consideration - (2.2)
Acquisition related costs - 1.9
Inventory fair value adjustments - 2.4
Adjusted operating (loss)/profit (1.2) 12.5
Depreciation 4.7 4.5
Other amortisation charges 2.7 2.1
Adjusted EBITDA 6.2 19.1
Amortisation charges for acquired intangible assets of $3.5m (HY21: $7.0m) are
considered exceptional as they do not change each period based on underlying
business trading and performance.
Restructuring costs related to the overhead reduction programme were $1.4m
(HY21: $nil). These costs include a $0.4m right of use asset impairment
relating to the closure of one of our U.S. offices and $0.2m of professional
fees relating to the strategic review of the armor business. These costs are
considered exceptional as they relate to a specific programme which does not
form part of the underlying business trading and performance.
Transaction costs of $0.8m (HY21: $nil) related to a potential sale of the
armor business. This opportunity is no longer considered to be in the best
interest of shareholders. These costs are considered exceptional as they are
specific to the wind down of the armor business and do not form part of the
underlying business trading and performance.
Impairment reviews for the Group's non-current assets resulted in $3.8m
exceptional impairment losses (HY21: $nil) as the carrying value of certain
cash-generating units exceeded estimated recoverable amounts. Further details
are provided in note 3.1. The impairment losses are significant items
resulting from changes in assumptions for future recoverable amounts. As such
they are considered unrelated to 2022 trading performance.
In HY21 a gain of $2.2m was recognised to reduce the net present value of the
contingent consideration payable to 3M as a result of rephased revenue
expectations from the DLA ESAPI body armor contract. As such, they are
considered unrelated to HY21 trading performance.
HY21 Acquisition costs of $1.9m related to the acquisition of Team Wendy and
the 3M ballistic protection business. HY21 Inventory fair value adjustments of
$2.4 million related to Team Wendy acquired inventory adjustments arising on
acquisition. These costs are considered exceptional as they do not relate to
the trading performance of HY21.
Adjustments to finance costs 26 weeks to 27 weeks to 03 April 2021
02 April 2022
$m $m
(restated)(1)
Finance costs (2.9) (3.0)
U.K. defined benefit pension scheme net interest expense 0.8 0.4
Contingent consideration unwind discount 0.5 1.1
Adjusted finance costs (1.6) (1.5)
$0.8m (HY21: $0.4m) net interest expense on the U.K. defined benefit pension
scheme liability is treated as exceptional given the scheme relates to
employees employed prior to 31 January 2003 and was closed to future accrual
of benefits on 1 October 2009 (note 5.2).
$0.5m (HY21: $1.1m) related to unwind of discounting on contingent
consideration from the 3M ballistic acquisition.
Cash conversion
Cash conversion excludes the impact of exceptional items from operating cash
flow and EBITDA.
26 weeks to 27 weeks to
02 April 2022 03 April 2021
$m $m
(restated)(1)
Cash flow from continuing operations before exceptional items (note 5.3) 5.2 13.1
Adjusted EBITDA 6.2 19.1
Cash conversion 83.9% 68.5%
Adjustments to taxation
Adjustments to taxation represent the tax effects of the adjustments to
operating profit and finance
costs. Adjusting items do not have significantly different tax rates, with the
overall effective rate of 21%
(HY21: 23%) approximating statutory rates applicable in the U.S. and U.K.
Organic constant currency reporting
Organic constant currency measures remove the impact of acquisitions and
changes in exchange rates. Constant currency measures are calculated by
translating the prior period at HY22 exchange rates.
As average USD/GBP rates applicable in each period were very similar (note
5.4), the impact of changes in exchange rates was less than $0.1m for HY21
Income Statement constant currency period measures. There was a currency
impact on orders received due to recognition phasing.
The armor business transacts entirely in USD meaning there is no currency
impact for this operating segment.
26 weeks to 27 weeks to
Respiratory and Head Protection 02 April 2022 (excluding acquisitions) 03 April 2021 (constant currency, restated(1))
Orders received $110.7m $167.3m
Closing order book $110.7m $130.7m
Revenue $116.8m $118.1m
Adjusted(1) EBITDA $11.8m $22.5m
Adjusted(1) operating profit $4.6m $16.8m
Adjusted(1) profit before tax $3.1m $15.5m
Adjusted(1) basic earnings per share 7.8c 40.1c
(1) The comparatives for the 27 weeks to 03 April 2021 have been restated to
reflect reclassification and phasing adjustments between H1 and H2 in the
prior year as disclosed in note 5.6.
2.2 Operating segments
The Group Executive team is responsible for allocating resources and assessing
performance of its operating segments. Operating segments are therefore
reported in a manner consistent with the internal reporting provided to the
Group Executive team.
The Group has, following a reorganisation, two different operating and
reportable segments, these being the core respiratory & head protection
business and the armor business which is in the process of being wound-down.
In the prior year, the sole reportable segment was made up by two operating
segments, Team Wendy and Avon Protection. Avon Protection has been
disaggregated into armor and respiratory & head protection following the
decision to close the armor business. In HY22 Team Wendy has been fully
integrated into the wider respiratory & head protection segment.
26 weeks to 02 April 2022
Armor Respiratory & Head protection Adjustments & discontinued Total
(note 2.1 & 2.3)
$m $m $m $m
Revenue 2.5 119.4 - 121.9
Adjusted EBITDA (6.3) 12.5 - 6.2
Depreciation - (4.7) - (4.7)
Other amortisation charges - (2.7) - (2.7)
Amortisation of acquired intangibles - - (3.5) (3.5)
Other adjusting items (note 2.1) - - (6.0) (6.0)
Operating profit/(loss) (6.3) 5.1 (9.5) (10.7)
Finance costs (0.1) (1.5) (1.3) (2.9)
Profit/(loss) before taxation (6.4) 3.6 (10.8) (13.6)
Taxation 1.4 (0.8) 2.3 2.9
Profit/(loss) for the period from continuing operations (5.0) 2.8 (8.5) (10.7)
Loss from discontinued operations - - (1.2) (1.2)
Profit/(loss) for the period (5.0) 2.8 (9.7) (11.9)
Total assets 18.2 361.7 - 379.9
Basic earnings per share (cents) (16.3c) 9.1c (31.6c) (38.8c)
Diluted earnings per share (cents) (16.2c) 9.1c (31.4c) (38.5c)
27 weeks to 03 April 2021 (restated)(1)
Armor Respiratory & Head protection Adjustments & discontinued Total
(note 2.1 & 2.3)
$m $m $m $m
Revenue 3.9 118.1 - 122.0
Adjusted EBITDA (3.4) 22.5 - 19.1
Depreciation (0.9) (3.6) - (4.5)
Other amortisation charges - (2.1) - (2.1)
Amortisation of acquired intangibles - - (7.0) (7.0)
Other adjusting items (note 2.1) - - (2.1) (2.1)
Operating profit/(loss) (4.3) 16.8 (9.1) 3.4
Finance costs (0.2) (1.3) (1.5) (3.0)
Profit/(loss) before taxation (4.5) 15.5 (10.6) 0.4
Taxation 0.9 (3.2) 2.4 0.1
Profit/(loss) for the period from continuing operations (3.6) 12.3 (8.2) 0.5
Loss from discontinued operations - - (1.4) (1.4)
Profit/(loss) for the period (3.6) 12.3 (9.6) (0.9)
Total assets 55.3 364.8 - 420.1
Basic earnings per share (cents) (11.7c) 40.1c (31.3c) (2.9c)
Diluted earnings per share (cents) (11.6c) 39.8c (31.1c) (2.9c)
(1) The comparatives for the 27 weeks to 03 April 2021 have been restated to
reflect reclassification and phasing adjustments between H1 and H2 in the
prior year as disclosed in note 5.6. Comparatives have also been aligned with
the new segmental reporting structure, as outlined above.
Revenue analysed by line of business
02 April 2022 03 April 2021(1)
Head Protection Total Head Protection Total
Respiratory $m Armor $m Respiratory $m $m Armor $m
$m $m $m
U.S. DOD 24.0 19.5 2.5 46.0 48.4 16.0 3.9 68.3
Commercial Americas 17.7 13.0 - 30.7 18.7 9.3 - 28.0
U.K. & International 41.1 4.1 - 45.2 18.2 7.5 - 25.7
Total 82.8 36.6 2.5 121.9 85.3 32.8 3.9 122.0
(1) Following a re-organisation and further integration of Team Wendy, the
Group classifies revenue into U.S. DOD (comprising all U.S. military revenue),
Commercial Americas (which includes U.S. first responder plus all revenue from
other parts of the Americas), and U.K. & International ("U.K. & Intl")
(comprising all revenue outside the continents of America). Prior year figures
have been re-classed to be presented on a consistent basis to current year
classifications.
Revenue analysed by geographic region by origin
26 weeks to 27 weeks to
02 April 03 April
2022 2021
$m $m
Europe 37.4 13.6
U.S. 84.5 108.4
Total 121.9 122.0
( )
2.3 Discontinued Operations
In September 2020 the Group divested the entire milkrite | InterPuls business.
As part of the sale and purchase agreement, the Group entered into a
Manufacturing Service Agreement whilst arrangements were made to relocate
manufacturing equipment from a previously shared U.K. facility. These are
expected to conclude in FY23. The Group also entered into agreements to
provide certain other information technology and administrative services under
a 12-month Transitional Services Agreement which have now concluded. As the
activities under these agreements are not part of the continuing operations of
the Group, the revenue and costs associated with these agreements have been
classified as discontinued operations.
26 weeks to 27 weeks to
02 April 03 April
2022 2021
$m $m
Revenue 1.7 2.0
Cost of Sales (3.2) (2.8)
Gross Loss (1.5) (0.8)
General and administrative expenses - (1.0)
Operating loss (1.5) (1.8)
Finance costs - -
Loss before taxation (1.5) (1.8)
Taxation 0.3 0.4
Loss from discontinued operations (1.2) (1.4)
Basic earnings per share (cents) (3.9c) (4.6c)
Diluted earnings per share (cents) (3.9c) (4.6c)
2.4 Earnings Per Share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the period, excluding those held as treasury shares (note 4.4).
The company has dilutive potential ordinary shares in respect of the
Performance Share Plan. Reconciliations of the earnings and weighted average
number of shares used in calculations of earnings per share are set out below:
Weighted average number of shares
26 weeks to 27 weeks to
02 April 03 April
2022 2021
Weighted average number of ordinary shares in issue used in basic calculations 30,644 30,649
(thousands)
Potentially dilutive shares (weighted average) (thousands) 284 246
Fully diluted number of ordinary shares (weighted average) (thousands) 30,928 30,895
2.5 Taxation
26 weeks to 27 weeks to
02 April 03 April
2022 2021
(restated)
$m $m
(Loss)/profit before taxation from continuing operations (13.6) 0.4
Tax charge/(credit) at the average standard U.K. rate of 19.0% (HY21: 19.0%) (2.6) 0.1
Differences in overseas tax rates (0.2) -
Permanent differences (0.1) (0.2)
Tax credit (2.9) (0.1)
The effective tax rate for the period is 21% (HY21: 25%).
Section 3: Non-current assets
3.1 Intangible assets
Acquired intangibles Development expenditure Computer software
Goodwill Total
Net book amounts $m $m $m $m $m
At 02 October 2021 88.8 58.9 23.2 10.1 181.0
Additions - - 2.7 0.2 2.9
Exceptional impairments - - (1.6) - (1.6)
Amortisation - (3.5) (2.1) (0.6) (6.2)
Exchange differences - - (0.2) - (0.2)
At 02 April 2022 88.8 55.4 22.0 9.7 175.9
The carrying amounts of non-financial assets have been reviewed at the interim
reporting date to determine whether there is any indication of impairment. For
assets that show indicators of impairment, this includes estimation of the
recoverable amount which is deemed to be value in use. Assets are tested at
CGU level (or at group of CGUs level in the case of goodwill) as the Directors
believe CGUs generate largely independent cash inflow.
Value in use was determined by discounting the future cash flow to be
generated from the continuing use of the CGU.
As a result of the review for the half year to 02 April 2022, the following
impairment charges were identified:
· General Service Respirator (GSR), impaired by $2.9m due to a change
made on costing assumptions and forecasted cash flow periods, driven by
changes in market factors ($0.7m development expenditure, $2.2m plant and
machinery).
· Other respiratory asset development expenditure, impaired by $0.7m
due to market factors.
· Armor-specific development expenditure, impaired by $0.2m for a small
number of reclassified assets.
Following the impairment charges recognised, recoverable amounts were equal to
carrying amounts.
For the GSR the following key assumptions were used as part of the value in
use analysis:
· A pre-tax discount rate of 32% (post-tax discount rate of 7.4%)
· Cashflow over a period of 6.5 years, including an assumption of
contractual extensions and commercial gross profit margins
Sensitivity analysis has shown that if gross profit margins improved by 8% in
additional contract periods, the impairment would be reduced by approximately
$0.2m.
Other CGUs were not tested for impairment because there were no impairment
indicators at 02 April 2022.
3.2 Property, plant and equipment
Right of use Plant and machinery Leasehold Improvements
Freeholds assets $m $m Total
$m $m $m
Net book amounts
At 02 October 2021 1.8 15.0 28.3 3.5 48.6
Additions - 0.2 2.9 - 3.1
Exceptional impairments (note 3.1) - (0.4) (2.2) - (2.6)
Depreciation charge (0.1) (1.7) (2.7) (0.2) (4.7)
Exchange differences - (0.2) (0.4) (0.1) (0.7)
At 02 April 2022 1.7 12.9 25.9 3.2 43.7
The $0.4m right of use asset impairment relates to the closure of one of our
U.S. offices under the overhead reduction programme. The $2.2m plant and
machinery impairment is detailed in note 3.1.
3.3 Capital commitments
As at As at
02 April 02 Oct
2022 2021
$m $m
Capital commitments 1.4 2.8
Capital commitments represent the amount contracted in respect of non-current
assets at the end of the period for which no provision has been made in the
financial statements
Section 4: Funding
4.1 Borrowings
As at As at
02 April 02 Oct
2022 2021
$m $m
Current
Lease liabilities 4.1 4.0
4.1 4.0
Non-Current
Bank Loans 69.2 40.9
Lease liabilities 22.6 25.1
91.8 66.0
Total Group borrowings 95.9 70.0
The Group has the following committed facilities:
As at As at
02 April 02 Oct
2022 2021
$m $m
Total undrawn committed borrowing facilities 135.8 164.1
Bank loans and overdrafts utilised 69.2 40.9
Total Group committed facilities 205.0 205.0
The Group has a revolving credit facility (RCF) with a total commitment of
$200 million across six lenders with an accordion option of an additional $50
million. The facility matures on 8 September 2024 with a one-year extension
option to 8 September 2025. In addition to the revolving credit facility, the
Group's U.S. operations have access to a $5.0 million overdraft facility.
The RCF is subject to financial covenants measured on a bi-annual basis. These
include a limit of 3.0 times for the ratio of net debt, excluding lease
liabilities, to bank-defined adjusted EBITDA (leverage). The Group was in
compliance with all financial covenants during the current and prior period.
The RCF is floating rate priced on the U.S. dollar secured overnight financing
rate (SOFR) plus a margin of 1.45-2.35% depending on leverage. The Group has
provided the lenders with a negative pledge in respect of certain shares in
Group companies.
4.2 Analysis of net debt
As at Cash flow $m Non-cash movements $m Exchange movements $m As at
02 Oct 2021 02 April 2022 $m
$m
Cash at bank and in hand 14.1 (1.5) - - 12.6
Bank loans (40.9) (28.3) - - (69.2)
Interest due on bank loans - 0.8 (0.8) - -
Net debt excluding lease liabilities (26.8) (29.0) (0.8) - (56.6)
Lease liabilities (29.1) 2.6 (0.5) 0.3 (26.7)
Net debt (55.9) (26.4) (1.3) 0.3 (83.3)
Cash flow relating to bank loans consisted of $33.9m proceeds from drawdowns,
less $5.6m repayments.
4.3 Finance costs
26 weeks to 02 April 27 weeks to
2022 03 April
2021
$m (restated)(1)
$m
Interest payable on bank loans and overdrafts (0.8) (0.6)
Interest payable in respect of leases (0.5) (0.6)
Amortisation of finance fees (0.3) (0.3)
U.K. defined benefit pension scheme net interest expense (0.8) (0.4)
Contingent Consideration unwind discount (0.5) (1.1)
Finance costs (2.9) (3.0)
(1) The comparatives for the 27 weeks to 03 April 2021 have been restated to
reflect reclassification and phasing adjustments between H1 and H2 in the
prior year as disclosed in note 5.6.
4.4 Equity
Share Capital
No. of shares Ordinary shares Share premium No. of shares Ordinary shares Share premium
as at as at as at as at as at as at
02 April 2022 02 April 02 April 02 Oct 2021 02 Oct 2021 02 Oct
2022 2022 2021
$m $m $m $m
Called up, allotted and fully paid ordinary shares of £1 each
At the beginning of the period 31,023,292 50.3 54.3 31,023,292 50.3 54.3
At the end of the period 31,023,292 50.3 54.3 31,023,292 50.3 54.3
Ordinary shareholders are entitled to receive dividends and to vote at
meetings of the Company.
Own shares held - Share Buyback Programme
26 weeks to Period ended
02 April 02 Oct
2022 2021
No. of shares No. of shares
Opening balance - -
Acquired in the period 658,161 -
Closing balance 658,161 -
In January 2022 the Group commenced a share buyback programme in respect of
its ordinary shares up to a maximum consideration of £18.5m. Dividends on the
shares have been waived. Purchased shares under the programme are held at cost
as treasury shares and deducted from shareholders' equity.
In the 26 weeks to 02 April 2022 658,161 shares have been acquired under the
share buyback programme.
Own shares held - Long-Term Incentive Plan
26 weeks to Period ended
02 April 02 Oct
2022 2021
No. of shares No. of shares
Opening balance 334,933 398,560
Acquired in the period - 95,855
Disposed on exercise of options (73,219) (159,482)
Closing balance 261,714 334,933
These shares are held in trust in respect of awards made under the Avon
Protection Long-Term Incentive Plan. Dividends on the shares have been waived.
The market value of shares held in trust at 02 April 2022 was $4.5m (02
October 2021: $8.8m). The shares are held at cost as treasury shares and
deducted from shareholders' equity.
In December 2021 73,219 shares vested under the Avon Protection Long-Term
Incentive Plan and were distributed to employees (Year ended 02 October 2021:
159,482 shares vested and distributed to employees in January 2021).
In the 53 weeks ended 02 October 2021 95,855 shares were acquired by the
trust.
4.5 Dividends
On 28 January 2022, the shareholders approved a final dividend of 30.6c per
qualifying ordinary share in respect of the year ended 02 October 2021. This
was paid on 11 March 2022 utilising $9.1m of shareholders' funds.
The Board of Directors has declared an interim dividend of 14.3c (2021: 14.3c)
per qualifying ordinary share in respect of the year ending 01 October 2022.
This interim dividend will be paid in sterling at the prevailing exchange rate
prior to payment on 02 September 2022 to shareholders on the register at the
close of business on 05 August 2022. In accordance with accounting standards,
this dividend has not been provided for. It will be recognised in
shareholders' funds in the 52 weeks to 01 October 2022 and is expected to
utilise $4.4m (2021: $4.4m) of shareholders' funds.
Section 5: Other
5.1 Provisions for liabilities and charges
Property Obligations Contingent consideration Total
$m $m $m
Balance at 02 October 2021 2.9 6.0 8.9
Payments in the period - (3.2) (3.2)
Unwind of discount on provisions - 0.5 0.5
Balance at 02 April 2022 2.9 3.3 6.2
As at As at
02 April 02 Oct
2022 2021
Analysis of total provisions $m $m
Non-current 2.9 5.4
Current 3.3 3.5
Total provisions 6.2 8.9
Property obligations relate to leased premises of the Group which are subject
to dilapidation risks and are expected to be utilised within the next ten
years. Property provisions are subject to uncertainty in respect of any final
negotiated settlement of any dilapidation claims with landlords.
The purchase consideration in relation to the Helmets & Armor acquisition
included contingent consideration up to a maximum of $25.0m depending on the
outcome of certain tenders which were pending at the acquisition date and the
level of sales which were generated on these contracts if secured.
At the balance sheet date, the remaining contingent consideration is presented
as a provision with a fair value of $3.3m being the present value of the
future expected cashflow relating to the contract.
5.2 Defined benefit pension scheme
As at As at
02 April 02 Oct
2022 2021
$m $m
Net pension liability 28.7 68.3
Defined benefit pension scheme
The Group operated a contributory defined benefit plan to provide pension and
death benefits for the employees of Avon Protection plc and its Group
undertakings in the U.K. employed prior to 31 January 2003. The plan was
closed to future accrual of benefit on 1 October 2009 and has a weighted
average maturity of approximately 15 years. The assets of the plan are held in
separate trustee administered funds and are invested by professional
investment managers. The Trustee is Avon Rubber Pension Trust Limited, the
Directors of which are members of the plan. Three of the Directors are
appointed by the Company and two are elected by the members.
The funding of the plan is based on regular actuarial valuations. The most
recent finalised actuarial valuation of the plan was carried out at 31 March
2019 when the market value of the plan's assets was £335.8m. The fair value
of those assets represented 83% of the value of the benefits which had accrued
to members, after allowing for future increase in pensions.
During the period the Group made payments to the fund of $2.6m (HY21: $nil) in
respect of scheme expenses and deficit recovery plan payments. In accordance
with the deficit recovery plan agreed following the 31 March 2019 actuarial
valuation, the Group will make payments of $4.5m in FY22 and $4.7m in FY23 in
respect of deficit recovery plan payments and scheme expenses.
The defined benefit plan exposes the Group to actuarial risks such as
longevity risk, inflation risk and investment risk.
The Directors have confirmed no additional liability is required to be
recognised as a consequence of minimum funding requirements. The trustees have
no rights to wind up the scheme or improve benefits without Company consent.
An updated actuarial valuation for IAS 19 purposes was carried out by an
independent actuary at 02 April 2022 using the projected unit method.
Movement in net defined benefit liability
Defined benefit Defined benefit Net defined benefit
obligation asset liability
02 April 02 Oct 02 April 02 Oct 02 April 02 Oct
2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m
At 02 October/26 September (534.7) (526.3) 466.4 446.7 (68.3) (79.6)
Included in profit or loss
Administrative expenses (0.7) (1.2) - - (0.7) (1.2)
Past service cost - - - - - -
Net interest cost (5.3) (8.6) 4.5 7.3 (0.8) (1.3)
(6.0) (9.8) 4.5 7.3 (1.5) (2.5)
Included in other comprehensive income
Remeasurement gain:
- Actuarial gain/(loss) arising from:
- Demographic assumptions 0.2 (0.4) - - 0.2 (0.4)
- Financial assumptions 45.4 3.6 - - 45.4 3.6
- Experience adjustment (2.9) 7.3 - - (2.9) 7.3
- Return on plan assets excluding interest income - - (6.3) 5.7 (6.3) 5.7
42.7 10.5 (6.3) 5.7 36.4 16.2
Other
Contributions by the employer - - 2.6 2.9 2.6 2.9
Net benefits paid out 10.7 24.5 (10.7) (24.5) - -
FX gain/(loss) 16.3 (33.6) (14.2) 28.3 2.1 (5.3)
At 02 April/02 October (471.0) (534.7) 442.3 466.4 (28.7) (68.3)
Actuarial assumptions
The main financial assumptions used by the independent qualified actuaries to
calculate the liabilities under IAS 19 are set out below:
02 April 02 Oct
2022 2021
% p.a. % p.a.
Inflation (RPI) 3.85 3.55
Inflation (CPI) 3.05 2.75
Pension increases post August 2005 2.35 2.30
Pension increases pre August 2005 3.65 3.40
Discount rate for scheme liabilities 2.80 2.00
Plan assets
02 April 02 Oct
2022 2021
$m $m
Equities and other securities 168.8 180.7
Liability Driven Investment 121.5 122.9
Secured income fund 67.4 69.5
Infrastructure fund 64.6 67.6
Cash 20.0 25.7
Fair value of assets 442.3 466.4
Equity securities are valued using quoted prices in active markets where
available.
Liability Driven Investments relate to a level 2 pooled investment vehicle
which combines a series of LIBOR-earning cash deposits combined with contracts
to hedge interest rate and inflation risk. The LDI is valued using a Net Asset
Value published on the Irish Stock Exchange.
Holdings in unquoted securities and infrastructure funds are classified as
level 3 within the fair value hierarchy. Holdings unquoted securities are
valued at fair value which is typically the Net Asset Value provided by the
fund administrator at the most recent quarter end. Holdings in the
infrastructure fund are valued by an independent valuer using a model-based
valuation such as a discounted cash flow approach. The significant assumptions
used in the valuation are the discount rate and the expected cash flow, both
of which are subject to estimation uncertainty.
5.3 Cash flow from operations
26 weeks to 27 weeks to 03 April
02 April 2021 (restated)
2022
$m $m
Continuing operations
(Loss)/profit for the period (10.7) 0.5
Adjustments for:
Taxation (2.9) (0.1)
Depreciation 4.7 4.5
Amortisation of intangible assets 6.2 9.1
Impairments 4.2 -
Defined benefit pension scheme cost 0.7 0.4
Finance costs 2.9 3.0
Change in contingent consideration - (2.2)
Fair value of share-based payments 0.5 0.7
Acquisition costs expensed - 1.9
Restructuring costs expensed (excluding impairments) 1.0 -
Transaction costs expensed 0.8 -
Increase in inventories (10.9) (1.9)
Decrease/(increase) in receivables 10.6 (5.4)
(Decrease)/increase in payables and provisions (1.9) 2.6
Cash flow from continuing operations before exceptional items 5.2 13.1
Restructuring costs paid (0.8) -
Acquisition costs paid - (4.4)
Cash flow from continuing operations 4.4 8.7
Discontinued operations
Profit for the period (1.2) (1.4)
Adjustments for:
Taxation (0.3) (0.4)
(Increase)/decrease in inventories 0.2 -
Increase/(decrease) in payables and provisions 0.7 0.2
Cash flow from discontinued operations (0.6) (1.6)
Cash flow from operations 3.8 7.1
5.4 Exchange rates
The following significant exchange rates applied during the period.
Average rate Closing rate Average rate Closing rate Closing rate
02 April 02 April 03 April 03 April 02 Oct
2022 2022 2021 2021 2021
GBP 0.7438 0.7614 0.7423 0.7253 0.7384
5.5 Acquisitions
Acquisition - Team Wendy
The results of the Team Wendy business were consolidated for the first time in
the prior period's financial statements as the acquisition was completed and
control passed on 2 November 2020.
The Group acquired 100% of the equity for a total consideration of $132.0m,
being the $130.0m initial consideration and purchase price adjustments of
$2.0m reflecting the cash and working capital position at close. The net
assets acquired had a book value of $22.3m before fair value adjustments.
Set out below is an analysis of the assigned fair values of the assets
acquired and liabilities assumed relating to this acquisition:
Fair value
$m
Customer relationships 28.2
Brand 10.4
Other intangible assets 13.1
Property, plant and equipment 8.7
Inventories 12.2
Trade Debtors and other receivables 5.8
Cash 1.1
Lease liability (3.1)
Trade and other payables (2.7)
Net assets acquired 73.7
Goodwill 58.3
Total consideration 132.0
Initial cash consideration 130.0
Post completion working capital adjustment 0.9
Cash acquired 1.1
Total consideration 132.0
5.6 Restatements
The comparatives for the half year to 03 April 2021 have been restated to
reflect the reclassification and phasing adjustments between H1 and H2 in the
prior year. The reclassification and phasing adjustments do not impact the
Group's reported 2021 full year results.
A reconciliation of previously reported figures for the half year to 03 April
2021 to restated figures is presented below:
Consolidated Statement of Comprehensive Income for the 27 weeks ended 03 April Previously reported Phasing adjustments Classification adjustments Restated
2021
$m $m $m $m
Continuing operations
Revenue 122.0 - - 122.0
Cost of sales (81.1) (4.0) (0.9) (86.0)
Gross profit 40.9 (4.0) (0.9) 36.0
Selling and distribution costs (10.7) - - (10.7)
General and administrative expenses (24.0) (1.0) 3.1 (21.9)
Operating profit 6.2 (5.0) 2.2 3.4
Finance costs (0.8) - (2.2) (3.0)
Profit before taxation 5.4 (5.0) - 0.4
Taxation (1.0) 1.1 - 0.1
Profit for the period from continuing operations 4.4 (3.9) - 0.5
Discontinued operations
Loss from discontinued operations (1.4) - - (1.4)
(Loss)/profit for the period 3.0 (3.9) - (0.9)
Consolidated Balance Sheet as at 03 April 2021 Previously reported Phasing adjustments Classification adjustments Restated
$m $m $m $m
Intangible Assets 206.6 (1.0) - 205.6
Inventories 55.1 (4.0) - 51.1
Current tax liabilities (1.5) 1.1 - (0.4)
Phasing adjustments relate to charges previously included in the Group's H2
FY21 results. On further review these adjustments should have been made in the
Group's H1 FY21 results, which have therefore been restated accordingly. The
adjustments are as follows:
· One-off, non-cash, inventory adjustments of $4.0m, as announced in
the Group's FY21 trading update on 13 October 2021 which corrected inventory
costing.
· $1.0m charged to general and administrative expenses, previously
incorrectly capitalised as an intangible asset in H1 FY21.
· $1.1m relating to the tax impact of these adjustments.
Classification adjustments relate to changes in the P/L line items in H1 FY21
to ensure consistent presentation with previous periods. The adjustments
include a $2.2m reclassification from finance costs to general and
administrative expenses, relating to a credit for changes in discounting
component of the contingent consideration fair value movements which were
previously presented within finance costs. Other adjustments relate to
reclassifications between general and administrative expenses and cost of
sales. The $0.9m is made up of $2.4m stock less a payroll related credit of
$1.5m.
In addition to the restatements above $4.4m acquisition costs paid have been
reclassified to cash flow from operations. In H1 FY21 these were disclosed
within cash flow used in investing activities, under the category "Acquisition
of business" when they should have been included in the Net cash flow from /
(used in) operating activities.
There will be no impact on the Group's reported 2021 full year results for any
of the above as these were appropriately presented in the 2021 full year
financial statements.
5.7 Principal risks and uncertainties
The nature of the principal risks and uncertainties impacting the Group are
described on pages 52-57 of our 2021 Annual Report and remain unchanged at 02
April 2022.
The principal risks include the delivery of strategic projects and new product
introduction, market threat to core business, talent management, cybersecurity
and information technology, customer dependency, financial management,
manufacturing risk, compliance and legal matters and political and economic
instability. There has been an increase in the significance and potential
financial impact of two of the principal risks at 02 April 2022. The first is
the financial management risk of a reduction in profitability due to
manufacturing inefficiency and product mix. The second is the customer
dependency risk of over reliance on the DOD and its funding and contracting
process, such that when these processes are delayed, shipments and revenue can
be delayed and there can be a shortfall if sufficient mitigation is not
available through sales to commercial and rest of world customers.
5.8 Related party transactions
There were no related party transactions during the period or outstanding at
the end of the period (2021: nil) other than internal transactions between
Group companies, and compensation of key management personnel which will be
disclosed as required in the Group's Annual Report for the 52 weeks ending 01
October 2022.
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