Avon Technologies Plc · LSE:AVON
Avon Technologies — Avon Protection — FY2021 Earnings Presentation
45 slides from Avon Technologies's earnings presentation, December 2021
Slide 1: Year End Results 2021
Year End Results 2021 Well invested for growth
Slide 2: Forward-looking information
Forward-looking information Avon Protection plc (the ‘Group’) is providing the following cautionary statement: This document contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of the Group. These statements are s
Slide 3: Agenda
Agenda Headlines Armor strategic FY21 results Well invested for review growth 3 YEAR END RESULTS 2021 3
Slide 4: Headlines
Headlines Paul McDonald Chief Executive Officer
Slide 5: Headlines
Headlines • 2021 has been a challenging year due to COVID, associated supply chain issues and body armor • Strategic review of armor business concluded that an orderly wind-down is in the best interest of stakeholders as a whole • Decisive action has been taken to refocus the Group as a global leade
Slide 6: Armor strategic review
Armor strategic review Paul McDonald Chief Executive Officer
Slide 7: Armor strategic review
Armor strategic review • Our next-generation body armor product, VTP ESAPI, failed first article testing (FAT) in November 2021 • This followed the legacy body armor product, DLA ESAPI, failing FAT in December 2020 • DLA ESAPI passed ballistic testing in August 2021. However, we have experienced fur
Slide 8: The challenge - body armor designs
The challenge - body armor designs Legacy DLA ESAPI VTP ESAPI • Ceradyne was a market leader in helmets and armor with a long track-record • $500m+ historic lifetime revenue from DLA ESAPI • $70m of VTP ESAPI LRIP in 2018 and 2019 • U.S. DOD mandated technical change in 2019 • Prohibited use of alum
Slide 9: 2021 engineering improvements
2021 engineering improvements • Following the DLA ESAPI test fail in December 2020 we Legacy DLA ESAPI VTP ESAPI implemented a number of engineering improvements • Engaged outside experts to support engineering team and review technology • Strengthened product to add greater contingency • Increased
Slide 10: Strategic Review - options
Strategic Review - 3 options Option 1 Option 2 Option 3 Re-design and re-FAT Sell body armor Managed wind-down VTP • Repeat same process as 2021 • Classified contracts will limit • Managed exit in collaboration engineering improvements buyers with customers • Expected to take c. 12 • Requires both r
Slide 11: Conclusion - Managed wind-down
Conclusion - Managed wind-down • An orderly wind-down offers the best risk / reward for stakeholders • Maintains strong relationship with the U.S. DOD • Completes customer contracts to avoid past performance issues • Provides certainty for employees with an established timeline • Redevelopment of th
Slide 12: Armor Strategic Review - Financial Impacts
Armor Strategic Review - Financial Impacts Nick Keveth Chief Financial Officer
Slide 13: FY21 Armor contribution
FY21 Armor contribution Armor Respiratory & Head Total Revenue split by product Orders received $1.7m $281.0m $282.7m 2.6% Closing order book $26.6m $116.5m $143.1m 6.4% Respiratory Revenue $6.5m $241.8m $248.3m $248.3m Head Protection Adjusted EBITDA $(8.4)m $46.0m $37.6m (2020: $213.6m) Armor Adju
Slide 14: Armor Expectations
Armor Expectations • Forecast FY22 revenues of up to $25m from DLA ESAPI, plus flat armor • Based on FAT approval in Q2 • Order book at 1 October 2021 for armor of $26.6m plus additional $20m DLA ESAPI order expected on FAT completion • Similar revenue expected from armor in FY23 • Following closure
Slide 15: Balance sheet impacts and presentation
Balance sheet impacts and presentation • Balance sheet impact • Impairments of $46.8m • Partial offset by release of contingent consideration liability of $15.7m • Three leases with total annual cost of $1.7m • NPV of $11.8m of which $8.6m is Lexington • We seek to sub-let properties to mitigate cos
Slide 16: Financial Review
Financial Review Nick Keveth Chief Financial Officer
Slide 17: Financial performance in FY21
Financial performance in FY21 2021 2020 % Change Revenue split by business Orders received $282.7m $209.6m 34.8% Closing order book $143.1m $101.8m 40.6% Military Revenue $248.3m $213.6m 16.2% $248.3m First Responder Adjusted EBITDA $37.6m $49.0m (23.3%) (2020: $213.6m) Team Wendy Adjusted EBITDA ma
Slide 18: Revenue growth driven by Team Wendy and Military Respiratory
Revenue growth driven by Team Wendy and Military Respiratory $40.3m $248.3m $213.6m $(15.0)m $8.6m $0.8m Team Wendy(1) 2021 Revenue (1) Team Wendy revenue net of intercompany eliminations 18 YEAR END RESULTS 2021
Slide 19: EBITDA impacted by operational gearing
EBITDA impacted by operational gearing $12.6m $(23.0)m Team Wendy: $10.1m $49.0m $(1.0)m $48.0m Ballistics annualisation: $5.6m Growth and inflation: $7.3m $37.6m FY20 adjusted FX FY20 constant Direct profit Increased FY21 adjusted EBITDA currency contribution overheads EBITDA from revenue growth 19
Slide 20: 83.2% cash conversion
83.2% cash conversion $147.7m $(144.8)m $37.6m $(6.3)m $(31.6)m $(4.3)m $(26.8)m $(9.3)m $(12.1)m $(4.3)m $0.6m 2020 Acquisitions Adj Working Capex Tax Pension, Dividends Share FX 2021 Net cash & EBITDA capital & interest & purchase Net debt Disposals non-cash leases 20 YEAR END RESULTS 2021
Slide 21: Strong order book provides visibility for FY22
Strong order book provides visibility for FY22 $79m $143m Opening order book U.S. DOD: ($117m excluding $51m $35m armor) Helmets: $25m ROW: Armor: $13m $44m $26m Military Respiratory Military Ballistic First Responder & Team Wendy 21 YEAR END RESULTS 2021
Slide 22: FY22 building blocks
FY22 building blocks $248.3m $(6.5m) $241.8m FY21 Armor FY21 Military Other Team FY22 Armor FY22 Revenue Revenue Respiratory respiratory Wendy Revenue Revenue Ex Armor ROW and head Ex Armor protection 22 YEAR END RESULTS 2021
Slide 23: Expectations for FY22
Expectations for FY22 • Solid start to trading in the first two months, with revenues ahead of last year on an organic basis • Growth expectations underpinned by our long-term contracts and strong opening order book ($117m excluding armor) • Continuing to experience disruption in global supply chain
Slide 24: Well invested for growth
Well invested for growth Paul McDonald Chief Executive Officer
Slide 25: Avon Protection for the future
Avon Protection for the future • Global market leader in respiratory and head protection • Deeply embedded customer relationships • Structurally growing defence and first responder end markets • Consistent and high margin returns • Consistent investment in product development • Growth opportunities
Slide 26: Strength of the respiratory business
Strength of the respiratory business • At the heart of Avon Protection for over a decade • Global standard-setter and market leader in military and first responder respiratory protection • Long-standing partnership with the U.S. DOD – our flagship customer • Growth opportunities in ROW include the N
Slide 27: NATO contract will drive growth in respiratory
NATO contract will drive growth in respiratory • U.S. DOD is our key customer European NATO framework contract opportunities • Leverage our technology into the 10-year NATO contract - provides access to our respiratory portfolio • During FY21 we received orders of $48m from 6 countries under this co
Slide 28: Creating a global leader in head protection
Creating a global leader in head protection • Current sole source IHPS supplier with secure contract for next generation helmet • Leading position in helmet supply within the U.S. DOD creates commercial product variants • Combination of Team Wendy and Ceradyne creates a global leader in military gra
Slide 29: First Responder well positioned for further growth
First Responder well positioned for further growth • Consistent history of growth with high margins • Broader range of respiratory and head protection products to our existing global First Responder customers • Launched the F90, a competitively priced, high-quality mid performance ballistic helmet,
Slide 30: Investing for growth
Investing for growth • Exciting portfolio of high margin technologies FM61 filter Enhancing the development for ST54 tactical SCBA the NATO contract Developing a Enhancements to the range of CBRN MCM100 underwater boots and gloves rebreather • Consistent track record of investment to broaden product
Slide 31: Sustainability
Sustainability • We recognise our responsibility to deliver measurable improvements in our sustainability • We have made some notable progress • Environmental - improved energy efficiency and recycling, • Social - launch of female mentoring programme • Governance – enhanced risk management processes
Slide 32: Confident in the medium-term outlook
Confident in the medium-term outlook • Multi-year military contracts across the product portfolio gives confidence in the medium-term • Growth in Rest of World revenues and from Military Respiratory, Team Wendy and First Responder – significant pipeline for the future • Continued investment in produ
Slide 33: Questions
Questions
Slide 34: Appendix
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Slide 35: FY22 technical guidance
FY22 technical guidance $ million Group Adjusted depreciation and amortisation $19m Amortisation of acquired intangibles $7m Capex ~$25m Adjusted interest $3m Cash pension contribution $5m Adjusted tax rate 21% Cash conversion 90%+ 1 cent increase/decrease in £:$ FX rate increases/decreases revenue
Slide 36: Income statement
Income statement FY21 FY20 $m $m (Restated) Revenue 248.3 213.6 Adjusted EBITDA 37.6 49.0 Adjusted depreciation and amortisation (15.6) (10.5) Adjusted operating profit 22.0 38.5 Adjusted net finance costs (3.1) (2.4) Adjusted profit before taxation 18.9 36.1 Adjusted taxation (0.3) (5.9) A
Slide 37: Reported to adjusted reconciliation
Reported to adjusted reconciliation FY21 FY20 $m $m (Restated) Operating (loss)/profit (29.0) 8.9 Amortisation of acquired intangible assets 14.2 8.3 Armor asset impairments 46.8 - Release of armor contingent consideration (15.7) - Acquisition and integration costs 2.6 13.6 Inventory acquisit
Slide 38: Revenue by line of business
Revenue by line of business 38 YEAR END RESULTS 2021
Slide 39: Armor order book and adjusted P&L
Armor order book and adjusted P&L 39 YEAR END RESULTS 2021
Slide 40: Armor impairment
Armor impairment 40 YEAR END RESULTS 2021
Slide 41: Balance sheet
Balance sheet FY21 FY20 $m $m (Restated) Intangible assets 181.0 89.4 Property, plant and equipment 48.6 65.9 Current assets 114.8 82.3 Current liabilities (43.5) (58.7) Net other non-current assets 28.7 11.5 Net (debt)/cash (including lease liabilities) (55.9) 118.7 Retirement benefit scheme
Slide 42: Cash flow
Cash flow FY21 FY20 $m $m (Restated) Cash flows from continuing operations before exceptional items 31.3 40.0 Cash impact of discontinued operations and exceptional items (7.7) (1.9) Cash flows from operations 23.6 38.1 Net interest (2.7) (3.5) Repayment of lease liability (3.7) (2.0) Payments to pe
Slide 43: Foreign exchange and sensitivities
Foreign exchange and sensitivities Average Closing Average Closing rate rate rate rate FY21 FY21 FY20 FY20 Sterling - £1 = $ 0.7311 0.7384 0.7842 0.7851 1 cent increase $m Revenue 0.2 Operating profit (0.2) Net assets (0.6) 43 YEAR END RESULTS 2021
Slide 44: Abbreviations
Abbreviations Term Explanation 50 Series A range of masks based on the proven technology of the M50 mask system BPS Basis points CBRN Chemical, Biological, Radiological, Nuclear CE CE markings indicate conformity to health and safety standards sold within the European Economic area DLA Defe
Slide 45: Abbreviations
Abbreviations Term Explanation MOD Ministry of Defence NATO North Atlantic Treaty Organization NSPA NATO Support and Procurement Agency PAPR Powered Air Purifying Respirator ROW Rest of World SCBA Self-contained breathing apparatus VTP Vital Torso Protection XSAPI X-Small Arms Protecti