REG - Avon Protection PLC - Post Close Half Year Trading Update

Avon TechnologiesAnnouncement

06/04/2022 07:00

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RNS Number : 3970H  Avon Protection PLC  06 April 2022

6 April 2022

Avon Protection plc

Post Close Half Year Trading Update

 

Avon Protection plc ("Avon Protection" or "the Group") today provides the
following trading update for the six months ended 31 March 2022 ("HY22" or the
"Period"). Unless otherwise stated, figures and commentary exclude the armor
business.

 

Trading update

 

Trading in the first half reflects a continuation of some of the challenges
seen in FY21, but with performance accelerating through the second quarter.
Order intake was, as expected, lower than the comparable period last year
reflecting a very strong first half in 2021, but, following the events in
Ukraine, enquiries remain robust giving us confidence in order intake for the
second half and beyond.  Revenue for the Period was in line with expectations
and ahead overall by c. 4%, with organic year-on-year performance broadly
flat.

 

Profitability has however been impacted, in broadly even proportions, by a
weaker than expected sales mix in the first half and additional manufacturing
costs, notably in the helmets business, due to supply chain and process
inefficiencies.  As a result, the adjusted EBITDA margin for the period is
expected to be approximately 10%.

 

Operationally, we have made good progress on the implementation of the $15m
overhead cost saving programme announced in December 2021 (of which
approximately half relates to overheads in the armor business and the
remainder relates to the rest of the Group), including the closure of one of
our U.S. offices and a change in management structure which streamlines the
organisation into one focussed business.

 

Strategically, we are pleased with our continued progress, which includes the
award of the U.S. DLA contract for the second-generation Advanced Combat
Helmet in February and delivery of the next-generation Integrated Head
Protection System for first article test scheduled for Q3. This momentum
further reinforces our position as a leading provider of head protection to
the U.S. military and provides a strong platform for future growth.

 

Outlook

 

The recent events in Ukraine have highlighted the criticality of our products
and capabilities, and we have seen a notable increase in customer enquiry
activity.

 

We have a number of active discussions ongoing with customers regarding
potential incremental orders across both respiratory and helmet products.
While these discussions remain ongoing and the quantum and timing of resultant
orders are still to be determined, the impact of this growth in demand is most
likely to be seen in FY23 and beyond, and as such the Board continues to have
a range of expected full year revenue outcomes for FY22 consistent with market
expectations.

 

Profitability in H2 is expected to improve versus H1 but will not offset the
weakness experienced in the Period. Full year underlying earnings will
therefore be lower than previously expected.

 

The second half margin will benefit from the adverse mix impact substantially
unwinding along with the operational gearing effect of higher revenues and the
initial contribution from the cost saving initiatives. The manufacturing
inefficiencies described above are expected to improve as higher volumes are
achieved. As a result, the Board expects EBITDA margins to recover
progressively through the second half of the financial year and beyond, with
the extent of this improvement in part dependent on the quantum and timing of
incremental orders. Looking forward into FY23, the Group's profitability will
benefit from the improved FY22 exit run-rate and the full year effect of the
cost savings.

 

Armor business

 

In the period, as expected, armor revenues were in the low single digit $m
pending final sign-off of first article testing of the DLA ESAPI body armor
product. Combined with overheads, this business therefore operated at an
EBITDA loss in the first half. We have continued with our steps for an orderly
exit of this business once existing contracts are satisfied.

 

Commenting, Paul McDonald, Chief Executive Officer, said:

"At Avon Protection, our purpose is to protect people and save lives.  As a
global leader in military-grade respiratory and head protection, we are seeing
an increased demand for our products for both the short and longer term. We
are working proactively with our key customers to confirm their requirements
and maximise our available capacity in the short term. Longer term, this will
create further opportunities and will likely result in mid-term capacity
expansion to meet expected demand."

 

 

Notice of Results

The Group will release its results for the half year ended 31 March 2022 on 24
May 2022.

 

For further enquiries, please contact:

 

 Avon Protection plc
 Paul McDonald, Chief Executive Officer           01225 896 848
 Rich Cashin, Chief Financial Officer

 Rachel Stevens, Director of Investor Relations

 MHP Communications
 Andrew Jaques                                    0203 128 8570
 Charlie Barker                                   avonprotection@mhpc.com (mailto:avonprotection@mhpc.com)
 Pete Lambie

 

Legal Entity Identifier: 213800JM1AN62REBWA71

Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014)
("MAR") prior to its release as part of this announcement and is disclosed in
accordance with the Company's obligations under Article 17 of those
Regulations.

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, Avon Protection's mission is to
relentlessly advance the future of protection enhancing the performance,
efficiency and capability of their customers whilst providing ever increasing
levels of protection.

Avon Protection operates from six locations 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) .

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