REG - Avon Protection PLC - Preliminary Results
22/11/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221122:nRSV1315Ha&default-theme=true
RNS Number : 1315H Avon Protection PLC 22 November 2022
AVON PROTECTION PLC
PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 1 OCTOBER 2022
STRONG H2 RECOVERY AND SIGNIFICANT LONG-TERM GROWTH OPPORTUNITY
Avon Protection plc, the leading global provider of respiratory and head
protection systems, today announces audited results for the 52 weeks ended 1
October 2022.
1 October 2022 2 October 2021 (5) Organic Change (constant currency)(4)
Group(2)
Orders received $280.1m $282.7m (1.6%)
Closing order book $151.3m $143.1m 7.8%
Revenue $271.9m $248.3m 9.1%
Adjusted(1) EBITDA $25.5m $37.6m (38.5%)
Adjusted(1) operating profit $10.1m $22.0m (61.4%)
Adjusted(1) profit before tax $6.1m $18.9m (74.4%)
Adjusted(1) basic earnings per share 20.4c 60.6c (72.9%)
Dividend per share 44.9c 44.9c 0.0%
Net debt excluding lease liabilities $44.2m $26.8m 64.9%
Statutory results
Operating loss(3) from continuing operations $(2.1)m $(29.0)m
Loss before tax from continuing operations $(8.5)m $(35.6)m
Basic loss per share from continuing operations (18.5)c (79.9)c
Net debt $68.0m $55.9m
Excluding Armor(2)
Revenue $263.5m $241.8m 8.6%
Adjusted(1) EBITDA $38.8m $46.0m (21.8%)
Adjusted(1) operating profit $23.4m $32.5m (35.3%)
Full year results underpinned by a significant step-up in H2 financial
performance
· Solid order intake of $280.1 million reflecting:
o First order of $42.1m from the U.S. Army for the Next-Generation Integrated
Head Protection System (NG IHPS) helmet.
o Strong underlying demand environment with NSPA contract facilitating
delivery of our life-critical personal protection to NATO countries.
· Notable growth in UK & International market revenue (+84.2%,
+88.9% on an organic constant currency basis) and Commercial Americas (+4.6%),
offsetting decline in U.S. DOD (-21.2%).
· Adjusted EBITDA margin of 9.4% (2021: 15.1%), reflecting a
combination of product mix shift and operational challenges, including supply
chain issues, with H2 margin of 12.9% following improvement in product mix and
manufacturing efficiencies.
o Adjusted EBITDA margin excluding armor of 14.7% (2021: 19.0%).
· Cash conversion of 142.7% reflecting tight control over working
capital.
· Net debt excluding lease liabilities of $44.2 million and leverage of
1.99 times bank adjusted EBITDA.
Operational and strategic progress
· Further development of our head protection portfolio:
o First delivery order worth $42.1m received from the U.S. Army for NG IHPS.
o Award of second-generation Advanced Combat Helmet contract for the U.S. DOD.
o In-sourcing of helmet shells for legacy Team Wendy products.
o Integration of our helmet design and manufacturing capability increasing
flexibility and capacity.
· Successful business improvement actions:
o Significant progress towards reducing overheads by $21 million per annum.
o Forward ordering of long lead-time components to combat supply chain
disruption, allowing greater agility and ability to react to demand signals.
· Full materiality assessment and impact plan created in line with our
sustainability agenda.
· Appointments of Rich Cashin as Chief Financial Officer in March 2022
and Jos Sclater as Chief Executive Officer with effect from 16 January 2023.
Outlook
· Opening order book of $151.3 million provides good visibility going
into the new financial year.
· Q1 performance to date has been in line with expectations.
· Mid-single-digit revenue growth excluding armor driven by
commencement of NG IHPS deliveries and growth in global head protection,
offsetting modest declines in European respiratory following very strong FY22.
· Revenue from armor is expected to total $28m-$30m.
· Adjusted EBITDA margin on an excluding armor basis consistent with
FY22, with new product introduction costs and inflationary pressures largely
offsetting efficiency improvements and overhead savings.
· Armor will continue to be a headwind for reported results, although
we expect to have fully withdrawn from the armor market by the end of FY23.
EBITDA margin including armor above FY22.
· Revenue and earnings are expected to reflect a normal weighting
towards H2.
· Further improvement of the leverage position expected.
· Greater focus on protective technologies and capabilities throughout
Europe and beyond.
· Anticipated increase in public defence spending on personal
protective equipment over the medium-long-term, including long-term upgrade
programmes.
· Significant long-term growth opportunity underpinned by our
world-leading technology positions and a heightened threat environment.
Bruce Thompson, Executive Chair:
"We are pleased to be announcing results this morning which reflect solid
order intake and a much-improved operational performance in the second half.
These results reflect the outstanding efforts of our employees across the
business, who have continued to focus on executing our strategy. Our thanks go
to them for their hard work and dedication to Avon Protection.
We have made good progress in 2022 preparing for a new chapter of growth and
future value generation, including restructuring some areas of the business
and resolving legacy execution issues. Importantly, earlier in the year we
recruited Rich Cashin as CFO and, more recently, Jos Sclater as our new CEO.
There is a significant long-term growth opportunity for Avon. The demand for
our world-leading respiratory and head protection systems is as strong as
ever, and we remain focused on protecting those who protect us with our
innovative solutions."
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 2.1.
(3) Reported operating loss includes $6.8m amortisation of acquired
intangibles, $3.8m impairment of non-current assets, restructuring costs of
$3.3m, transaction costs of $0.6m, as well as a gain of $3.9m from the
reduction of the net present value of the contingent consideration payable to
3M due to lower orders under the DLA ESAPI contract, off-set by an inventory
provision of $1.6m in respect of raw materials held for the DLA ESAPI
contract. See adjusted performance section for full breakdown of adjustments
and comparatives.
(4) Organic constant currency measures are provided in the adjusted
performance section.
(5) In previous periods, the Group reported financial statements to the 30
September, this being the Company's accounting reference date. Headings for
the current and prior period now show the actual dates to which the financial
statements were drawn up. This has no impact on previously reported numbers.
For further enquiries, please contact:
Avon Protection p.l.c. +44 1225 896 848
Bruce Thompson, Executive Chair
Rich Cashin, Chief Financial Officer
Rory Wiltshire, Investor Relations Manager
MHP +44 7710 032 657
Tim Rowntree avonprotection@mhpgroup.com
Peter Lambie
Analyst and investor webcast
Bruce Thompson, Executive Chair, 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/AVON_FY22
(https://brrmedia.news/AVON_FY22)
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)
OPERATIONAL REVIEW
We have made significant progress during the year towards delivering our
strategy to strengthen and grow our respiratory and head protection offerings.
Our key strategic achievements throughout the year include:
· Organic growth in our respiratory portfolio:
o NSPA continues to be a strong vehicle for providing our mission-critical
personal protection to NATO countries.
· Good progress in developing our head protection portfolio:
o First delivery order received for NG IHPS.
o Award of U.S. DOD ACH GEN II contract in February.
o In-sourcing of helmet shells for legacy Team Wendy products.
o Integration of our helmet design and manufacturing capability.
· Continued new product development:
o Launch of the EXOSKIN boots and gloves range to address growing threats and
broaden our CBRN product portfolio.
· Strong demand environment:
o Current threat environment driving greater focus on protective technologies
and capabilities throughout Europe and beyond.
A robust core business
Our 20-year relationship with the U.S DOD as a sole-source provider of
general-purpose respirators, tactical forces respirators, powered-air
purifying respirators and tactical self-contained breathing apparatus
solutions has seen us design, develop, and maintain a portfolio of innovative
and world-leading respiratory protection systems. We also 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 as
the risk environment has increased and we are actively engaged with our
customers as they decide how to co-ordinate their response to world events.
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 will position
Avon Protection as the leading helmet provider to the U.S. DOD as we commence
deliveries on programmes we have already won.
Our longer-term strategic aspirations include selling a wider range of both
respirators and helmets to our global customer base. During the year, we have
taken further steps to integrate the two acquired businesses, resulting in a
more streamlined organisation with significant opportunities for realising
manufacturing and technological synergies that will drive longer-term value
creation for the Group.
We have continued to invest during the year to maintain our market-leading
positions through continued development of our existing portfolio of
innovative products, and development of the next generation of products that
will deliver future growth for the business. We continue to develop our
product portfolio in partnership with our customers to meet exacting
performance requirements whilst providing a commercially robust route to
market to maximise our return on investment.
Our people are at the heart of everything we do, and at the core of our DNA is
pride for our product and how it protects the user. The reorganisation to
integrate the two head protection businesses and streamline the Group, as well
as our financial performance, has been a challenge for our people this year.
However, we are making progress and continuing our journey to shape our
culture for the future. We are grateful to our colleagues for their ongoing
commitment as we continue to align the business for future growth.
Additional programme wins
Following the contract award from the U.S. Army for the NG IHPS in 2021, we
received the first delivery order worth $42.1 million in September 2022.
Manufacturing ramp-up is progressing to plan after completing rigorous
testing, with initial deliveries expected in the first half of FY23.
The award of the ACH GEN II contract in February 2022 is a further
demonstration of the strength of our head protection portfolio. Our ACH GEN II
helmet will be submitted for first article testing (FAT) in early FY23 with
initial revenue expected in FY24.
When NG IHPS 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,
validating the strategic rationale for bringing the two helmet brands together
by combining Ceradyne's helmet shell moulding capabilities and Team Wendy's
helmet liner and retention system technologies.
We continue to make progress with our MCM100 underwater rebreather, with
several countries having taken delivery, and others conducting full dive test
programmes.
A heightened threat environment
The current threat environment is driving a greater focus on protective
technologies and capabilities throughout Europe and beyond, giving rise to a
dynamic-demand environment.
NATO nations continue to safeguard against the possibility of adversarial use
of CBRN capabilities, and our core competence in these areas leaves us
well-placed to protect against the increased threat level.
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 evident in
the current environment where ease of ordering is paramount in a fast-moving
situation. On behalf of various NATO governments, we have delivered over
65,000 50 series respirators to protect military, government and humanitarian
personnel in Ukraine throughout the year.
We are anticipating higher public defence spending to address the increased
need for personal protective equipment in the medium and long-term. This will
likely result in upgrade programmes across NATO and militaries globally over
the coming years, for which we are well positioned.
Our leading position in the CBRN market means we are well positioned to
continue our growth in supporting our customers around the world to improve
and enhance their protective measures. To further expand our capabilities in
the important CBRN market, we developed the EXOSKIN range of boots and gloves
to protect personnel without compromising the wearer's tactical agility in the
field. In expanding our offerings into protective garments, we aim to provide
the full scope of integrated protective wear that can be scaled to address
changing threat environments and readiness levels.
Successfully addressing challenges
As a result of global supply chain issues, which in some cases pushed lead
times of components that were once 6 weeks closer to 40 weeks, we took the
initiative to buy-forward inventory where we had identified the most risk,
particularly electronics and textiles. Whilst this increased our working
capital, it greatly improved our ability to react to the higher demand
environment which we now find ourselves in. This has also enabled us to run
our facilities at improved levels of productivity and efficiency.
We have made significant progress against the previously announced cost
savings programmes. Half of the $15 million announced in December 2021 has
been executed, with the remainder linked to the closure of the armor business.
We have also delivered the incremental $6 million reduction announced in May
2022, although as stated at the time of announcement this cost reduction was
more variable in nature and costs will be added back into the business as
revenue continues to grow.
Following FAT approval for the Defense Logistics Agency Enhanced Small Arms
Protective Insert (DLA ESAPI) body armor, we started to deliver product to the
U.S DOD in H2 22. This leaves us on track to fulfil our final contractual
obligations and allow the orderly wind-down of the armor business to conclude
by the end of FY23.
The appointments of Rich Cashin as CFO in March 2022, and of Jos Sclater as
CEO with effect from 16 January 2023 brings a wealth of experience and
impressive track records within the aerospace and defence sector to Avon
Protection and positions us well for future growth.
Sustainability
We protect; it's ingrained within our culture and is at the heart of
everything we do, and is why sustainability is so important to us. We
recognise we are at the start of our sustainability journey to achieving net
zero by 2045 at the latest. This year, we commenced work on a high-level
sustainability vision linked to our purpose and strategy.
We have concentrated our efforts on the following:
1. Identifying key sustainability areas
To ensure we focus our efforts on the sustainability issues that are most
material, we engaged our stakeholders through a materiality review process.
Targeting the most material sustainability areas, we have developed an impact
plan consisting of four distinct pillars: an employee-centric approach,
environmental impact, sustainable supply chains and cybersecurity and data
protection.
2. Assessing our existing greenhouse gas (GHG) data and building an action
plan for delivering net zero
We have committed to achieving net zero by 2045 at the latest by reducing our
absolute scope 1 and 2 GHG emissions (compared to 2021). During the year, we
have been focused on ensuring data accuracy and understanding the process by
which scope 1 and 2 emissions are generated to provide an appropriate base
year for reporting targets against. Following this work, we have now aligned
data reporting with the GHG Protocol and will use 2021 as a base year. We will
be carrying out a further scope of work based on recommendations to add detail
to the Net Zero Plan.
3. Governance of our sustainability agenda and TCFD reporting
To ensure focus and greater transparency of our sustainability agenda, a new
governance framework has been put in place. The Board takes overall
responsibility for our sustainability agenda, disclosure and reporting. During
the year a Sustainability Committee, chaired by Rich Cashin, was established
with responsibility for the design, implementation, and delivery of our
sustainability agenda on behalf of the Board. This approach will ensure that
delivery has top-level support and is underpinned by strong governance.
We have made substantial progress over the past 12 months in setting the
foundations for our sustainability agenda which will continue to evolve over
the coming months and years.
FINANCIAL REVIEW
Avon Protection has seen strong revenue growth in 2022 with revenue of $271.9
million up 9.5% (9.1% on an organic constant currency basis) compared to the
prior period. However, a shift in product mix, along with operational
challenges including supply chain constraints, have impacted profitability,
resulting in an adjusted operating profit of $10.1 million (2021: $22.0
million) which includes $13.3m of losses relating to the armor business, and a
statutory operating loss of $2.1 million (2021: loss of $29.0 million).
1 October 2022 2 October 2021 (2) Organic change (constant currency)(3)
Orders received $280.1m $282.7m (1.6%)
Closing order book $151.3m $143.1m 7.8%
Revenue $271.9m $248.3m 9.1%
Adjusted(1) EBITDA $25.5m $37.6m (38.5%)
Adjusted(1) EBITDA margin 9.4% 15.1% (710bps)
Adjusted(1) operating profit $10.1m $22.0m (61.4%)
Adjusted(1) net finance costs $(4.0)m $(3.1)m 33.3%
Adjusted(1) profit before tax $6.1m $18.9m (74.4%)
Adjusted(1) taxation $0.1m $(0.3)m
Adjusted(1) profit after tax $6.2m $18.6m (73.1%)
Adjusted(1) basic earnings per share 20.4c 60.6c (72.9%)
Dividend per share 44.9c 44.9c 0.0%
Net debt excluding lease liabilities(1) $44.2m $26.8m 64.9%
Cash conversion(1) 142.7% 83.2%
Statutory results
Operating loss $(2.1)m $(29.0)m
Net finance costs $(6.4)m $(6.6)m
Loss before tax $(8.5)m $(35.6)m
Taxation $2.9m $11.1m
Loss after tax from continuing operations $(5.6)m $(24.5)m
Loss from discontinued operations $(2.0)m $(1.1)m
Loss for the period $(7.6)m $(25.6)m
Basic loss per share from continuing operations (18.5)c (79.9)c
Net debt (1) $68.0m $55.9m
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 In previous periods, the Group reported financial statements to the 30
September, this being the Company's accounting reference date. Headings for
the current and prior period now show the actual dates to which the financial
statements were drawn up to. This has no impact on previously reported
numbers.
3 Organic constant currency measures are provided in the adjusted performance
measures section below.
Order intake totalled $280.1 million (2021: $282.7 million) in the year, down
0.9% (1.6% on an organic constant currency basis), with increases in head
protection, including the previously announced $42.1 million order for NG
IHPS, offset by decreases in respiratory following the receipt of several
large NSPA orders in the prior year. Order intake excluding armor totalled
$267.9 million (2021: $281.0 million), down 4.7% (5.4% on an organic constant
currency basis).
The closing order book of $151.3 million (2021: $143.1 million) reflects an
increase of 5.7% (7.8% on an organic constant currency basis) on the prior
period. Closing order book excluding armor of $120.9 million (2021: $116.5
million) reflects an increase of 3.8% (6.2% on an organic constant currency
basis).
Revenue totalled $271.9 million (2021: $248.3 million), up 9.5% (9.1% on an
organic constant currency basis), reflecting strong growth in respiratory
notably driven by the NSPA contract, offsetting a small decline in head
protection. Revenue excluding armor totalled $263.5 million (2021: $241.8
million), up 9.0% (8.6% on an organic constant currency basis).
Adjusted EBITDA of $25.5 million is down 32.2% (38.5% on an organic constant
currency basis) compared to the prior period (2021: $37.6 million) with
operational challenges including supply chain disruptions and manufacturing
inefficiencies, along with shifts in product mix, being the predominant
factors for the decrease. Adjusted EBITDA margin of 9.4% represents a decline
of 570bps (710bps on an organic constant currency basis). Adjusted EBITDA
losses for armor totalled $13.3 million with a large overhead base supporting
low levels of throughput prior to FAT approval, resulting in adjusted EBITDA
excluding armor of $38.8 million, down 15.7% (21.8% on an organic constant
currency basis) compared to the prior year (2021: $46.0 million), and EBITDA
margin excluding armor of 14.7%, down 430bps. Headwinds were alleviated
somewhat in H2 with operational improvements and benefits of the overhead
reduction programmes.
Adjusted operating profit of $10.1 million (2021: $22.0 million) is after
adjusted depreciation, amortisation and impairment of $15.4 million (2021:
$15.6 million), a decrease of 54.1% (61.4% on an organic constant currency
basis) compared to the prior period following the decrease in EBITDA.
Statutory operating loss was $2.1 million (2021: loss of $29.0 million) after
$12.2 million adjustments (2021: $51.0 million adjustments) with the decreased
loss as a result of the large amount of armor related impairments in the prior
year. The adjusted performance section contains further explanation for
adjusting items which are summarised below.
Statutory operating loss 2022 2021
$m $m
(2.1) (29.0)
Amortisation of acquired intangibles 6.8 14.2
Impairments and provisions related to armor assets 1.8 46.8
Release of contingent consideration (3.9) (15.7)
Impairment of non-current assets 3.6 0.7
Restructuring costs 3.3 -
Acquisition and transaction costs 0.6 2.6
Inventory fair value adjustments - 2.4
Adjusted operating profit 10.1 22.0
Adjusted net finance costs increased to $4.0 million (2021: $3.1 million) due
to higher net debt and variable interest charges.
After an adjusted tax credit of $0.1 million (2021: charge of $0.3 million),
the Group recorded an adjusted profit for the period after tax of $6.2 million
(2021: $18.6 million).
Adjusted basic earnings per share decreased by 66.3% to 20.4 cents (2021: 60.6
cents).
Statutory net finance costs of $6.4 million (2021: $6.6 million) include $1.3
million (2021: $1.3 million) of discount unwind relating to the U.K. pension
scheme and a discount unwind of $1.1 million (2021: $2.2 million) relating to
the contingent consideration payable to 3M.
Statutory loss before tax from continuing operations was $8.5 million (2021:
loss of $35.6 million) and, after a tax credit of $2.9 million (2021: credit
of $11.1 million), the loss for the period from continuing operations was $5.6
million (2021: loss of $24.5 million). Basic losses per share from continuing
operations were 18.5 cents (2021: losses of 79.9 cents).
2022 2021
Respiratory Head protection Total Respiratory Head protection Armor
Revenue $m Armor Total
U.S. DOD 63.2 35.5 - 98.7 86.1 39.1 - 125.2
Commercial Americas 40.5 25.2 - 65.7 40.4 22.4 - 62.8
U.K. & International 89.3 9.8 - 99.1 42.1 11.7 - 53.8
Total excluding Armor 193.0 70.5 - 263.5 168.6 73.2 - 241.8
Armor - - 8.4 8.4 - - 6.5 6.5
Total 193.0 70.5 8.4 271.9 168.6 73.2 6.5 248.3
U.S. DOD
U.S. DOD revenue declined by 21.2% to $98.7 million (2021: $125.2 million).
U.S. DOD respiratory revenue declined by 26.6% to $63.2 million (2021: $86.1
million) as a result of the M69 contract coming to an end, reduced volumes of
Powered Air Purifiers, and a strong prior year comparator for spares and
accessories. Head protection revenue declined by 9.2% to $35.5 million (2021:
$39.1 million) following the completion of the first-generation IHPS contract.
Deliveries against the follow-on NG IHPS will commence in FY23.
U.S. DOD closing order book for 2022 of $92.3 million (2021: $62.1 million)
provides excellent revenue visibility for 2023 and is comprised of $39.0
million respiratory orders and $53.3 million head protection orders.
Commercial Americas
Commercial Americas revenue increased by 4.6% to $65.7 million (2021: $62.8
million).
Commercial Americas respiratory revenue grew by 0.2% to $40.5 million (2021:
$40.4 million) with price increases within our commercial portfolio throughout
the period giving strong momentum in the second half after a weaker start.
Head protection revenue grew by 12.5% to $25.2 million (2021: $22.4 million),
predominantly reflecting the additional month of Team Wendy ownership.
Commercial Americas closing order book for 2022 of $7.9 million (2021: $5.2
million), comprises $4.5 million of respiratory orders and $3.4 million of
head protection orders.
U.K. & International
U.K. & International revenue increased by 84.2% (88.9% on an organic
constant currency basis) to $99.1 million (2021: $53.8 million).
U.K. & International respiratory revenue grew by 112.1% (120.0% on an
organic constant currency basis) to $89.3 million (2021: $42.1 million) as a
result of continued expansion of the NSPA contract, with deliveries made to
seven countries within the period, whilst head protection revenue saw a
decline of 16.2% (18.8% on an organic constant currency basis) to $9.8 million
(2021: $11.7 million) following the switch of the Australian Defence Forces
Tiered Combat Helmet (TCH) program from production to sustainment and
refurbishment.
U.K. & International closing order book for 2022 of $20.8 million (2021:
$49.3 million) follows strong deliveries to NSPA resulting in a decreased
respiratory order book of $16.7 million (2021: $48.5 million), partially
offset by an increase in the head protection order book to $4.1 million (2021:
$0.9 million) after a strong launch into the European market.
Armor
Armor revenue increased by 29.2% to $8.4 million (2021: $6.5 million)
following commencement of DLA ESAPI deliveries.
Armor closing order book of $30.4 million (2021: $26.6 million) comprises
$20.1 million of DLA ESAPI and $10.3 million of flat armor.
Research and development expenditure
In line with our strategy to maintain our technology leadership positions we
continue to invest in our portfolio of products. Total investment in research
and development (capitalised and expensed) amounted to $10.9 million (2021:
$19.1 million), of which $6.0 million (2021: $7.8 million) related to our
respiratory portfolio, and $4.9 million (2021: $5.4 million) to the
development of our head protection portfolio. Total research and development
as a percentage of revenue was 4.0% (2021: 7.7%), with the decrease following
cessation of armor related development, which amounted to $5.9 million in
FY21.
2022 2021
$m $m
Total expenditure 10.9 19.1
Less customer funded (1.4) (2.3)
Group expenditure 9.5 16.8
Capitalised (5.8) (15.0)
Amortisation and impairment of development expenditure 6.7 12.4
Total income statement impact 10.4 14.2
Revenue 271.9 248.3
R&D spend as a % of revenue 4.0% 7.7%
Within respiratory, investment centred around the development of the EXOSKIN
range of boots and gloves, and improvements to the supplied air ST54 tactical
self-contained breathing apparatus.
Development expenditure for the head protection portfolio has focused on the
NG IHPS and ACH GEN II programmes.
Net debt and cash flow
2022 2021
$m $m
Adjusted continuing EBITDA 25.5 37.6
Share-based payments and defined benefit pension scheme costs 1.8 1.9
Working capital(1) 9.1 (8.2)
Cash flows from continuing operations before exceptional items 36.4 31.3
Restructuring, transaction and acquisition costs paid (1.6) (4.4)
Cash flows from continuing operations 34.8 26.9
Cash flows from discontinued operations (1.3) (3.3)
Cash flow from operations 33.5 23.6
Payments to pension plan (8.5) (2.9)
Finance costs (3.7) (2.7)
Repayment of lease liability (4.1) (3.7)
Tax received/(paid) excluding capital gains tax paid on divestment(2) 3.7 (4.3)
Capital Expenditure (8.9) (31.6)
Acquisitions and divestments (3.2) (137.1)
Purchase of own shares - LTIP and share buyback (12.4) (4.3)
Dividends to shareholders (13.4) (12.1)
Foreign exchange (0.4) 0.6
Change in net debt (17.4) (174.5)
Opening net debt, excluding lease liabilities (26.8) 147.7
Closing net debt, excluding lease liabilities (44.2) (26.8)
1 Working capital excludes $1.6 million armor inventory impairment (2021: $1.7
million) and $2.4 million inventory acquisition accounting adjustments in
2021. These are included within changes in inventory in the statutory
reconciliation of cash flow from operations.
2 Cash flows 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.
Cash flows from continuing operations before exceptional items were $36.4
million (2021: $31.3 million). Total capital expenditure was $8.9 million
(2021: $31.6 million), with the decrease following large amounts of spend
related to one-off IT software programmes and armor development in the prior
year.
Dividends and purchase of own shares were $25.8 million (2021: $16.4 million)
reflecting the share buyback programme started in January and paused in May.
Cash flows from continuing operations before exceptional items as a percentage
of adjusted EBITDA (cash conversion) was 142.7% (2021: 83.2%) reflecting
improved working capital management.
Net debt was $68.0 million (2021: net debt $55.9 million), which includes
lease liabilities of $23.8 million (2021: $29.1 million). Excluding lease
liabilities, net debt was $44.2 million (2021: net debt $26.8 million). The
increase in net debt is principally due to the share buyback programme and
accelerated pension plan payments to lock in benefits following the increase
in bond yields.
During the period we exercised our option to extend the maturity of $142
million from the total $200 million revolving credit facility (RCF) to 8
September 2025. The remaining $58 million matures on 8 September 2024, subject
to a one-year extension option to 8 September 2025. As at 1 October 2022 $53.7
million of the RCF was drawn.
The RCF is subject to financial covenants measured on a biannual basis. These
include a limit of 3.0 times for the ratio of net debt, excluding lease
liabilities, to adjusted EBITDA (leverage). The Group complied with all
financial covenants during the current and prior financial periods.
In addition to the RCF our U.S. operations have access to a $5.0 million
overdraft facility.
Armor update
Following January's announcement regarding the decision to wind-down the armor
business, the following tables summarise the contribution of the armor
business to the group's financial statements for 2022.
Armor 2022 2021
Orders received $12.2m $1.7m
Closing order book $30.4m $26.6m
Revenue $8.4m $6.5m
2022 adjusted Armor Respiratory & head Total
$m $m $m
Orders received 12.2 267.9 280.1
Closing order book 30.4 120.9 151.3
Revenue 8.4 263.5 271.9
Adjusted EBITDA (13.3) 38.8 25.5
Adjusted EBITDA margin (158.3%) 14.7% 9.4%
Adjusted operating profit/(loss) (13.3) 23.4 10.1
2022 adjustments Armor Respiratory & head Total
$m $m $m
Revenue - - -
EBITDA(1) 0.4 (1.6) (1.2)
Operating profit/(loss)(1) 0.2 (12.4) (12.2)
2022 total Armor Respiratory & head Total
$m $m $m
Revenue 8.4 263.5 271.9
EBITDA (12.9) 37.2 24.3
Operating profit/(loss) (13.1) 11.0 (2.1)
1 Armor operating loss adjustments totalling a credit of $0.2 million comprise
a gain of $3.9 million to reduce the provision for contingent consideration
payable to 3M, less $1.6 million armor inventory provisions, $0.6 million
transaction costs, $0.2 million non-current asset impairments and $1.3 million
armor 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 $6.3 million as at 01 October 2022 (2021: $68.3 million).
The reduction is due to a higher discount rate being applied to pension
liabilities, partially offset by a fall in plan asset values.
During the period the Group made payments to the plan of $8.5 million (2021:
$2.9 million) in respect of scheme expenses and deficit recovery plan
payments, including a $4.0 million prepayment 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 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 in 2023.
Plan assets include Liability Driven Investments ("LDI") of $54.4 million
(2021: $122.9 million), which are held to manage funding risk. The fall in LDI
valuation reflects increases in government bond yields through 2022.
The Group is in close contact with the trustees of the scheme to monitor cash
liquidity risk in the context of recent market volatility, including
collateral requirements for the LDI. To the date of this report, the scheme
has covered all LDI collateral requirements.
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 $0.2 million and increased operating profit
by approximately $0.2 million.
RCF borrowings are floating rate priced using the U.S. Secured Overnight
Financing Rate (SOFR). In 2022 the Group has implemented a new hedging policy
using interest rate swaps to fix a portion of SOFR floating rate interest. The
notional value of interest rate swaps at 1 October 2022 was $30.0 million
(2021: $nil), expiring on 8 September 2025 in line with the RCF. The financial
value of interest rate swaps at 1 October 2022 was a $0.5m (2021: $nil), an
asset position as hedged fixed rates are lower than current market forecasts
for SOFR.
Dividends
The Board is recommending a final dividend of 30.6 cents per share (2021: 30.6
cents) which together with the 14.3 cents per share interim dividend, gives a
total dividend of 44.9 cents (2021: 44.9 cents), consistent with last year.
The final dividend will be paid in pounds sterling on 10 March 2023 to
shareholders on the register at 10 February 2023 with an ex-dividend date of 9
February 2023. The final dividend will be converted into pounds sterling for
payment at the prevailing exchange rate which will be announced prior to
payment.
The recommended dividend results in an adjusted cover ratio of 0.5 times
(2021: 1.3 times). On a statutory continuing basis, the ratio was a deficit of
0.4 times (2021: deficit of 1.8 times). In recommending this year's final
dividend, the Board has taken into account its expectations that the adjusted
cover ratio will improve in the 2023 financial period.
Our policy is to grow dividends in line with adjusted earnings growth. Given
the decline in earnings over the last two years, we would not seek to grow
dividends further ahead of an increase in dividend cover.
Bruce Thompson Rich Cashin
Executive Chair
Chief Financial Officer
22 November 2022
22 November 2022
FORWARD-LOOKING STATEMENTS
Certain statements in this 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 full annual report will be made available on 5 December 2022 on the
Company's website 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.
PERFORMANCE MEASURES
The Directors assess the operating performance of the Group based on adjusted
measures of EBITDA, operating profit, net finance costs, taxation and earnings
per share, as well as other measures not defined under IFRS including orders
received, closing order book, EBITDA margin, cash conversion, return on
capital employed, net debt excluding lease liabilities, and organic constant
currency equivalents for relevant metrics. These measures are collectively
described as Adjusted Performance Measures (APMs) in this Annual Report.
The Directors believe that the APMs provide a useful comparison of business
trends and performance. The APMs exclude exceptional items considered
unrelated to the underlying trading performance of the Group. The term
adjusted is not defined under IFRS and may not be comparable with similarly
titled measures used by other companies. The Group uses these measures for
planning, budgeting and reporting purposes and for its internal assessment of
the operational performance.
Adjusted performance measures
The following table summarises the statutory and adjusted profit and loss
account measures for the period together with the adjustments made to each
line item.
52 weeks ended 1 October 2022 53 weeks ended 2 October 2021
Adjusted $m Adjustments Total Adjusted Adjustments Total
$m
$m
$m
$m
$m
Continuing operations
Revenue 271.9 - 271.9 248.3 - 248.3
Cost of sales (192.1) (1.6) (193.7) (165.4) (4.1) (169.5)
Gross profit 79.8 (1.6) 78.2 82.9 (4.1) 78.8
Selling and distribution costs (26.0) - (26.0) (22.2) - (22.2)
General and administrative expenses (43.7) (10.6) (54.3) (38.7) (46.9) (85.6)
Operating profit/(loss) 10.1 (12.2) (2.1) 22.0 (51.0) (29.0)
EBITDA 25.5 (1.2) 24.3 37.6 9.0 46.6
Depreciation, amortisation and impairment (15.4) (11.0) (26.4) (15.6) (60.0) (75.6)
Operating profit/(loss) (note 1) 10.1 (12.2) (2.1) 22.0 (51.0) (29.0)
Net finance costs (note 2) (4.0) (2.4) (6.4) (3.1) (3.5) (6.6)
(Loss)/profit before taxation 6.1 (14.6) (8.5) 18.9 (54.5) (35.6)
Taxation (note 3) 0.1 2.8 2.9 (0.3) 11.4 11.1
Profit/(loss) for the period from continuing operations 6.2 (11.8) (5.6) 18.6 (43.1) (24.5)
Discontinued operations - loss from discontinued operations (note 4) - (2.0) (2.0) - (1.1) (1.1)
Profit/(loss) for the period (note 5) 6.2 (13.8) (7.6) 18.6 (44.2) (25.6)
Basic (loss)/earnings per share 20.4c (45.5c) (25.1c) 60.6c (144.1c) (83.5c)
Diluted (loss)/earnings per share 20.4c (45.5c) (25.1c) 60.6c (144.1c) (83.5c)
1 Adjustments to operating loss
Adjusted operating profit excludes exceptional items considered unrelated to
the underlying trading performance of the Group. Transactions are classified
as exceptional where they relate to an event that falls outside of the
underlying trading activities of the business and where individually, or in
aggregate, they have a material impact on the financial statements.
2022 2021
$m $m
Operating loss (2.1) (29.0)
Amortisation of acquired intangibles1 6.8 14.2
Items related to armor
Impairment of acquired intangibles - 11.3
Impairment of development expenditure 0.2 8.1
Impairment of right of use assets - 11.7
Impairment of plant and machinery - 13.9
Impairment of leasehold improvements - 0.1
Inventory provisions 1.6 1.7
Release of contingent consideration (3.9) (15.7)
Transaction costs 0.6 -
Restructuring costs 1.3
Net (credit)/charge related to armor (0.2) 31.1
Restructuring costs (including $0.4m right of use asset impairment) 2.0 -
Impairment of non-current assets (excluding $0.4m right of use asset 3.6 -
impairment)
Inventory fair value acquisition accounting adjustment - 2.4
Acquisition costs - 2.6
Write down of brought forward capitalised cloud computing costs - 0.7
Other adjusting items 5.6 5.7
Adjusted operating profit 10.1 22.0
Depreciation 9.1 10.4
Other impairment charges 0.4 0.4
Other amortisation charges 5.9 4.8
Adjusted EBITDA 25.5 37.6
1 None of the amortisation charges for acquired intangible assets relate to
the armor business following the prior period impairments (2021: $7.3
million).
Amortisation of acquired intangibles
Amortisation charges for acquired intangible assets of $6.8 million (2021:
$14.2 million) are considered exceptional as they do not change each period
based on underlying business trading and performance.
Items related to armor
On 12 November 2021 the Group announced the next generation VTP ESAPI body
armor product had failed first article testing. This followed a similar result
in December 2020 for the legacy DLA ESAPI body armor product. It was also
announced that the Group was experiencing further delays to achieving final
product approval for the DLA ESAPI product.
The failure of the VTP ESAPI body armor product was considered an adjusting
event that provided evidence of conditions that existed at the end of the
reporting period. As such the Group performed an impairment review of assets
at 2 October 2021 removing all future revenue for VTP ESAPI body armor. The
review also incorporated reduced revenue expectations for DLA ESAPI.
The review resulted in total non-current asset impairments of $45.1 million in
respect of assets relating to the armor business acquired from 3M as part of
the ballistic protection acquisition. In addition, inventory provisions of
$1.7 million were recognised against VTP ESAPI armor materials.
Offsetting these charges, a gain of $15.7 million was recognised to reduce the
net present value of the contingent consideration payable to 3M as a result of
the reduced revenue expectations from the DLA ESAPI body armor contract.
In 2022 revenue expectations from the DLA ESAPI body armor contract have
further reduced, resulting in an additional gain of $3.9 million on release of
the remaining net present value of the contingent consideration payable.
Offsetting this credit, inventory provisions of $1.6 million were recognised
in respect of raw materials held for the DLA ESAPI body armor contract. In
addition, armor-specific development expenditure was impaired by $0.2 million
for a small number of reclassified assets.
The impairment charges, provisions and related release of contingent
consideration resulted from changes in recoverable amounts and expected future
payments arising from assumptions of forecast trading. As such they are
considered unrelated to trading performance.
Armor transaction costs
Transaction costs of $0.6 million (2021: $nil) related to a potential sale of
the armor business in the first half of 2022. 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.
Restructuring costs
Restructuring costs related to the overhead reduction programme were $3.3
million (2021: $nil). These costs include a $0.4 million right of use asset
impairment relating to the closure of one of our U.S. offices and $0.2 million
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.
Impairment of non-current assets
Impairment reviews for the Group's non-current assets resulted in $3.6 million
exceptional impairment losses (2021: $nil) as the carrying value of certain
cash-generating units exceeded estimated recoverable amounts. 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 the period the Group also recognised $0.4m other non-current asset
impairments that were not considered exceptional on the basis of materiality.
Acquisition costs and accounting adjustments
These charges resulted from two significant acquisitions by the Group, which
are considered exceptional items as they are material and unrelated to the
underlying trading activities of the business:
· 2021 acquisition costs of $2.6 million relating to the acquisitions
of Team Wendy and the 3M ballistic protection business.
· Acquisition accounting adjustment of $2.4 million to account for
acquired inventory at the underlying historical cost before the fair value
adjustments arising on acquisition.
Write down of brought forward capitalised cloud computing costs
In 2021 $0.7 million brought forward capitalised costs relating to cloud
computing arrangements were written down. This followed updated guidance from
the IFRS Interpretations Committee. The change in guidance was unrelated to
the underlying trading performance of the Group; hence, the write down was
treated as exceptional. Costs associated with configuration and customisation
of cloud computing arrangements after 26 September 2020 have been expensed as
incurred and included within adjusted performance measures.
2 Adjustments to net finance costs
Adjusted net finance costs exclude exceptional items considered unrelated to
the underlying trading performance of the Group.
2022 2021
$m $m
Net finance costs 6.4 6.6
Defined benefit pension unwind discount (1.3) (1.3)
Contingent consideration unwind discount (1.1) (2.2)
Adjusted net finance costs 4.0 3.1
· $1.3 million (2021: $1.3 million) unwind of discounting 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.
· $1.1 million (2021: $2.2 million) unwind of discounting on contingent
consideration related to the acquisition of the 3M ballistic protection
business.
3 Adjustments to taxation
Adjustments to taxation represent the tax effects of the adjustments to
operating profit and net finance costs. Adjusting items do not have
significantly different effective tax rates, with the overall effective rate
of 19% (2021: 21%) approximating statutory rates applicable.
4 Loss from discontinued operations
The adjusted profit measures exclude the result from discontinued operations
relating to the divestment of milkrite | InterPuls.
During the period, the Group incurred a loss after tax of $2.0 million on
these discontinued operations (2021: loss after tax of $1.1 million).
5 Adjustments to loss for the period
2022 2021
$m $m
Loss for the period (7.6) (25.6)
Amortisation of acquired intangible assets 6.8 14.2
Impairments related to armor assets 0.2 45.1
Armor inventory provisions 1.6 1.7
Release of contingent consideration (3.9) (15.7)
Defined benefit pension unwind discount 1.3 1.3
Contingent consideration unwind discount 1.1 2.2
Restructuring costs 3.3 -
Impairment of non-current assets 3.6 -
Transaction costs 0.6 -
Acquisition costs - 2.6
Inventory fair value acquisition accounting adjustment - 2.4
Write down of brought forward capitalised cloud computing costs - 0.7
Tax on exceptional items (2.8) (11.4)
Loss from discontinued operations 2.0 1.1
Adjusted profit for the period 6.2 18.6
6 Adjusted Earnings per share
Weighted average number of shares 2022 2021
Weighted average number of ordinary shares in issue used in basic calculation 30,308 30,669
(thousands)
Potentially dilutive shares (weighted average) (thousands) 221 189
Diluted number of ordinary shares (weighted average) (thousands) 30,529 30,858
2022 2021
Adjusted continuing earnings per share $ cents $ cents
Basic 20.4c 60.6
Diluted 20.4c 60.6
7 Net debt
2022 2021
$m
$m
Cash and cash equivalents 9.5 14.1
Bank loans (53.7) (40.9)
Net debt excluding lease liabilities (44.2) (26.8)
Lease liabilities (23.8) (29.1)
Net debt including lease liabilities (68.0) (55.9)
8 Adjusted dividend cover ratio
2022 2021
$m
$m
Interim dividend 14.3 14.3
Final dividend 30.6 30.6
Total dividend 44.9 44.9
Adjusted basic earnings per share 20.4 60.6
Adjusted dividend cover ratio 0.5 times 1.3 times
9 Cash conversion
Cash conversion excludes the impact of exceptional items from operating cash
flows and EBITDA.
2022 2021
$m
$m
Cash flows from continuing operations before exceptional items 36.4 31.3
Adjusted EBITDA 25.5 37.6
Cash conversion 142.7% 83.2%
Cash flows from continuing operations before exceptional items 2022 2021
$m
$m
Cash flows from continuing operations 34.8 26.9
Restructuring costs paid 1.0 -
Transaction costs paid 0.6 -
Acquisition and integration costs paid - 4.4
Cash flows from continuing operations before exceptional items 36.4 31.3
10 Return on capital employed (ROCE)
Return on capital employed (ROCE) is calculated as adjusted operating profit
over average capital employed. The following shows the ROCE calculations and
reconciling tables:
2022 2021
$m $m
Shareholders' funds 210.5 205.4
Current borrowings 4.8 7.5
Non-current liabilities 90.4 145.8
Capital employed 305.7 358.7
Average capital employed 332.2 382.1
Adjusted operating profit 10.1 22.0
Return on capital employed 3.0% 5.8%
2022 2021
Average capital employed $m $m
Current period capital employed 305.7 358.7
Prior period capital employed 358.7 405.4
Average capital employed 332.2 382.1
2022 2021
Current borrowings $m $m
Current borrowings 4.1 4.0
Current provisions for liabilities and charges 0.7 3.5
Current borrowings for ROCE 4.8 7.5
11 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 current period exchange rates.
The armor business transacts entirely in USD meaning there is no currency
impact for this operating segment.
2022 2021
$m (excluding acquisitions) $m (constant currency)
Group
Orders received 277.2 281.7
Closing order book 151.3 140.4
Revenue 269.3 246.8
Adjusted EBITDA 24.8 40.3
Adjusted operating profit 9.6 24.9
Adjusted profit before tax 5.6 21.9
Adjusted basic earnings per share 19.1c 70.5c
2022 2021
$m (excluding acquisitions) $m (constant currency)
Respiratory and head protection
Orders received 265.0 280.0
Closing order book 151.3 113.8
Revenue 260.9 240.3
Adjusted EBITDA 38.1 48.7
Adjusted operating profit 22.9 35.4
Adjusted profit before tax 19.1 32.7
Adjusted basic earnings per share 53.4c 99.8c
2022 2021
$m (excluding acquisitions) $m (constant currency)
UK & International
Revenue 98.8 52.3
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 1 October 2022
52 weeks ended 53 weeks ended
1 October 2022¹ 2 October 2021¹
Note $m $m
Continuing operations
Revenue 2.1 271.9 248.3
Cost of sales (193.7) (169.5)
Gross profit 78.2 78.8
Selling and distribution costs (26.0) (22.2)
General and administrative expenses (54.3) (85.6)
Operating loss 2.1 (2.1) (29.0)
Net finance costs 3.3 (6.4) (6.6)
Loss before taxation (8.5) (35.6)
Taxation 2.9 11.1
Loss for the period from continuing operations (5.6) (24.5)
Discontinued operations
Loss from discontinued operations (2.0) (1.1)
Loss for the period (7.6) (25.6)
Other comprehensive income/(expense)
Items that are not subsequently reclassified to the income statement
Remeasurement gain recognised on retirement benefit scheme 50.1 16.2
Deferred tax relating to retirement benefit scheme (9.6) (3.1)
Deferred tax relating to change in tax rates (3.4) 4.1
Deferred tax relating to other temporary differences ] - 0.3
Current tax relating to other temporary differences (0.1) -
Items that may be subsequently reclassified to the income statement
Net exchange differences offset in reserves 0.8 0.6
Cash flow hedges 0.5 -
Current tax relating to cash flow hedges (0.1) -
Other comprehensive income for the period 38.2 18.1
Total comprehensive income/(expense)for the period 30.6 (7.5)
Earnings per share 2.2
Basic (25.1c) (83.5c)
Diluted (25.1c) (83.5c)
Earnings per share from continuing operations 2.2
Basic (18.5c) (79.9c)
Diluted (18.5c) (79.9c)
1 In previous periods, the Group reported financial statements to 30
September, this being the Company's accounting reference date. Headings for
the current and prior period now show the actual dates to which the financial
statements were drawn up. This has no impact on previously reported numbers.
Consolidated Balance Sheet
At 1 October 2022
At 1 October At 2 October
2022¹ 2021¹
Note $m $m
Assets
Non-current assets
Intangible assets 171.0 181.0
Property, plant and equipment 39.9 48.6
Deferred tax assets 26.7 40.2
Derivative financial instruments 0.3 -
237.9 269.8
Current assets
Inventories 65.6 62.3
Trade and other receivables 30.6 44.7
Derivative financial instruments 0.2 -
Current tax receivables 4.2 7.8
Cash and cash equivalents 3.1 9.5 14.1
110.1 128.9
Liabilities
Current liabilities
Borrowings 3.2 4.1 4.0
Trade and other payables 42.3 40.0
Provisions for liabilities and charges 0.7 3.5
47.1 47.5
Net current assets 63.0 81.4
Non-current liabilities
Borrowings 3.2 73.4 66.0
Deferred tax liabilities 5.8 6.1
Retirement benefit obligations 6.3 68.3
Provisions for liabilities and charges 4.9 5.4
90.4 145.8
Net assets 210.5 205.4
Shareholders' equity
Ordinary shares 3.5 50.3 50.3
Share premium account 3.5 54.3 54.3
Other reserves (14.2) (15.0)
Cash flow hedging reserve 0.4 -
Retained earnings 119.7 115.8
Total equity 210.5 205.4
1 In previous periods, the Group reported financial statements to the 30
September, this being the Company's accounting reference date. Headings for
the current and prior period now show the actual dates to which the financial
statements were drawn up. This has no impact on previously reported numbers.
Consolidated Cash Flow Statement
For the 52 weeks ended 1 October 2022
52 weeks ended 53 weeks ended
1 October 2022¹ 2 October 2021¹
Note $m $m
Cash flows from operating activities
Cash flows from continuing operations 3.1 34.8 26.9
Cash flows from discontinued operations 3.1 (1.3) (3.3)
Cash flows from operations 3.1 33.5 23.6
Retirement benefit deficit recovery contributions (8.5) (2.9)
Tax received/(paid) 3.7 (13.3)
Net cash flows from operating activities 28.7 7.4
Cash flows used in investing activities
Proceeds from disposal of discontinued operations - 3.4
Costs of divestment - (0.6)
Purchase of property, plant and equipment (2.9) (11.7)
Capitalised development costs and purchased software (6.0) (19.9)
Acquisition of business (2021: net of acquired cash of $1.1m) (3.2) (130.9)
Net cash used in investing activities (12.1) (159.7)
Cash flows used in financing activities
Proceeds from loan drawdowns 3.4 42.9 42.0
Loan repayments 3.4 (30.1) (40.6)
Finance costs paid in respect of bank loans and overdrafts 3.3 (2.7) (1.6)
Finance costs paid in respect of leases (1.0) (1.1)
Repayment of lease liability (4.1) (3.7)
Dividends paid to shareholders 3.6 (13.4) (12.1)
Purchase of own shares - Long Term Incentive Plan 3.5 - (4.3)
Purchase of own shares - Share Buyback Programme 3.5 (12.4) -
Net cash used in financing activities (20.8) (21.4)
Net decrease in cash and cash equivalents (4.2) (173.7)
Cash and cash equivalents at the beginning of the period 14.1 187.2
Effects of exchange rate changes (0.4) 0.6
Cash and cash equivalents at the end of the period 3.1 9.5 14.1
1 In previous periods, the Group reported financial statements to 30
September, this being the Company's accounting reference date. Headings for
the current and prior period now show the actual dates to which the financial
statements were drawn up. This has no impact on previously reported numbers.
Consolidated Statement of Changes in Equity
For the 52 weeks ended 1 October 2022
Share capital Share premium Hedging reserve Other reserves Retained earnings Total equity
$m $m $m $m $m $m
Note
At 26 September 2020¹ 50.3 54.3 - (15.6) 140.5 229.5
Loss for the period - - - - (25.6) (25.6)
Net exchange differences offset in reserves - - - 0.6 - 0.6
Deferred tax relating to other temporary differences - - - - 0.3 0.3
Remeasurement gain recognised on retirement benefit scheme
- - - - 16.2 16.2
Deferred tax relating to change in tax rates - - - - 4.1 4.1
Deferred tax relating to retirement benefit scheme - - - - (3.1) (3.1)
Total comprehensive income/(expense) for the period - - - 0.6 (8.1) (7.5)
Dividends paid 3.6 - - - - (12.1) (12.1)
Own shares acquired 3.5 - - - - (4.3) (4.3)
Fair value of share-based payments - - - - 0.5 0.5
Current tax relating to employee share schemes charged to equity
- - - - 1.2 1.2
Deferred tax relating to employee share schemes charged directly to equity
- - - - (1.9) (1.9)
At 2 October 2021¹ 50.3 54.3 - (15.0) 115.8 205.4
Loss for the period - - - - (7.6) (7.6)
Net exchange differences offset in reserves - - - 0.8 - 0.8
Current tax relating to other temporary differences - - - - (0.1) (0.1)
Remeasurement gain recognised on retirement benefit scheme
- - - - 50.1 50.1
Deferred tax relating to change in tax rates - - - - (3.4) (3.4)
Deferred tax relating to retirement benefit scheme - - - - (9.6) (9.6)
Interest rate swaps - cash flow hedge - - 0.5 - - 0.5
Current tax on interest rate swaps - cash flow hedge - - (0.1) - - (0.1)
Total comprehensive income for the period - - 0.4 0.8 29.4 30.6
Dividends paid 3.6 - - - - (13.4) (13.4)
Own shares acquired 3.5 - - - - (12.4) (12.4)
Fair value of share-based payments - - - - 1.0 1.0
Current tax relating to employee share schemes charged to equity
- - - - - -
Deferred tax relating to employee share schemes charged directly to equity
- - - - (0.7) (0.7)
At 1 October 2022¹ 50.3 54.3 0.4 (14.2) 119.7 210.5
1 In previous periods, the Group reported financial statements to 30
September, this being the Company's accounting reference date. Headings for
the current and prior period now show the actual dates to which the financial
statements were drawn up. This has no impact on previously reported numbers.
Other reserves consist of the capital redemption reserve of $0.6 million
(2021: $0.6 million) and the translation reserve of ($14.8) million (2021:
($15.6 million). All movements in other reserves relate to the translation
reserve.
NOTES TO THE ACCOUNTS
1 Basis of preparation
Avon Protection plc is a public limited company incorporated and domiciled in
England and Wales and its ordinary shares are traded on the London Stock
Exchange.
The financial period presents 52 weeks ended 1 October 2022 (prior financial
period 53 weeks ended 2 October 2021). The Company previously reported that
the reporting date 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 2 October 2021 and therefore the
headings of the financial statements have been amended accordingly. This has
no impact on previously reported numbers.
The financial statements have been prepared on a going concern basis and in
accordance with U.K. adopted International Accounting Standards. The financial
statements have been prepared under the historical cost convention except for
derivative instruments which are held at fair value through profit or loss.
The financial information set out above does not constitute the company's
statutory accounts for the periods ended 1 October 2022 or 2 October 2021 but
is derived from those accounts. Statutory accounts for 2021 have been
delivered to the registrar of companies, and those for 2022 will be delivered
in due course. The auditor has reported on those accounts; their reports were
(i) unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
2 Results for the period
Within this section you will find disclosures explaining the Group's results
for the period, segmental information, earnings per share and taxation, as
well as details of the discontinued operations.
2.1. Operating segments
The Group Executive team is responsible for allocating resources and assessing
performance of the 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 and head protection
business and the armor business which is in the process of being wound down.
In the prior period, the sole reportable segment was made up of two operating
segments, Team Wendy and Avon Protection. Avon Protection has been
disaggregated into armor and respiratory and head protection following the
decision to close the armor business. Team Wendy has been fully integrated
into the wider respiratory and head protection segment.
52 weeks ended 1 October 2022
Respiratory and head protection Adjustments and discontinued¹
Armor $m $m Total
$m $m
Revenue 8.4 263.5 - 271.9
Adjusted EBITDA (13.3) 38.8 (1.2) 24.3
Depreciation and amortisation - (15.0) - (15.0)
Impairment charges - (0.4) (4.2) (4.6)
Amortisation of acquired intangibles - - (6.8) (6.8)
Operating (loss)/profit (13.3) 23.4 (12.2) (2.1)
Finance costs (0.3) (3.7) (2.4) (6.4)
(Loss)/profit before taxation (13.6) 19.7 (14.6) (8.5)
Taxation 3.2 (3.1) 2.8 2.9
(Loss)/profit for the period from continuing operations (10.4) 16.6 (11.8) (5.6)
Discontinued operations - loss for the year - - (2.0) (2.0)
(Loss)/profit for the year (10.4) 16.6 (13.8) (7.6)
Total assets 23.2 324.8 - 348.0
Basic earnings per share (cents) (34.3c) 54.7c (45.5c) (25.1c)
Diluted earnings per share (cents) (34.3c) 54.7c (45.5c) (25.1c)
53 weeks ended 2 October 2021
53 weeks ended 2 October 2021
Respiratory and head protection Adjustments and discontinued¹
Armor $m $m Total
$m $m
Revenue 6.5 241.8 - 248.3
Adjusted EBITDA (8.4) 46.0 9.0 46.6
Depreciation and amortisation (2.1) (13.1) - (15.2)
Impairment charges - (0.4) (45.8) (46.2)
Amortisation of acquired intangibles - - (14.2) (14.2)
Operating (loss)/profit (10.5) 32.5 (51.0) (29.0)
Finance costs (0.3) (2.8) (3.5) (6.6)
(Loss)/profit before taxation (10.8) 29.7 (54.5) (35.6)
Taxation 2.3 (2.6) 11.4 11.1
(Loss)/profit for the year from continuing operations (8.5) 27.1 (43.1) (24.5)
Discontinued operations - loss for the year - - (1.1) (1.1)
(Loss)/profit for the year (8.5) 27.1 (44.2) (25.6)
Total assets 14.5 384.2 - 398.7
Basic earnings per share (cents) (27.7c) 88.3c (144.1c) (83.5c)
Diluted earnings per share (cents) (27.7c) 88.3c (144.1c) (83.5c)
1 Please refer to Adjusted Performance Measures section for a full breakdown
of adjusted measures, including a reconciliation between segmental adjusted
EBITDA and statutory operating profit by line item.
Revenue includes $107.1 million (2021: $130.8 million) of revenues from the
U.S. DOD, sold directly and through indirect channels, the only customer which
individually contributes more than 10% to Group revenues.
Revenue analysed by geographic origin
2022 2021
$m $m
Europe 73.0 32.3
U.S. 198.9 216.0
Total 271.9 248.3
Revenue by line of business - restated¹
52 weeks ended 1 October 2022 53 weeks ended 2 October 2021¹
Head protection Head protection
Respiratory $m Armor Total Respiratory $m Armor Total
$m $m $m $m $m $m
U.S. DOD 63.2 35.5 8.4 107.1 86.1 39.1 6.5 131.7
Commercial Americas 40.5 25.2 - 65.7 40.4 22.4 - 62.8
U.K. & International 89.3 9.8 - 99.1 42.1 11.7 - 53.8
193.0 70.5 8.4 271.9 168.6 73.2 6.5 248.3
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 (comprising all
revenue outside the continents of America). Prior period figures have been
reclassified so they are presented on a consistent basis with the current
period.
2.2 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 in the employee share ownership
trust. 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
the calculations are set out below. As the Group was loss making on a
statutory basis in the current and prior periods, basic and diluted earnings
per share are equivalent.
Weighted average number of shares 2022 2021
Weighted average number of ordinary shares in issue used in basic calculations 30,308 30,669
(thousands)
Potentially dilutive shares (weighted average) (thousands) 221 189
Diluted number of ordinary shares (weighted average) (thousands) 30,529 30,858
2022 2021
Earnings $m $m
Basic (7.6) (25.6)
Basic - continuing operations (5.6) (24.5)
Basic - discontinued operations (2.0) (1.1)
2022 2021
Earnings per share $ cents $ cents
Basic (25.1) (83.5)
Basic - continuing operations (18.5) (79.9)
Basic - discontinued operations (6.6) (3.6)
Diluted (25.1) (83.5)
Diluted - continuing operations (18.5) (79.9)
Diluted - discontinued operations (6.6) (3.6)
3 Working Capital and Funding
3.1 Cash and cash equivalents
2022 2021
$m $m
Cash and cash equivalents 9.5 14.1
Cash and cash equivalents are denominated in U.S. dollars, pounds sterling and
euros and earn interest based on national rates.
The Group generates cash from its operating activities as follows:
2022 2021
$m $m
Continuing operations
Loss for the period (5.6) (24.5)
Adjustments for:
Taxation (2.9) (11.1)
Depreciation 9.1 10.4
Amortisation of intangible assets 12.7 19.0
Impairment of non-current assets (excluding $0.4m right of use asset 4.2 46.2
impairment)
Defined benefit pension scheme cost 0.8 1.2
Finance costs 4.0 3.1
Other finance expense 2.4 3.5
Change in contingent consideration (3.9) (15.7)
Fair value of share-based payments 1.0 0.7
Acquisition costs expensed - 2.6
Transaction costs expensed 0.6 -
Restructuring costs expensed (including $0.4m right of use asset impairment) 3.3 -
Increase in inventories (5.0) (9.7)
Decrease in receivables 11.6 5.4
Increase in payables and provisions 4.1 0.2
Cash flows from continuing operations before restructuring, transaction and 36.4 31.3
acquisition costs
Restructuring, transaction and acquisition costs paid (1.6) (4.4)
Cash flows from continuing operations 34.8 26.9
Discontinued operations
Loss for the period (2.0) (1.1)
Adjustments for:
Taxation (0.6) (1.0)
Decrease in receivables 0.2 -
Increase/(decrease) in payables and provisions 1.1 (1.2)
Cash flows from discontinued operations (1.3) (3.3)
Cash flows from operations 33.5 23.6
3.2 Borrowings
2022 2021
$m $m
Current
Lease liabilities 4.1 4.0
No-current
Bank loans 53.7 40.9
Lease liabilities 19.7 25.1
73.4 66.0
Total Group borrowings 77.5 70.0
Bank loans comprise drawings under the revolving credit facility.
The Group has the following undrawn committed facilities:
2022 2021
$m $m
Expiring beyond one year
Total undrawn committed borrowing facilities 151.3 164.1
Bank loans and overdrafts utilised 53.7 40.9
Total Group 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.
The RCF is subject to financial covenants measured on a biannual 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 financial
periods.
The RCF is drawn in short to medium-term tranches of debt which are repayable
within 12 months of draw-down. These tranches of debt can be rolled over
provided certain conditions are met, including covenant compliance. The Group
considers that it is highly unlikely it would be unable to exercise its right
to roll over the debt based on forecast covenant compliance. Even in a severe
downside scenario there are mitigating actions (within the control of the
Group) that could be taken to maintain compliance with these conditions,
including future covenant requirements. The Directors therefore believe that
the Group has the ability and the intent to roll over the drawn RCF amounts
when due and consequently has presented the RCF as a non-current liability.
The RCF is floating rate priced on the 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.
In addition to the RCF our U.S. operations have access to a $5.0 million
overdraft facility, used to manage short term liquidity requirements.
The table below presents the maturity analysis in respect of lease liabilities
and bank loans:
2022 2021
$m $m
In one year or less, or on demand 4.1 4.0
Two to five years 65.5 55.8
More than five years 7.9 10.2
Total Group borrowings 77.5 70.0
Lease liabilities relate to land and buildings (right of use assets) leased by
the Group for its office space and manufacturing facilities. The leases
typically run for a period of 5-15 years. Most leases include an option to
renew the lease for an additional period of 3-10 years after the end of the
contract term. Where practicable, the Group seeks to include extension options
in new leases to provide operational flexibility. The extension options held
are exercisable only by the Group and not by the lessors. The Group assesses
at lease commencement whether it is reasonably certain to exercise the
extension options. It reassesses whether it is reasonably certain to exercise
the options if there is a significant change in circumstances within its
control and discloses any potential future lease payments not included in
lease liabilities where it is reasonably certain extension options will be
exercised.
Payments associated with short-term leases and leases of low-value assets are
recognised on a straight-line basis as an expense in the income statement.
Short-term leases are leases with a lease term of 12 months or less. Low-value
assets comprise IT and other equipment.
3.3 Net finance costs
2022 2021
$m $m
Finance costs:
- Interest payable on bank loans and overdrafts (2.5) (1.4)
- Interest payable in respect of leases (1.0) (1.1)
- Amortisation of finance fees (0.5) (0.6)
(4.0) (3.1)
Other finance expenses:
- Net interest cost: U.K. defined benefit pension scheme (1.3) (1.3)
- Unwinding of discount on contingent consideration (1.1) (2.2)
(2.4) (3.5)
Net finance costs (6.4) (6.6)
Floating interest on bank loans has been hedged using interest rate swaps.
3.4 Analysis of net cash/(debt)
At 2 October Non-cash movements Exchange movements At 1 October
2021 Cash flow $m $m 2022
$m $m $m
Cash and cash equivalents 14.1 (4.2) - (0.4) 9.5
Bank loans (40.9) (12.8) - - (53.7)
Net debt excluding lease liabilities (26.8) (17.0) - (0.4) (44.2)
Lease liabilities (29.1) 5.1 (1.4) 1.6 (23.8)
Net debt (55.9) (11.9) (1.4) 1.2 (68.0)
At 26 September Non-cash movements Exchange movements At 2 October
2020 Cash flow $m $m 2021
$m $m $m
Cash and cash equivalents 187.2 (173.7) - 0.6 14.1
Bank loans (39.5) (1.4) - - (40.9)
Net cash/(debt) excluding lease liabilities 147.7 (175.1) - 0.6 (26.8)
Lease liabilities (29.0) 4.8 (4.2) (0.7) (29.1)
Net cash/(debt) 118.7 (170.3) (4.2) (0.1) (55.9)
3.5 Equity
Share Capital
Ordinary shares 2022 Share premium Ordinary shares 2021 Share premium
Number of shares $m 2022 Number of shares $m 2021
2022 $m 2021 $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 - Long-Term Incentive Plan
2022 2021
Number of shares Number of shares
Opening balance 334,933 398,560
Acquired in the period - 95,855
Disposed of 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 1 October 2022 was $3.2 million (2
October 2021: $8.8 million). 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 (2021: 159,482 shares vested
and were distributed to employees in January 2021). In the 53 weeks ended 2
October 2021 95,855 shares were acquired by the trust.
Own shares held - Share Buyback Programme
2022 2021
Number of shares Number of shares
Opening balance - -
Acquired in the period 765,098 -
Closing balance 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 the shares have been waived. Purchased shares under the programme
are held at cost as treasury shares and deducted from shareholders' equity.
3.6 Dividends
On 28 January 2022, the shareholders approved a final dividend of 30.6 cents
per qualifying ordinary share in respect of the 53 weeks ended 2 October 2021.
This was paid on 11 March 2022 utilising $9.1 million of shareholders' funds
(2021: $7.7 million).
The Board of Directors declared an interim dividend of 14.3 cents (2021: 14.3
cents) per qualifying ordinary share in respect of the 52 weeks ended 1
October 2022. This was paid on 2 September 2022 utilising $4.3 million (2021:
$4.4 million) of shareholders' funds.
The Board is recommending a final dividend of 30.6 cents per share (2021: 30.6
cents) which together with the 14.3 cents per share interim dividend gives a
total dividend of 44.9 cents (2021: 44.9 cents). The final dividend will be
paid on 10 March 2023 to shareholders on the register at 10 February 2023 with
an ex-dividend date of 9 February 2023.
Dividend Cover
2022 2021
$ cents $ cents
Interim dividend 14.3 14.3
Final dividend 30.6 30.6
Total dividend 44.9 44.9
Basic earnings per share - continuing operations (18.5) (79.9)
Dividend cover ratio (0.4) times (1.8) times
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR PPGPPGUPPPUGRecent news on Avon Technologies
See all newsREG - Avon Technologies - Directors'/PDMR Shareholding
AnnouncementRCS - Avon Technologies - Notice of Results & Investor Presentation via IMC
AnnouncementREG - Avon Technologies - Holding(s) in Company
AnnouncementREG - Avon Technologies - Directors'/PDMR Shareholding
AnnouncementREG - Avon Technologies - Holding(s) in Company
Announcement