REG - Avon Protection PLC - Interim Results
23/05/2023 07:00
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RNS Number : 2697A Avon Protection PLC 23 May 2023
AVON PROTECTION PLC
("Avon Protection", "Avon" or the "Group")
INTERIM RESULTS FOR THE 26-WEEK PERIOD ENDED 1 APRIL 2023
IMPROVED H1 PROFITABILITY AND STRATEGIC PLAN TO REALISE OUR POTENTIAL
Jos Sclater, Chief Executive Officer, said:
"Avon Protection is a business with strong foundations and extraordinary
potential. We have moved fast to develop our new STAR strategy and have
already taken meaningful steps forward, focusing initially on strengthening
the fundamentals with a view to building short term momentum. In addition, we
have developed strategic initiatives to further improve the business over the
medium term to accelerate growth, improve margins and returns on capital, and
protect more lives through the sale of our innovative products.
Revenue during the first half was below our expectations, but a better second
half is supported by the strong order book, the steps we have already taken to
strengthen the factories focused on shipping the first lots of NG IHPS helmet
to the U.S. DOD and the discontinuation of our armour business.
During the last four months we have increased the pace of change, so I would
like to thank everybody across the business for their help and determination
to realise our full potential. I am confident that, together, we are setting
Avon Protection up for a successful future."
1 April 2023 2 April 2022 Change (constant currency)(4)
Group(2)
Orders received $125.6m $113.9m 11.9%
Closing order book $160.7m $135.1m 20.1%
Revenue $116.2m $121.9m (3.9%)
Adjusted(1) EBITDA $11.2m $6.2m 30.2%
Adjusted(1) operating profit $4.2m $(1.2)m 180.0%
Adjusted(1) profit/(loss) before tax $0.9m $(2.8)m
Adjusted(1) basic earnings per share 2.4c (7.2c) 15.3%
Interim dividend per share 14.3c 14.3c
Net debt excluding lease liabilities $71.8m $56.6m 26.9%
Statutory results
Operating loss(3) from continuing operations $(1.6)m $(10.7)m
Loss before tax from continuing operations $(5.3)m $(13.6)m
Basic loss per share from continuing operations (14.0)c (34.9)c
Net debt $94.9m $83.3m
Excluding Armour(2)
Revenue $101.6m $119.4m (14.2%)
Adjusted(1) EBITDA $15.9m $12.5m 6.7%
Adjusted(1) operating profit $8.9m $5.1m 14.1%
Improving margins provide a strong foundation to build upon
* Strong order intake of $125.6 million, with a record-high order book of $160.7
million.
* Revenue decline of 4.7%, with DOD helmet programmes slower than expected and a
decrease in respiratory following a strong prior year driven by NSPA volume,
partially offset by increased armour revenue.
* Adjusted EBITDA margin of 9.6% (HY22: 5.1%), reflecting cost reduction, early
stages of operational efficiencies and improved product mix. Adjusted EBITDA
margin excluding armour of 15.6% (HY22: 10.5%).
* Net debt excluding lease liabilities of $71.8 million and leverage of 2.6
times bank adjusted EBITDA. Increased net debt reflects inventory build in NG
IHPS and respiratory products ahead of expected H2 shipments.
* Progress made against new head protection contracts; production of the first
lot of NG IHPS helmets approved for shipment and good progress towards
achieving ACH GEN II FAT approval.
Strategy development underway to realise our potential
We have engaged our team to develop the STAR strategy to drive value creation,
focused on four key areas:
* Strengthen - Strengthen fundamentals to quickly improve execution
* Transform - Improve efficiency and working capital turns
* Advance - Organically grow the core and scale up emerging opportunities
* Revolutionise - Leverage innovation to drive further growth
Outlook and FY23 guidance
* Good year-on-year revenue growth in Head Protection expected in FY23 and
beyond, supported by the strong order intake in H1.
* Softer demand for mask systems seen in H1 has led to a more cautious view on
H2 Respiratory revenue, which is now anticipated to be lower than initially
expected for FY23.
* Full year Group revenue excluding armour now expected to be c9% lower than the
prior year, reflecting the Respiratory demand backdrop and some ongoing risk
to shipment timings in H2.
* Notwithstanding the lower revenue, following decisive action to right size
Respiratory, full year Group EBITDA margins excluding armour expected to be
broadly consistent with the 14.7% reported in the prior year.
* On track to complete armour obligations by end of financial year.
* Year-end net debt position expected to be broadly in line with previous year,
with strong cash generation in H2 from inventory unwind.
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 Armour
performance refer to note 2.1.
(3) Reported operating loss includes $3.1 million amortisation of acquired
intangibles, restructuring costs of $2.3 million and transaction costs of $0.4
million. See adjusted performance section for full breakdown of adjustments
and comparatives.
(4) Constant currency measures are provided in the adjusted performance
section.
For further enquiries, please contact:
Avon Protection plc
Jos Sclater, Chief Executive Officer
+44 1225 896
848
Rich Cashin, Chief Financial
Officer
Rory Wiltshire, Investor Relations Manager
MHP
Tim Rowntree
+44 7710 032 657
Pete
Lambie
avonprotection@mhpgroup.com (mailto:avonprotection@mhpgroup.com)
Analyst and investor webcast
Jos Sclater, Chief Executive Officer, and Rich Cashin, Chief Financial
Officer, will host a presentation for analysts and investors at 9.00am this
morning, at Peel Hunt, 100 Liverpool Street, EC2M 2AT. The presentation will
also be broadcast live at: https://brrmedia.news/AvonProtection_hy_results
(https://brrmedia.news/AvonProtection_hy_results)
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.
About Avon Protection:
Avon Protection make products that are trusted to protect the world's
militaries and first responders.
Our dedicated teams achieve this by developing mission-critical solutions that
enhance our customers' performance, efficiency and capability, whilst
providing ever-increasing levels of protection.
With a portfolio that includes respiratory and head protection systems, we are
renowned for our innovative thinking and our steadfast approach to
manufacturing unrivalled products.
For further information, please visit our website www.avon-protection-plc.com
(http://www.avon-protection-plc.com)
CEO REVIEW
STRONG FOUNDATIONS
Avon Protection is fundamentally a good business with excellent potential: the
order book is improving, the customer base is diverse and our long-term
contracts provide good visibility around future growth opportunities in Head
Protection. Following the exit from our Armour business, we are left with a
high-quality business capable of generating attractive margins and returns on
capital, with those margins being well protected by strong technology, high
value brands and significant barriers to entry.
Our Respiratory Protection business has an extremely strong market position
with a globally respected brand. It is a sole-source supplier to the U.S. DOD,
U.S. SOCOM, U.K. MOD and NATO, which supports a reliable aftermarket in
filters, spares and repairs which represented over 40% of Respiratory
Protection sales in H1. Our underwater systems product line has world-leading
rebreather technology with a strong pipeline of opportunities.
In Head Protection, we are well positioned for growth with the DOD through the
long-term NG IHPS and ACH GEN II programmes. These programmes will supplement
the Team Wendy business, which continues to perform well. There is a large
untapped addressable market beyond the DOD, which we believe we can expand
into in the medium term by commercialising our Ceradyne ballistic capability
and Team Wendy pad system technologies.
STRATEGY TO REALISE OUR POTENTIAL
With the strong market positions and reputation of our Respiratory Protection
business, and high potential for growth following large contract wins in Head
Protection, there is significant opportunity for our business to deliver
revenue growth and improved margins.
We have developed a new strategy to capture this potential, involving around
40 of our people in the development process to ensure we capture the best
ideas, improve buy in and reduce execution risk. The new strategy is called
STAR, and focuses on four areas:
Strengthen
We are quickly strengthening the fundamentals to ensure rapid improvement in
delivery to our customers. This includes implementing a new operating model
which will have two Strategic Business Units (SBUs) called Respiratory
Protection and Head Protection, with the responsibility and empowerment to
deliver their own specific strategic objectives. We are also strengthening our
factories by improving both leadership capabilities and processes. Quarterly
improvement kaizens have been implemented at each site using a common
methodology, underpinned by consistent KPIs to cultivate a high-performance
operational culture across the business.
Transform
Within Transform, we are looking to significantly improve efficiency and
working capital turns, focusing on standard transformational levers including:
* Operational excellence
* Footprint optimisation
* Programme management excellence
* Supply chain optimisation
* Innovation process improvement
* Sales and marketing focus
* Finance Excellence
Advance
Advance is about growing our current core business organically and scaling up
emerging business models, with the strategic initiatives tailored for each
SBU. Within Respiratory Protection we are looking to launch a certified
self-contained breathing apparatus (SCBA) to open up non-military markets and
intend to launch new masks to expand our serviceable markets. There is
significant opportunity to leverage our installed mask base to increase sales
of filters and accessories, and we see the potential to capture a leading
share of the growing market in deep water military rebreathers.
In Head Protection, we need to ensure we capitalise on the known demand for
new helmets and pads from the DOD, whilst combining the best of the Ceradyne
ballistic capability with the pad system technologies of Team Wendy to exploit
the large unserved market outside the DOD and North America.
Revolutionise
Revolutionise focuses on a number of exciting longer-term opportunities,
leveraging our core capabilities to drive further growth through innovation
and penetration into new markets. In Respiratory Protection we are developing
a game changing Modular Integrated Tactical Respirator (MiTR) and several
higher capability filters. We also see potential opportunities to expand our
rebreathers business into adjacent markets such as mid to shallow water.
We also have a roadmap within Head Protection, looking towards expanding the
capability and technology of our helmets including the enabling of power and
data solutions and further research into traumatic brain injury prevention. In
the longer term we see an opportunity to supply integrated helmet and
respirator solutions, combined with other head mounted technologies.
SIGNIFICANT PROGRESS
Whilst we are in the early stages of what will be a five-year journey, a
number of key actions have already taken place in H1 and we are moving fast to
drive the change required:
In Strengthen, we have a clear and granular strategy, which is a key building
block for stronger performance management, and we are in the process of
communicating this throughout the organisation to ensure alignment and focus.
We have built a more capable team, with the creation of new SBU organisations,
a new leadership team at our Irvine facility and significantly strengthening
our Respiratory team responsible for liaising with the DOD. Unfortunately, we
have also had to react to the lower than anticipated respiratory sales within
the DOD and have reduced headcount at our Cadillac facility by around a
quarter.
As part of the Transform pillar, we have insourced production of our EXFIL SL
helmet significantly improving gross margins and have created a plan to
optimise our manufacturing footprint further in support of growth and margin
improvement. We have also implemented a new programme management process for
DOD helmets projects.
Advance has also seen a great deal of progress. Within Head Protection, the
first lot of NG IHPS has been approved for shipping and we have made good
progress towards achieving FAT approval on ACH GEN II. We have had new Team
Wendy pad system technology approved on the NG IHPS helmet programme and have
launched our new EPIC range of ballistic helmets for sale outside of the DOD.
Lastly, although Revolutionise focuses on a longer-term horizon, several
crucial first steps have already been taken. Funded development is well
underway within Respiratory Protection for our next generation of higher
capability filters, and we are already market testing prototypes made for our
new modular tactical respirator. Feedback at a recent user trial was very
positive. In Head Protection, we have funded work looking at the next
generation of technology to protect against traumatic brain injury.
STAR is designed to realise our full potential and deliver growth, improved
margins and cash return on capital, whilst delivering more innovative products
to protect those who protect us. We will provide medium term guidance as our
plans develop. We will also carry out a balance sheet review in H2 in light of
the new organisational structure, with a focus on some IT assets as our plans
for footprint optimisation develop.
CAPITAL ALLOCATION PRIORITIES
Reflecting the development of the Group over the last five years and the need
to invest for sustainable growth as part of our new strategy, we have
implemented a new capital allocation framework, prioritising organic growth
and investment in the medium term. We do not envisage further share buybacks
and expect to maintain net debt/EBITDA leverage on a bank covenant basis
between 1 and 2 times. We will review our dividend policy in H2.
FINANCIAL REVIEW
Despite a decline in revenue of 4.7% to $116.2 million (HY22: $121.9 million),
a more favourable product mix, effects of cost saving programmes and
operational efficiency initiatives alongside favourable FX movements have
resulted in increased profitability of the business, with an adjusted
operating profit of $4.2 million (HY22: loss of $1.2 million). This includes
$4.7 million of losses relating to the Armour business. The statutory
operating loss of $1.6 million compares to a HY22 loss of $10.7 million for
the equivalent period last year.
2 April 2022 Change (constant currency)(2)
1 April 2023
Orders received $125.6m $113.9m 11.9%
Closing order book $160.7m $135.1m 20.1%
Revenue $116.2m $121.9m (3.9%)
Adjusted(1) EBITDA $11.2m $6.2m 30.2%
Adjusted(1) EBITDA margin 9.6% 5.1% 250bps
Adjusted(1) operating profit/(loss) $4.2m $(1.2)m 180.0%
Adjusted(1) operating profit/(loss) margin 3.6% (1.0)% 240bps
Adjusted(1) net finance costs $(3.3)m $(1.6)m 120.0%
Adjusted(1) profit/(loss) before tax $0.9m $(2.8)m
Adjusted(1) taxation $(0.2)m $0.6m
Adjusted(1) profit/(loss) after tax $0.7m $(2.2)m
Adjusted(1) basic earnings/(loss) per share 2.4c (7.2c)
Dividend per share 14.3c 14.3c
Net debt excluding lease liabilities(1) $71.8m $44.2m
Return on invested capital(1) 5.6% 2.8%
Statutory results
Operating loss $(1.6)m $(10.7)m
Net finance costs $(3.7)m $(2.9)m
Loss before tax $(5.3)m $(13.6)m
Taxation $1.1m $2.9m
Loss after tax from continuing operations $(4.2)m $(10.7)m
Profit/(loss) from discontinued operations(3) $0.8m $(1.2)m
Loss for the period $(3.4)m $(11.9)m
Basic loss per share from continuing operations (14.0)c (34.9)c
Net debt $94.9m $83.3m
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 Constant currency measures are provided in the adjusted performance measures
section below.
3 Discontinued operations relate to activities under the Manufacturing Service
Agreement for the milkrite | InterPuls business divested in September 2020,
see note 2.3.
Order intake of $125.6 million (HY22: $113.9 million) was up 10.3% (11.9% on a
constant currency basis). Respiratory orders were largely flat year on year,
but with slightly higher order intake within U.K. & International offset
by a small decline in Commercial Americas orders, whilst Head Protection
orders saw strong growth in both U.S. DOD and U.K. & International. Order
intake excluding armour totalled $125.4 million (HY22: $113.6 million), up
10.4% (12.1% on a constant currency basis).
The closing order book of $160.7 million (HY22: $135.1 million) reflects an
increase of 18.9% (20.1% on a constant currency basis) on the prior period.
Closing order book excluding armour of $144.7 million (HY22: $110.7 million)
reflects an increase of 30.8% (32.4% on a constant currency basis).
Revenue totalled $116.2 million (HY22: $121.9 million), down 4.7% (down 3.9%
on a constant currency basis). This reflects a decline in Respiratory sales
with softer demand in Commercial Americas and U.K. & International markets
in the half comparing to strong NSPA volumes in the previous year. Head
Protection sales also dipped modestly, with a decrease in U.S. DOD deliveries
ahead of first shipments of NG IHPS, partially offset by an increase in U.K.
& International. Armour revenue grew to $14.6 million (HY22: $2.5m) as
shipments of DLA ESAPI product ramped up. Revenue excluding armour totalled
$101.6 million (HY22: $119.4 million), down 14.9% (down 14.2% on a constant
currency basis).
Adjusted EBITDA of $11.2 million (HY22: $6.2 million) is up 80.6% (30.2% on a
constant currency basis) compared to the prior period, with the decrease in
revenue offset by improved mix, cost reductions and the initial impacts of
operational efficiency improvements implemented. Adjusted EBITDA margin of
9.6% represents an increase of 450bps (250bps on a constant currency basis).
Adjusted EBITDA losses for armour totalled $4.7 million (HY22: loss of $6.3
million), resulting in adjusted EBITDA excluding armour of $15.9 million, up
27.2% (6.7% on a constant currency basis) compared to the prior year (HY22:
$12.5 million), and EBITDA margin excluding armour of 15.6%, up 510bps.
Adjusted operating profit of $4.2 million (HY22: loss of $1.2 million) is
after adjusted depreciation and amortisation of $7.0 million (HY22: $7.4
million), an increase of 450% (180.0% on a constant currency basis) compared
to the prior period.
Statutory operating loss was $1.6 million (HY22: loss of $10.7 million) after
$5.8 million adjustments (HY22: $9.5 million adjustments) with the decreased
loss reflecting increased adjusted operating profit, and $3.8 million of
non-current asset impairments in the prior year. The adjusted performance
section contains further explanation for adjusting items which are summarised
below.
Statutory operating loss HY23 HY22
$m $m
(1.6) (10.7)
Amortisation of acquired intangibles 3.1 3.5
Impairment of non-current assets - 3.8
Restructuring costs 2.3 1.4
Transaction costs 0.4 0.8
Adjusted operating profit 4.2 (1.2)
Adjusted net finance costs increased to $3.3 million (HY22: $1.6 million) due
to higher net debt and variable interest charges.
After an adjusted tax charge of $0.2 million (HY22: credit of $0.6 million),
the Group recorded an adjusted profit for the period after tax of $0.7 million
(HY22: loss of $2.2 million).
Adjusted basic earnings per share increased to 2.4 cents (HY22: negative 7.2
cents).
Return on invested capital, calculated on a rolling 12-month basis, improved
to 5.6% (HY22: 2.8%), reflecting higher adjusted operating profit.
Statutory net finance costs of $3.7 million (HY22: $2.9million) include $0.4
million (HY22: $0.8 million) net interest expense on the U.K. defined benefit
pension scheme liability.
Statutory loss before tax from continuing operations was $5.3 million (HY22:
loss of $13.6 million) and, after a tax credit of $1.1 million (HY22: credit
of $2.9 million), the loss for the period from continuing operations was $4.2
million (HY22: loss of $10.7 million). Basic losses per share from continuing
operations were 14.0 cents (HY22: losses of 34.9 cents).
HY23 HY22
Respiratory Protection Head Protection Total Respiratory Protection Head Protection Armour
Revenue $m Armour Total
U.S. DOD 34.1 8.3 - 42.4 24.0 19.5 - 43.5
Commercial Americas 14.6 12.1 - 26.7 17.7 13.0 - 30.7
U.K. & International 19.8 12.7 - 32.5 41.1 4.1 - 45.2
Total excluding Armour 68.5 33.1 - 101.6 82.8 36.6 - 119.4
Armour - - 14.6 14.6 - - 2.5 2.5
Total 68.5 33.1 14.6 116.2 82.8 36.6 2.5 121.9
U.S. DOD
U.S. DOD revenue declined by 2.5% to $42.4 million (HY22: $43.5 million). U.S.
DOD Respiratory revenue grew by 42.1% to $34.1 million (HY22: $24.0 million)
with strong sales of M50 masks and M61 filters, partially offset by
non-recurrence of M69 mask revenue following contract completion last year.
Head Protection revenue declined by 57.4% to $8.3 million (HY22: $19.5
million). HY22 benefited from first generation IHPS revenue which has not
repeated this year due to the manufacture of NG IHPS for delivery in H2 2023
and beyond.
U.S. DOD closing order book for HY23 of $91.8 million (HY22: $52.5 million) is
comprised of $28.6 million respiratory orders and $63.2 million Head
Protection orders, which includes $42 million of NG IHPS and $13 million of
ACH GEN II orders.
Commercial Americas
Commercial Americas revenue declined by 13.0% to $26.7 million (HY22: $30.7
million). Commercial Americas Respiratory revenue declined by 18.1% to $14.5
million (HY22: $17.7 million) with decreases in Respiratory revenue following
deliveries in support of Ukraine in the prior year. Head Protection revenue
declined by 6.9% to $12.1 million (HY22: $13.0 million) with a decline in
EXFIL SL helmets partially offset by increased sales of F90 helmets.
Commercial Americas closing order book for HY23 of $7.5 million (HY22: $6.1
million), comprises $3.9 million of Respiratory orders and $3.6 million of
Head Protection orders.
U.K. & International
U.K. & International revenue declined by 28.1% (26.6% on a constant
currency basis) to $32.5 million (HY22: $45.2 million). U.K. &
International Respiratory revenue declined by 51.7% (50.6% on a constant
currency basis) to $19.8 million (HY22: $41.0 million) following a very strong
prior year comparator with the NSPA contract. U.K. & International Head
Protection revenue grew by 209.8% (208.2% on a constant currency basis) to
$12.7 million (HY22: $4.1 million) with a large delivery of EXFIL Ballistic
helmets to the Australian Defence Force.
U.K. & International closing order book for HY23 of $45.4 million (HY22:
$52.1 million) is comprised of $41.4 million (HY22: $49.0 million) of
Respiratory orders, including a $14 million order for the middle east expected
to ship in H2, and $4.0 million (HY22: $3.1 million) of Head Protection
orders.
Armour
Armour revenue increased to $14.6 million (HY22: $2.5 million), leaving us on
track to have fulfilled all obligations by the end of the financial year.
Armour closing order book of $16.0 million (HY22: $24.4 million) comprises
$8.0 million of DLA ESAPI and $8.0 million of flat armour.
Research and development expenditure
Total investment in research and development (capitalised and expensed) was
$5.1m (HY22: $5.3m), in line with the prior period.
HY23 HY22
$m $m
Total expenditure 5.1 5.3
Less customer funded (0.6) (0.7)
Group expenditure 4.5 4.6
Capitalised (2.2) (2.7)
Income statement impact 2.3 1.9
Amortisation and impairment of development expenditure 2.5 3.7
Total income statement impact 4.8 5.6
Revenue 116.2 121.9
R&D spend as a % of revenue 4.1% 4.3%
Respiratory expenditure has primarily focused on completing the development of
the EXOSKIN line of boots and gloves, whilst Head Protection expenditure
continued to centre around NG IHPS and ACH GEN II helmet development.
In HY23 research and development costs have been reclassified as a separate
line item below gross profit in the Consolidated Statement of Comprehensive
Income, with comparatives restated accordingly.
Net debt and cash flow
HY23 HY22
$m $m
Adjusted continuing EBITDA 11.2 6.2
Share-based payments and defined benefit pension scheme costs 1.2 1.2
Working capital (23.4) (2.2)
Cash flows from continuing operations before exceptional items (11.0) 5.2
Restructuring and transaction costs paid (1.6) (0.8)
Cash flows from continuing operations (12.6) 4.4
Cash flows from discontinued operations (0.4) (0.6)
Cash flow from operations (13.0) 3.8
Payments to pension plan - (2.6)
Net finance costs (3.0) (1.3)
Repayment of lease liability (1.5) (2.1)
Tax received 3.9 0.6
Capital Expenditure (4.9) (5.8)
Acquisitions - (3.2)
Purchase of own shares - share buyback - (10.1)
Dividends to shareholders (9.1) (9.1)
Change in net debt (27.6) (29.8)
Opening net debt, excluding lease liabilities (44.2) (26.8)
Closing net debt, excluding lease liabilities (71.8) (56.6)
Cash flows from continuing operations before exceptional items were an outflow
$11.0 million (HY22: inflow of $5.2 million) principally due to increased
inventory holdings for anticipated H2 deliveries.
Dividends and purchase of own shares were $9.1 million (HY22: $19.2 million),
with the reduction reflecting the cessation of the buyback programme in April
2022. The buyback programme has now been formally cancelled.
Tax was an inflow of $3.9m (HY22: inflow of $0.6m), due to historical amounts
owed being settled in the period.
Net debt was $94.9 million (FY22: net debt $68.0 million), which includes
lease liabilities of $23.1 million (FY22: $23.8 million). Excluding lease
liabilities, net debt was $71.8 million (FY22: net debt $44.2 million). The
change in net debt is principally due to increased inventory holding in
support of NG IHPS and increased respiratory deliveries scheduled for H2.
Armour update
The following tables summarise the contribution of the Armour business to the
Group's financial statements for HY23.
Armour HY23 HY22
Orders received $0.2m $0.3m
Closing order book $16.0m $24.4m
Revenue $14.6m $2.5m
HY23 adjusted Armour Respiratory & Head Total
$m $m $m
Orders received 0.2 125.4 125.6
Closing order book 16.0 144.7 160.7
Revenue 14.6 101.6 116.2
Adjusted EBITDA (4.7) 15.9 11.2
Adjusted EBITDA margin (32.2%) 15.6% 9.6%
Adjusted operating profit/(loss) (4.7) 8.9 4.2
HY23 adjustments Armour Respiratory & Head Total
$m $m $m
Revenue - - -
EBITDA(1) (0.8) (1.2) (2.0)
Operating profit/(loss)(1) (0.8) (5.0) (5.8)
HY23 total Armour Respiratory & Head Total
$m $m $m
Revenue 14.6 101.6 116.2
EBITDA (5.5) 14.7 9.2
Operating profit/(loss) (5.5) 3.9 (1.6)
1 Armour operating loss adjustments totalling a charge of $0.8 million
comprise $0.4 million transaction costs and $0.4 million of armour specific
restructuring costs.
Defined benefit pension scheme
The Group operated a contributory defined benefits 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 12 years. The net pension liability for the
scheme amounted to $16.5 million as at 1 April 2023 (FY22: $6.3 million). The
increase is due to a lower discount rate being applied to pension liabilities.
There were no contributions in respect of scheme expenses and deficit recovery
plan payments in the period as these were fully prepaid for FY23 in the
previous year. In accordance with the deficit recovery plan agreed following
the 31 March 2019 actuarial valuation, the Group will make payments in FY24 of
$4.3 million in respect of deficit recovery and scheme expenses. These
payments are subject to review following the March 2022 actuarial valuation
which will be finalised during H2 2023.
Foreign exchange and interest rate risk management
The Group is exposed to translational foreign exchange risk arising when the
results of sterling denominated companies are consolidated into the Group
presentational currency, U.S. dollars. Group policy is not to hedge
translational foreign exchange risk. Due to the translational effect, a
one-cent increase in the value of the U.S. dollar against sterling would have
decreased revenue by approximately $0.1 million and increased operating profit
by approximately $0.1 million for HY23.
RCF borrowings are floating rate priced using the U.S. Secured Overnight
Financing Rate (SOFR). In 2022 the Group implemented a hedging policy using
interest rate swaps to fix a portion of SOFR floating rate interest. The
notional value of interest rate swaps at 1 April 2023 was $30.0 million (FY22:
$30.0 million), expiring on 8 September 2025 in line with the RCF. The
financial value of interest rate swaps at 1 April 2023 was a $0.4m (FY22:
$0.5m), an asset position as hedged fixed rates are lower than current market
forecasts for SOFR.
Dividends
The Board has proposed an interim dividend of 14.3 cents per share (HY22: 14.3
cents) in line with the interim dividend last year. The interim dividend will
be paid in pounds sterling on 8 September 2023 to shareholders on the register
at 11 August 2023. The final dividend will be converted into pounds sterling
for payment at the prevailing exchange rate which will be announced prior to
payment.
As mentioned previously, we will be reviewing our dividend policy in the
second half of the year to ensure it aligns with our new strategy.
Jos Sclater Rich Cashin
Chief Financial Officer
Chief Executive Officer
23 May 2023
23 May 2023
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:
á 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
á material related party transactions in the first six months and any
material changes in the related party transactions described in the last
annual report.
á 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 2023
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 01
April 2023 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 01 April 2023 is not prepared,
in all material respects, in accordance with IAS 34 Interim Financial
Reporting as adopted for use in the UK and the Disclosure Guidance and
Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the
UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK.
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 (UK) 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the group will continue in operation.
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 UK FCA.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK-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 UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so.
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. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
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
UK 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 2023
Consolidated Statement of Comprehensive Income for the 26 weeks ended 01 April
2023
26 weeks to 01 April 2023 26 weeks to 02 April 2022
(restated) (1)
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 2.2 116.2 - 116.2 121.9 - 121.9
Cost of sales (77.4) (0.4) (77.8) (83.6) - (83.6)
Gross profit 38.8 (0.4) 38.4 38.3 - 38.3
Selling and distribution costs (10.9) - (10.9) (12.8) - (12.8)
Research and development costs (4.8) - (4.8) (4.0) (1.6) (5.6)
General and administrative expenses (18.9) (5.4) (24.3) (22.7) (7.9) (30.6)
Operating (loss)/profit 4.2 (5.8) (1.6) (1.2) (9.5) (10.7)
Net finance costs 4.3 (3.3) (0.4) (3.7) (1.6) (1.3) (2.9)
(Loss)/profit before taxation 0.9 (6.2) (5.3) (2.8) (10.8) (13.6)
Taxation 2.5 (0.2) 1.3 1.1 0.6 2.3 2.9
(Loss)/profit for the period from continuing operations 0.7 (4.9) (4.2) (2.2) (8.5) (10.7)
Discontinued operations
Profit/(loss) from discontinued operations 2.3 - 0.8 0.8 - (1.2) (1.2)
(Loss)/profit for the period 0.7 (4.1) (3.4) (2.2) (9.7) (11.9)
( )
(1) The comparatives for the 26 weeks to 02 April 2022 have been restated to
reflect reclassification of research and development costs as disclosed in
note 5.5.
Consolidated Statement of Comprehensive Income for the 26 weeks ended 01 April
2023 (Continued)
Note 26 weeks to 26 weeks to
01 April 2023$m 02 April
2022
$m
Loss for the period (3.4) (11.9)
Other comprehensive income/(expense)
Items that are not subsequently reclassified to the income statement
Remeasurement (loss)/gain recognised on retirement benefit scheme 5.2 (8.3) 36.4
Deferred tax relating to retirement benefit scheme 2.1 (9.3)
Items that may be subsequently reclassified to the income statement
Cash flow hedges (0.1) -
Net exchange differences offset in reserves 0.3 0.4
Other comprehensive (expense)/ income for the period (6.0) 15.6
Total comprehensive (expense)/income for the period (9.4) 3.7
Earnings per share (cents)
Basic (11.4c) (38.8c)
Diluted (11.4c) (38.8c)
Earnings per share from continuing operations (cents)
Basic (14.0c) (34.9c)
Diluted (14.0c) (34.9c)
Consolidated Balance Sheet
Note As at As at
01 April 01 Oct
2023 2022
$m $m
Assets
Non-current assets
Intangible assets 3.1 168.1 171.0
Property, plant and equipment 3.2 37.1 39.9
Finance leases 3.3 2.5 -
Deferred tax assets 29.9 26.7
Derivative financial instruments 0.2 0.3
237.8 237.9
Current assets
Inventories 82.3 65.6
Trade and other receivables 34.8 30.6
Derivative financial instruments 0.2 0.2
Current tax receivables 1.3 4.2
Cash and cash equivalents 14.9 9.5
133.5 110.1
Liabilities
Current liabilities
Borrowings 4.1 4.3 4.1
Trade and other payables 40.3 42.3
Provisions for liabilities and charges 5.1 0.8 0.7
45.4 47.1
Net current assets 88.1 63.0
Non-current liabilities
Borrowings 4.1 105.6 73.4
Deferred tax liabilities 5.8 5.8
Retirement benefit obligations 5.2 16.5 6.3
Provisions for liabilities and charges 5.1 5.2 4.9
133.1 90.4
Net assets 192.8 210.5
Shareholders' equity
Ordinary shares 4.4 50.3 50.3
Share premium account 4.4 54.3 54.3
Other reserves (13.9) (14.2)
Cash flow hedging reserve 0.3 0.4
Retained earnings 101.8 119.7
Total equity 192.8 210.5
Consolidated Cash Flow Statement
26 weeks to 26 weeks to
01 April 02 April
2023 2022
Note $m $m
Cash flow from operating activities
Cash flow from continuing operations 5.3 (12.6) 4.4
Cash flow used in discontinued operations 5.3 (0.4) (0.6)
Cash flow from operations (13.0) 3.8
Retirement benefit deficit recovery contributions 5.2 - (2.6)
Tax receipts 3.9 0.6
Net cash flow (used in)/from operating activities (9.1) 1.8
Cash flow used in investing activities
Purchase of property, plant and equipment 3.2 (2.1) (2.9)
Capitalised development costs and computer software 3.1 (2.8) (2.9)
Interest income 4.3 0.2 -
Acquisition of business - (3.2)
Net cash used in investing activities (4.7) (9.0)
Cash flow used in financing activities
Proceeds from loan drawdowns 4.2 42.0 33.9
Loan repayments 4.2 (9.0) (5.6)
Finance costs paid in respect of bank loans and overdrafts 4.3 (2.7) (0.8)
Finance costs paid in respect of leases 4.3 (0.5) (0.5)
Repayment of lease liability (1.5) (2.1)
Dividends paid to shareholders 4.5 (9.1) (9.1)
Purchase of own shares - Share buyback programme 4.4 - (10.1)
Net cash from financing activities 19.2 5.7
Net increase/(decrease) in cash and cash equivalents 5.4 (1.5)
Cash and cash equivalents at beginning of the period 9.5 14.1
Cash and cash equivalents at end of the period 14.9 12.6
Consolidated Statement of Changes in Equity
Note Share Share premium Hedging reserve Other reserves Retained earnings Total equity
capital
$m $m $m $m $m $m
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 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 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
Profit for the period - - - - 4.3 4.3
Net exchange differences offset in reserves - - - 0.4 - 0.4
Current tax relating to other temporary differences - - - - (0.1) (0.1)
Actuarial gain on retirement benefit scheme - - - - 13.7 13.7
Deferred tax relating to retirement benefit scheme - - - - (0.3) (0.3)
Deferred tax relating to change in tax rates - - - - (3.4) (3.4)
Interest rate swaps - cash flow hedge - - 0.5 - - 0.5
Current tax on interest rate swaps - - (0.1) - - (0.1)
Total comprehensive income for the period - - 0.4 0.4 14.2 15.0
Dividends paid 4.5 - - - - (4.3) (4.3)
Own shares acquired - - - - (1.7) (1.7)
Fair value of share-based payments - - - - 0.5 0.5
Deferred tax relating to employee share schemes - - - - (0.7) (0.7)
At 01 October 2022 50.3 54.3 0.4 (14.2) 119.7 210.5
Loss for the period - - - - (3.4) (3.4)
Net exchange differences offset in reserves - - - 0.3 - 0.3
Actuarial loss on retirement benefit scheme - - - - (8.3) (8.3)
Deferred tax relating to retirement benefit scheme - - - - 2.1 2.1
Interest rate swaps - cash flow hedge - - (0.1) - - (0.1)
Total comprehensive income for the period - - (0.1) 0.3 (9.6) (9.4)
Dividends paid 4.5 - - - - (9.1) (9.1)
Fair value of share-based payments - - - - 0.8 0.8
At 01 April 2023 50.3 54.3 0.3 (13.9) 101.8 192.8
Other reserves consist of the capital redemption reserve of $0.6m (02 April
2022: $0.6m, 01 October 2022: $0.6m) and the translation reserve of ($14.5m)
(02 April 2022: ($15.2m), 01 October 2022: ($14.8m)).
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 23 May 2023.
The financial period presents the 26 weeks ended 1 April 2023 (prior financial
period 26 weeks ended 2 April 2022, prior financial year 52 weeks ended 1
October 2022).
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 21
November 2022 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 1 April 2023 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 1 October 2022, which have been prepared in
accordance with UK-adopted International accounting standards.
The financial information presented in this Interim Report has been prepared
in accordance with the accounting policies expected to be used in preparing
the 2023 Annual Report and Accounts which do not differ significantly from
those used in the preparation of the 2022 Annual Report and Accounts.
The Directors have prepared a going concern assessment covering the 52 week
period from the date of approval of these interim financial statements. The
assessment indicates that the Group will have sufficient funds to meet its
liabilities as they fall due for that period.
As part of their assessment, the Directors considered a base case and a severe
downside scenario involving a 32% decline in bank-determined adjusted EBITDA
against the base case. 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). $142 million of the facility matures on 8 September 2025. The
remaining $58 million matures on 8 September 2024, subject to a one-year
extension option to 8 September 2025.
On this basis, the Directors are confident that the Group will have sufficient
funds to continue to meet its liabilities as they fall due for at least 12
months from the approval of these interim financial statements. Accordingly,
the Group continues to adopt the going concern basis in preparing its interim
financial statements.
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, ROIC 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 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 26 weeks to
01 April 02 April
2023 2022
$m $m
Operating loss (1.6) (10.7)
Amortisation of acquired intangibles 3.1 3.5
Restructuring costs 2.3 1.4
Transaction costs 0.4 0.8
Impairment of non-current assets - 3.8
Adjusted operating profit/(loss) 4.2 (1.2)
Depreciation 3.9 4.7
Other amortisation charges 3.1 2.7
Adjusted EBITDA 11.2 6.2
Amortisation charges for acquired intangible assets of $3.1 million (HY22:
$3.5 million) are excluded from adjusted measures as they do not change each
period based on underlying business trading and performance.
Restructuring costs relating to the closure of Armour and the overhead
reduction programme were $2.3 million (HY22: $1.4 million). These costs
include a $0.5m right of use asset impairment relating to the closure of one
of our U.S. offices (HY22: $0.4 million). 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 $0.4 million (HY22: $0.8 million) relate to the planned
sale of the armour related assets later in FY23. These costs are considered
exceptional as they are specific to the wind down of the Armour business and
do not form part of the underlying business trading and performance.
In the prior year, impairment reviews for the Group's non-current assets
resulted in $3.8 million exceptional impairment losses as the carrying value
of certain cash-generating units exceeded estimated recoverable amounts. These
impairment losses were significant items resulting from changes in assumptions
for future recoverable amounts. As such they were considered unrelated to 2022
trading performance. No indications for further impairments were identified in
the current period.
26 weeks to 26 weeks to
Adjustments to finance costs 01 April 2023 02 April 2022
$m $m
Net finance costs (3.7) (2.9)
U.K. defined benefit pension scheme net interest expense 0.4 0.8
Contingent consideration unwind discount - 0.5
Adjusted net finance costs (3.3) (1.6)
$0.4 million (HY22: $0.8 million) 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).
In the prior year, $0.5 million related to unwind of discounting on contingent
consideration from the 3M ballistic acquisition.
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%
(HY22: 21%) approximating statutory rates applicable in the U.S. and U.K.
Constant currency reporting
Constant currency measures remove the impact of changes in exchange rates.
Constant currency measures are calculated by translating the prior period at
HY23 exchange rates.
The Armour business transacts entirely in USD meaning there is no currency
impact for this operating segment.
26 weeks to 26 weeks to Change
Group 01 April 2023 02 April 2022 (constant currency)
Orders received $125.6m $112.2m 11.9%
Closing order book $160.7m $133.8m 20.1%
Revenue $116.2m $120.9m (3.9%)
Adjusted EBITDA $11.2m $8.6m 30.2%
Adjusted operating profit $4.2m $1.5m 180.0%
Adjusted profit before tax $0.9m $0.0m
Adjusted basic earnings per share 2.4c 2.0c 15.3%
Respiratory and Head Protection
Orders received $125.4m $111.9m 12.1%
Closing order book $144.7m $109.4m 32.4%
Revenue $101.6m $118.4m (14.2%)
Adjusted EBITDA $15.9m $14.9m 6.7%
Adjusted operating profit $8.9m $7.8m 14.1%
Adjusted profit before tax $5.7m $6.4m (10.9%)
Adjusted basic earnings per share 15.3c 18.3c (16.9%)
Return on invested capital (ROIC)
26 weeks to 26 weeks to
01 April 2023 02 April 2022
$m $m
Net assets 192.8 201.7
Net debt 71.8 56.6
Lease liabilities 23.1 26.7
Retirement benefit obligations 16.5 28.7
Derivatives (0.4) -
Net tax (25.4) (34.7)
Total invested capital 278.4 279.0
Average invested capital 278.7 300.5
Adjusted operating profit (preceding 12 months) 15.6 8.3
ROIC 5.6% 2.8%
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 two different operating and reportable segments, these being the
core Respiratory and Head Protection business and the Armour business which is
in the process of being wound-down. The Group plans to split Respiratory and
Head Protection into separate segments in the second half of the financial
year in order to enable more granular analysis.
26 weeks to 01 April 2023
Armour Respiratory & Head Protection Adjustments & discontinued Total
(note 2.1 & 2.3)
$m $m $m $m
Revenue 14.6 101.6 - 116.2
Adjusted EBITDA (4.7) 15.9 (2.0) 9.2
Depreciation - (3.9) - (3.9)
Other amortisation charges - (3.1) - (3.1)
Amortisation of acquired intangibles - - (3.1) (3.1)
Other adjusting items (note 2.1) - - (0.7) (0.7)
Operating profit/(loss) (4.7) 8.9 (5.8) (1.6)
Net finance costs (0.1) (3.2) (0.4) (3.7)
Profit/(loss) before taxation (4.8) 5.7 (6.2) (5.3)
Taxation 0.9 (1.1) 1.3 1.1
Profit/(loss) for the period from continuing operations (3.9) 4.6 (4.9) (4.2)
Profit from discontinued operations - - 0.8 0.8
Profit/(loss) for the period (3.9) 4.6 (4.1) (3.4)
Total assets 15.1 177.7 - 192.8
Basic earnings per share (cents) (12.9c) 15.3c (13.8c) (11.4c)
Diluted earnings per share (cents) (12.9c) 15.3c (13.8c) (11.4c)
26 weeks to 02 April 2022
Armour 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) (16.3c) 9.1c (31.6c) (38.8c)
Revenue analysed by line of business
01 April 2023 02 April 2022
Head Protection Total Head Protection Total
Respiratory $m Armour $m Respiratory $m $m Armour $m
$m $m $m
U.S. DOD 34.1 8.3 14.6 57.0 24.0 19.5 2.5 46.0
Commercial Americas 14.6 12.1 - 26.7 17.7 13.0 - 30.7
U.K. & International 19.8 12.7 - 32.5 41.1 4.1 - 45.2
Total 68.5 33.1 14.6 116.2 82.8 36.6 2.5 121.9
Revenue analysed by geographic region by origin
26 weeks to 26 weeks to
01 April 02 April
2023 2022
$m $m
U.K. 16.5 37.4
U.S. 99.7 84.5
Total 116.2 121.9
( )
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. As the
activities under this agreement is not part of the continuing operations of
the Group, the revenue and costs associated with this agreement have been
classified as discontinued operations.
26 weeks to 26 weeks to
01 April 02 April
2023 2022
$m $m
Revenue 2.6 1.7
Cost of Sales (1.6) (3.2)
Gross Profit/(loss) 1.0 (1.5)
General and administrative expenses - -
Operating profit/(loss) 1.0 (1.5)
Finance costs - -
Profit/(loss) before taxation 1.0 (1.5)
Taxation (0.2) 0.3
Profit/(loss) from discontinued operations 0.8 (1.2)
Basic earnings per share (cents) 2.7c (3.9c)
Diluted earnings per share (cents) 2.7c (3.9c)
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 26 weeks to
01 April 02 April
2023 2022
Weighted average number of ordinary shares in issue used in basic calculations 29,996 30,644
(thousands)
Potentially dilutive shares (weighted average) (thousands) 331 284
Fully diluted number of ordinary shares (weighted average) (thousands) 30,327 30,928
2.5 Taxation
26 weeks to 26 weeks to
01 April 02 April
2023 2022
$m $m
Loss before taxation from continuing operations (5.3) (13.6)
Tax charge/(credit) at the average standard U.K. rate of 22.0% (HY22: 19.0%) (1.2) (2.6)
Differences in overseas tax rates (0.1) (0.2)
Permanent differences 0.2 (0.1)
Tax credit (1.1) (2.9)
The effective tax rate for the period is 21% (HY22: 21%).
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 01 October 2022 88.7 52.1 21.1 9.1 171.0
Additions - - 2.2 0.6 2.8
Amortisation - (3.1) (2.5) (0.6) (6.2)
Exchange differences - - 0.5 - 0.5
At 01 April 2023 88.7 49.0 21.3 9.1 168.1
The carrying amounts of non-financial assets have been reviewed at the interim
reporting date to determine whether there is any indication of impairment. No
indications of impairment were identified in the period.
3.2 Property, plant and equipment
Net book amounts Freeholds Right of use assets Plant and machinery Leasehold improvements Total
$m $m $m $m $m
At 01 October 2022 1.7 12.6 22.6 3.0 39.9
Additions - - 2.1 - 2.1
Transfer to finance leases - (1.5) - - (1.5)
Impairments - (0.5) (0.2) - (0.7)
Depreciation (0.1) (1.3) (2.3) (0.2) (3.9)
Exchange differences - 0.5 0.8 (0.1) 1.2
At 01 April 2023 1.6 9.8 23.0 2.7 37.1
The Group sub-leases legacy commercial premises where they are longer required
for operations, resulting in lease assets being held on the balance sheet.
Following the sub-let of an additional property in the period, these assets
have been transferred from right of use assets to a specific finance lease
balance sheet classification as they are now considered collectively material.
3.3 Finance leases
Finance leases
$m
At 01 October 2022 -
Transfer from property, plant and equipment 1.5
Additions 1.1
Payments received (0.1)
At 01 April 2023 2.5
Section 4: Funding
4.1 Borrowings
As at As at
01 April 01 Oct
2023 2022
$m $m
Current
Lease liabilities 4.3 4.1
Non-Current
Bank Loans 86.7 53.7
Lease liabilities 18.9 19.7
105.6 73.4
Total Group borrowings 109.9 77.5
The Group has the following committed facilities:
As at As at
01 April 01 Oct
2023 2022
$m $m
Total undrawn committed borrowing facilities 118.3 151.3
Bank loans and overdrafts utilised 86.7 53.7
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. $142 million of the facility matures on 8 September 2025. The
remaining $58 million matures on 8 September 2024, subject to a one-year
extension option to 8 September 2025. In addition to the RCF, 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. In 2022 the
Group implemented a hedging policy using interest rate swaps to fix a portion
of SOFR floating rate interest. The notional value of interest rate swaps at 1
April 2023 was $30.0 million (01 October 2022: $30.0 million), expiring on 8
September 2025 in line with the RCF.
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
01 Oct 2022 01 April 2023 $m
$m
Cash at bank and in hand 9.5 5.4 - - 14.9
Bank loans (53.7) (33.0) - - (86.7)
Net debt excluding lease liabilities (44.2) (27.6) - - (71.8)
Lease liabilities (23.8) 2.1 (1.0) (0.4) (23.1)
Net debt (68.0) (25.5) (1.0) (0.4) (94.9)
Cash flow relating to bank loans consisted of $42.0 million proceeds from
drawdowns, less $9.0 million repayments.
4.3 Net finance costs
26 weeks to 01 April 26 weeks to 02 April
2023 2022
$m $m
Interest payable on bank loans and overdrafts (2.7) (0.8)
Interest payable in respect of leases (0.5) (0.5)
Amortisation of finance fees (0.3) (0.3)
U.K. defined benefit pension scheme net interest expense (0.4) (0.8)
Contingent Consideration unwind discount - (0.5)
Other finance income 0.2 -
Net finance costs (3.7) (2.9)
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
01 April 2023 01 April 01 April 01 Oct 01 Oct 01 Oct
2023 2023 2022 2022 2022
$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
01 April 01 Oct
2023 2022
No. of shares No. of shares
Opening balance 765,098 -
Acquired in the period - 765,098
Closing balance 765,098 765,098
In the 52 weeks ended 1 October 2022, the Group completed a £9.25 million
($12.4 million) Share Buyback Programme, purchasing 765,098 ordinary shares.
Dividends on these shares have been waived. Purchased shares under the
programme are held at cost as treasury shares and deducted from shareholders'
equity.
Own shares held - Long-Term Incentive Plan
26 weeks to Period ended
01 April 01 Oct
2023 2022
No. of shares No. of shares
Opening balance 261,714 334,933
Acquired in the period - -
Disposed on exercise of options - (73,219)
Closing balance 261,714 261,714
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 2023 was $3.0 million (02
April 2022: $4.5 million). The shares are held at cost as treasury shares and
deducted from shareholdersÕ equity.
In December 2021 73,219 shares vested under the Avon Protection Long-Term
Incentive Plan and were distributed to employees.
4.5 Dividends
On 27 January 2023, the shareholders approved a final dividend of 30.6c per
qualifying ordinary share in respect of the year ended 01 October 2022. This
was paid on 10 March 2023 utilising $9.1 million of shareholders' funds.
The Board of Directors has declared an interim dividend of 14.3c (2022: 14.3c)
per qualifying ordinary share in respect of the year ending 30 September 2023.
This interim dividend will be paid in sterling at the prevailing exchange rate
prior to payment on 08 September 2023 to shareholders on the register at the
close of business on 11 August 2023. In accordance with accounting standards,
this dividend has not been provided for. It will be recognised in
shareholders' funds in the 52 weeks to 30 September 2023 and is expected to
utilise $4.3 million (2022: $4.4 million) of shareholders' funds.
Section 5: Other
5.1 Provisions for liabilities and charges
Warranty Property Obligations Total
provisions
$m $m $m
Balance at 01 October 2022 2.3 3.3 5.6
Provision created in the period 0.2 - 0.2
Payments in the period (0.1) - (0.1)
Foreign exchange movements - 0.3 0.3
Balance at 01 April 2023 2.4 3.6 6.0
As at As at
01 April 01 Oct
2023 2022
Analysis of total provisions $m $m
Current 0.8 0.7
Non-current 5.2 4.9
Total provisions 6.0 5.6
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.
5.2 Defined benefit pension scheme
As at As at
01 April 01 Oct
2023 2022
$m $m
Net pension liability 16.5 6.3
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 12 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 defined
benefit plan exposes the Group to actuarial risks such as longevity risk,
inflation risk and investment risk.
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 £335.8 million. 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 $nil (HY22: $2.6
million) in respect of scheme expenses and deficit recovery plan payments. In
the financial period ending 01 October 2022, the Group made a prepayment of
$4.0m covering all contributions due in FY23. In accordance with the deficit
recovery plan agreed following the 31 March 2019 actuarial valuation, the
Group will make payments of $4.3m in FY24 in respect of deficit recovery plan
payments and scheme expenses. These payments are subject to review following
the March 2022 actuarial valuation which will be finalised in 2023.
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 01 April 2023 using the projected unit method.
Movement in net defined benefit liability
Defined benefit Defined benefit Net defined benefit
obligation asset liability
01 April 01 Oct 01 April 01 Oct 01 April 01 Oct
2023 2022 2023 2022 2023 2022
$m $m $m $m $m $m
At 02 October/01 October (284.9) (534.7) 278.6 466.4 (6.3) (68.3)
Included in profit or loss
Administrative expenses (0.5) (0.8) - - (0.5) (0.8)
Net interest cost (8.1) (10.3) 7.8 9.0 (0.3) (1.3)
(8.6) (11.1) 7.8 9.0 (0.8) (2.1)
Included in other comprehensive income
Remeasurement gain:
Ð Actuarial gain/(loss) arising from:
Ð Demographic assumptions 2.3 (0.2) - - 2.3 (0.2)
Ð Financial assumptions (8.1) 175.4 - - (8.1) 175.4
Ð Experience adjustment (5.2) (11.3) - - (5.2) (11.3)
Ð Return on plan assets excluding interest income - - 2.7 (113.8) 2.7 (113.8)
(11.0) 163.9 2.7 (113.8) (8.3) 50.1
Other
Contributions by the employer - - - 8.5 - 8.5
Net benefits paid out 11.3 21.5 (11.3) (21.5) - -
FX gain/(loss) (34.6) 75.5 33.5 (70.0) (1.1) 5.5
At 01 April/01 October (327.8) (284.9) 311.3 278.6 (16.5) (6.3)
Actuarial assumptions
The main financial assumptions used by the independent qualified actuaries to calculate the liabilities under IAS 19 are set out below:
01 April 01 Oct
2023 2022
% p.a. % p.a.
Inflation (RPI) 3.25 3.60
Inflation (CPI) 2.55 2.80
Pension increases post August 2005 2.05 2.30
Pension increases pre August 2005 3.05 3.45
Discount rate for scheme liabilities 4.80 5.30
Plan assets
01 April 01 Oct
2023 2022
$m $m
Equities and other securities 83.9 105.6
Liability Driven Investment 94.6 54.4
Secured income fund 41.5 53.1
Infrastructure fund 64.7 55.2
Cash 26.6 10.3
Fair value of assets 311.3 278.6
Equity securities are valued using quoted prices in active markets where
available.
Liability Driven Investments (LDI) comprises an investment in a level 2 pooled investment vehicle which combines a series of variable interest-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. Changes in assumptions relating to these variables could positively or negatively impact the reported fair value of these instruments.
5.3 Cash flow from operations
26 weeks to 26 weeks to
01 April 02 April
2023 2022
$m $m
Continuing operations
(Loss)/profit for the period (4.2) (10.7)
Adjustments for:
Taxation (1.1) (2.9)
Depreciation 3.9 4.7
Amortisation of intangible assets 6.2 6.2
Impairments 0.7 4.2
Defined benefit pension scheme cost 0.4 0.7
Finance costs 3.7 2.9
Fair value of share-based payments 0.8 0.5
Restructuring costs expensed (excluding impairments) 1.6 1.0
Transaction costs expensed 0.4 0.8
Increase in inventories (16.5) (10.9)
(Increase)/decrease in receivables (3.9) 10.6
Decrease in payables and provisions (3.0) (1.9)
Cash flow from continuing operations before exceptional items (11.0) 5.2
Restructuring and transaction costs paid (1.6) (0.8)
Cash flow from continuing operations (12.6) 4.4
Discontinued operations
Profit/(loss) for the period 0.8 (1.2)
Adjustments for:
Taxation 0.2 (0.3)
(Increase)/decrease in inventories (0.2) 0.2
Increase in receivables (0.3) -
(Decrease)/increase in payables and provisions (0.9) 0.7
Cash flow from discontinued operations (0.4) (0.6)
Cash flow from operations (13.0) 3.8
5.4 Exchange rates
The following significant exchange rates applied during the period.
Average rate Closing rate Average rate Closing rate Closing rate
01 April 01 April 02 April 02 April 01 Oct
2023 2023 2022 2022 2022
GBP 0.8380 0.8085 0.7438 0.7614 0.9058
5.5 Restatements
The comparatives for the period to 02 April 2022 have been restated to reflect
the reclassification of research and development costs as a separate line item
below gross profit. This change in accounting policy provides visibility of
research and development costs on the face of the consolidated statement of
comprehensive income when it was previously only reported in the financial
review. This presentation is consistent and comparable with common market
practice and therefore provides reliable and more relevant information to the
reader of the accounts.
Overall operating loss figures as reported in the previous period remain
unchanged as this is only a presentational change.
A reconciliation of previously reported figures for the period to 02 April
2022 to restated figures is presented below:
Consolidated Statement of Comprehensive Income - for the 26 weeks ended 02
April 2022
Adjusted Adjustments Totals
Previously reported Reclass adjustment Restated Previously reported Reclass adjustment Restated Previously reported Reclass adjustment Restated
Continuing operations $m $m $m $m $m $m $m $m $m
Revenue 121.9 - 121.9 - - - 121.9 - 121.9
Cost of sales (87.6) 4.0 (83.6) - - - (87.6) 4.0 (83.6)
Gross profit 34.3 4.0 38.3 - - - 34.3 4.0 38.3
Selling and distribution costs (12.8) - (12.8) - - - (12.8) - (12.8)
Research and development costs - (4.0) (4.0) - (1.6) (1.6) - (5.6) (5.6)
General and administrative expenses (22.7) - (22.7) (9.5) 1.6 (7.9) (32.2) 1.6 (30.6)
Operating loss (1.2) - (1.2) (9.5) - (9.5) (10.7) - (10.7)
5.6 Principal risks and uncertainties
The nature of the principal risks and uncertainties impacting the Group are
described on pages 62-69 of our 2022 Annual Report and remain unchanged.
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.
5.7 Related party transactions
There were no related party transactions during the period or outstanding at
the end of the period (2022: 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 30
September 2023.
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