Avon Technologies Plc · LSE:AVON
Avon Technologies — Avon Protection — H1 2022 Earnings Presentation
35 slides from Avon Technologies's earnings presentation, 2022
Slide 1: Half Year Results 2022
Half Year Results 2022 Addressing challenges, opportunities ahead 1 HALF YEAR RESULTS 2022
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 Financial review Addressing Questions challenges, opportunities ahead 3 HALF YEAR RESULTS 2022
Slide 4: Headlines
Headlines Paul McDonald 44 Chief Executive Officer HALF YEAR RESULTS 2022
Slide 5: 6 months of challenges and successes
6 months of challenges and successes Revenue in line but with a different mix than normal Profitability impacted by identified and addressable issues Product mix and process issues Higher inventory (not converted into revenue) Improvement expected through H2 Further success in our helmet
Slide 6: Threat environment changing
Threat environment changing U.S. buys highest threat level protection (c. 3.5% GDP) Europe has had low levels of investment in military equipment based on a relatively low threat level (c. 1.5% GDP) Events in Ukraine have changed both the threat and funding environment Sophisticated enemy wi
Slide 7: How does this impact us?
How does this impact us? Immediate impact 1 – 2 years 2 – 4 years • NATO supporting • Ukraine requirements • Increased quality and Ukraine from current identified quantity of stocks at the stocks. • Increased funding (Aid & country level • We sold all available Defence) • Increased use due to stock
Slide 8: Financial Review
Financial Review Rich Cashin 88 Chief Financial Officer HALF YEAR RESULTS 2022
Slide 9: Financial performance in HY22
Financial performance in HY22 Continuing operations excluding armor HY22 HY21(1) Revenue split by business Orders received $113.6m $167.9m Closing order book $110.7m $131.5m U.S. DOD Revenue $119.4m $118.1m Commercial $119.4m (HY21: $118.1m) Americas Adjusted EBITDA $12.5m $22.5m U.K. & Adjusted EBI
Slide 10: Income statement
Income statement Respiratory & Head HY21 Armor Protection HY22 Total $m $m $m $m (restated) Revenue 2.5 119.4 121.9 122.0 Adjusted EBITDA (6.3) 12.5 6.2 19.1 Adjusted depreciation and amortisation - (7.4) (7.4) (6.6) Adjusted operating (loss)/profit (6.3) 5.1 (1.2) 12.5 Adjusted net finance costs (0
Slide 11: Revenue growth from Europe offsetting U.S. weakness
Revenue growth from Europe offsetting U.S. weakness 11 HALF YEAR RESULTS 2022
Slide 12: EBITDA bridge
EBITDA bridge Mix and operational issues resulted in a direct profit decline rather than the expected increase Overheads increased in anticipation of supporting a larger business Adjusted EBITDA – before adjusting items and excluding armor 12 HALF YEAR RESULTS 2022
Slide 13: Actions for H2
Actions for H2 H1 Issue Solutions Mix – both between business Mix improvement dependent on orders expected in Q3 – we are in segments and within segments active dialogue, but volatile funding and ordering environment creates risk Operational issues – lumpy sourcing of Changed our procurement process
Slide 14: Cash flow
Cash flow HY22 HY21 $m $m (Restated) Cash flows from continuing operations before exceptional items 5.2 13.1 Cash impact of discontinued operations and exceptional items (1.4) (6.0) Cash flows from operations 3.8 7.1 Finance costs (1.3) (0.5) Repayment of lease liability (2.1) (2.0) Payments to pens
Slide 15: Net debt reconciliation
Net debt reconciliation Excludes IFRS16 lease liabilities 15 HALF YEAR RESULTS 2022
Slide 16: Balance sheet
Balance sheet HY22 FY21 $m $m Intangible assets 175.9 181.0 Property, plant and equipment 43.7 48.6 Current assets 117.5 114.8 Current liabilities (44.0) (43.5) Net other non-current assets 21.2 28.7 Net (debt)/cash (including lease liabilities) (83.3) (55.9) Retirement benefit scheme (28.7) (68.3)
Slide 17: Range of possible outcomes for FY22
Range of possible outcomes for FY22 Opening order book, excluding armor $52.5m $52.1m $111m Opening order book (excluding armor) c. 90% Opening order book to be delivered in H2 $6.1m U.S. DOD U.K. & Int'l Commercial Americas We are working closely to convert interest into firm, funded orders 17 HALF
Slide 18: Expectations for FY22
Expectations for FY22 Order book Revenue Margin • Opening order book of • Volatility of funding and • Margin should improve in H2 $111m provides good timing of customer orders visibility into H2 gives rise to risk to the H2 • $3 – 4m savings delivered in revenue mix outlook despite H2 from $15m savi
Slide 19: First observations…
First observations… Outstanding team and culture World class products and capabilities Developing strategy Recent challenges weighing on sentiment Opportunity to improve financial analysis Focus shifting to delivering growth/improving efficiency 19 HALF YEAR RESULTS 2022
Slide 20: Addressing challenges, opportunities ahead
Addressing challenges, opportunities ahead Paul McDonald Chief Executive Officer 20 20 HALF YEAR RESULTS 2022
Slide 21: Building a world-leading helmet business
Building a world- leading helmet business Progress this year IHPS NG FAT in progress, with expected approvals in the summer for production from FY23 ACH GEN II approval will be submitted in the summer, for approval in Q2 FY23 In-sourced shell production into legacy Team Wendy production comp
Slide 22: Addressing the challenges
Addressing the challenges Working with our people Our people are at the heart of our capability and decision-making Integrated organisation with one global structure Rolled out U.S. COVID vaccine mandate Increased employee turnover and direct labour shortages due to market conditions We
Slide 23: Addressing the challenges
Addressing the challenges Product lead times stabilised Global supply lead times now stabilised We are taking a more agile approach to component procurement Customers willing to use air freight to speed up delivery Armor At final stages of DLA ESAPI product approval Product delivery wi
Slide 24: Strong, established business
Strong, established business Global market leader in advanced respiratory and head protection systems Structurally growing defence and security end markets Deeply embedded customer relationships with proven technology and long-term product life cycle expectations Design, develop & manufacture in-hou
Slide 25: Deeply embedded customer relationships
Deeply embedded customer relationships NSPA CONTRACTS WON NSPA OPPORTUNITIES U.K. GSR CONTRACT 25 HALF YEAR RESULTS 2022
Slide 26: Confident in the medium-term outlook
Confident in the medium-term outlook In the medium-term, Avon Protection has 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-leadi
Slide 27: Questions
27 27 HALF YEAR RESULTS 2022 Questions
Slide 28: Appendix
28 28 HALF YEAR RESULTS 2022 Appendix
Slide 29: FY22 technical guidance
FY22 technical guidance $ million Group Adjusted depreciation and amortisation $17m Amortisation of acquired intangibles $7m Capex $12-15m Adjusted interest $4m Cash pension contribution $4.5m Adjusted tax rate 21% 1 cent increase/decrease in £:$ FX rate increases/decreases revenue by ~$0.2m 1 cent
Slide 30: Income statement by line of business
Income statement by line of business Respiratory & Head HY22 Armor Protection Total $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
Slide 31: Reported to adjusted reconciliation
Reported to adjusted reconciliation HY22 HY21 $m $m (restated) 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 co
Slide 32: Revenue by line of business
Revenue by line of business HY22 HY21 Head Head Respiratory Total Respiratory Total Protection Protection $m $m $m $m $m $m U.S. DOD 24.0 19.5 43.5 48.4 16.0 64.4 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 36.6 119.4 85.3 32.8 118.1
Slide 33: Prior period restatement – no change to FY21
Prior period restatement – no change to FY21 Previously Phasing Classification Restated HY21 Income statement reported adjustments adjustments3 $m $m $m $m Revenue 122.0 - - 122.0 1 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) - - (
Slide 34: Foreign exchange and sensitivities
Foreign exchange and sensitivities Average rate Closing rate Average rate Closing rate Closing rate HY22 HY22 HY21 HY21 FY21 Sterling - £1 = $ 0.7438 0.7614 0.7423 0.7253 0.7384 1 cent increase $m Revenue 0.2 Operating profit (0.2) Net assets (0.6) 34 HALF YEAR RESULTS 2022
Slide 35: Abbreviations
Abbreviations 50 Series - A range of masks based on the proven technology of the M50 mask system CBRN - Chemical, Biological, Radiological, Nuclear CE - CE markings indicate conformity to health and safety standards sold within the European Economic area DLA - Defense Logistics Agency DOD