TIDMAVON
RNS Number : 5199M
Avon Protection PLC
24 May 2022
AVON PROTECTION PLC
INTERIM RESULTS FOR THE HALF YEARED 2 APRIL 2022
AND BOARD UPDATE
Board Update
Bruce Thompson, Chair: "Today, we are announcing that, after 5
years as CEO and 19 years with the company, Paul McDonald will be
stepping down as CEO at the end of this financial year. Beyond this
date, he has agreed to make himself available to support the
transition to a new CEO.
Paul has been instrumental in the transformation of Avon
Protection into a world leader in respiratory and head protection
technology, and I am grateful for his dedication and commitment
during his tenure. A search will be initiated to identify a
successor with the skill set to manage the complex challenges and
opportunities ahead and deliver value for all stakeholders, and the
Board will update the market at the appropriate time."
Interim Results
ADDRESSING CHALLENGES, OPPORTUNITIES AHEAD
Paul McDonald, Chief Executive Officer:
"The first six months of FY22 has seen both challenge and
opportunity for the Group.
While we have experienced some specific issues impacting
profitability, they have been identified. We are working
proactively to address them.
The requirement for our world-leading, high-tech products has
never been stronger. Our global customers are adjusting to the
structurally higher threat environment and, against this backdrop,
we remain confident in a return to growth."
02 April 03 April Organic Change
2022 2021 (restated) (constant currency)(5)
(3, 6)
-------------------------------------------- --------- ----------------- ------------------------
Respiratory and Head Protection
(2)
Orders received $113.6m $167.9m (33.8%)
Closing order book $110.7m $131.5m (15.3%)
Revenue $119.4m $118.1m (1.1%)
Adjusted(1) EBITDA $12.5m $22.5m (47.6%)
Adjusted(1) operating profit $5.1m $16.8m (72.6%)
Adjusted(1) profit before tax $3.6m $15.5m (80.0%)
Adjusted(1) basic earnings per share 9.1c 40.1c (80.6%)
Armor (2)
Revenue $2.5m $3.9m (35.9%)
Adjusted(1) operating loss ($6.3m) ($4.3m) (46.5%)
Adjusted(1) loss before tax ($6.4m) ($4.5m) (42.2%)
Group
Interim dividend per share 14.3c 14.3c -
Net debt excluding lease liabilities $56.6m $12.9m 338.8%
Statutory results
Revenue $121.9m $122.0m
Operating (loss)/profit(4) from continuing
operations ($10.7m) $3.4m
(Loss)/profit before tax from continuing
operations ($13.6m) $0.4m
Basic (losses) / earnings per share
from continuing operations (34.9c) 1.6c
Net debt $83.3m $44.1m
-------------------------------------------- --------- ----------------- ------------------------
Strategic and operational headlines
-- Solid order intake of $113.6m in the first half, a reduction
as expected against the strong prior year comparable, and with
continued delays in U.S. DOD ordering
-- Active engagement with European and North American customers
following the start of hostilities in Ukraine
o We expect to see a significant shift in demand in the short,
medium and longer term
-- Next-generation Integrated Head Protection System (IHPS NG)
helmet submitted for first article testing in March
-- Award of second-generation Advanced Combat Helmet (ACH GEN II) contract for the U.S. DOD
-- Corrective actions underway to address identified operational challenges
o Improved forward ordering to anticipate future demand, now
possible in higher demand environment
o Implementation of the announced $15m overhead reduction
programme on track and additional $6m reduction now planned
Financial headlines
-- Revenue broadly flat - despite headwinds of delayed U.S.
Budget approval and delayed expenditure in U.S. first responder
market
-- Adjusted EBITDA margin of 10.5%, down 860bps, reflecting a
combination (in broadly equal proportions) of product mix shift and
operational challenges, including supply chain issues
-- Leverage of 2.6x EBITDA (on a bank covenant basis), under the 3.0x covenant
o Leverage expected to reduce as receipts build and profit
recovers
o Half of the announced GBP18.5m buy-back now completed, second
half on hold to enable further organic investment to meet elevated
demand levels and to allow for leverage stability
-- Dividend of 14.3 cents per share reflects confidence in the
medium and long-term prospects of the Group
Outlook
FY22
-- Opening order book of $111m provides good visibility into H2
-- A very strong macro demand environment drives medium-term
confidence, but volatility of funding and timing of customer orders
gives rise to risk to the H2 outlook on revenue mix
-- Revenue mix risk flows into margin expectations for the remainder of the current year
-- The work we have done in the last 2-3 months to protect
ourselves against extended supply chain delivery times, leaves us
in good stead to capitalise on the revenue opportunities as orders
flow
-- Additional near-term action to reduce overhead costs by $6m
(on an annualised basis), combined with the savings that will be
delivered in H2 from the already established $15m savings
programme, will mitigate some of the inefficiencies that impacted
H1
-- Effects of inflation are expected to present a headwind
-- Expect EBITDA margin improvement H2-on-H1, with the scale of
improvement dependent on orders yet to be won
-- Working capital and capex continue to be tightly managed
FY23 and beyond
-- Fundamental shift in the European threat environment requiring higher military spending
-- We have a significant opportunity given the expansion of demand
-- We have confidence in delivering growth into the medium and long-term
Notes:
(1) The Directors believe that adjusted measures provide a
useful comparison of business trends and performance. Adjusted
results exclude exceptional items and discontinued operations. The
term adjusted is not defined under IFRS and may not be comparable
with similarly titled measures used by other companies.
(2) For more information regarding segmental reporting and
detailed Armor performance refer to note 2.2.
(3) The comparatives for the half year to 03 April 2021 have
been restated to reflect reclassification and phasing adjustments
between H1 and H2 in the prior year as disclosed in note 5.6.
(4) Reported operating loss includes $3.5m amortisation of
acquired intangibles, $3.8m impairment of non-current assets, $1.4m
restructuring costs and $0.8m transaction costs. See note 2.1 for
full breakdown of adjustments and comparatives.
(5) Organic constant currency measures are provided in note
2.1.
(6) The Group previously reported that the reporting date for
the comparable period was the 31 March 2021 and for the latest
annual financial statements was 30 September 2021, being the
Company's accounting reference date. The actual date to which the
financial statements were drawn up was 03 April 2021 and 02 October
2021 respectively and therefore the headings in the interim
financial statements have been amended accordingly. This has no
impact on previously reported numbers.
For further enquiries, please contact:
Avon Protection p.l.c.
Paul McDonald, Chief Executive Officer +44 1225 896 848
Rich Cashin, Chief Financial Officer
Rachel Stevens, Director of Investor Relations
MHP Communications
Andrew Jaques +44 7834 623 818
Charlie Barker +44 7710 032 657
Peter Lambie avonprotection@mhpc.com
Analyst and investor webcast
Paul McDonald, Chief Executive Officer and Rich Cashin, Chief
Financial Officer, will host a presentation for analysts and
investors at 9.00am this morning, at Storey Club - 100 Liverpool
Street, EC2M 2AT. The presentation will also be broadcast live at:
https://webcasting.brrmedia.co.uk/broadcast/623b00125929033805715060
A copy of the presentation for the webcast will be uploaded to
www.avon-protection-plc.com at 8:30am this morning.
Legal Entity Identifier: 213800JM1AN62REBWA71
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation ("MAR") EU no.596/2014. Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
Note to editors:
Avon Protection designs and produces life-critical personal
protection solutions for the world's militaries and first
responders. With a portfolio that includes Chemical, Biological,
Radiological, Nuclear ("CBRN"), respiratory and head protection
products, our mission is to enhance the performance, efficiency and
capability of our customers whilst providing ever increasing levels
of protection.
Avon Protection operates from 6 sites employing approximately
1,000 people and is listed on the London Stock Exchange (LSE:
AVON).
For further information, please visit our website
www.avon-protection-plc.com .
CHIEF EXECUTIVE OFFICER'S REVIEW
The first six months of FY22 has seen both challenge and
opportunity through the period.
-- Respiratory business continues to make good progress
benefiting from deliveries to NSPA customers
-- Good progress in developing the helmets business
o IHPS NG helmet submitted for first article testing in
March
o Award of U.S. DOD ACH GEN II contract in February
o In-sourcing of helmet shells for legacy Team Wendy
products
-- Integration of our helmet design and manufacturing capability, with synergies to follow
-- A review of the armor business in late calendar year 2021 led
to the decision to wind it down, as announced in December,
following the test failure of the vital torso protection body armor
product.
-- Delayed revenues, particularly from the U.S. DOD, combined
with operational issues, resulting in lower profit margin than
originally expected
-- We are undertaking cost-reduction actions to right-size our
overheads, which are progressing to plan
-- Following the events in Ukraine, there has been a significant
increase in expression of interest in our products. We continue to
work proactively and at pace with our customers to confirm orders
and maximise the utilisation of our facilities.
A robust core business
Over the last twenty years, Avon Protection has established a
position as the sole-source provider to the U.S. DOD for
general-purpose respirators, tactical forces respirators,
powered-air purifying respirators, tactical self-contained
breathing apparatus, and the M53A1 tactical mask. We have a
long-standing relationship with the U.K. MOD, and, in October 2020,
were awarded the NATO Support and Procurement Agency contract in
relation to our full respiratory range. The importance of these
long-term partnerships has come to the fore in recent months as the
risk environment has increased and we are in detailed and active
engagement with our customers as they decide how to co-ordinate
their response to the Ukraine crisis.
Over the past two years, the acquisitions of 3M's ballistic
protection business and Team Wendy have added head protection to
our portfolio, combining world-leading technology in helmet shells
and protective inserts. The combination of the two has positioned
Avon Protection as the leading helmet provider to the U.S. DOD.
Our longer-term strategy aspirations are to sell a wider range
of both respirators and helmets to our global customer base. During
this period, we have taken further steps to integrate these two
businesses, resulting in a more streamlined organisation with
significant opportunities for realising commercial synergies that
will drive longer term value creation for the Group.
Additional programme wins
Following the IHPS NG contract won in 2021, our product entered
first article testing in March 2022, as planned, and manufacturing
will commence on receipt of approval.
The award of the ACH GEN II contract in February 2022 is a
demonstration of the strength of our helmets business. The ACH GEN
II contract with the U.S. DLA is for a maximum of $204m over five
years. It is a sole-source contract with a second smaller tranche
expected to be awarded at a later date, effectively resulting in a
dual-source arrangement for the DLA. Our ACH GEN II helmet will be
submitted for first article testing in FY23 with initial revenue
expected in FY24.
When IHPS NG and ACH GEN II enter service life with the U.S.
DOD, this will position Avon Protection as the leading helmet
supplier to the U.S. DOD and confirms the synergies of bringing the
two helmet brands together.
In addition to the above, we continue to make progress with our
MCM100 underwater rebreather, with further orders received in
Europe.
Delivering for our customers
The events in Ukraine have elevated the priority of national
security awareness throughout Europe, resulting in a higher demand
environment. These opportunities can be seen as three distinct
phases:
(1) Immediate support. Numerous countries are looking to procure
and donate military product for Ukraine. While we carry limited
unallocated stocks, we have sold some product on this basis
(2) Short-term response. Attention has focused on the quality
and quantity of equipment held by our customers, who are now
looking to increase inventories and improve preparedness. We have
seen a growing level of enquiries and are seeing increased
short-term funding aligned to these orders and requests.
(3) Longer term response . The European NATO border with Russia
is likely to become more militarised, driving demand for personal
protective equipment into the medium and long-term . This will
likely result in upgrade programmes across NATO for which we are
well positioned.
In light of these drivers for growth, the sole-source framework
respirator contract with the NATO Support & Procurement Agency,
which allows NATO and associate members to order from our portfolio
of respiratory products under standard pre-negotiated terms, is an
important route to market for us. The benefits of this contract are
ever-more evident in the current environment where ease of ordering
is paramount in a fast-moving situation. We are engaged with seven
NATO / NATO associate countries on this basis and in active
dialogue with three more.
Responding to challenges
The extended delay in the sign-off of the U.S. federal budget,
has impacted our customers dependent on federal funding, notably
the U.S. DOD and our U.S. first responder customers. The absence of
an agreed budget has resulted in orders being delayed, with
consequences both for our order receipts and revenue mix.
Profit margin in the half year was impacted by a combination of
identified and addressable issues, with the shortfall falling due
to two impacts in broadly even amounts, being (1) adverse product
mix, and (2) inefficiencies due to process and supply-chain issues.
The adverse product mix was due to lower sales of higher margin
products, particularly first responder products which are typically
our highest margin business as well as fewer high-value product
systems to the U.S. DOD. This should gradually reverse in H2, given
the strength of demand, in part dependent on further orders that
are expected to be received in Q3. We will utilise our capacity
with higher margin products, and hence expect to revert to more
normalised mix of product in this period. The inefficiencies we
have seen are a result of a combination of process issues arising
from lower utilisation, particularly in helmets, exacerbated by
supply chain challenges. We are addressing the supply chain
challenges by improving our forward ordering to anticipate future
orders, which is now possible in this high demand environment. We
are now planning further cost savings of $6m to limit margin
downside, which will reach this run-rate by the end of FY22.
We are on track to achieve our target overhead reduction of
$15m. This is broadly evenly split between overheads relating to
armor (which will cease when that business is closed) and those
relating to the on-going business, which had increased in
anticipation of the increased size of business. Approximately half
the savings in the continuing business are now realised and the
remainder by the end of this financial year. This, combined with
the additional $6m savings announced today, will allow the business
to rebalance revenue and costs over the medium-term to improve
profitability and margin.
Our people
Our people are at the heart of everything we do. The recent
reorganisation to integrate the two helmet businesses and
streamline the Group has involved difficult choices. We are
grateful to our colleagues for their ongoing commitment as we have
aligned the business for future growth.
FINANCIAL REVIEW
Unless otherwise stated, figures and commentary relate to
continuing operations and exclude armor.
INCOME STATEMENT
Orders received in the period were $113.6m (HY21: $167.9m), down
period-on-period principally due to lower U.S. DOD orders and also
due to strong orders in the prior year, at the outset of the NSPA
contract in October 2020. Accordingly, the closing order book of
$110.7m (HY21: $131.5m) reflects a 15.8% decrease on last half
year.
Revenue
02 April 2022
Sub-total
Head Protection Avon Protection
Respiratory $m $m Armor Total
$m $m $m
-----------
U.S. DOD 24.0 19.5 43.5 2.5 46.0
Commercial Americas 17.7 13.0 30.7 - 30.7
U.K. & International 41.1 4.1 45.2 - 45.2
-----------
Total 82.8 36.6 119.4 2.5 121.9
---------------------- ---------------- ------------------ -------- -----------
03 April 2021(1)
Sub-total
Head Protection Avon Protection
Respiratory $m $m Armor Total
$m $m $m
U.S. DOD 48.4 16.0 64.4 3.9 68.3
Commercial Americas 18.7 9.3 28.0 - 28.0
U.K. & International 18.2 7.5 25.7 - 25.7
Total 85.3 32.8 118.1 3.9 122.0
---------------------- ---------------- ------------------ -------- ----------
(1) Following a re-organisation and further integration of Team
Wendy, we are classifying revenue into U.S. DOD (comprising all
U.S. military revenue), Commercial Americas (which includes U.S.
first responder plus all revenue from other parts of the Americas,
including Team Wendy), and U.K. and International (comprising all
revenue outside North and South America). Prior year figures have
been re-classified to be presented on a consistent basis to current
year classifications.
Having started the year with a record order book, revenue was
broadly as expected, with growth of 1.1% to $119.4m (HY21:
$118.1m), a decrease of 1.1% on a constant currency basis,
excluding the contribution of one additional month versus the
comparable period, from Team Wendy.
U.S. DOD revenue of $43.5m (HY21: $64.4m) was 32.5% lower versus
last half year, with order delays and ongoing supply chain
challenges in sourcing key components (notably electronics and
fabrics) causing lower than expected product deliveries in the
earlier part of the period. We nevertheless continue to see the
benefit of the large installed base of two million M50 masks with
strong associated revenue from filters, spares and accessories,
alongside continued deliveries of the M53A1 and M69 masks. In head
protection, our contract for first-generation IHPS helmets is now
largely complete, with the follow-on NG IHPS expected to start this
calendar year.
Commercial Americas revenue of $30.7m increased c. 10%
year-on-year, principally reflecting the additional month of Team
Wendy ownership and success with the helmets portfolio, partially
offset by declines in respiratory sales. We have raised prices on
our commercial portfolio both in October 2021 and in March 2022,
reflecting rising input costs.
U.K. and International revenue of $45.2m grew 75.9% compared to
$25.7m in the first half for 2021, as the NSPA contract continued
to expand, with orders delivered to five countries in the half year
period. We are building our sales and marketing capability in this
region in order to more fully capitalise on the market opportunity
from our world-leading products.
Adjusted EBITDA of $12.5m is down 47.6% versus last half year on
an organic constant-currency basis. The adjusted EBITDA margin of
10.5%, (HY21: 19.1%), reflects the impact of adverse product mix
combined with negative process and supply chain issues, described
above. Compared to the prior half year, overheads increased,
principally due to rising employee costs and sea freight rates. The
inflationary effect seen on freight costs will persist through the
balance of the year, and we expect other cost lines in the P&L
to be impacted as inflation levels in our key operating markets
increase.
Adjusted operating profit decreased by 72.6% on an organic
constant-currency basis, to $5.1m (HY21: $16.8m) reflecting the
drop-through effect of the lower EBITDA combined with a higher
depreciation and amortisation charge than the prior year,
reflective of greater investment in the business over the prior
years.
After an adjusted tax charge of $0.8m (HY21: $3.2m), the Group
recorded an adjusted profit after tax for the period of $2.8m
(HY21: $12.3m).
Adjusted basic earnings per share decreased by 80.6% on an
organic constant-currency basis to 9.1c (HY21: 40.1c).
Armor business
In December 2021 we announced that the armor business would be
wound down, fulfilling existing contracts and then closed. The
Board reached this decision following a series of events including
the test failure of a key body armor product, which led to the
conclusion that this was the best decision for stakeholders. We are
taking actions to reduce overheads and will wind the business down
once contracts are complete, expected to take c. 18 months. The
armor order book relates to the DLA ESAPI product; we are in the
final stages of formal first-article test approval and revenue will
commence once this is received.
Respiratory
HY22 Armor & Head protection Total
Adjusted continuing operations $m $m $m
---------------------------------- ------- ------------------- ------
Orders received 0.3 113.6 113.9
Closing order book 24.4 110.7 135.1
Revenue 2.5 119.4 121.9
Adjusted EBITDA (6.3) 12.5 6.2
Adjusted EBITDA margin (252%) 10.4% 5.1%
Adjusted operating profit/(loss) (6.3) 5.1 (1.2)
---------------------------------- ------- ------------------- ------
On a reported continuing basis, statutory operating loss was
$10.7m (HY21: profit of $3.4m), reflecting an operating loss from
armor of $7.3m and a loss of $3.4m from the respiratory and head
protection operations after adjusting items of $9.5m.
The adjusting items (detailed in note 2.1) principally comprise
the amortisation of acquired intangibles ($3.5m) and an impairment
of non-current assets ($3.8m). The majority of the impairment
losses ($2.9m) relate to the General Service Respirator (GSR) with
the balance relating to other respiratory assets ($0.7m) and
reclassified armor development ($0.2m). Impairment losses resulted
from changes in assumptions for future recoverable amounts and as
such they are considered unrelated to 2022 trading performance
(further details available in note 3.1).
Loss before tax was $13.6m (HY21: profit of $0.4m) and, after a
tax credit of $2.9m (HY21: credit of $0.1m), loss for the period
was $10.7m (HY21: profit of $0.5m). Basic losses per share were
(34.9c) (HY21: earnings per share of 1.6c).
RESEARCH & DEVELOPMENT
In line with our strategy, we continue to invest in the next
generation of products and our total investment in research and
development (capitalised and expensed) amounted to $5.3m (HY21:
$10.5m), with the reduction reflecting a more focused investment
strategy. The figures below include armor, of which there was no
capitalised expenditure in HY22 and $2.6m in HY21.
26 weeks 27 weeks
to to
02 April 03 April
2022 2021
-------------------------------------------- ---------- ----------
Total research and development expenditure $5.3m $10.5m
Less customer funded ($0.7m) ($0.9m)
-------------------------------------------- ---------- ----------
Group expenditure $4.6m $9.6m
Capitalised ($2.7m) ($9.0m)
-------------------------------------------- ---------- ----------
Income statement impact $1.9m $0.6m
Amortisation and impairment of development
expenditure $3.7m $2.0m
Total income statement impact $5.6m $2.6m
-------------------------------------------- ---------- ----------
Revenue $121.9m $122.0m
R&D spend as % of revenue 4.3% 8.6%
-------------------------------------------- ---------- ----------
CASH FLOW AND NET DEBT (1)
26 weeks 27 weeks
to 02 April to 03 April
2022 2021 (restated)(3)
$m
$m
--------------------------------------------------------- ------------- --------------------
Adjusted continuing EBITDA 6.2 19.1
Share-based payments and defined benefit pension
scheme costs 1.2 1.1
Working Capital (2.2) (7.1)
--------------------------------------------------------- ------------- --------------------
Cash flow from continuing operations before exceptional
items 5.2 13.1
--------------------------------------------------------- ------------- --------------------
Restructuring and acquisition costs paid (0.8) (4.4)
--------------------------------------------------------- ------------- --------------------
Cash flow from continuing operations 4.4 8.7
--------------------------------------------------------- ------------- --------------------
Cash flow from discontinued operations (0.6) (1.6)
--------------------------------------------------------- ------------- --------------------
Cash flow from operations 3.8 7.1
--------------------------------------------------------- ------------- --------------------
Finance costs (1.3) (0.5)
Payments to pension plan (2.6) -
Repayment of lease liability (2.1) (2.0)
Tax excluding capital gains tax on divestment(2) 0.6 (2.0)
Capital Expenditure (5.8) (14.7)
Acquisitions and divestments (3.2) (137.1)
Purchase of own shares - LTIP and share buyback (10.1) (4.3)
Dividends to shareholders (9.1) (7.7)
Foreign exchange - 0.6
--------------------------------------------------------- ------------- --------------------
Change in net debt (29.8) (160.6)
--------------------------------------------------------- ------------- --------------------
Opening net (debt)/cash, excluding lease liabilities (26.8) 147.7
--------------------------------------------------------- ------------- --------------------
Closing net debt, excluding lease liabilities (56.6) (12.9)
--------------------------------------------------------- ------------- --------------------
1 - For full Consolidated Cash Flow Statement under IFRS see
p.19
2 - Cash flow from divestments in the prior period are shown net
of $9.0 million capital gains tax paid. This is included in tax
paid in the Consolidated Cash Flow Statement.
3 - The comparatives for the half year to 03 April 2021 have
been restated to reflect reclassification and phasing adjustments
between H1 and H2 in the prior year as disclosed in note 5.6.
Cash flow from continuing operations before exceptional items
was $5.2m (HY21: $13.1m). Capital expenditure used in continuing
operations was $5.8m (HY21: $14.7m).
Dividends and purchases of own shares were $19.2m (HY21: $12.0m)
reflecting the final dividend and $10.1m (including costs) for the
share buy-back. Tax receipts were $0.6m, resulting from taxable
losses in previous periods.
Cash flow from continuing operations as a percentage of adjusted
continuing EBITDA of 83.9% reflected lower accounts receivable
offset by a build-up of inventory both in advance of second half
shipments but also to mitigate the impact of longer material lead
times. Net debt at the half year was $83.3m (FY21: $55.9m), which
includes lease liabilities of $26.7m (FY21: $29.1m). Excluding
lease liabilities, net debt was $56.6m (FY21 $26.8m). The increase
in net debt is principally due to shareholder returns from the
dividend and share buyback programme plus some continued build-up
of working capital and cash outflow relating to the armor
business.
Net pension liabilities at the half year were $28.7m, down 58.0%
since 02 October 2021 principally due to the change in liability
discount rate assumption, based on current rates. Based on the
deficit recovery plan agreed following the 31 March 2019 actuarial
valuation, the Group will make payments of $4.5m in FY22 and $4.7m
in FY23 in respect of deficit recovery plan payments and scheme
expenses. The next triennial valuation is now underway, based on
the balance at the half year end, and the outcome of the process is
expected in May 2023.
DIVIDS AND SHARE BUY-BACK
The Board has declared an interim dividend of 14.3c per ordinary
share (HY21: 14.3c) reflecting confidence in the medium and
long-term prospects of the Group. There remains a range of possible
out-turns for full year performance, and the annual dividend will
be determined after the full year closes. The interim dividend will
be paid on 2 September 2022 to shareholders on the register at
close of business on 5 August 2022. The dividend amount will be
converted into pounds sterling for payment at the prevailing
exchange rate prior to payment.
Having executed the first half of the share buy-back, announced
in January, the Board have decided to put the second half on hold
to enable further organic investment to meet elevated demand levels
and to ensure leverage stability
BOARD UPDATE
After 5 years as CEO and 19 years with the company, Paul will be
stepping down as CEO at the end of this financial year. Beyond this
date, he has agreed to make himself available to support the
transition to a new CEO. A search will be initiated to identify a
successor and the Board will update the market at the appropriate
time.
OUTLOOK
The opening order book of $111m provides good visibility into
H2. A very strong macro demand environment drives medium-term
confidence, but volatility of funding and timing of customer orders
gives rise to risk to the H2 outlook on revenue mix. In the
short-term, the situation remains dynamic and complex, such that
order visibility is reduced and consequently we are taking a more
cautious view. This revenue mix risk flows to margin expectations
for the remainder of the current year.
The work we have done in the last 2-3 months to protect
ourselves against extended supply chain lead times leaves us in
good stead to capitalise on the revenue opportunities as orders
flow.
We expect a benefit in H2 of c. $3-4m from the savings that will
be delivered from the already established $15m savings programme.
This will mitigate the costs of inefficiencies that impacted H1,
although effects of rising inflation are expected to present a
headwind through the second half. As a consequence of the cost
savings, we continue to expect EBITDA margin improvement H2-on-H1,
with the scale of this improvement dictated by orders yet to be
won. Working capital and capital expenditure will continue to be
tightly managed through the balance of the year.
The armor business will remain loss-making until revenues
commence on finalisation of testing on the DLA ESAPI product,
expected before the end of this financial year. As such, it will be
loss-making for the year as a whole.
In the medium-term, we have a significant opportunity given the
expansion of demand for our products. We are carefully considering
how to manage that demand in a disciplined way, to support our
customers while optimising returns.
Our world-leading products and solutions have a key role to play
in protecting service personnel in an increasingly unstable
environment, and we have confidence in delivering growth into the
medium and long-term.
Paul McDonald Rich Cashin
Chief Executive Officer Chief Financial Officer
23 May 2022 23 May 2022
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with
International Accounting Standard 34, 'Interim Financial Reporting'
as adopted by the United Kingdom, and that the interim management
report herein includes a true and fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed consolidated
interim financial information, and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
-- A true and fair view of the assets, liabilities, financial
position and profit or loss of the undertakings included in the
consolidation.
Miles Ingrey-Counter
Company Secretary
23 May 2022
FORWARD-LOOKING STATEMENTS
Certain statements in this half year report are forward --
looking. Although the Group believes that the expectations
reflected in these forward -- looking statements are reasonable, we
can give no assurance that these expectations will prove to have
been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those
expressed or implied by these forward -- looking statements.
We undertake no obligation to update any forward -- looking
statements whether as a result of new information, future events or
otherwise.
COMPANY WEBSITE
The half year report is available on the Company's website at
https://www.avon-protection-plc.com/ . 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.
INDEPENT REVIEW REPORT TO AVON PROTECTION PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half yearly financial report for the
26-week period ended 02 April 2022 which comprises the Consolidated
Statement of Comprehensive Income, Consolidated Balance Sheet,
Consolidated Cash Flow Statement, Consolidated Statement of Changes
in Equity and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half yearly financial report for the 26-week period ended 02
April 2022 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
U.K. and the Disclosure Guidance and Transparency Rules ("the DTR")
of the U.K.'s Financial Conduct Authority ("the U.K. FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (U.K. and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
U.K.. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the half
yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (U.K.) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Whilst the Company has previously produced a half yearly report
containing a condensed set of financial statements, those financial
statements have not previously been subject to a review by an
independent auditor. As a consequence, the review procedures set
out above have not been performed in respect of the comparative
period for the 27-week period ended 03 April 2021.
Directors' responsibilities
The half yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half yearly financial report in accordance with
the DTR of the U.K. FCA.
The latest annual financial statements of the group were
prepared in accordance with International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union and in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and the next annual financial statements will be
prepared in accordance with U.K.-adopted international accounting
standards. The directors are responsible for preparing the
condensed set of financial statements included in the half yearly
financial report in accordance with IAS 34 as adopted for use in
the U.K.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the U.K. FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Andrew Campbell-Orde
for and on behalf of KPMG LLP
Chartered Accountants
66 Queen Square
Bristol
BS1 4BE
23 May 2022
Consolidated Statement of Comprehensive Income for the 26 weeks
ended 02 April 2022
26 weeks to 02 April 27 weeks to 03 April
2022 2021
(restated) (1, 2)
Adjusted Adjustments Total Adjusted Adjustments Total
------------------------------
$m $m $m $m $m $m
------------------------------
Note (Note 2.1) (Note 2.1)
------------------------------ --------------- -------- ----------- ------ -------- ----------- ------
Continuing operations
Revenue 2.2 121.9 - 121.9 122.0 - 122.0
Cost of sales (87.6) - (87.6) (83.6) (2.4) (86.0)
-------------------------------- ------------- -------- ----------- ------ -------- ----------- ------
Gross profit 34.3 - 34.3 38.4 (2.4) 36.0
Selling and distribution
costs (12.8) - (12.8) (10.7) - (10.7)
General and administrative
expenses (22.7) (9.5) (32.2) (15.2) (6.7) (21.9)
-------------------------------- ------------- -------- ----------- ------ -------- ----------- ------
Operating (loss)/profit (1.2) (9.5) (10.7) 12.5 (9.1) 3.4
Finance costs 4.3 (1.6) (1.3) (2.9) (1.5) (1.5) (3.0)
------------- -------- ----------- ------
(Loss)/profit before taxation (2.8) (10.8) (13.6) 11.0 (10.6) 0.4
-------------------------------- ------------- -------- ----------- ------ -------- ----------- ------
Taxation 2.5 0.6 2.3 2.9 (2.3) 2.4 0.1
-------------------------------- ------------- -------- ----------- ------ -------- ----------- ------
(Loss)/profit for the period
from continuing operations (2.2) (8.5) (10.7) 8.7 (8.2) 0.5
Discontinued operations
Loss from discontinued
operations 2.3 - (1.2) (1.2) - (1.4) (1.4)
-------------------------------- ------------- -------- ----------- ------ -------- ----------- ------
Loss for the period (2.2) (9.7) (11.9) 8.7 (9.6) (0.9)
-------------------------------- ------------- -------- ----------- ------ -------- ----------- ------
(1) The comparatives for the 27 weeks to 03 April 2021 have been
restated to reflect reclassification and phasing adjustments
between H1 and H2 in the prior year as disclosed in note 5.6.
(2) The Group previously reported that the reporting date for
the comparable period was the 31 March 2021 and for the latest
annual financial statements was 30 September 2021, being the
Company's accounting reference date. The actual date to which the
financial statements were drawn up was 03 April 2021 and 02 October
2021 respectively and therefore the headings in the interim
financial statements have been amended accordingly. This has no
impact on previously reported numbers.
Consolidated Statement of Comprehensive Income for the 26 weeks
ended 02 April 2022 (Continued)
Note 26 weeks 27 weeks
to to
02 April 03 April
2022
2021
$m (restated)
(1, 2)
$m
Loss for the period (11.9) (0.9)
Other comprehensive income/(expense)
Items that are not subsequently reclassified
to the income statement
Remeasurement profit/(loss) recognised on
retirement benefit scheme 5.2 36.4 (9.0)
Deferred tax relating to retirement benefit
scheme (9.3) 1.8
Items that may be subsequently reclassified
to the income statement
Net exchange differences offset in reserves 0.4 2.4
----------------------------------------------------- ----- ----------- ------------
Other comprehensive income/(expense) for
the period 15.6 (4.8)
Total comprehensive income/(expense) for
the period 3.7 (5.7)
----------------------------------------------------- ----- ----------- ------------
Earnings per share (cents)
Basic (38.8c) (2.9c)
Diluted (38.5c) (2.9c)
Earnings per share from continuing operations
(cents)
Basic (34.9c) 1.6c
Diluted (34.6c) 1.6c
----------------------------------------------------- ----- ----------- ------------
Consolidated Balance Sheet
Note As at As at
02 April 02 Oct
2022 2021
$m $m (2)
Assets
Non-current assets
Intangible assets 3.1 175.9 181.0
Property, plant and equipment 3.2 43.7 48.6
Deferred tax assets 30.2 40.2
--------------------------------------------- ----- ----------- --------
249.8 269.8
Current assets
Inventories 73.0 62.3
Trade and other receivables 33.9 44.7
Current tax receivables 10.6 7.8
Cash and cash equivalents 12.6 14.1
--------------------------------------------- ----- ----------- --------
130.1 128.9
Liabilities
Current liabilities
Borrowings 4.1 4.1 4.0
Trade and other payables 41.3 40.0
Provisions for liabilities and charges 5.1 3.3 3.5
48.7 47.5
Net current assets 81.4 81.4
--------------------------------------------- ----- ----------- --------
Non-current liabilities
Borrowings 4.1 91.8 66.0
Deferred tax liabilities 6.1 6.1
Retirement benefit obligations 5.2 28.7 68.3
Provisions for liabilities and charges 5.1 2.9 5.4
--------------------------------------------- ----- ----------- --------
129.5 145.8
Net assets 201.7 205.4
--------------------------------------------- ----- ----------- --------
Shareholders' equity
Ordinary shares 4.4 50.3 50.3
Share premium account 4.4 54.3 54.3
Other reserves (14.6) (15.0)
Retained earnings 111.7 115.8
--------------------------------------------- ----- ----------- --------
Total equity 201.7 205.4
--------------------------------------------- ----- ----------- --------
Consolidated Cash Flow Statement
26 weeks 27 weeks
to to 03 April
02 April 2021
2022 (restated)(1,
2)
Note $m $m
--------------------------------------------------- ----- ------------ ----------------
Cash flow from operating activities
Cash flow from continuing operations 5.3 4.4 8.7
Cash flow used in discontinued operations 5.3 (0.6) (1.6)
--------------------------------------------------- ----- ------------ ----------------
Cash flow from operations 3.8 7.1
Retirement benefit deficit recovery contributions 5.2 (2.6) -
Tax receipts/(payments) 0.6 (11.0)
--------------------------------------------------- -----
Net cash flow from / (used in) operating
activities 1.8 (3.9)
--------------------------------------------------- ----- ------------ ----------------
Cash flow used in investing activities
Proceeds from disposal of discontinued operations - 3.4
Costs of divestment - (0.6)
Purchase of property, plant and equipment 3.2 (2.9) (2.1)
Capitalised development costs and computer
software 3.1 (2.9) (12.6)
Acquisition of business 5.5 (3.2) (130.9)
Net cash used in investing activities (9.0) (142.8)
--------------------------------------------------- ----- ------------ ----------------
Cash flow used in financing activities
Proceeds from loan drawdowns 4.2 33.9 11.0
Loan repayments 4.2 (5.6) (39.5)
Finance costs paid in respect of bank loans
and overdrafts 4.3 (0.8) (0.3)
Finance costs paid in respect of leases 4.3 (0.5) (0.2)
Repayment of lease liability (2.1) (2.0)
Dividends paid to shareholders 4.5 (9.1) (7.7)
Purchase of own shares - Long-term incentive
plan 4.4 - (4.3)
Purchase of own shares - Share buyback programme 4.4 (10.1) -
Net cash from / (used in) financing activities 5.7 (43.0)
--------------------------------------------------- ----- ------------ ----------------
Net decrease in cash, cash equivalents and
bank overdrafts (1.5) (189.7)
Cash, cash equivalents, and bank overdrafts
at beginning of the period 14.1 187.2
Effects of exchange rate changes - 0.6
--------------------------------------------------- -----
Cash, cash equivalents and bank overdrafts
at end of the period 12.6 (1.9)
--------------------------------------------------- ----- ------------ ----------------
(1) The comparatives for the 27 weeks to 03 April 2021 have been
restated to reflect reclassification and phasing adjustments
between H1 and H2 in the prior year as disclosed in note 5.6.
(2) The Group previously reported that the reporting date for
the comparable period was the 31 March 2021 and for the latest
annual financial statements was 30 September 2021, being the
Company's accounting reference date. The actual date to which the
financial statements were drawn up was 03 April 2021 and 02 October
2021 respectively and therefore the headings in the interim
financial statements have been amended accordingly. This has no
impact on previously reported numbers .
Consolidated Statement of Changes in Equity
Note Share Share Other Retained Total
capital premium reserves earnings equity
(restated) (restated)
(1) (1)
$m $m $m $m $m
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
At 26 September 2020 50.3 54.3 (15.6) 140.5 229.5
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
Loss for the period (restated)
(1) - - - (0.9) (0.9)
Net exchange differences offset
in reserves - - 2.4 - 2.4
Actuarial loss recognised on retirement
benefit
scheme - - - (9.0) (9.0)
Deferred tax relating to retirement
benefit scheme - - - 1.8 1.8
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
Total comprehensive income for
the period (restated) (1) - - 2.4 (8.1) (5.7)
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
Dividends paid 4.5 - - - (7.7) (7.7)
Deferred tax relating to employee
share scheme - - - (1.8) (1.8)
Own shares acquired - Long-term
incentive plan 4.4 - - - (4.3) (4.3)
Fair value of share-based payments - - - 0.7 0.7
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
At 03 April 2021 (restated) (1) 50.3 54.3 (13.2) 119.3 210.7
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
Loss for the period (restated)
(1) - - - (24.7) (24.7)
Net exchange differences offset
in reserves - - (1.8) - (1.8)
Deferred tax relating to other
temporary differences - - - 0.3 0.3
Actuarial gain recognised on retirement
benefit scheme - - - 25.2 25.2
Deferred tax relating to retirement
benefit scheme - - - (4.9) (4.9)
Deferred tax relating to change
in tax rates - - - 4.1 4.1
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
Total comprehensive income for
the period (restated) (1) - - (1.8) - (1.8)
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
Dividends paid 4.5 - - - (4.4) (4.4)
Fair value of share-based payments - - - (0.2) (0.2)
Current tax relating to employee
share schemes - - - 1.2 1.2
Deferred tax relating to employee
share schemes - - - (0.1) (0.1)
At 02 October 2021 50.3 54.3 (15.0) 115.8 205.4
Loss for the period - - - (11.9) (11.9)
Net exchange differences offset
in reserves - - 0.4 - 0.4
Actuarial loss recognised on retirement
benefit scheme - - - 36.4 36.4
Deferred tax relating to retirement
benefit scheme - - - (9.3) (9.3)
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
Total comprehensive income for
the period - - 0.4 15.2 15.6
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
Dividends paid 4.5 - - - (9.1) (9.1)
Own shares acquired - Share buyback
programme 4.4 - - - (10.7) (10.7)
Fair value of share-based payments - - - 0.5 0.5
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
At 02 April 2022 50.3 54.3 (14.6) 111.7 201.7
----------------------------------------- ----- --------- --------- ---------- ------------ ------------
(1) H1 and H2 losses in the prior year been restated to reflect
phasing adjustments as disclosed in note 5.6.
Other reserves consist of the capital redemption reserve of
$0.6m (03 April 2021: $0.6m, 02 October 2021: $0.6m) and the
translation reserve of ($15.2m) (03 April 2021: ($13.8m), 02
October 2021: ($15.6m).
NOTES TO THE FINANCIAL STATEMENTS
Section 1: General Information and Basis of Preparation
The Company is a public limited Company incorporated in England
and Wales and domiciled in England with its ordinary shares being
traded on the London Stock Exchange. The address of its registered
office is Hampton Park West, Semington Road, Melksham, Wiltshire,
SN12 6NB.
This unaudited condensed consolidated interim financial
information was approved for issue on 24 May 2022.
The financial period presents the 26 weeks ended 2 April 2022
(prior financial period 27 weeks ended 3 April 2021, prior
financial year 53 weeks ended 2 October 2021). The Company
previously reported that the reporting date for the comparable
period was the 31 March 2021 and for the latest annual financial
statements was 30 September 2021, being the Company's accounting
reference date. The actual date to which the financial statements
were drawn up was 03 April 2021 and 02 October 2021 respectively
and therefore the headings in the interim financial statements have
been amended accordingly. This has no impact on previously reported
numbers.
The financial information set out in this document does not
constitute the Group's statutory accounts for the period or the
full year. Statutory accounts for the previous financial year were
approved by the Board of Directors on 14 December 2021 and
delivered to the Registrar of Companies.
The report of the auditors on those accounts was unqualified,
did not contain an emphasis of matter paragraph and did not contain
any statement under Section 498 of the Companies Act 2006.
This condensed consolidated interim financial information for
the 26 weeks ended 02 April 2022 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting' as adopted
by the United Kingdom. These interim financial results should be
read in conjunction with the annual financial statements for the
year ended 02 October 2021, which have been prepared in accordance
with International Financial Reporting Standards adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European Union
and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
The financial information presented in this Interim Report has
been prepared in accordance with the accounting policies expected
to be used in preparing the 2022 Annual Report and Accounts which
do not differ significantly from those used in the preparation of
the 2021 Annual Report and Accounts.
The Directors have prepared a going concern assessment covering
the 12 month period from the date of approval of these interim
financial results. The assessment indicates that the Group will
have sufficient funds to meet its liabilities as they fall due for
that period, and therefore the interim financial results have been
prepared on a going concern basis.
As part of their assessment, the Directors considered the
Group's base case, and a severe but plausible downside scenario
involving a 22% decline in forecast bank-determined adjusted EBITDA
against the base case, covering some potential delays on revenue
delivery as well as the potential for further supply chain and
manufacturing challenges. Even in this severe downside scenario,
the assessment indicates that the Group will have sufficient funds
to meet its liabilities as they fall due, and will continue to
comply with its loan covenants, throughout the forecast period. The
Group has committed RCF facilities of $200 million and related loan
covenants include a limit of 3.0 times for the ratio of net debt,
excluding lease liabilities, to bank-determined adjusted EBITDA
(leverage).
The recent developments in Ukraine have led to an increased
demand for the Group's product range, which will influence the
order book and revenue expectations. Given the business remains
robust with good liquidity and revenue visibility, the Directors
are confident that the Group will continue to operate on a going
concern basis over the 12 month assessment period.
Section 2: Results for the Period
2.1 Adjusted performance measures
The Directors assess the operating performance of the Group
based on adjusted measures of EBITDA, operating profit, finance
costs, taxation and earnings per share (note 2.4), as well as other
measures not defined under IFRS including orders received, closing
order book, EBITDA margin, cash conversion, and net debt excluding
lease liabilities (note 4.2). These measures are collectively
described as Adjusted Performance Measures (APMs).
The Directors believe that the APMs provide a useful comparison
of business trends and allow investors to understand the underlying
performance of the Group. The APMs exclude exceptional items
considered unrelated to the underlying trading performance of the
Group and discontinued operations. APMs also include constant
currency and organic equivalent metrics. The term adjusted is not
defined under IFRS and may not be comparable with similarly titled
measures used by other companies.
Adjustments to operating profit
26 weeks to 27 weeks to
02 April 03 April
2022 2021
(restated)(1)
$m $m
-------------------------------------- ------------- ---------------
Operating (loss)/profit (10.7) 3.4
-------------------------------------- ------------- ---------------
Amortisation of acquired intangibles 3.5 7.0
Restructuring costs 1.4 -
Transaction costs 0.8 -
Impairment of non-current assets 3.8 -
Release of contingent consideration - (2.2)
Acquisition related costs - 1.9
Inventory fair value adjustments - 2.4
-------------------------------------- ------------- ---------------
Adjusted operating (loss)/profit (1.2) 12.5
-------------------------------------- ------------- ---------------
Depreciation 4.7 4.5
Other amortisation charges 2.7 2.1
-------------------------------------- ------------- ---------------
Adjusted EBITDA 6.2 19.1
-------------------------------------- ------------- ---------------
Amortisation charges for acquired intangible assets of $3.5m
(HY21: $7.0m) are considered exceptional as they do not change each
period based on underlying business trading and performance.
Restructuring costs related to the overhead reduction programme
were $1.4m (HY21: $nil). These costs include a $0.4m right of use
asset impairment relating to the closure of one of our U.S. offices
and $0.2m of professional fees relating to the strategic review of
the armor business. These costs are considered exceptional as they
relate to a specific programme which does not form part of the
underlying business trading and performance.
Transaction costs of $0.8m (HY21: $nil) related to a potential
sale of the armor business. This opportunity is no longer
considered to be in the best interest of shareholders. These costs
are considered exceptional as they are specific to the wind down of
the armor business and do not form part of the underlying business
trading and performance.
Impairment reviews for the Group's non-current assets resulted
in $3.8m exceptional impairment losses (HY21: $nil) as the carrying
value of certain cash-generating units exceeded estimated
recoverable amounts. Further details are provided in note 3.1. The
impairment losses are significant items resulting from changes in
assumptions for future recoverable amounts. As such they are
considered unrelated to 2022 trading performance.
In HY21 a gain of $2.2m was recognised to reduce the net present
value of the contingent consideration payable to 3M as a result of
rephased revenue expectations from the DLA ESAPI body armor
contract. As such, they are considered unrelated to HY21 trading
performance.
HY21 Acquisition costs of $1.9m related to the acquisition of
Team Wendy and the 3M ballistic protection business. HY21 Inventory
fair value adjustments of $2.4 million related to Team Wendy
acquired inventory adjustments arising on acquisition. These costs
are considered exceptional as they do not relate to the trading
performance of HY21.
Adjustments to finance costs 26 weeks 27 weeks
to to 03 April
02 April 2021
2022
$m $m
(restated)(1)
-------------------------------------------------- ---------- ---------------
Finance costs (2.9) (3.0)
-------------------------------------------------- ---------- ---------------
U.K. defined benefit pension scheme net interest
expense 0.8 0.4
Contingent consideration unwind discount 0.5 1.1
-------------------------------------------------- ---------- ---------------
Adjusted finance costs (1.6) (1.5)
-------------------------------------------------- ---------- ---------------
$0.8m (HY21: $0.4m) net interest expense on the U.K. defined
benefit pension scheme liability is treated as exceptional given
the scheme relates to employees employed prior to 31 January 2003
and was closed to future accrual of benefits on 1 October 2009
(note 5.2).
$0.5m (HY21: $1.1m) related to unwind of discounting on
contingent consideration from the 3M ballistic acquisition.
Cash conversion
Cash conversion excludes the impact of exceptional items from
operating cash flow and EBITDA.
26 weeks 27 weeks
to to
02 April 03 April
2022 2021
$m $m
(restated)(1)
--------------------------------------------------------- ---------- ---------------
Cash flow from continuing operations before exceptional
items (note 5.3) 5.2 13.1
--------------------------------------------------------- ---------- ---------------
Adjusted EBITDA 6.2 19.1
Cash conversion 83.9% 68.5%
--------------------------------------------------------- ---------- ---------------
Adjustments to taxation
Adjustments to taxation represent the tax effects of the
adjustments to operating profit and finance
costs. Adjusting items do not have significantly different tax
rates, with the overall effective rate of 21%
(HY21: 23%) approximating statutory rates applicable in the U.S.
and U.K.
Organic constant currency reporting
Organic constant currency measures remove the impact of
acquisitions and changes in exchange rates. Constant currency
measures are calculated by translating the prior period at HY22
exchange rates.
As average USD/GBP rates applicable in each period were very
similar (note 5.4), the impact of changes in exchange rates was
less than $0.1m for HY21 Income Statement constant currency period
measures. There was a currency impact on orders received due to
recognition phasing.
The armor business transacts entirely in USD meaning there is no
currency impact for this operating segment.
26 weeks to 27 weeks to
Respiratory and Head Protection 02 April 2022 03 April 2021
(excluding (constant currency,
acquisitions) restated(1)
)
-------------------------------------- --------------- ---------------------
Orders received $110.7m $167.3m
Closing order book $110.7m $130.7m
Revenue $116.8m $118.1m
Adjusted(1) EBITDA $11.8m $22.5m
Adjusted(1) operating profit $4.6m $16.8m
Adjusted(1) profit before tax $3.1m $15.5m
Adjusted(1) basic earnings per share 7.8c 40.1c
-------------------------------------- --------------- ---------------------
(1) The comparatives for the 27 weeks to 03 April 2021 have been
restated to reflect reclassification and phasing adjustments
between H1 and H2 in the prior year as disclosed in note 5.6.
2.2 Operating segments
The Group Executive team is responsible for allocating resources
and assessing performance of its operating segments. Operating
segments are therefore reported in a manner consistent with the
internal reporting provided to the Group Executive team.
The Group has, following a reorganisation, two different
operating and reportable segments, these being the core respiratory
& head protection business and the armor business which is in
the process of being wound-down. In the prior year, the sole
reportable segment was made up by two operating segments, Team
Wendy and Avon Protection. Avon Protection has been disaggregated
into armor and respiratory & head protection following the
decision to close the armor business. In HY22 Team Wendy has been
fully integrated into the wider respiratory & head protection
segment.
26 weeks to 02 April 2022
Armor Respiratory Adjustments Total
& Head & discontinued
protection
--------------------------------------
(note 2.1
& 2.3)
--------------------------------------
$m $m $m $m
-------------------------------------- ---------------- --------
Revenue 2.5 119.4 - 121.9
-------------------------------------- ------- ------------ ---------------- --------
Adjusted EBITDA (6.3) 12.5 - 6.2
-------------------------------------- ------- ------------ ---------------- --------
Depreciation - (4.7) - (4.7)
Other amortisation charges - (2.7) - (2.7)
Amortisation of acquired intangibles - - (3.5) (3.5)
Other adjusting items (note 2.1) - - (6.0) (6.0)
-------------------------------------- ------- ------------ ---------------- --------
Operating profit/(loss) (6.3) 5.1 (9.5) (10.7)
-------------------------------------- ------- ------------ ---------------- --------
Finance costs (0.1) (1.5) (1.3) (2.9)
-------------------------------------- ------- ------------
Profit/(loss) before taxation (6.4) 3.6 (10.8) (13.6)
-------------------------------------- ------- ------------ ---------------- --------
Taxation 1.4 (0.8) 2.3 2.9
-------------------------------------- ------- ------------ ---------------- --------
Profit/(loss) for the period from
continuing operations (5.0) 2.8 (8.5) (10.7)
---------------- --------
Loss from discontinued operations - - (1.2) (1.2)
Profit/(loss) for the period (5.0) 2.8 (9.7) (11.9)
-------------------------------------- ------- ------------ ---------------- --------
Total assets 18.2 361.7 - 379.9
-------------------------------------- ------- ------------ ---------------- --------
Basic earnings per share (cents) (16.3c) 9.1c (31.6c) (38.8c)
Diluted earnings per share (cents) (16.2c) 9.1c (31.4c) (38.5c)
------------------------------------ -------- ----- -------- --------
27 weeks to 03 April 2021 (restated)(1)
Armor Respiratory Adjustments Total
& Head & discontinued
protection
--------------------------------------
(note 2.1
& 2.3)
--------------------------------------
$m $m $m $m
-------------------------------------- ---------------- -------
Revenue 3.9 118.1 - 122.0
-------------------------------------- -------- ------------ ---------------- -------
Adjusted EBITDA (3.4) 22.5 - 19.1
-------------------------------------- -------- ------------ ---------------- -------
Depreciation (0.9) (3.6) - (4.5)
Other amortisation charges - (2.1) - (2.1)
Amortisation of acquired intangibles - - (7.0) (7.0)
Other adjusting items (note 2.1) - - (2.1) (2.1)
-------------------------------------- -------- ------------ ---------------- -------
Operating profit/(loss) (4.3) 16.8 (9.1) 3.4
-------------------------------------- -------- ------------ ---------------- -------
Finance costs (0.2) (1.3) (1.5) (3.0)
-------------------------------------- -------- ------------ ---------------- -------
Profit/(loss) before taxation (4.5) 15.5 (10.6) 0.4
-------------------------------------- -------- ------------ ---------------- -------
Taxation 0.9 (3.2) 2.4 0.1
---------------- -------
Profit/(loss) for the period from
continuing operations (3.6) 12.3 (8.2) 0.5
Loss from discontinued operations - - (1.4) (1.4)
-------------------------------------- -------- ------------ ---------------- -------
Profit/(loss) for the period (3.6) 12.3 (9.6) (0.9)
-------------------------------------- -------- ------------ ---------------- -------
Total assets 55.3 364.8 - 420.1
-------------------------------------- -------- ------------ ---------------- -------
Basic earnings per share (cents) (11.7c) 40.1c (31.3c) (2.9c)
Diluted earnings per share (cents) (11.6c) 39.8c (31.1c) (2.9c)
-------------------------------------- -------- ------------ ---------------- -------
(1) The comparatives for the 27 weeks to 03 April 2021 have been
restated to reflect reclassification and phasing adjustments
between H1 and H2 in the prior year as disclosed in note 5.6.
Comparatives have also been aligned with the new segmental
reporting structure, as outlined above.
Revenue analysed by line of business
02 April 2022 03 April 2021(1)
Head Head
Respiratory Protection Armor Total Respiratory Protection Armor Total
$m $m $m $m $m $m $m $m
U.S. DOD 24.0 19.5 2.5 46.0 48.4 16.0 3.9 68.3
Commercial
Americas 17.7 13.0 - 30.7 18.7 9.3 - 28.0
U.K. &
International 41.1 4.1 - 45.2 18.2 7.5 - 25.7
Total 82.8 36.6 2.5 121.9 85.3 32.8 3.9 122.0
--------------- ------------- ----------- -------- ------ ---------------- ------------ -------- -------------
(1) Following a re-organisation and further integration of Team
Wendy, the Group classifies revenue into U.S. DOD (comprising all
U.S. military revenue), Commercial Americas (which includes U.S.
first responder plus all revenue from other parts of the Americas),
and U.K. & International ("U.K. & Intl") (comprising all
revenue outside the continents of America). Prior year figures have
been re-classed to be presented on a consistent basis to current
year classifications.
Revenue analysed by geographic region by origin
26 weeks to 27 weeks
02 April to
2022 03 April
2021
$m $m
-------- -------------- ----------
Europe 37.4 13.6
U.S. 84.5 108.4
-------- -------------- ----------
Total 121.9 122.0
-------- -------------- ----------
2.3 Discontinued Operations
In September 2020 the Group divested the entire milkrite |
InterPuls business. As part of the sale and purchase agreement, the
Group entered into a Manufacturing Service Agreement whilst
arrangements were made to relocate manufacturing equipment from a
previously shared U.K. facility. These are expected to conclude in
FY23. The Group also entered into agreements to provide certain
other information technology and administrative services under a
12-month Transitional Services Agreement which have now concluded.
As the activities under these agreements are not part of the
continuing operations of the Group, the revenue and costs
associated with these agreements have been classified as
discontinued operations.
26 weeks 27 weeks
to to
02 April 03 April
2022 2021
$m $m
---------
Revenue 1.7 2.0
Cost of Sales (3.2) (2.8)
------------------------------------ --------- ---------
Gross Loss (1.5) (0.8)
General and administrative expenses - (1.0)
------------------------------------ --------- ---------
Operating loss (1.5) (1.8)
Finance costs - -
------------------------------------ --------- ---------
Loss before taxation (1.5) (1.8)
Taxation 0.3 0.4
--------- ---------
Loss from discontinued operations (1.2) (1.4)
------------------------------------ --------- ---------
Basic earnings per share (cents) (3.9c) (4.6c)
Diluted earnings per share (cents) (3.9c) (4.6c)
------------------------------------ --------- ---------
2.4 Earnings Per Share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period, excluding
those held as treasury shares (note 4.4). The company has dilutive
potential ordinary shares in respect of the Performance Share Plan.
Reconciliations of the earnings and weighted average number of
shares used in calculations of earnings per share are set out
below:
Weighted average number of shares
26 weeks to 27 weeks to
02 April 03 April
2022 2021
-------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
in issue used in basic calculations (thousands) 30,644 30,649
Potentially dilutive shares (weighted average)
(thousands) 284 246
-------------------------------------------------- ------------ ------------
Fully diluted number of ordinary shares
(weighted average) (thousands) 30,928 30,895
-------------------------------------------------- ------------ ------------
2.5 Taxation
26 weeks to 27 weeks to
02 April 03 April
2022 2021
(restated)
$m $m
------------------------------------------------- ------------ ------------
(Loss)/profit before taxation from continuing
operations (13.6) 0.4
------------------------------------------------- ------------ ------------
Tax charge/(credit) at the average standard U.K.
rate of 19.0% (HY21: 19.0%) (2.6) 0.1
Differences in overseas tax rates (0.2) -
Permanent differences (0.1) (0.2)
------------------------------------------------- ------------ ------------
Tax credit (2.9) (0.1)
------------------------------------------------- ------------ ------------
The effective tax rate for the period is 21% (HY21: 25%).
Section 3: Non-current assets
3.1 Intangible assets
Acquired Development Computer
Goodwill intangibles expenditure software Total
Net book amounts $m $m $m $m $m
------------------------- ---------------- ------------------- ------------------- --------------- --------
At 02 October 2021 88.8 58.9 23.2 10.1 181.0
Additions - - 2.7 0.2 2.9
------------------------- ---------------- ------------------- ------------------- --------------- --------
Exceptional impairments - - (1.6) - (1.6)
------------------------- ---------------- ------------------- ------------------- --------------- --------
Amortisation - (3.5) (2.1) (0.6) (6.2)
------------------------- ---------------- ------------------- ------------------- --------------- --------
Exchange differences - - (0.2) - (0.2)
------------------------- ---------------- ------------------- ------------------- --------------- --------
At 02 April 2022 88.8 55.4 22.0 9.7 175.9
------------------------- ---------------- ------------------- ------------------- --------------- --------
The carrying amounts of non-financial assets have been reviewed
at the interim reporting date to determine whether there is any
indication of impairment. For assets that show indicators of
impairment, this includes estimation of the recoverable amount
which is deemed to be value in use. Assets are tested at CGU level
(or at group of CGUs level in the case of goodwill) as the
Directors believe CGUs generate largely independent cash
inflow.
Value in use was determined by discounting the future cash flow
to be generated from the continuing use of the CGU.
As a result of the review for the half year to 02 April 2022,
the following impairment charges were identified:
-- General Service Respirator (GSR), impaired by $2.9m due to a
change made on costing assumptions and forecasted cash flow
periods, driven by changes in market factors ($0.7m development
expenditure, $2.2m plant and machinery).
-- Other respiratory asset development expenditure, impaired by $0.7m due to market factors.
-- Armor-specific development expenditure, impaired by $0.2m for
a small number of reclassified assets.
Following the impairment charges recognised, recoverable amounts
were equal to carrying amounts.
For the GSR the following key assumptions were used as part of
the value in use analysis:
-- A pre-tax discount rate of 32% (post-tax discount rate of 7.4%)
-- Cashflow over a period of 6.5 years, including an assumption
of contractual extensions and commercial gross profit margins
Sensitivity analysis has shown that if gross profit margins
improved by 8% in additional contract periods, the impairment would
be reduced by approximately $0.2m.
Other CGUs were not tested for impairment because there were no
impairment indicators at 02 April 2022.
3.2 Property, plant and equipment
Net book amounts Right of
use Plant and Leasehold
Freeholds assets machinery Improvements Total
$m $m $m $m $m
------------------------ --------- -------- -------------- ------------- -----
At 02 October 2021 1.8 15.0 28.3 3.5 48.6
------------------------ --------- -------- -------------- ------------- -----
Additions - 0.2 2.9 - 3.1
------------------------ --------- -------- -------------- ------------- -----
Exceptional impairments
(note 3.1) - (0.4) (2.2) - (2.6)
======================== ========= ======== ============== ============= =====
Depreciation charge (0.1) (1.7) (2.7) (0.2) (4.7)
------------------------ --------- -------- -------------- ------------- -----
Exchange differences - (0.2) (0.4) (0.1) (0.7)
------------------------ --------- -------- -------------- ------------- -----
At 02 April 2022 1.7 12.9 25.9 3.2 43.7
------------------------ --------- -------- -------------- ------------- -----
The $0.4m right of use asset impairment relates to the closure
of one of our U.S. offices under the overhead reduction programme.
The $2.2m plant and machinery impairment is detailed in note
3.1.
3.3 Capital commitments
As at As at
02 April 02 Oct
2022 2021
$m $m
-------------------- ---------- -------
Capital commitments 1.4 2.8
-------------------- ---------- -------
Capital commitments represent the amount contracted in respect
of non-current assets at the end of the period for which no
provision has been made in the financial statements
Section 4: Funding
4.1 Borrowings
As at As at
02 April 02 Oct
2022 2021
$m $m
Current
Lease liabilities 4.1 4.0
4.1 4.0
----------------------- ---------- -------
Non-Current
Bank Loans 69.2 40.9
Lease liabilities 22.6 25.1
----------------------- ---------- -------
91.8 66.0
----------------------- ---------- -------
Total Group borrowings 95.9 70.0
----------------------- ---------- -------
The Group has the following committed facilities:
As at As at
02 April 02 Oct
2022 2021
$m $m
--------------------------------------------- ---------- -------
Total undrawn committed borrowing facilities 135.8 164.1
Bank loans and overdrafts utilised 69.2 40.9
Total Group committed facilities 205.0 205.0
--------------------------------------------- ---------- -------
The Group has a revolving credit facility (RCF) with a total
commitment of $200 million across six lenders with an accordion
option of an additional $50 million. The facility matures on 8
September 2024 with a one-year extension option to 8 September
2025. In addition to the revolving credit facility, the Group's
U.S. operations have access to a $5.0 million overdraft
facility.
The RCF is subject to financial covenants measured on a
bi-annual basis. These include a limit of 3.0 times for the ratio
of net debt, excluding lease liabilities, to bank-defined adjusted
EBITDA (leverage). The Group was in compliance with all financial
covenants during the current and prior period.
The RCF is floating rate priced on the U.S. dollar secured
overnight financing rate (SOFR) plus a margin of 1.45-2.35%
depending on leverage. The Group has provided the lenders with a
negative pledge in respect of certain shares in Group
companies.
4.2 Analysis of net debt
As at
02 Oct 2021 As at
Non-cash Exchange
Cash flow movements movements 02 April
$m $m $m $m 2022 $m
---------------------- ------------- ---------- ----------- ----------- -----------
Cash at bank and in
hand 14.1 (1.5) - - 12.6
Bank loans (40.9) (28.3) - - (69.2)
Interest due on bank
loans - 0.8 (0.8) - -
Net debt excluding
lease liabilities (26.8) (29.0) (0.8) - (56.6)
---------------------- ------------- ---------- ----------- ----------- -----------
Lease liabilities (29.1) 2.6 (0.5) 0.3 (26.7)
---------------------- ------------- ---------- ----------- ----------- -----------
Net debt (55.9) (26.4) (1.3) 0.3 (83.3)
---------------------- ------------- ---------- ----------- ----------- -----------
Cash flow relating to bank loans consisted of $33.9m proceeds
from drawdowns, less $5.6m repayments.
4.3 Finance costs
26 weeks 27 weeks
to 02 April to
2022 03 April
2021
$m (restated)(1)
$m
------------------------------------------------- ------------ --------------
Interest payable on bank loans and overdrafts (0.8) (0.6)
Interest payable in respect of leases (0.5) (0.6)
Amortisation of finance fees (0.3) (0.3)
U.K. defined benefit pension scheme net interest
expense (0.8) (0.4)
Contingent Consideration unwind discount (0.5) (1.1)
Finance costs (2.9) (3.0)
------------------------------------------------- ------------ --------------
(1) The comparatives for the 27 weeks to 03 April 2021 have been
restated to reflect reclassification and phasing adjustments
between H1 and H2 in the prior year as disclosed in note 5.6.
4.4 Equity
Share Capital
No. of Ordinary Share No. of Ordinary Share premium
shares shares premium shares shares
as at as at as at as at as at as at
02 April 02 April 02 April 02 Oct 02 Oct 02 Oct
2022 2022 2022 2021 2021 2021
$m $m $m $m
--------------------- ----------- ---------- ---------- ----------- --------- --------------
Called up, allotted
and fully paid
ordinary shares
of GBP1 each
--------------------- ----------- ---------- ---------- ----------- --------- --------------
At the beginning
of the period 31,023,292 50.3 54.3 31,023,292 50.3 54.3
At the end of the
period 31,023,292 50.3 54.3 31,023,292 50.3 54.3
--------------------- ----------- ---------- ---------- ----------- --------- --------------
Ordinary shareholders are entitled to receive dividends and to
vote at meetings of the Company.
Own shares held - Share Buyback Programme
26 weeks to Period ended
02 April 02 Oct
2022 2021
No. of shares No. of shares
----------------------- -------------- --------------
Opening balance - -
Acquired in the period 658,161 -
Closing balance 658,161 -
----------------------- -------------- --------------
In January 2022 the Group commenced a share buyback programme in
respect of its ordinary shares up to a maximum consideration of
GBP18.5m. Dividends on the shares have been waived. Purchased
shares under the programme are held at cost as treasury shares and
deducted from shareholders' equity.
In the 26 weeks to 02 April 2022 658,161 shares have been
acquired under the share buyback programme.
Own shares held - Long-Term Incentive Plan
26 weeks to Period ended
02 April 02 Oct
2022 2021
No. of shares No. of shares
-------------------------------- -------------- --------------
Opening balance 334,933 398,560
Acquired in the period - 95,855
Disposed on exercise of options (73,219) (159,482)
-------------------------------- -------------- --------------
Closing balance 261,714 334,933
-------------------------------- -------------- --------------
These shares are held in trust in respect of awards made under
the Avon Protection Long-Term Incentive Plan. Dividends on the
shares have been waived. The market value of shares held in trust
at 02 April 2022 was $4.5m (02 October 2021: $8.8m). The shares are
held at cost as treasury shares and deducted from shareholders'
equity.
In December 2021 73,219 shares vested under the Avon Protection
Long-Term Incentive Plan and were distributed to employees (Year
ended 02 October 2021: 159,482 shares vested and distributed to
employees in January 2021).
In the 53 weeks ended 02 October 2021 95,855 shares were
acquired by the trust.
4.5 Dividends
On 28 January 2022, the shareholders approved a final dividend
of 30.6c per qualifying ordinary share in respect of the year ended
02 October 2021. This was paid on 11 March 2022 utilising $9.1m of
shareholders' funds.
The Board of Directors has declared an interim dividend of 14.3c
(2021: 14.3c) per qualifying ordinary share in respect of the year
ending 01 October 2022. This interim dividend will be paid in
sterling at the prevailing exchange rate prior to payment on 02
September 2022 to shareholders on the register at the close of
business on 05 August 2022. In accordance with accounting
standards, this dividend has not been provided for. It will be
recognised in shareholders' funds in the 52 weeks to 01 October
2022 and is expected to utilise $4.4m (2021: $4.4m) of
shareholders' funds.
Section 5: Other
5.1 Provisions for liabilities and charges
Property Contingent Total
Obligations consideration
$m $m $m
------------- --------------- ------
Balance at 02 October 2021 2.9 6.0 8.9
---------------------------------- ------------- --------------- ------
Payments in the period - (3.2) (3.2)
Unwind of discount on provisions - 0.5 0.5
Balance at 02 April 2022 2.9 3.3 6.2
---------------------------------- ------------- --------------- ------
As at As at
02 April 02 Oct
2022 2021
Analysis of total provisions $m $m
Non-current 2.9 5.4
Current 3.3 3.5
------------------------------ ---------- --------
Total provisions 6.2 8.9
------------------------------ ---------- --------
Property obligations relate to leased premises of the Group
which are subject to dilapidation risks and are expected to be
utilised within the next ten years. Property provisions are subject
to uncertainty in respect of any final negotiated settlement of any
dilapidation claims with landlords.
The purchase consideration in relation to the Helmets &
Armor acquisition included contingent consideration up to a maximum
of $25.0m depending on the outcome of certain tenders which were
pending at the acquisition date and the level of sales which were
generated on these contracts if secured.
At the balance sheet date, the remaining contingent
consideration is presented as a provision with a fair value of
$3.3m being the present value of the future expected cashflow
relating to the contract.
5.2 Defined benefit pension scheme
As at As at
02 April 02 Oct
2022 2021
$m $m
---------------------- ---------- -------
Net pension liability 28.7 68.3
---------------------- ---------- -------
Defined benefit pension scheme
The Group operated a contributory defined benefit plan to
provide pension and death benefits for the employees of Avon
Protection plc and its Group undertakings in the U.K. employed
prior to 31 January 2003. The plan was closed to future accrual of
benefit on 1 October 2009 and has a weighted average maturity of
approximately 15 years. The assets of the plan are held in separate
trustee administered funds and are invested by professional
investment managers. The Trustee is Avon Rubber Pension Trust
Limited, the Directors of which are members of the plan. Three of
the Directors are appointed by the Company and two are elected by
the members.
The funding of the plan is based on regular actuarial
valuations. The most recent finalised actuarial valuation of the
plan was carried out at 31 March 2019 when the market value of the
plan's assets was GBP335.8m. The fair value of those assets
represented 83% of the value of the benefits which had accrued to
members, after allowing for future increase in pensions.
During the period the Group made payments to the fund of $2.6m
(HY21: $nil) in respect of scheme expenses and deficit recovery
plan payments. In accordance with the deficit recovery plan agreed
following the 31 March 2019 actuarial valuation, the Group will
make payments of $4.5m in FY22 and $4.7m in FY23 in respect of
deficit recovery plan payments and scheme expenses.
The defined benefit plan exposes the Group to actuarial risks
such as longevity risk, inflation risk and investment risk.
The Directors have confirmed no additional liability is required
to be recognised as a consequence of minimum funding requirements.
The trustees have no rights to wind up the scheme or improve
benefits without Company consent.
An updated actuarial valuation for IAS 19 purposes was carried
out by an independent actuary at 02 April 2022 using the projected
unit method.
Movement in net defined benefit liability
Defined benefit Defined benefit Net defined
obligation asset benefit
liability
================================= ------------------- ------------------- -------------------
02 April 02 Oct 02 April 02 Oct 02 April 02 Oct
2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m
================================= ========== ======= ========== ======= ========== =======
At 02 October/26 September (534.7) (526.3) 466.4 446.7 (68.3) (79.6)
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Included in profit or
loss
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Administrative expenses (0.7) (1.2) - - (0.7) (1.2)
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Past service cost - - - - - -
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Net interest cost (5.3) (8.6) 4.5 7.3 (0.8) (1.3)
--------------------------------- ---------- ------- ---------- ------- ---------- -------
(6.0) (9.8) 4.5 7.3 (1.5) (2.5)
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Included in other comprehensive
income
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Remeasurement gain:
--------------------------------- ---------- ------- ---------- ------- ---------- -------
- Actuarial gain/(loss)
arising from:
--------------------------------- ---------- ------- ---------- ------- ---------- -------
- Demographic assumptions 0.2 (0.4) - - 0.2 (0.4)
--------------------------------- ---------- ------- ---------- ------- ---------- -------
- Financial assumptions 45.4 3.6 - - 45.4 3.6
--------------------------------- ---------- ------- ---------- ------- ---------- -------
- Experience adjustment (2.9) 7.3 - - (2.9) 7.3
--------------------------------- ---------- ------- ---------- ------- ---------- -------
- Return on plan assets
excluding interest income - - (6.3) 5.7 (6.3) 5.7
--------------------------------- ---------- ------- ---------- ------- ---------- -------
42.7 10.5 (6.3) 5.7 36.4 16.2
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Other
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Contributions by the employer - - 2.6 2.9 2.6 2.9
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Net benefits paid out 10.7 24.5 (10.7) (24.5) - -
--------------------------------- ---------- ------- ---------- ------- ---------- -------
FX gain/(loss) 16.3 (33.6) (14.2) 28.3 2.1 (5.3)
--------------------------------- ---------- ------- ---------- ------- ---------- -------
At 02 April/02 October (471.0) (534.7) 442.3 466.4 (28.7) (68.3)
--------------------------------- ---------- ------- ---------- ------- ---------- -------
Actuarial assumptions
The main financial assumptions used by the independent qualified
actuaries to calculate the liabilities under IAS 19 are set out
below:
02 April 02 Oct
2022 2021
% p.a. % p.a.
====================================== ========= =======
Inflation (RPI) 3.85 3.55
-------------------------------------- --------- -------
Inflation (CPI) 3.05 2.75
-------------------------------------- --------- -------
Pension increases post August 2005 2.35 2.30
-------------------------------------- --------- -------
Pension increases pre August 2005 3.65 3.40
-------------------------------------- --------- -------
Discount rate for scheme liabilities 2.80 2.00
-------------------------------------- --------- -------
Plan assets
02 April 02 Oct
2022 2021
$m $m
=============================== ========= ======
Equities and other securities 168.8 180.7
------------------------------- --------- ------
Liability Driven Investment 121.5 122.9
------------------------------- --------- ------
Secured income fund 67.4 69.5
------------------------------- --------- ------
Infrastructure fund 64.6 67.6
------------------------------- --------- ------
Cash 20.0 25.7
------------------------------- --------- ------
Fair value of assets 442.3 466.4
------------------------------- --------- ------
Equity securities are valued using quoted prices in active
markets where available.
Liability Driven Investments relate to a level 2 pooled
investment vehicle which combines a series of LIBOR-earning cash
deposits combined with contracts to hedge interest rate and
inflation risk. The LDI is valued using a Net Asset Value published
on the Irish Stock Exchange.
Holdings in unquoted securities and infrastructure funds are
classified as level 3 within the fair value hierarchy. Holdings
unquoted securities are valued at fair value which is typically the
Net Asset Value provided by the fund administrator at the most
recent quarter end. Holdings in the infrastructure fund are valued
by an independent valuer using a model-based valuation such as a
discounted cash flow approach. The significant assumptions used in
the valuation are the discount rate and the expected cash flow,
both of which are subject to estimation uncertainty.
5.3 Cash flow from operations
26 weeks 27 weeks
to to 03 April
02 April 2021 (restated)
2022
$m $m
------------------------------------------------------ ---------- -----------------
Continuing operations
(Loss)/profit for the period (10.7) 0.5
Adjustments for:
Taxation (2.9) (0.1)
Depreciation 4.7 4.5
Amortisation of intangible assets 6.2 9.1
Impairments 4.2 -
Defined benefit pension scheme cost 0.7 0.4
Finance costs 2.9 3.0
Change in contingent consideration - (2.2)
Fair value of share-based payments 0.5 0.7
Acquisition costs expensed - 1.9
Restructuring costs expensed (excluding impairments) 1.0 -
Transaction costs expensed 0.8 -
Increase in inventories (10.9) (1.9)
Decrease/(increase) in receivables 10.6 (5.4)
(Decrease)/increase in payables and provisions (1.9) 2.6
------------------------------------------------------ ---------- -----------------
Cash flow from continuing operations before
exceptional items 5.2 13.1
------------------------------------------------------ ---------- -----------------
Restructuring costs paid (0.8) -
Acquisition costs paid - (4.4)
------------------------------------------------------ ---------- -----------------
Cash flow from continuing operations 4.4 8.7
------------------------------------------------------ ---------- -----------------
Discontinued operations
Profit for the period (1.2) (1.4)
Adjustments for:
Taxation (0.3) (0.4)
(Increase)/decrease in inventories 0.2 -
Increase/(decrease) in payables and provisions 0.7 0.2
------------------------------------------------------ ---------- -----------------
Cash flow from discontinued operations (0.6) (1.6)
------------------------------------------------------ ---------- -----------------
Cash flow from operations 3.8 7.1
------------------------------------------------------ ---------- -----------------
5.4 Exchange rates
The following significant exchange rates applied during the
period.
Average Closing Average Closing Closing
rate rate rate rate rate
02 April 02 April 03 April 03 April 02 Oct
2022 2022 2021 2021 2021
----- --------- --------- --------- --------- --------
GBP 0.7438 0.7614 0.7423 0.7253 0.7384
----- --------- --------- --------- --------- --------
5.5 Acquisitions
Acquisition - Team Wendy
The results of the Team Wendy business were consolidated for the
first time in the prior period's financial statements as the
acquisition was completed and control passed on 2 November
2020.
The Group acquired 100% of the equity for a total consideration
of $132.0m, being the $130.0m initial consideration and purchase
price adjustments of $2.0m reflecting the cash and working capital
position at close. The net assets acquired had a book value of
$22.3m before fair value adjustments.
Set out below is an analysis of the assigned fair values of the
assets acquired and liabilities assumed relating to this
acquisition:
Fair value
$m
------------------------------------- -----------
Customer relationships 28.2
Brand 10.4
Other intangible assets 13.1
Property, plant and equipment 8.7
Inventories 12.2
Trade Debtors and other receivables 5.8
Cash 1.1
Lease liability (3.1)
Trade and other payables (2.7)
------------------------------------- -----------
Net assets acquired 73.7
Goodwill 58.3
------------------------------------- -----------
Total consideration 132.0
------------------------------------- -----------
Initial cash consideration 130.0
Post completion working capital adjustment 0.9
Cash acquired 1.1
-------------------------------------------- ------
Total consideration 132.0
-------------------------------------------- ------
5.6 Restatements
The comparatives for the half year to 03 April 2021 have been
restated to reflect the reclassification and phasing adjustments
between H1 and H2 in the prior year. The reclassification and
phasing adjustments do not impact the Group's reported 2021 full
year results.
A reconciliation of previously reported figures for the half
year to 03 April 2021 to restated figures is presented below:
Consolidated Statement of Comprehensive Previously Phasing Classification Restated
Income for the 27 weeks ended reported adjustments adjustments
03 April 2021
-----------------------------------------
$m $m $m $m
----------------------------------------- ----------- ------------- --------------- ---------
Continuing operations
Revenue 122.0 - - 122.0
Cost of sales (81.1) (4.0) (0.9) (86.0)
----------------------------------------- ----------- ------------- --------------- ---------
Gross profit 40.9 (4.0) (0.9) 36.0
Selling and distribution costs (10.7) - - (10.7)
General and administrative expenses (24.0) (1.0) 3.1 (21.9)
----------------------------------------- ----------- ------------- --------------- ---------
Operating profit 6.2 (5.0) 2.2 3.4
Finance costs (0.8) - (2.2) (3.0)
----------------------------------------- ----------- ------------- --------------- ---------
Profit before taxation 5.4 (5.0) - 0.4
----------------------------------------- ----------- ------------- --------------- ---------
Taxation (1.0) 1.1 - 0.1
----------------------------------------- ----------- ------------- --------------- ---------
Profit for the period from continuing
operations 4.4 (3.9) - 0.5
Discontinued operations
Loss from discontinued operations (1.4) - - (1.4)
----------------------------------------- ----------- ------------- --------------- ---------
(Loss)/profit for the period 3.0 (3.9) - (0.9)
----------------------------------------- ----------- ------------- --------------- ---------
Consolidated Balance Sheet as Previously Phasing Classification Restated
at 03 April 2021 reported adjustments adjustments
-------------------------------
$m $m $m $m
------------------------------- ----------- ------------- --------------- ---------
Intangible Assets 206.6 (1.0) - 205.6
Inventories 55.1 (4.0) - 51.1
Current tax liabilities (1.5) 1.1 - (0.4)
------------------------------- ----------- ------------- --------------- ---------
Phasing adjustments relate to charges previously included in the
Group's H2 FY21 results. On further review these adjustments should
have been made in the Group's H1 FY21 results, which have therefore
been restated accordingly. The adjustments are as follows:
-- One-off, non-cash, inventory adjustments of $4.0m, as
announced in the Group's FY21 trading update on 13 October 2021
which corrected inventory costing.
-- $1.0m charged to general and administrative expenses,
previously incorrectly capitalised as an intangible asset in H1
FY21.
-- $1.1m relating to the tax impact of these adjustments.
Classification adjustments relate to changes in the P/L line
items in H1 FY21 to ensure consistent presentation with previous
periods. The adjustments include a $2.2m reclassification from
finance costs to general and administrative expenses, relating to a
credit for changes in discounting component of the contingent
consideration fair value movements which were previously presented
within finance costs. Other adjustments relate to reclassifications
between general and administrative expenses and cost of sales. The
$0.9m is made up of $2.4m stock less a payroll related credit of
$1.5m.
In addition to the restatements above $4.4m acquisition costs
paid have been reclassified to cash flow from operations. In H1
FY21 these were disclosed within cash flow used in investing
activities, under the category "Acquisition of business" when they
should have been included in the Net cash flow from / (used in)
operating activities.
There will be no impact on the Group's reported 2021 full year
results for any of the above as these were appropriately presented
in the 2021 full year financial statements.
5.7 Principal risks and uncertainties
The nature of the principal risks and uncertainties impacting
the Group are described on pages 52-57 of our 2021 Annual Report
and remain unchanged at 02 April 2022.
The principal risks include the delivery of strategic projects
and new product introduction, market threat to core business,
talent management, cybersecurity and information technology,
customer dependency, financial management, manufacturing risk,
compliance and legal matters and political and economic
instability. There has been an increase in the significance and
potential financial impact of two of the principal risks at 02
April 2022. The first is the financial management risk of a
reduction in profitability due to manufacturing inefficiency and
product mix. The second is the customer dependency risk of over
reliance on the DOD and its funding and contracting process, such
that when these processes are delayed, shipments and revenue can be
delayed and there can be a shortfall if sufficient mitigation is
not available through sales to commercial and rest of world
customers.
5.8 Related party transactions
There were no related party transactions during the period or
outstanding at the end of the period (2021: nil) other than
internal transactions between Group companies, and compensation of
key management personnel which will be disclosed as required in the
Group's Annual Report for the 52 weeks ending 01 October 2022.
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END
IR FFFSIEAIVFIF
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