REG - Avon Protection PLC - Preliminary Results
21/11/2023 07:00
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RNS Number : 0565U Avon Protection PLC 21 November 2023
AVON PROTECTION PLC
("Avon Protection", "Avon" or the "Group")
PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 30 SEPTEMBER 2023
EXCELLENT STRATEGIC PROGRESS, SETTING AVON UP FOR THE FUTURE
Jos Sclater, Chief Executive Officer, said:
"We made excellent strategic progress during 2023 and enter 2024 with a
stronger, more stable business. We are now entering the transform stage of our
strategy with a focus on delivering improved margins, cash flow and returns on
capital for our shareholders. Avon has an exciting future and is well
positioned to become the largest supplier of ballistic helmets to the U.S.
Department of Defense, complementing our existing position as the leading
provider of respiratory products to the DOD and other NATO countries.
I want to thank all our employees for the tenacity they have shown in
overcoming a number of major challenges during 2023, including successfully
exiting our loss-making armour business and ramping up production of the next
generation IHPS helmet for the U.S. DOD. It is this dedication that will
enable Avon Protection to deliver its strategy in the medium term, protecting
more lives through our innovative products."
30 September 2023 1 October Change Change (constant currency)(4)
2022
52 weeks ended:
Continuing operations(1)
Orders received $258.7m $267.9m (3.4%) (2.9%)
Closing order book $135.8m $120.9m 12.3% 10.9%
Revenue $243.8m $263.5m (7.5%) (7.5%)
Adjusted(2) EBITDA $35.7m $38.8m (8.0%) (13.6%)
Adjusted(2) operating profit $21.2m $23.4m (9.4%) (18.5%)
Adjusted(2) profit before tax $14.0m $19.7m (28.9%) (37.5%)
Adjusted(2) basic earnings per share 40.3c 54.7c (26.3%) (35.2%)
Total dividend per share 29.6c 44.9c (34.1%)
Net debt excluding lease liabilities $64.5m $44.2m 45.9%
Statutory results
Operating (loss)/profit from continuing operations(3) $(12.6)m $11.0m
(Loss)/profit before tax from continuing operations $(20.2)m $6.0m
(Loss)/profit for the period $(14.4)m $(7.6)m
Basic loss per share(2) (48.0c) (25.1c)
Net debt $85.4m $68.0m
Results in-line with expectations and order book to support growth in 2024
· Robust order intake of $258.7 million and closing order book of
$135.8 million.
· Revenue in line with expectations, with strong growth in Head
Protection following the commencement of deliveries of NG IHPS helmets,
partially offsetting expected weaker demand in Respiratory Protection,
resulting in year-on-year revenue decline of 7.5% at constant currency.
· Adjusted operating profit margin of 8.7% (FY22: 8.9%), with lower
revenue in the higher margin Respiratory Protection business and manufacturing
ramp-up costs in Head Protection, offset by favourable Respiratory Protection
product mix, lower freight costs and lower central overheads.
· Cash conversion of 7.0%, with a high receivables balance driven by a
large number of orders shipped in the final month of the period, and inventory
build in support of 2024 Head Protection deliveries.
· Net debt excluding lease liabilities of $64.5 million and leverage of
1.9 times bank adjusted EBITDA (versus 2.6 times at the half-year), reflecting
improved profitability and the movement of the Armour business into
discontinued operations.
· Return on invested capital of 8.7% (FY22: 9.0%), with the reduction
in operating profit partially offset by a lower capital base following an
impairment to goodwill.
Good strategic and operational progress
We have made good progress in implementing initiatives as part of our STAR
strategy:
· Strengthen - Exited the Armour business on-time and to plan. SBU
leadership teams embedded and strategy cascaded throughout the business.
Continued strengthening of teams in key areas. Launch of new mission, vision
and values.
· Transform - Focus is now on our transformation programme which is
expected to deliver mid-teens operating margins, and improved return on
capital and cash flow, through 5 key elements; footprint optimisation,
operational efficiency, commercial optimisation, functional excellence and
programme management excellence.
· Advance - Respiratory Protection focused on rebuilding the sales
pipeline, winning the NSPA contract for boots and gloves and building a strong
pipeline for rebreathers. Head Protection focused on ensuring we have the
capacity and capability to fulfil demand.
· Revolutionise - Success in securing a number of funded research and
development programmes including new filter technology, shallow water
rebreather and traumatic brain injury mitigation.
Outlook and FY24 guidance
· High-single-digit revenue growth for the Group:
· Strong growth in Head Protection revenue, with growing commercial
helmet sales, full year of NG IHPS and H2 ramp in ACH GEN II deliveries,
supported by strong orders
· Continued soft demand for respiratory products, with opportunities
for growth in rebreather revenue.
· Revenue expected to be H2 weighted.
· Solid operating margin progression - expected outturn close to 10%:
· Strong recovery in Head Protection margin from operational leverage
and efficiency improvements.
· Margin improvement from transformation expected to start from H2.
· Dividend rebased as part of revised capital allocation policy focused
on margin progression, organic growth and debt reduction.
· Net debt position expected to reduce, with strong operating cash
flows and rebased dividend partially offset by investment in transformation
and increased pension contributions.
Notes:
(1) At 30 September 2023 Armour operations have fully closed. Armour has
therefore been classified as a discontinued operation, including restatement
of prior period comparatives.
(2) 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.
(3) Reported operating loss includes $6.3 million amortisation of acquired
intangibles, restructuring costs of $1.4 million, impairment of non-current
assets and goodwill of $24.6 million and transition costs of $1.5 million. See
adjusted performance measures section for full breakdown of adjustments and
comparatives.
(4) Constant currency measures are provided in the adjusted performance
measures section.
For further enquiries, please contact:
Avon Protection plc +44 1225 896 848
Jos Sclater, Chief Executive Officer
Rich Cashin, Chief Financial Officer
MHP +44 7817 458 804
Tim Rowntree avonprotection@mhpgroup.com (mailto:avonprotection@mhpgroup.com)
Ollie
Hoare
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_fy_results
(https://brrmedia.news/AvonProtection_fy_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.
Capital markets day
The company will be hosting a capital markets day in London on 8(th) February
2024. Further details will be provided in due course.
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
LOTS DONE. LOTS TO DO.
2023 has been a transformative year for the Group. We have undertaken
significant changes that have reshaped the very core of our business. This
journey has seen us realign our structure into two Strategic Business Units, a
move designed to improve delivery, focus and accountability. We launched our
new STAR strategy to realise our potential and deliver revenue growth,
mid-teens operating margins and improved cash flow. Furthermore, we have
defined a combined purpose, mission, vision and values that unite our entire
business under a shared ethos with a view to accelerating strategy execution.
We have maintained high levels of energy through the continued execution of
our STAR strategy and we have made significant progress in each of the key
areas, which is a testament to the dedication and determination of our team.
STRENGTHEN
In the period, we have wound-down and subsequently exited the Armour business
on-time and to plan, with the successful delivery of all outstanding
obligations. As well as giving us an immediate financial benefit, this also
enables us to fully focus on the objectives and priorities within the
continuing business, whilst freeing up space to optimise helmet manufacturing
within our Irvine facility.
The Group has diligently worked to implement the new operating model announced
at the half year results, with the creation of two Strategic Business Units
(SBUs) for Respiratory Protection and Head Protection, each with focused
leadership teams who are empowered and accountable for delivering our STAR
strategy. Development of improved performance management processes is well
underway, with objectives, key results and full financial performance reports
at an SBU level.
We have continued to strengthen our teams in many key areas including finance,
sales, programme management, engineering, and HR. Importantly, we have
strengthened the operational leadership teams at our Salem and Irvine
facilities, which is essential in ensuring the successful delivery of the U.S.
DOD contracts which underpin the growth of the Head Protection business in the
coming years.
Following the lower than expected demand for our respiratory products in the
year, we took decisive action to right-size the capacity of the business. In
Head Protection, we have improved productivity following the exit from the
Armour business. Altogether, we have reduced headcount by around 100 people
through these initiatives.
During the second half, we have also developed a reinvigorated purpose,
mission, vision and values and are excited to start sharing this across the
Group. To create something that is reflective of our collective aspirations,
we initiated a comprehensive process that invited employees to provide their
feedback through surveys and focus groups. These insights were invaluable and
provided the foundations upon which our shared values were developed, aligning
us as a company with a clear direction and shared ethos. Our Group will be
more aligned than ever before, united in our goal to protect lives and provide
unparalleled support to those who protect us, all of which is underpinned by
our STAR strategy.
TRANSFORM
Whilst the majority of the year has been focused on strengthening and
stabilising the business, attention has now turned to a number of
transformational initiatives which are at the core of ensuring we can deliver
mid-teens operating margins, and improved return on capital and cash flow.
The transformation programme has been split into five workstreams with
dedicated teams, and most importantly defined costs and benefits. Furthermore,
we have aligned the incentives of the business to these initiatives with a
greater focus on profit and average working capital turns for our annual bonus
scheme, and an emphasis on 2026 earnings and ROIC for our longer-term
incentive plans.
The first and single biggest lever within transformation is footprint
optimisation. Within Head Protection initiatives include insourcing the
production of our EXFIL Ballistic SL helmets, the movement of finishing for
our new EPIC range of helmets to Cleveland, and the consolidation of
high-volume ACH GEN II production into Cleveland and Salem. All of these
initiatives deliver good margin improvements and support the future growth of
the Head Protection business. We have further initiatives in our pipeline
which will help us accelerate further.
Secondly comes operational excellence. Laying the groundwork for a culture of
continuous improvement will be essential in driving efficiency and growing
margins as we move forward, and we took some important first steps in the
second half of the year. Regular Kaizens have been implemented at all our
sites, with a number of significant improvements already realised, including
reducing the scrap rate for NG IHPS, as well as the creation of a funnel of
Kaizens for the new year. To further drive operational improvement, we have
developed a new set of operational metrics with consistency across the SBUs;
these will be rolled out to all sites at a value stream level along with a
reinvigorated operational tier system in the new year.
Commercial optimisation focuses on streamlining our product offerings and
routes to market, whilst ensuring we are fully leveraging our market leading
positions. The introduction of the good, better, best range of EPIC helmets
has been very successful, with the majority of customers choosing the top end
EPIC specialist variant. Within Respiratory Protection we have identified a
number of pricing optimisation opportunities on products where we do not
currently make acceptable levels of margin.
The final two workstreams of functional excellence and programme management
excellence are at the earlier stages of their execution, but important first
steps have taken place with a number of opportunities identified to improve
functional efficiency, reduce waste, and improve productivity. We will also be
expanding the Kaizen methodology outside of operations to drive similar levels
of improvement in other areas of the business including HR, finance and new
product introduction.
We estimate that the total cash cost for these transformation initiatives will
total between $10-12 million in 2024, including $1-2 million of capital
expenditure. The transformation expenses are expected to be recognised as
exceptional cost. There will be further transformation costs in 2025, with a
sharp decrease expected in 2026.
ADVANCE - RESPIRATORY PROTECTION
A lot of the effort within Respiratory Protection this year has focused on
rebuilding the sales pipeline, either by innovation of new products or new
channels to market.
Earlier in the year we announced that we had been awarded a framework contract
by the NATO Support and Procurement Agency (NSPA), to supply our EXOSKIN range
of CBRN protective boots and gloves, and this was followed up later in the
year by the first order under the contract from a NATO customer. Importantly
this serves as the first country to have procured against both the boots and
gloves contract and the existing framework contract for FM50 masks, evidencing
the robust platform the contracts provide for showcasing our extensive CBRN
portfolio to NATO nations and partners.
We have made good progress strengthening our relationship with the DOD
programme office and are seeing significantly higher levels of collaboration
on future product developments. We do not expect this to translate into
increased DOD demand this year, which will be impacted by a gap in filter
production. Going forwards, we will level load the filter line to avoid this
happening again.
We are continuing to focus on capturing the underwater market with our
world-leading rebreather technology, and see a strong pipeline which we expect
to enable us to expand our customer base beyond the NATO countries that we
have already won contracts with.
Looking forward, we will focus on the launch of our revolutionary new Modular
Integrated Tactical Respirator (MiTR) mask and goggle system via our Quick
Launch process, increasing sales of our complete CBRN portfolio including our
new protective suit developed in partnership with OPEC CBRNe, and importantly
start to see returns from sales of rebreathers following many years of
continuous product development.
ADVANCE - HEAD PROTECTION
Within Head Protection, the focus has been on ensuring we have the capacity
and capability to fulfil the demand against our DOD contracts.
The ramp-up of NG IHPS production has made significant progress, and in total
over 12,000 helmets were successfully produced, approved and delivered within
the year. We expect to deliver around 24,000 NG IHPS helmets in 2024. This, in
combination with the award of a five-year extension to the J&A contract,
underpins growth within the Head Protection business.
Formal FAT approval for ACH GEN II has been received, which represents an
important milestone in de-risking this programme. We will now move into the
ramp-up phase of this programme, but with the lessons learned from the
successful launches of both NG IHPS and EPIC this year, I am confident that we
will start production in H1.
The new EPIC range of ballistic helmets that launched earlier in the year
demonstrates the collaboration across our Head Protection sites, combining the
ballistic helmet technology that was developed for the ACH GEN II programme
with the Team Wendy liner systems to provide a lightweight, high-performance
helmet with premium comfort and a best-in-class performance to weight ratio.
Initial interest and orders have been very promising with around 10,000
ordered to date.
The focus for 2024 remains on improving productivity and scrap rates as we
ramp-up production to drive margins up to an acceptable level.
REVOLUTIONISE
Revolutionise focuses on a longer-term horizon and we have made a number of
important first steps in the year.
Our Head Protection team has started work on the next generation of bump
helmets, as well as leveraging the Ceradyne technology into new
high-performance helmets for the commercial market.
We have also had success in securing a number of funded research and
development programmes, which further demonstrates the strong partnerships we
hold with our customers in collaborating on the next generation of protective
technologies. Within Respiratory Protection we received funding for the
development of the next generation of filters, as well as funding for the
development of new diving masks and shallow water rebreathers to complement
our underwater portfolio. In Head Protection we continue to be one of the
leading experts in traumatic brain injury mitigation and have received funding
to continue our research in this area.
SUSTAINABILITY
We protect lives; it's ingrained within our culture and is at the heart of
everything we do, which is why sustainability is so important to us. We
recognise we are at the start of our sustainability journey so have been
focused on developing a high-level sustainability vision linked to our purpose
and strategy.
During the period, we evolved our sustainability agenda by redefining and
expanding the four distinct pillars which underpin our sustainability agenda
to better reflect our key stakeholders, each of whom has an important role to
play in our journey. These are now known as our planet, our supply chain, our
customers and our colleagues and communities.
Within each pillar, we have identified priority objectives which will be
closely monitored by the Board. Targets have been agreed against these
ambitions and will help drive positive momentum. Each pillar also has a number
of other focus areas that support the priority objectives and are necessary
for us to manage as part of our day-to-day stewardship.
CAPITAL ALLOCATION POLICY
We have completed a review of our capital allocation policy and have
introduced a new framework. First and foremost, we want to focus our attention
and resources on capitalising on the growth opportunities ahead of us, whilst
maximising the returns from these growth opportunities through the targeted
transformation activities detailed above. Our second focus is to reduce debt
to enable flexibility and minimise our interest costs. Thirdly, while we
recognise the importance of dividends to some of our shareholders, we want to
ensure that these distributions are sized appropriately and, importantly, set
at a level from which they can grow as business performance starts to improve
on a sustainable basis. With this in mind, we believe that an appropriate
level of distribution is for dividend payments to be between 2.5 and 3x
covered by adjusted basic EPS through the cycle.
Beyond these three core principles, in the medium term we will consider
inorganic bolt-on opportunities with the express requirement that they
accelerate the delivery of our strategy. However, we do not anticipate
considering inorganic investments until we have meaningfully improved
profitability in the Head Protection business and reduced debt to a more
comfortable level.
FINANCIAL REVIEW
Revenue declined within Respiratory Protection this year following a record
prior year supported by the initial deployment of masks into Europe under the
NSPA framework contract, in addition to support for Ukraine. This has been
partially offset by revenue growth within Head Protection with the
commencement of shipments against the NG IHPS contract, which resulted in
total revenue for the Group declining by 7.5% to $243.8 million (2022: $263.5
million). Margins in both businesses improved year on year, but a shift in
revenue from higher margin Respiratory Protection to lower margin Head
Protection led to margin erosion at a group level, resulting in adjusted
operating profit margin at 8.7% (2022: 8.9%). Following the completion of our
contractual obligations, the Armour business has moved into discontinued
operations, and we have restated the 2022 financials to compare on a
like-for-like basis.
30 September 2023 1 October Change Change (constant currency)(4)
2022
52 weeks ended:
Continuing operations(1)
Orders received $258.7m $267.9m (3.4%) (2.9%)
Closing order book $135.8m $120.9m 12.3% 10.9%
Revenue $243.8m $263.5m (7.5%) (7.5%)
Adjusted(2) EBITDA $35.7m $38.8m (8.0%) (13.6%)
Adjusted(1) EBITDA margin 14.6% 14.7% (10bps) (110bps)
Adjusted(2) operating profit $21.2m $23.4m (9.4%) (18.5%)
Adjusted(2) operating profit margin 8.7% 8.9% (20bps) (120bps)
Adjusted(2) net finance costs $(7.2)m $(3.7)m 94.6% 100.0%
Adjusted(2) profit before tax $14.0m $19.7m (28.9%) (37.5%)
Adjusted(2) taxation $(1.9)m $(3.1)m
Adjusted(2) profit/(loss) after tax $12.1m $16.6m
Adjusted(2) basic earnings per share 40.3c 54.7c (26.3%) (35.2%)
Total dividend per share 29.6c 44.9c (34.1%)
Net debt excluding lease liabilities $64.5m $44.2m 45.9%
Cash conversion 7.0% 151.3%
Return on invested capital(2) 8.7% 9.0%
Statutory results
Operating (loss)/profit from continuing operations(3) $(12.6)m $11.0m
Net finance costs $(7.6)m $(5.0)m
(Loss)/profit before tax from continuing operations $(20.2)m $6.0m
Taxation $3.8m $(0.3)m
(Loss)/profit after tax from continuing operations $(16.4)m $5.7m
Profit/(loss) from discontinued operations $2.0m $(13.3)m
Loss for the period $(14.4)m $(7.6)m
Basic loss per share (48.0c) (25.1c)
Net debt $85.4m $68.0m
1 At 30 September 2023 Armour operations have fully closed. Armour has
therefore been classified as a discontinued operation, including restatement
of prior period comparatives.
2 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.
3 Reported operating loss includes $6.3 million amortisation of acquired
intangibles, restructuring costs of $1.4 million, impairment of non-current
assets and goodwill of $24.6 million and transition costs of $1.5 million. See
Adjusted Performance Measures section for full breakdown of adjustments and
comparatives.
4 Constant currency measures are provided in the Adjusted Performance Measures
section.
Order intake for the Group of $258.7 million (2022: $267.9 million) was down
3.4% (2.9% constant currency). Head Protection orders grew strongly with $38
million of orders for NG IHPS and $14 million of orders against the ACH GEN II
contract received in the year. Respiratory orders were down in the year, with
weak demand from the U.S. DOD as expected.
The closing order book of $135.8 million reflects an increase of 12.3% (10.9%
constant currency) over the prior year, with an increase of 64.5% (64.5%
constant currency) in the Head Protection order book more than offsetting a
decrease of 40.4% (42.0% constant currency) within Respiratory Protection.
Notably the Head Protection order book consists of $59 million of orders for
NG IHPS and over $20 million for ACH GEN II, both fully covering expected
sales for these products in the next financial year.
Revenue for the Group totalled $243.8 million, a decline of 7.5% (7.5%
constant currency) compared to a prior year of $263.5 million.
Respiratory Protection revenue totalled $156.9 million, a decline of 18.7%
(18.7% constant currency) compared to $193.0 million in 2022, with the largest
decrease within the U.K. & International market as a result of the large
sales into Europe last year under the NSPA framework contract. Respiratory
Protection sales into the U.S. DOD grew modestly, albeit with a significant
mix shift away from mask systems to aftermarket products as sales of M53A1 and
M69 masks in the prior year were replaced with sales of filters and other
spares and accessories. Notably, we delivered over $17 million of M61 filters
into the U.S. DOD which represented 24 months' worth of demand, and although
we expect to receive similar orders in the future, there will be a significant
decline of U.S. DOD filters revenue in 2024 as a consequence. Commercial
Americas revenue dropped significantly; however, this was driven by one-off
deliveries in the prior year in support of Ukraine.
Head Protection revenue totalled $86.9 million, an increase of 23.3% (23.3%
constant currency) over the prior year of $70.5 million. U.S. DOD revenue grew
by 19.7% with strong sales of EXFIL ballistic helmets and a successful ramp-up
of the NG IHPS programme. Commercial Americas revenue grew modestly at 7.1%
with encouraging initial sales of the new EPIC commercial helmet range
following a successful launch in the second half of the year. Lastly, we had a
strong year for Head Protection in the U.K. & International market with
revenue growth of 77.6%, driven by deliveries of EXFIL helmets into the
Australian Defence Force.
Group adjusted EBITDA of $35.7 million (2022: $38.8 million) is down 8.0%
(13.6% constancy currency) compared to the prior period. Lower revenue in high
margin Respiratory Protection, high levels of scrap from production ramp-up of
NG IHPS, and increased levels of expensed R&D were headwinds in the year,
partially offset by favourable product mix within Respiratory Protection,
reduced freight costs, and savings in central overheads. Adjusted EBITDA
margin of 14.6% was down 10bps (down 110bps constant currency) on the prior
year.
Adjusted operating profit of $21.2 million (2022: $23.4 million) is after
adjusted depreciation, amortisation and impairment of $14.5 million (FY22:
$15.4 million), resulting in an adjusted operating profit margin of 8.7%
(2022: 8.9%) down 20bps (down 120bps constant currency) on the prior year.
Statutory operating loss from continuing operations of $12.6 million (2022:
profit of $11.0 million) reflected exceptional items in the period which are
summarised below.
Impairments include a $23.4 million charge to goodwill (2022: $nil), arising
as the new Head Protection cash-generating unit (CGU) was subject to
impairment testing for the first time. Based on the Group's Board approved
five-year financial plan, adjusted to exclude cash flows considered
expansionary, the value in use of the Head Protection CGU was less than the
carrying amount.
The Head Protection CGU includes all goodwill associated with the 2020
Ceradyne acquisition of $28.0 million and 2021 Team Wendy acquisition of $58.3
million. In 2021, goodwill related to the Ceradyne acquisition was allocated
in full to the sole Respiratory and Head protection operating segment, and as
such was unaffected by the 2021 armour-related impairments. In 2022, the
decision to present Armour as a separate operating segment was taken, with nil
goodwill value allocated to the Armour segment. This was based on a relative
value approach, which attributed no value to Armour given trading losses
forecast to closure. Further details of the impairment are included in note
3.1.
The Adjusted Performance Measures section contains a full breakdown and
explanation of adjustments.
Statutory operating (loss)/profit FY23 FY22
$m $m
(12.6) 11.0
Amortisation of acquired intangibles 6.3 6.8
Impairment of goodwill and other non-current assets 24.6 4.0
Restructuring costs 1.4 1.6
Transaction costs 1.5 -
Adjusted operating profit 21.2 23.4
Adjusted net finance costs increased to $7.2 million (2022: $3.7 million) due
to higher net debt and variable interest charges.
After an adjusted tax charge of $1.9 million (2022: $3.1 million), the Group
recorded an adjusted profit for the period after tax of $12.1 million (2022:
$16.6 million).
Adjusted basic earnings per share fell to 40.3 cents (2022: 54.7 cents).
Return on invested capital, calculated on a rolling 12-month basis, fell to
8.7% (2022: 9.0%), reflecting lower adjusted operating profit.
Statutory net finance costs of $7.6 million (2022: $5.0 million) include $0.4
million (2022: $1.3 million) net interest expense on the U.K. defined benefit
pension scheme liability.
Statutory loss before tax from continuing operations was $20.2 million (2022:
profit of $6.0 million) and, after a tax credit of $3.8 million (2022: charge
of $0.3 million), the loss for the period from continuing operations was $16.4
million (2022: profit of $5.7 million).
Segmental performance
FY23 FY22
Respiratory Protection Head Protection Total Respiratory Protection Head Protection
$m Total
Revenue 156.9 86.9 243.8 193.0 70.5 263.5
Adjusted EBITDA 36.6 (0.9) 35.7 42.4 (3.6) 38.8
Adjusted EBITDA margin 23.3% (1.0%) 14.6% 22.0% (5.1%) 14.7%
Adjusted operating profit 29.3 (8.1) 21.2 33.5 (10.1) 23.4
Adjusted operating profit margin 18.7% (9.3%) 8.7% 17.4% (14.3%) 8.9%
Adjusted operating profit margin within the Respiratory Protection business
improved despite the fall in revenue, growing from 17.4% in FY22 to 18.7% in
FY23. This was due to a product mix shift away from lower margin sales on the
NSPA framework in the prior period, and repricing on a couple of key products.
Beyond these mix effects, rapid action to right-size the cost base was taken
in light of the weaker demand environment.
The Head Protection business has continued to make a loss as we work through
the production ramp-up for the NG IHPS and ACH GEN II programmes, although we
have seen reduced losses with the operational gearing tailwinds from the
increased revenue, resulting in an adjusted operating profit margin of (9.3%),
up from (14.3%) in FY22. We continue to believe that the transformational
initiatives within the STAR strategy will bring this business to acceptable
levels of profitability.
Research and development expenditure
Total investment in research and development (capitalised and expensed) was
$10.2 million (2022: $10.9 million), in line with the prior period as a
percentage of revenue. Excluding amortisation and impairment, we have seen an
increase in costs expensed to the P&L and lower levels of capitalisation.
FY23 FY22
Continuing operations $m $m
Total expenditure 10.2 10.9
Less customer funded (1.2) (1.4)
Group expenditure 9.0 9.5
Capitalised (3.1) (5.8)
Income statement impact 5.9 3.7
Amortisation and impairment of development expenditure 4.3 6.5
Total income statement impact 10.2 10.2
Revenue 243.8 263.5
R&D spend as a % of revenue 4.2% 4.1%
Respiratory Protection 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 FY23 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
FY23 FY22
$m $m
Adjusted continuing EBITDA 35.7 38.8
Share-based payments and defined benefit pension scheme costs 1.7 1.8
Working capital (34.9) 18.1
Cash flows from continuing operations before exceptional items 2.5 58.7
Restructuring and transaction costs paid (2.3) (1.0)
Cash flows from continuing operations 0.2 57.7
Cash flows from discontinued operations 3.2 (24.2)
Cash flow from operations 3.4 33.5
Payments to pension plan - (8.5)
Net finance costs (6.6) (3.4)
Net repayment of leases (3.0) (3.2)
Tax received 3.7 3.7
Capital expenditure (11.0) (8.9)
Discontinued operation disposals, investing and financing cash flows 6.6 (4.4)
Purchase of own shares - share buyback - (12.4)
Dividends to shareholders (13.4) (13.4)
Foreign exchange on cash - (0.4)
Change in net debt (20.3) (17.4)
Opening net debt, excluding lease liabilities (44.2) (26.8)
Closing net debt, excluding lease liabilities (64.5) (44.2)
Cash flows from continuing operations before exceptional items were $2.5
million (2022: $58.7 million) with the movement principally due to working
capital outflows of $34.9 million, compared to inflows of $18.1 million in the
prior year. Working capital outflows were driven by a $26.2 million increase
in receivables due to sales phasing (2022: $13.2 million reduction in
receivables).
Dividends and purchase of own shares were $13.4 million (2022: $25.8 million),
with the change reflecting the buyback programme in the prior year, which has
now been formally cancelled.
Tax was an inflow of $3.7m (2022: inflow of $3.7 million), due to historical
amounts owed being settled in the period.
Net debt was $85.4 million (2022: net debt $68.0 million), which includes
lease liabilities of $20.9 million (2022: $23.8 million). Excluding lease
liabilities, net debt was $64.5 million (2022: net debt $44.2 million).
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 11 years. The net pension liability for the
scheme amounted to $40.2 million as at 30 September 2023 (2022: $6.3 million).
The increase is mainly due to adverse actuarial experience adjustments.
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 2022 actuarial valuation, the Group will make payments in FY24 of
£6.95 million, FY25 of £4.30 million and FY26 of £4.70 million in respect
of deficit recovery and scheme expenses.
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 1 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 for FY23.
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 active interest rate swaps at 30 September 2023 was $30.0
million (2022: $30.0 million), expiring on 8 September 2025. The Group also
has additional interest rate swaps in place with a notional value of $20.0
million starting on 8 September 2025 and expiring on 8 September 2026 (2022:
$nil). The financial value of interest rate swaps at 30 September 2023 was
$0.9 million (2022: $0.5 million), an asset position as hedged fixed rates are
lower than current market forecasts for SOFR.
Dividends
In-line with the revised capital allocation policy, the Board has proposed a
final dividend of 15.3 cents per share (2022: 30.6 cents). The final dividend
will be paid in pounds sterling on 8 March 2024 to shareholders on the
register at 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.
We expect the H1 2024 dividend to be similarly rebased, resulting in the
customary one-third to two-thirds distribution for the full year next year.
Jos Sclater Rich Cashin
Chief Financial Officer
Chief Executive Officer
21 November 2023
21 November 2023
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 12 December 2023 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 measurement
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, operating profit margin,
return on invested capital, cash conversion, net debt excluding lease
liabilities, average working capital turns, and constant currency equivalents
for relevant metrics. These are collectively described as Adjusted Performance
Measures (APMs).
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 30 September 2023 52 weeks ended 1 October 2022 (restated)(1)
Continuing operations Adjusted Adjustments Total Adjusted Adjustments Total
$m $m $m $m $m $m
Revenue 243.8 - 243.8 263.5 - 263.5
Cost of sales (157.9) - (157.9) (174.6) - (174.6)
Gross profit 85.9 - 85.9 88.9 - 88.9
Sales and marketing expenses (14.9) - (14.9) (15.0) - (15.0)
Research and development costs (10.0) (0.2) (10.2) (8.8) (1.4) (10.2)
General and administrative expenses (39.8) (33.6) (73.4) (41.7) (11.0) (52.7)
Operating profit/(loss) 21.2 (33.8) (12.6) 23.4 (12.4) 11.0
EBITDA 35.7 (2.9) 32.8 38.8 (1.6) 37.2
Depreciation, amortisation (14.5) (30.9) (45.4) (15.4) (10.8) (26.2)
and impairment
Operating profit/(loss) (note 1) 21.2 (33.8) (12.6) 23.4 (12.4) 11.0
Net finance costs (note 2) (7.2) (0.4) (7.6) (3.7) (1.3) (5.0)
Profit/(loss) before taxation 14.0 (34.2) (20.2) 19.7 (13.7) 6.0
Taxation (note 3) (1.9) 5.7 3.8 (3.1) 2.8 (0.3)
Profit/(loss) for the period from continuing operations 12.1 (28.5) (16.4) 16.6 (10.9) 5.7
Discontinued operations - profit/(loss) from discontinued operations (note 4) - 2.0 2.0 - (13.3) (13.3)
Profit/(loss) for the period (note 5) 12.1 (26.5) (14.4) 16.6 (24.2) (7.6)
Basic (loss)/earnings per share 40.3c (88.3c) (48.0c) 54.7c (79.8c) (25.1c)
Diluted (loss)/earnings per share 40.3c (88.3c) (48.0c) 54.4c (79.3c) (24.9c)
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect reclassification of research and development costs, reclassification
of selling and distribution costs, and the discontinuation of the Armour
business. These are disclosed in APMs note 13.
1 Adjustments to operating loss
Adjusted operating profit excludes discontinued operations and 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.
2023 2022
(restated)(1)
$m $m
Operating (loss)/profit (12.6) 11.0
Amortisation of acquired intangibles 6.3 6.8
Restructuring costs 1.4 1.6
Restructuring-related impairment of non-current assets 0.7 0.4
Impairment of other non-current assets (excluding restructuring related 0.5 3.6
impairments)
Impairment of goodwill 23.4 -
Transition costs 1.5 -
Adjusted operating profit 21.2 23.4
Depreciation 9.2 9.1
Other impairment charges - 0.4
Other amortisation charges 5.3 5.9
Adjusted EBITDA 35.7 38.8
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect the discontinuation of the Armour business.
Amortisation of acquired intangibles
Amortisation charges for acquired intangible assets of $6.3 million (2022:
$6.8 million) are considered exceptional as they do not change each period
based on underlying business trading and performance.
Restructuring costs
Restructuring costs related to the right-sizing of operations were $1.4
million (2022: $1.6 million). These costs are considered exceptional as they
relate to specific programmes which do not form part of the underlying
business trading and performance.
Restructuring-related impairment of non-current assets
Restructuring-related impairment of non-current assets was $0.7 million. This
related to the closure of one of our U.S. offices, with a $0.5 million
impairment to right of use assets (2022: $0.4 million impairment), and $0.2
million impairment to plant and machinery (2022: $nil). These costs are
considered exceptional as they relate to a specific office closure which does
not form part of the underlying business trading and performance.
Impairment of other non-current assets
Reviews of the Group's non-current assets resulted in $0.5 million exceptional
impairment losses (2022: $3.6 million) as the carrying value of certain
product group level cash-generating units (CGUs) exceeded estimated
recoverable amounts. Further details are provided in note 3.1. The impairment
losses are significant items resulting from changes in assumptions for future
recoverable amounts. As such they are considered unrelated to current or prior
year trading performance.
In the prior period the Group also recognised $0.4 million other non-current
asset impairments that were not considered exceptional (note 3.1).
Impairment of goodwill
Review of the Head Protection CGU resulted in impairment to goodwill of $23.4
million (2022: $nil) as the carrying value of the CGU exceeded its estimated
recoverable amount. Further details are provided in note 3.1. The impairment
is a significant item based on forecast assumptions for future cash flows. As
such it is considered unrelated to current year trading performance.
Transition costs
Transition costs of $1.5 million (2022: $nil) related to the transfer of
legacy Team Wendy operations in Head Protection onto a Group controlled ERP
system. These costs are considered transition-related and exceptional as they
relate to a specific programme for Team Wendy operations that was only
required as a result of acquisition in November 2020.
2 Adjustments to net finance costs
Adjusted net finance costs exclude exceptional items considered unrelated to
the underlying trading performance of the Group.
2023 2022
(restated)(1)
$m $m
Net finance costs 7.6 5.0
Defined benefit pension unwind discount (0.4) (1.3)
Adjusted net finance costs 7.2 3.7
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect the discontinuation of the Armour business.
$0.4 million (2022: $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.
3 Adjustments to taxation
Adjustments to taxation represent the tax effects of the adjustments to
operating profit and net finance costs. Except for the impairment to goodwill,
adjusting items do not have significantly different effective tax rates
compared to statutory rates, with an overall effective rate of 17% (2022:
20%).
The $23.4 million impairment of goodwill resulted in a tax credit of $3.4
million (effective tax rate 14.5%), which explains the lower overall rate
compared to statutory rates on the total level of adjustments.
4 Profit from discontinued operations
The adjusted profit measures exclude the result from discontinued operations
relating to the divestment of milkrite | InterPuls and closure of the Armour
business (note 2.2).
During the period, total profit after tax from discontinued operations was
$2.0 million (2022: loss after tax of $13.3 million).
5 Adjustments to loss for the period
2023 2022
(restated)(1)
$m $m
Loss for the period (14.4) (7.6)
Amortisation of acquired intangibles 6.3 6.8
Restructuring costs 1.4 1.6
Restructuring-related impairment of non-current assets 0.7 0.4
Impairment of other non-current assets (excluding restructuring-related 0.5 3.6
impairments)
Impairment of goodwill 23.4 -
Transition costs 1.5 -
Defined benefit pension unwind discount 0.4 1.3
Tax on exceptional items (5.7) (2.8)
(Profit)/loss from discontinued operations (2.0) 13.3
Adjusted profit for the period 12.1 16.6
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect the discontinuation of the Armour business.
6 Adjusted earnings per share
Weighted average number of shares 2023 2022
Weighted average number of ordinary shares in issue used in basic calculation 29,996 30,308
(thousands)
Potentially dilutive shares (weighted average) (thousands) 263 221
Diluted number of ordinary shares (weighted average) (thousands) 30,259 30,529
Adjusted continuing earnings per share 2023 2022
(restated)(1)
$ cents $ cents
Basic 40.3c 54.7c
Diluted 40.3c 54.4c
7 Net debt
2023 2022
$m $m
Cash and cash equivalents 13.2 9.5
Bank loans (77.7) (53.7)
Net debt excluding lease liabilities (64.5) (44.2)
Lease liabilities (20.9) (23.8)
Net debt including lease liabilities (85.4) (68.0)
8 Adjusted dividend cover ratio
2023 2022
(restated)(1)
$ cents $ cents
Interim dividend 14.3c 14.3c
Final dividend 15.3c 30.6c
Total dividend 29.6c 44.9c
Adjusted basic earnings per share 40.3c 54.7c
Adjusted dividend cover ratio 1.4 times 1.2 times
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect the discontinuation of the Armour business.
9 Return on invested capital
Return on invested capital (ROIC) is calculated as adjusted operating profit
over average invested capital relating to continuing operations.
2023 2022
$m $m
Net assets 159.4 210.5
Net assets associated with discontinued operations (5.6) (8.4)
Net assets associated with continuing operations 153.8 202.1
Net debt excluding lease liabilities 64.5 44.2
Lease liabilities (excluding liabilities associated with discontinued 20.9 14.5
operations)
Pension 40.2 6.3
Derivatives (0.9) (0.5)
Net tax (33.2) (25.1)
Total invested capital 245.3 241.5
Average invested capital 243.4 261.3
Adjusted operating profit 21.2 23.4
ROIC 8.7% 9.0%
Average invested capital 2023 2022
$m $m
Current period invested capital 245.3 241.5
Prior period invested capital 241.5 281.0
Average invested capital 243.4 261.3
10 Average working capital turn (AWCT)
AWCT is the ratio of the 12 month average month end working capital (defined
as the total of inventory, receivables and payables excluding lease
liabilities) to revenue, based on continuing operations.
Continuing operations 2023 2022
$m $m
12 month average month end working capital 65.7 48.2
Revenue 243.8 263.5
AWCT 3.7 5.5
11 Cash conversion
Cash conversion excludes the impact of exceptional items from operating cash
flows and EBITDA.
2023 2022
(restated)(1)
$m $m
Cash flows from continuing operations before exceptional items 2.5 58.7
Adjusted EBITDA 35.7 38.8
Cash conversion 7.0% 151.3%
2023 2022
(restated)(1)
$m $m
Cash flows from continuing operations 0.2 57.7
Restructuring and transition costs paid 2.3 1.0
Cash flows from continuing operations before exceptional items 2.5 58.7
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect the discontinuation of the Armour business.
12 Constant currency reporting
Constant currency measures are calculated by translating the prior period at
current period exchange rates.
Continuing operations 2023 2022
(restated)(1)
$m $m
Orders received 258.7 266.3
Closing order book 135.8 122.5
Revenue 243.8 263.5
Adjusted EBITDA 35.7 41.3
Adjusted operating profit 21.2 26.0
Adjusted profit before tax 14.0 22.4
Adjusted basic earnings per share 40.3c 62.2c
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect the discontinuation of the Armour business.
13 Restatement of adjusted performance measures
As per statutory equivalents reconciled in note 5.1, prior period comparatives
for adjusted performance measures have been restated to present the Armour
business as a discontinued operation, and to reclassify certain expenses in
the Consolidated Statement of Comprehensive Income.
Expense reclassifications include disclosure of research and development costs
as a separate line item below gross profit, and recategorisation of selling
and distribution costs. The 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. Selling and distribution costs have been disaggregated into sales and
marketing expenses, presented in a separate line below gross profit, and
freight and distribution costs which have been reclassified into cost of
sales.
This presentation reflects the way the business performance will be monitored
in future, with separate disclosure of research and development appropriate as
an integral part of operations. It is also consistent and comparable with
common market practice and therefore provides reliable and more relevant
information to the reader. Overall operating loss figures for the previous
period remain unchanged as this is only a presentational restatement. A
reconciliation of reported prior period to restated figures is presented
below:
Consolidated Statement of Comprehensive Income for the 52 weeks ended 1
October 2022
Continuing operations - Adjusted Previously Remove Research and Selling and Restated
reported Armour development distribution $m
$m $m $m $m
Revenue 271.9 (8.4) - - 263.5
Cost of sales (192.1) 18.5 8.8 (9.8) (174.6)
Gross profit 79.8 10.1 8.8 (9.8) 88.9
Selling and distribution costs / Sales and marketing expenses (26.0) 1.2 - 9.8 (15.0)
Research and development costs - - (8.8) - (8.8)
General and administrative expenses (43.7) 2.0 - - (41.7)
Operating profit 10.1 13.3 - - 23.4
Net finance costs (4.0) 0.3 - - (3.7)
Profit before tax 6.1 13.6 - - 19.7
Continuing operations - Adjustments Previously Remove Research and Restated
reported Armour development $m
$m adjustments $m
$m
Revenue - - - -
Cost of sales (1.6) 1.6 - -
Gross profit (1.6) 1.6 - -
Selling and distribution costs / Sales and marketing expenses - - - -
Research and development costs - - (1.4) (1.4)
General and administrative expenses (10.6) (1.8) 1.4 (11.0)
Operating profit/(loss) (12.2) (0.2) - (12.4)
Net finance costs (2.4) 1.1 - (1.3)
Profit before tax (14.6) 0.9 - (13.7)
Consolidated Statement of Comprehensive Income
For the 52 weeks ended 30 September 2023
Continuing operations Note 52 weeks ended 52 weeks ended
30 September 1 October 2022
2023 (restated)(1)
$m $m
Revenue 2.1 243.8 263.5
Cost of sales (157.9) (174.6)
Gross profit 85.9 88.9
Sales and marketing expenses (14.9) (15.0)
Research and development costs (10.2) (10.2)
General and administrative expenses (73.4) (52.7)
Operating (loss)/profit (12.6) 11.0
Net finance costs 4.3 (7.6) (5.0)
(Loss)/profit before taxation (20.2) 6.0
Taxation 3.8 (0.3)
(Loss)/profit for the period from continuing operations (16.4) 5.7
Discontinued operations
Profit/(loss) from discontinued operations 2.2 2.0 (13.3)
(Loss)/profit for the period (14.4) (7.6)
Other comprehensive income/(expense)
Items that are not subsequently reclassified to the income statement
Remeasurement (loss)/gain recognised on retirement benefit scheme (31.8) 50.1
Deferred tax relating to retirement benefit scheme 6.9 (9.6)
Deferred tax relating to change in tax rates 1.1 (3.4)
Deferred tax relating to other temporary differences (0.2) (0.1)
Items that may be subsequently reclassified to the income statement
Deferred tax exchange differences offset in reserves 0.8 (2.7)
Other exchange differences offset in reserves (0.5) 3.5
Cash flow hedges 0.4 0.5
Current tax relating to cash flow hedges - (0.1)
Other comprehensive (expense)/income for the period (23.3) 38.2
Total comprehensive (expense)/income for the period (37.7) 30.6
Earnings per share
Basic (48.0c) (25.1c)
Diluted (48.0c) (24.9c)
Earnings per share from continuing operations
Basic (54.7c) 18.8c
Diluted (54.7c) 18.7c
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect reclassification of research and development costs, reclassification
of selling and distribution costs, and the discontinuation of the Armour
business. These are disclosed in note 5.1.
Consolidated Balance Sheet At 30 September 2023
Note At 30 September At 1 October
2023 2022
$m $m
Non-current assets
Intangible assets 3.1 139.2 171.0
Property, plant and equipment 35.8 39.9
Finance leases 6.2 -
Deferred tax assets 40.1 26.7
Derivative financial instruments 0.6 0.3
221.9 237.9
Current assets
Inventories 54.4 65.6
Trade and other receivables 58.3 30.6
Derivative financial instruments 0.3 0.2
Current tax receivables - 4.2
Cash and cash equivalents 13.2 9.5
126.2 110.1
Current liabilities
Borrowings 4.2 4.3 4.1
Current tax payables 0.7 -
Trade and other payables 34.6 42.3
Provisions for liabilities and charges 0.4 0.7
40.0 47.1
Net current assets 86.2 63.0
Non-current liabilities
Borrowings 4.2 94.3 73.4
Deferred tax liabilities 6.2 5.8
Retirement benefit obligations 40.2 6.3
Provisions for liabilities and charges 8.0 4.9
148.7 90.4
Net assets 159.4 210.5
Shareholders' equity
Ordinary shares 50.3 50.3
Share premium account 54.3 54.3
Other reserves (13.9) (14.2)
Cash flow hedging reserve 0.8 0.4
Retained earnings 67.9 119.7
Total equity 159.4 210.5
Consolidated Cash Flow Statement
For the 52 weeks ended 30 September 2023
Note 52 weeks ended 52 weeks ended
30 September 1 October 2022
2023 (restated)(1)
$m $m
Cash flows from operating activities
Cash flows from continuing operations 4.1 0.2 57.7
Cash flows from discontinued operations 4.1 3.2 (24.2)
Cash flows from operations 4.1 3.4 33.5
Retirement benefit deficit recovery contributions - (8.5)
Tax received 3.7 3.7
Net cash flows from operating activities 7.1 28.7
Cash flows used in investing activities
Proceeds from disposal of discontinued operations 2.2 7.9 -
Costs of disposal 2.2 (0.4) -
Purchase of property, plant and equipment (7.4) (2.9)
Capitalised development costs and purchased software 3.1 (3.6) (6.0)
Other finance income 4.3 0.4 -
Finance lease capital receipts 0.5 -
Investing cash flows used in discontinued operations - (3.2)
Net cash flows used in investing activities (2.6) (12.1)
Cash flows used in financing activities
Proceeds from loan drawdowns 4.4 48.0 42.9
Loan repayments 4.4 (24.0) (30.1)
Finance costs paid in respect of bank loans and overdrafts 4.3 (6.3) (2.7)
Finance costs paid in respect of leases 4.3 (0.7) (0.7)
Repayment of lease liability (3.5) (3.2)
Dividends paid to shareholders 4.5 (13.4) (13.4)
Purchase of own shares - Share Buyback Programme - (12.4)
Financing cash flows used in discontinued operations (0.9) (1.2)
Net cash flows used in financing activities (0.8) (20.8)
Net increase/(decrease) in cash and cash equivalents 3.7 (4.2)
Cash and cash equivalents at the beginning of the period 9.5 14.1
Effects of exchange rate changes - (0.4)
Cash and cash equivalents at the end of the period 13.2 9.5
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect the discontinuation of the Armour business.
Consolidated Statement of Changes in Equity
For the 52 weeks ended 30 September 2023
Note Share Share Hedging Other Retained Total
capital premium reserve reserves earnings equity
$m $m $m $m $m $m
At 2 October 2021 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
Deferred 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 4.5 - - - - (13.4) (13.4)
Own shares acquired - - - - (12.4) (12.4)
Fair value of share-based payments - - - - 1.0 1.0
Deferred tax relating to employee share schemes charged directly to equity - - - - (0.7) (0.7)
At 1 October 2022 50.3 54.3 0.4 (14.2) 119.7 210.5
Loss for the period - - - - (14.4) (14.4)
Net exchange differences offset in reserves - - - 0.3 - 0.3
Deferred tax relating to other temporary differences - - - - (0.2) (0.2)
Remeasurement loss recognised on retirement benefit scheme - - - - (31.8) (31.8)
Deferred tax relating to retirement benefit scheme - - - - 6.9 6.9
Deferred tax relating to change in tax rates - - - - 1.1 1.1
Interest rate swaps - cash flow hedge - - 0.4 - - 0.4
Total comprehensive income for the period - - 0.4 0.3 (38.4) (37.7)
Dividends paid 4.5 - - - - (13.4) (13.4)
Fair value of share-based payments - - - - 0.7 0.7
Deferred tax relating to employee share schemes charged directly to equity - - - - (0.7) (0.7)
At 30 September 2023 50.3 54.3 0.8 (13.9) 67.9 159.4
Other reserves consist of the capital redemption reserve of $0.6 million
(2022: $0.6 million) and the translation reserve of $(14.5) million (2022:
$(14.8) 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 30 September 2023 (prior
financial period 52 weeks ended 1 October 2022). 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.
The financial information set out above does not constitute the company's
statutory accounts for the periods ended 30 September 2023 or 1 October 2022
but is derived from those accounts. Statutory accounts for 2022 have been
delivered to the registrar of companies, and those for 2023 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.
2.1 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 continuing operating
and reportable segments, these being Head Protection and Respiratory
Protection. In the prior period the Group had two continuing operating and
reportable segments, Respiratory and Head Protection, and Armour. The Armour
business was formally closed in the second half of the 2023 financial period
and has therefore been reclassified as into discontinued operations, with
comparatives restated accordingly.
52 weeks ended 30 September 2023 Respiratory Head Total Adjustments Total
Protection Protection $m and $m
$m $m discontinued¹ $m
Revenue 156.9 86.9 243.8 - 243.8
Adjusted EBITDA 36.6 (0.9) 35.7 (2.9) 32.8
Depreciation and amortisation (7.3) (7.2) (14.5) - (14.5)
Impairment charges - - - (24.6) (24.6)
Amortisation of acquired intangibles - - - (6.3) (6.3)
Operating profit/(loss) 29.3 (8.1) 21.2 (33.8) (12.6)
Finance costs (7.2) (0.4) (7.6)
Profit/(loss) before taxation 14.0 (34.2) (20.2)
Taxation (1.9) 5.7 3.8
(Loss)/profit for the period from continuing operations 12.1 (28.5) (16.4)
Discontinued operations - profit for the year - 2.0 2.0
(Loss)/profit for the year 12.1 (26.5) (14.4)
Basic earnings per share (cents) 40.3c (88.3c) (48.0c)
Diluted earnings per share (cents) 40.3c (88.3c) (48.0c)
52 weeks ended 1 October 2022 (restated)(2) Respiratory Head Total Adjustments Total
Protection Protection $m and $m
$m $m discontinued¹ $m
Revenue 193.0 70.5 263.5 - 263.5
Adjusted EBITDA 42.4 (3.6) 38.8 (1.6) 37.2
Depreciation and amortisation (8.5) (6.5) (15.0) - (15.0)
Impairment charges (0.4) - (0.4) (4.0) (4.4)
Amortisation of acquired intangibles - - - (6.8) (6.8)
Operating profit/(loss) 33.5 (10.1) 23.4 (12.4) 11.0
Finance costs (3.7) (1.3) (5.0)
Profit/(loss) before taxation 19.7 (13.7) 6.0
Taxation (3.1) 2.8 (0.3)
Profit/(loss) for the period from continuing operations 16.6 (10.9) 5.7
Discontinued operations - loss for the year - (13.3) (13.3)
Profit/(loss) for the year 16.6 (24.2) (7.6)
Basic earnings per share (cents) 54.7c (79.8c) (25.1c)
Diluted earnings per share (cents) 54.4c (79.3c) (24.9c)
1 Refer to Adjusted Performance Measures section for a full breakdown
of adjusted measures, including a reconciliation between adjusted EBITDA and
statutory operating profit by line item. The ($2.9) million adjusted EBITDA is
the $1.5 million transition costs and $1.4 million of restructuring costs
(2022: $1.6 million of restructuring costs).
2 Comparatives for the 52 weeks ended 1 October 2022 have been restated
to reflect the discontinuation of the Armour business.
Revenue by line of business
52 weeks ended 30 September 2023 52 weeks ended 1 October 2022
Respiratory Head Total Respiratory Head Total
Protection Protection $m Protection Protection $m
$m $m $m $m
U.S. DOD 67.1 42.5 109.6 63.2 35.5 98.7
Commercial Americas 30.5 27.0 57.5 40.5 25.2 65.7
U.K. & International 59.3 17.4 76.7 89.3 9.8 99.1
156.9 86.9 243.8 193.0 70.5 263.5
U.S. DOD revenues, sold directly and through indirect channels, represent the
only customer which individually contributes more than 10% to Group revenues.
2.2 Discontinued operations
At 30 September 2023 all outstanding armour orders have been delivered to
customers, and Armour operations have fully closed. As such the Armour
business has been classified as discontinued, including restatement of prior
period comparatives. The closure of Armour included the sale of assets
relating to the Lexington facility as further described in the gain on
disposal section below.
In September 2020 the Group divested of the milkrite | InterPuls business,
resulting in its classification as discontinued. As part of the divestment,
the Group entered into a Manufacturing Service Agreement with the purchasers
to provide manufacturing support, which was extended to 30 September 2023
during the period. As the activity under this agreement is not part of the
continuing operations of the Group, related revenue and costs have been
classified as discontinued operations.
Armour milkrite | 2023 Armour milkrite | 2022
$m InterPuls $m $m InterPuls $m
$m $m
Revenue 30.5 6.2 36.7 8.4 3.2 11.6
Cost of sales (36.5) (4.0) (40.5) (21.3) (5.8) (27.1)
Gross (loss)/profit (6.0) 2.2 (3.8) (12.9) (2.6) (15.5)
Research and development costs - - - (0.2) - (0.2)
General and administrative expenses (2.8) - (2.8) (3.9) - (3.9)
Release of contingent consideration(1) - - - 3.9 - 3.9
Operating loss (8.8) 2.2 (6.6) (13.1) (2.6) (15.7)
Finance costs (0.2) - (0.2) (1.4) - (1.4)
(Loss)/profit before taxation (9.0) 2.2 (6.8) (14.5) (2.6) (17.1)
Taxation 1.8 (0.5) 1.3 3.2 0.6 3.8
(Loss)/profit from discontinued operations related to trading (7.2) 1.7 (5.5) (11.3) (2.0) (13.3)
Gain on disposal before tax 9.1 - 9.1 - - -
Tax on disposal (1.6) - (1.6) - - -
Gain on disposal after tax 7.5 - 7.5 - - -
Total profit/(loss) from discontinued operations 0.3 1.7 2.0 (11.3) (2.0) (13.3)
Basic earnings per share 1.0c 5.7c 6.7c (37.3c) (6.6c) (43.9c)
Diluted earnings per share 1.0c 5.7c 6.7c (37.0c) (6.6c) (43.6c)
1 In 2022 revenue expectations from the DLA ESAPI body armour contract were
reduced, resulting in a gain of $3.9 million on release of the net present
value of contingent consideration payable.
Gain on disposal - Armour
In the second half of the financial period the Group completed the sale of
Armour assets at the Lexington facility for cash consideration of $7.4
million. The sale agreement also included a sublease of the Lexington facility
to the purchaser. The Group has retained its lease liabilities relating to the
Lexington head lease. The Group also separately disposed of other Armour
assets for cash consideration of $0.5 million.
The total gain on disposal relating to Armour operations is reconciled below.
2023
$m
Cash consideration received - Lexington 7.4
Cash consideration received - other assets 0.5
Inventories disposed (2.0)
Plant and machinery disposed (0.5)
Finance lease adjustment 4.1
Transaction costs (0.4)
Gain on disposal before tax 9.1
Tax on disposal (1.6)
Gain on disposal after tax 7.5
The finance lease adjustment recognises the present value of the finance lease
receipts over the sublease term. The right of use lease asset for the
Lexington site was previously impaired to $nil in the 2021 financial period.
Cash consideration was fully paid in the current period.
3.1 Intangible assets
Goodwill Acquired Development Computer Total
$m intangibles expenditure software $m
$m $m $m
At 2 October 2021
Cost 88.8 98.2 64.6 15.1 266.7
Accumulated amortisation and impairment - (39.3) (41.4) (5.0) (85.7)
Net book amount 88.8 58.9 23.2 10.1 181.0
52 weeks ended 1 October 2022
Opening net book amount 88.8 58.9 23.2 10.1 181.0
Exchange differences (0.1) - (1.2) - (1.3)
Additions - - 5.8 0.2 6.0
Impairments - - (2.0) - (2.0)
Amortisation - (6.8) (4.7) (1.2) (12.7)
Closing net book amount 88.7 52.1 21.1 9.1 171.0
At 1 October 2022
Cost 88.7 98.2 69.2 15.3 271.4
Accumulated amortisation and impairment - (46.1) (48.1) (6.2) (100.4)
Net book amount 88.7 52.1 21.1 9.1 171.0
52 weeks ended 30 September 2023
Opening net book amount 88.7 52.1 21.1 9.1 171.0
Exchange differences 0.1 - 0.3 - 0.4
Additions - - 3.1 0.5 3.6
Impairments (23.4) - (0.2) (0.6) (24.2)
Amortisation - (6.3) (4.1) (1.2) (11.6)
Closing net book amount 65.4 45.8 20.2 7.8 139.2
At 30 September 2023
Cost 88.8 98.2 69.5 15.0 271.5
Accumulated amortisation and impairment (23.4) (52.4) (49.3) (7.2) (132.3)
Net book amount 65.4 45.8 20.2 7.8 139.2
The remaining useful economic life of the development expenditure is up to ten
years.
Computer software associated with Armour was impaired by $0.6 million in the
period, following the closure of this business.
Impairment review of goodwill
Goodwill is tested for impairment annually and whenever there is an indication
of impairment at the level of the cash-generating unit (CGU) to which it
is allocated.
In line with the change in operating segments set out in note 2.1, goodwill
has been allocated to Head Protection and Respiratory Protection CGUs. Head
Protection includes goodwill from the Ceradyne and Team Wendy acquisitions,
which are now part of a fully integrated business segment. Respiratory
goodwill is related to three legacy acquisitions that completed in 2016 and
earlier financial periods.
Goodwill has been allocated to CGUs on the basis of historic acquisitions,
which provides a more accurate basis than allocating by relative value given
each of the acquisitions related fully to Head Protection or Respiratory
products individually.
2023 allocation of goodwill by CGU Cost Impairment Net book
$m $m amount
$m
Respiratory Protection 2.5 - 2.5
Head Protection 86.3 (23.4) 62.9
Total goodwill 88.8 (23.4) 65.4
In the prior period goodwill was entirely allocated to the previous single
operating segment and CGU, Respiratory and Head Protection.
The total carrying value of each CGU is tested for impairment against
corresponding recoverable amounts. CGU carrying values include associated
goodwill, other intangible assets and property, plant and equipment, and
attributable working capital.
The recoverable amount of the CGUs has been determined based on value in use
calculations, using discounted cash flow projections for a five-year period
plus a terminal value based upon a long-term perpetuity growth rate of 1.5%
(2022: 2.0%). The growth rate was selected as specifically appropriate for the
Head Protection review considered further below. Any reasonable adjustment to
the growth rate that could be made for the Respiratory protection review would
still leave substantial headroom.
Value in use calculations are based on the Group's Board approved five-year
plan which has been adjusted to exclude the impact of capital expenditure
considered expansionary and certain linked earnings and cash flows. Excluded
expansionary items relate to new helmet programmes which, although
specifically identified and planned, have yet to incur significant capital
expenditure. Central costs in the five-year plan are allocated to Respiratory
Protection and Head Protection CGUs based on an average of relative net
assets, payroll costs and revenues. Central costs include Board, Finance, IT,
HR, Legal and Communications, where these are not directly attributable to an
individual CGU.
It is considered appropriate to extrapolate cash flows into perpetuity as the
fifth year represents a reasonable estimate of steady state business
operations, excluding expansionary items. Long-term growth has been adjusted
to a slightly lower level this year, accounting for the risk of slower
incremental progress once the significant opportunities in the five-year plan
have been delivered without further expansionary expenditure. The post-tax
discount rates applied were 10.4% (Respiratory Protection) and 10.9% (Head
Protection) (2022: 9.9%, sole Respiratory and Head Protection CGU). Equivalent
pre-tax rates were 14.2% and 14.9% (2022: 14.3%). Post-tax discount rates were
derived by external experts taking into consideration current market
conditions.
The Group's Board-approved five-year plan includes management's estimate of
revenue, gross margin and other financial assumptions that will be achieved
under the new STAR strategy. These consolidate risk-adjusted granular
forecasts for individual products or initiatives that consider market
opportunities, execution risk, past experience and other relevant factors.
The Group has assessed the potential impact of climate change for the next
five years to be low, and have therefore not included climate related impacts
in the value in use calculation. Beyond 2028 although there are potential
costs associated with climate change, these are balanced with significant
opportunity for increased demand for protective products in a changing global
security environment. Given this balanced view no climate related risk
adjustments have been made to long-term projections beyond five years.
Head Protection CGU
The recoverable amount of the Head Protection CGU of $182.1 million,
determined based on value in use calculations, is less than the carrying
amount of the associated CGU net assets and has therefore resulted in an
impairment to goodwill of $23.4 million.
An impairment has arisen due to a Head Protection level CGU test being
performed for the first time which includes all goodwill associated with the
2020 Ceradyne acquisition of $28.0 million and 2021 Team Wendy acquisition of
$58.3 million. In 2021, goodwill related to the Ceradyne acquisition was
allocated in full to the sole Respiratory and Head protection operating
segment, and as such was unaffected by the 2021 armour-related impairments. In
2022, the decision to present Armour as a separate operating segment was
taken, with nil goodwill value allocated to the Armour segment. This was based
on a relative value approach, which attributed no value to Armour given
trading losses forecast to closure.
The exclusion of cash flows considered expansionary, which form a part of the
Group's long-term forecasts, have also contributed to the impairment.
The calculation of the recoverable amount for the Head Protection CGU is
highly sensitive to small changes in key assumptions, considered to be revenue
growth, gross profit margins, the discount rate and the perpetuity growth
rate. The Group has carried out sensitivity analysis on the Head Protection
CGU impairment test, using reasonably plausible scenarios focused on changes
to key assumptions applied in the value in use calculations. The table below
provides the expected revenue and gross margin growth rates included in the
calculation. Annual growth is expected to be higher in earlier years of the
five-year plan.
Annual growth in revenue from 2024/25 to 2027/28 5 to 18%
Annual growth in gross margin from 2024/25 to 2027/28 8 to 31%
If the compound annual revenue growth rate over the first five years of the
forecast was reduced by 1.0%, with the impact on the fifth year extrapolated
in calculating terminal value, the impairment to Head Protection CGU goodwill
would be increased by $22.0 million. There are many revenue assumptions which
are included in the forecast, with the impact a 1.0% change in revenue growth
rate disclosed. Small changes in other aspects of the revenue assumptions
would have material impact on the value in use which we have not disclosed. A
1.0% change in the revenue growth rate demonstrates the significant impact on
a wide range of these revenue assumptions.
Sensitivity to other key assumptions is as follows:
Increase to Head
CGU impairment
$m
Gross margin for all products reduced by 1.0% 13.8
Post-tax discount rate increased by 0.5% 9.5
Perpetuity growth rate reduced by 0.5% 6.3
Respiratory Protection CGU
Value in use for the Respiratory Protection CGU is substantially greater than
it's carrying amount. Sensitivity analysis has been performed which shows
there are no reasonable changes in assumptions that would result in an
impairment to goodwill and other net assets associated with the Respiratory
Protection CGU.
Impairment review of development costs
Development assets are grouped into the smallest identifiable group of assets
generating future cash flows largely independent from other assets, known as
cash-generating units (CGU). Included in CGUs are development expenditure,
tangible assets and inventory related to the product group. CGUs are tested
for impairment annually and whenever there is an indication of impairment. The
CGUs have been tested against their recoverable amount deemed to be their
value in use. Cash flows were discounted using a post-tax rate of 10.9% (2022:
9.9%). Equivalent pre-tax rates were 14.9% (2022: 14.3%). Cash flows were
adjusted to incorporate risks specific to each CGU. Sensitivity analysis
demonstrated any reasonably possible change in discount rate to incorporate an
uplift to the size premium for smaller CGUs would not result in any additional
impairments.
As a result of the review the following impairment charges were identified.
Following the impairment charges recognised, recoverable amounts were equal to
carrying amounts.
Current period:
· Assets relating to one of the products in the Group's escape hood
range fully exceptionally impaired by $0.5 million due to its discontinuation
($0.2 million development expenditure, $0.3 million plant and machinery).
Prior period:
· General Service Respirator (GSR) fully exceptionally impaired by $2.9
million due to a change made on costing assumptions and forecast cash flow
periods, driven by changes in market factors ($0.7 million development
expenditure, $2.2 million plant and machinery).
· Other respiratory asset development expenditure impaired by $1.1
million due to a change in expected forecast cash flows and market factors.
$0.7 million of these impairments were considered exceptional.
· Armour-specific development expenditure impaired by $0.2 million for
a small number of reclassified assets.
Development costs include $1.2 million relating to the boots and gloves
product range, which was awarded an NSPA framework contract during the period.
Given reliance on forecast future NSPA revenues and other upcoming commercial
opportunities impairment sensitivity for the boots and gloves CGU has been
disclosed. The carrying amount of the CGU includes attributable fixed assets
and inventory. Given the need to secure profitable future orders the changes
in revenue and gross margin to the breakeven position disclosed in the table
below are considered reasonably possible. A further reduction of 50% in
forecast revenues would lead to an impairment of $1.1m and a 1500bps reduction
in gross margin would lead to an impairment of $0.7m.
Individual assumptions required for the estimated recoverable amount to equal
to the carrying amount
Carrying amount Value in use Post-tax discount Forecast revenue Change in
$m $m rate reduction gross margin
Boots and gloves CGU 3.0 5.7 27.0% (35.0%) (1200bps)
At the period end $2.6 million of development costs relate to technology under
development (2022: $12.2 million), including $2.6 million relating to ACH GEN
II First Article Testing approval (2022: $1.5 million). Formal ACH GEN II
First Article Testing approval was received post period end.
4.1 Cash flows from operations
2023 2022
$m (restated)(1)
$m
Continuing operations
(Loss)/profit for the period (16.4) 5.7
Taxation (3.8) 0.3
Depreciation 9.2 9.1
Amortisation of intangible assets 11.6 12.7
Loss on disposal (excluding Armour sale transaction) 0.3 -
Restructuring-related impairment of non-current assets 0.7 0.4
Impairment of other non-current assets (excluding restructuring-related 0.5 4.0
impairments)
Impairment of goodwill 23.4 -
Defined benefit pension scheme cost 1.0 0.8
Net finance costs 7.6 5.0
Fair value of share-based payments 0.7 1.0
Transition costs expensed 1.5 -
Restructuring costs expensed 1.4 1.6
(Increase)/decrease in inventories (6.8) 1.7
(Increase)/decrease in receivables (26.2) 13.2
(Decrease)/increase in payables and provisions (2.2) 3.2
Cash flows from continuing operations before restructuring and transition 2.5 58.7
costs
Restructuring and transition costs paid (2.3) (1.0)
Cash flows from continuing operations 0.2 57.7
Discontinued operations
Profit/(loss) for the period 2.0 (13.3)
Taxation 0.3 (3.8)
Impairments 0.6 0.2
Net finance costs 0.2 1.4
Change in contingent consideration - (3.9)
Gain on disposal before tax (9.1) -
Decrease/(increase) in inventories 16.7 (6.6)
Increase in receivables (1.3) (1.4)
(Decrease)/increase in payables and provisions (6.2) 3.2
Cash flows from discontinued operations 3.2 (24.2)
Cash flows from operations 3.4 33.5
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect the discontinuation of the Armour business.
4.2 Borrowings
2023 2022
$m $m
Current
Lease liabilities 4.3 4.1
Non-current
Bank loans 77.7 53.7
Lease liabilities 16.6 19.7
94.3 73.4
Total Group borrowings 98.6 77.5
Bank loans comprise drawings under the revolving credit facility.
The Group has the following undrawn committed facilities:
2023 2022
$m $m
Expiring beyond one year
Total undrawn committed borrowing facilities 127.3 151.3
Bank loans and overdrafts utilised 77.7 53.7
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.
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.
4.3 Net finance costs
2023 2022
(restated) (1)
$m $m
Interest payable on bank loans and overdrafts (6.3) (2.5)
Interest payable in respect of leases (0.7) (0.7)
Amortisation of finance fees (0.6) (0.5)
Net interest cost: U.K. defined benefit pension scheme (0.4) (1.3)
Other finance income 0.4 -
Net finance costs (7.6) (5.0)
1 Comparatives for the 52 weeks ended 1 October 2022 have been restated to
reflect the discontinuation of the Armour business.
Other finance income comprises $0.1 million finance lease interest and $0.3
million bank interest on cash balances.
4.4 Analysis of net cash/(debt)
At Cash flow Non-cash Exchange At
1 October $m movements movements 30 September
2022 $m $m 2023
$m $m
Cash and cash equivalents 9.5 3.7 - - 13.2
Bank loans (53.7) (24.0) - - (77.7)
Net debt excluding lease liabilities (44.2) (20.3) - - (64.5)
Lease liabilities (23.8) 5.1 (1.5) (0.7) (20.9)
Net debt (68.0) (15.2) (1.5) (0.7) (85.4)
At Cash flow Non-cash Exchange At
2 October $m movements movements 1 October
2021 $m $m 2022
$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)
Cash flows against lease liabilities were as follows:
2023 2022
$m $m
Repayment of lease liability - continuing operations 3.5 3.2
Finance costs paid in respect of leases - continuing operations 0.7 0.7
Lease cash flows related to discontinued operations 0.9 1.2
Total lease cash flows 5.1 5.1
4.5 Dividends
On 27 January 2023, the shareholders approved a final dividend of 30.6c per
qualifying ordinary share in respect of the 52 weeks ended 1 October 2022.
This was paid on 10 March 2023 utilising $9.1 million of shareholders' funds.
The Board of Directors declared an interim dividend of 14.3c (2022: 14.3c) per
qualifying ordinary share in respect of the 52 weeks ended 30 September 2023.
This was paid on 8 September 2023 utilising $4.3 million (2022: $4.3 million)
of shareholders' funds.
The Board is recommending a final dividend of 15.3c per share (2022: 30.6c)
which together with the 14.3c interim dividend gives a total dividend of 29.6c
(2022: 44.9c). The final dividend will be paid on 8 March 2024 to shareholders
on the register at 9 February 2024 with an ex-dividend date of 8 February
2024.
5.1 Restatements
Prior period comparatives have been restated to present the Armour business as
a discontinued operation, and to reclassify certain expenses in the
Consolidated Statement of Comprehensive Income.
Expense reclassifications include disclosure of research and development costs
as a separate line item below gross profit, and recategorisation of selling
and distribution costs. The 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. Selling and distribution costs have been disaggregated into sales and
marketing expenses, presented in a separate line below gross profit, and
freight and distribution costs which have been reclassified into cost of
sales.
This presentation reflects the way the business performance will be monitored
in future, with separate disclosure of research and development appropriate as
an integral part of operations. It is also consistent and comparable with
common market practice and therefore provides reliable and more relevant
information to the reader. Overall operating loss figures for the previous
period remain unchanged as this is only a presentational restatement. A
reconciliation of reported prior period to restated figures is presented
below. Equivalent reconciliations for restatement of adjusted performance
metrics are provided in APMs note 13.
Consolidated Statement of Comprehensive Income for the 52 weeks ended 1
October 2022
Statutory total
Continuing operations Previously Remove Research and Selling and Restated
reported Armour development distribution $m
$m $m $m $m
Revenue 271.9 (8.4) - - 263.5
Cost of sales (193.7) 20.1 8.8 (9.8) (174.6)
Gross profit 78.2 11.7 8.8 (9.8) 88.9
Selling and distribution costs / Sales and marketing expenses (26.0) 1.2 - 9.8 (15.0)
Research and development costs - - (10.2) - (10.2)
General and administrative expenses (54.3) 0.2 1.4 - (52.7)
Operating profit (2.1) 13.1 - - 11.0
Net finance costs (6.4) 1.4 - - (5.0)
Profit before tax (8.5) 14.5 - - 6.0
Armour discontinued operations (note 2.2)
Armour
Previously Research and Selling and Restated
reported development distribution $m
$m $m $m
Revenue 8.4 - - 8.4
Cost of sales (20.1) - (1.2) (21.3)
Gross profit (11.7) - (1.2) (12.9)
Selling and distribution costs / Sales and marketing expenses (1.2) - 1.2 -
Research and development costs - (0.2) - (0.2)
General and administrative expenses (including release of contingent (0.2) 0.2 - -
consideration)
Operating profit/(loss) (13.1) - - (13.1)
Net finance costs (1.4) - - (1.4)
Profit before tax (14.5) - - (14.5)
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