Avon Technologies (LSE:AVON) — FY25 Results

0:00 Good afternoon, and welcome to the AVON TECHNOLOGIES PLC twenty twenty five Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. We begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Josh Slater. Good afternoon to you. Hi there, and good afternoon, everybody. We're just gonna go through a cut down version of our deck, and then what we really like is questions, so please save up your questions for later.

0:50 The our results actually are videoed and the whole script and video is available on our website if anyone wants more information that we can give in the time we've got available on this call. So last year was a good year from a financial perspective. Revenue and profit both grew very well. Revenue is actually probably a bit above expectations, and actually we ended up the year overall a bit above expectations. Our strengthened system, which is our version of the Toyota production system, but tailored for our own needs, continues to deliver sustainable competitive advantage for us and has helped us drive improvement in productivity, reduced scrap rates, and improved inventory turns or less cash tied up in inventory.

1:46 We are also nearly through our transformation program, which we set out in 2023. We've got got a a bit bit more to do this work this year with a couple of projects. But the main heavy lifting has now been completed. We have closed the factory in California and built a new factory in in Cleveland and have ramped up production nearly to where we need in Cleveland with a bit more to do this year. We have increased our investment into r and d during the last financial year, which has led to some exciting new products and new markets opening up to us, which we'll talk more about later.

2:32 And we have, over the last three years, developed a business improvement system which we believe can be used to improve not only our own businesses, but any industrial business. And therefore, we are starting to get our head up and think about how we can augment our organic growth with m and a opportunities as well. That is not an immediate pivot. We We just want to signal that over the next five to ten years, we see this as a company that will continue to grow organically as well as through small bolt on acquisitions over time. Overall, we have actually exceeded all of the targets that we originally set for 2027 apart from margin. On margin, we expect to achieve those targets this financial year.

3:30 So with that, I'll hand over to Rich, and he'll take you through the numbers. Thanks, Josh. As you can see, the headlines demonstrate another year of pretty solid progress. The order book up 16% at a record $263,000,000 leaves us pretty well covered going through FY '26 on both helmets and respirators. So that's a great move in the right direction. Revenue growth of 14% was, as Josh alluded, slightly stronger than people expected. And that dropped through to operating profit, which was up 31% in the year to $40,300,000. And my preferred area of focus is return on invested capital. That came in at 18.6% after very strong progress was made reducing the average working capital tied up in the business.

4:18 I imagine we'll probably come back and talk about that a bit more later. Cash conversion of 90% is another good year even after a pretty late burst in deliveries in Q4 left us with a bit of a receivables overhang going into the new year. That receivables overhang has now evaporated. We have been paid for all of those receivables, so that's good progress again. And net debt leverage of below 0.9 times is is a very strong position despite actually quite considerable investment into the business during the year. So revenue growth, ROIC, cash conversion and leverage are now all better than our medium term targets, which were originally slated to be achieved by 2027. And and actually operating margin is well on its way, and we'll and we'll we'll hit that hurdle in '26.

5:10 Moving on to the P and L. As you can see, order intake in the year was very healthy at $352,000,000 Book to bill is 1.12 times. Orders were slightly slower, slightly lower year on year in Team Wendy, reflecting very high call offs against US Department of War Helmet programs in 2024. So coming off a very high base, but you can see that the book is still very well covered going into '26. And actually, those calls will be reasonably lumpy. It's just the nature of the beast. The record closing order book of $263,000,000 benefited from strong particularly strong growth in AVON protection, where actually UK and international orders were incredibly strong. Revenue of 14% growth revenue growth of 14% reflects a very strong performance across the board with AVON protection up 16% and Team Windy up 12% year on year. Operating profit, as I said, of $40,300,000 is over 30% higher than the prior year, resulting in a margin of 12.8, which is 130 basis points higher than 2024, and it is a very helpful step on the road to achieving our medium term target of 14% to 16%.

6:25 Net finance costs reduced by 16% to $5,400,000 largely driven by lower average net debt. And the tax charge of $8,000,000 represents an effective tax rate of 23%, which is where we we think it will stay over the next few years absent any further changes to the tax regime. All of that adds up to adjusted basic EPS of 91.2¢ per share, 35% up year on year despite the step up in tax rate from last year's 17% where we benefited from some one off adjustments. Quick counter through the divisions. AVON protection has has actually had an awesome year. Order intake up 18%, order book up 63%, revenue up 16%, operating profit margin up a 160 basis points at almost 20%.

7:15 This does show the ability of the business to lean into a strong demand environment and drive profitable growth. The growth in orders and backlog in orders and backlog has been largely driven by in international markets, as I said, offsetting a slightly softer year in commercial Americas, which actually saw a very strong year in 2024. Ukraine related demand now accounts for just $13,000,000 in that order book. And, you know, we've always seen Ukraine related demand as something of a of a unicorn. You know, it won't be around forever. But what is interesting is that partly even after stripping that out, all the book is growing very nicely. And and actually, where we are seeing strong demand, which one could argue is is Ukraine related, is is countries that are peripheral to Ukraine and Russia where clearly governments are concerned that, you know, Russia's ambitions might not just stop at Ukraine.

8:14 Revenue growth in the year was driven largely by Australian FM 54 deliveries, strong demand for CVRN boots and gloves for NATO customers, and like I say, semi crane support with another good year for rebreathers. The excellent drop through margin was helped by operational gearing, improved productivity and sales mix. And actually, given the strength of the order book, AVON Protection is exceptionally well positioned to deliver further growth in 2026. As I as I said, order intake in Teen Wendy was a little bit softer year on year, but the backlog remained robust, And the strength in product portfolio is driving an excellent pipeline of opportunities as we enter the new year. Revenue growth of 12% was driven by further growth in military helmets, ACH two deliveries moved towards full rate production, and and actually saw further strong demand for bump helmets and for for a number of customers, but particularly the US Air Force and Navy.

9:12 Operating profit margin nudged four to 4.6% from 3.9% the year before, which is a good improvement, but it's still somewhere off our medium term ambitions. But we are confident of further progress in '26 as we demonstrate the sustainability of the production rate increases that we saw in the last quarter of 'twenty five and as the benefit of cost reduction largely through the transition from California to Ohio comes through to the bottom line. As a reminder, ACH two will grow further in 2026 as we step up the production rate again. And whilst it is profitable, it will remain dilutive at the at the margin level. But notwithstanding this, we do expect further progress on margin as we go through the new year.

10:01 So just moving quickly on to on to the outlook for the year before I hand back to Joss. We we do expect further good growth in helmet deliveries, as I said, as we finish the ACH two ramp up. And we also expect good growth in AVON protection underpinned by the very strong order book in the business. These factors combined will equate to what we estimate to be high single digit revenue growth at the group level. We do expect the financial benefits of the transformation program to drop through this year with a modest weighting to the second half. And even after the additional dilution from the growth in lower margin ACH sales, we are confident that we can deliver our operating margin within our target range of 14% to 16%. As highlighted during the call on Wednesday, we do expect transformation investment to drop to around $6,000,000 in 2026, and we expect return on invested capital will progress nicely as well. And and just addressing one of the questions that was presubmitted, it was pointed out that we have made $20,000,000 of adjustments to operating profit, around 15,000,000 of which relates to the transformation.

11:12 The question was when can we expect these transformation adjust adjustments to come to an end? And the answer is 2026. So '26 represents the last year of transformation adjustments coming below the line. And finally, we expect cash conversion to remain above 80% despite further increases in investment in the business to drive future organic growth. So I think '26 shaping up to be quite a positive one. Yeah. Absolutely. Thank you, Rich. So we continue with our star strategy, which was set out originally in 2023. Though it's not a static thing. Every year, we set new initiatives for the year ahead, and we've already done that for 2026.

12:00 But the big picture remains the same. We have our strengthened system that we use to continually improve the business. That will continue forever, and we still see plenty of opportunities to improve our businesses and therefore drive cash flow and free up resources to invest into the business. Our transformation program, is nearing its end, and this year, as Richard said, is the last year. In advance, we are investing more into r and d. Most of that we expense, so it does impact our profit in the year we spend it. We think that means that we have good discipline around spending our money wisely.

12:47 And in Revolutionize, we continue to work on new products which will support growth in the long term, and we are starting to look at opportunities to acquire other companies to accelerate that growth. And that is a slight refinement of our revolutionized. Slide shows our business improvement system. Starting with strategy, we are unusual in many ways. One of them is the way we do strategy. We actually teach and coach our businesses on how to set strategy, but we want them to set their own strategies because our view is that they are then much more likely to actually execute on their strategies, and we feel that where most strategies fall down is that they don't actually get done and translated into action.

13:48 We translate our strategy into action through an objective and key result setting process where we cascade the objectives all the way through the organization to align every single employee to our strategy. We have our own proprietary Star Academy to build capability in our people. A lot of that is actually focused around how you continually improve a business and the tools enable you to do that. And this year, we sent 30 people to Japan to learn from people like Toyota that have been doing it for fifty or sixty years. And actually next week, we're sending another 20 people to Japan. We feel it's a worthwhile investment in people development.

14:37 And then our strengthened system continues to deliver results, and we continue to improve and build out the system itself. These are our key operating metrics. Our view is that if we improve these metrics, the profit will follow. Since we originally launched the strengthened system, we've improved productivity 28%, obviously, than offsetting inflation. We've reduced scrap by 62%, and we've improved inventory turns by 46%. And we see more to come on inventory turns, freeing up more cash to invest into the business. Over the summer, we needed to increase production in our Cleveland factory to meet customer demand. We have considerable demand for helmets, actually from all around the world, but particularly the Department of War in The US.

15:42 It's a nice problem to have to have too much customer demand, but does also cause challenges. I was actually in Cleveland for two months myself, and we ran 14 improvement projects over two months with a view to increasing production. And over that time, we actually tripled production on our two main department of war lines as these charts show. AVON Protection also had a great year on using our strengthened system to improve its business. We could have used any number of examples, just a few on this page. In rebreathers, we improved productivity by nearly 80%.

16:28 We reduced scrap by over 50%. And in boots and gloves, which is not product a product line we talk about very much, but it's actually been wildly successful. We've got enormous demand for our chemically resistant boots and gloves. So much demand, we've actually got two years order backlog on it. So we also needed to increase production there. We managed to increase production rates 47% in the year without really adding a lot of presses. We are now adding four extra presses to increase production even more, although we managed to get those secondhand from a company that scaling back the rubber production. If you actually look at our results as a video of the transformation of our UK site, it's actually the only one we did a time lapse of, which is a shame, really, because the other sites would have shown something similar. But it's worth a watch for those of it interested.

17:27 The point we're trying to make is that our factories have changed almost every single week as we move them from batch manufacturing to flow. One of the reasons we are very happy to talk about our strength and system and I think a copy of our book on the strength and system is available on our website. It is one thing to know how to improve a factory. It is quite another thing to actually do it, and the point we're trying to get across is how much is involved in actually moving a factory from batch to flow. This year is a pivotal year in the sense that we are moving from the fixed stage of our strategy to focusing entirely on growth.

18:19 And we have very good markets. They provide a tailwind. We certainly think it's better to be swimming with the current than against it. Defense spending is going up. The threat of chemical attack is going up considerably. We were told by someone from the Ukrainian front line only last week actually that the Russians have had 5,000 gas attacks over the last year against Ukrainian troops. All those troops need gas masks and everybody proximate to Russia. So many of the other countries on the fringes of the Russian border are also stocking up on gas masks for the same reason. And numbers of military personnel are increasing, and they all need resistance against chemical weapons.

19:11 And gun crime in The US continues as a long running trend of increasing, unfortunately. We're increasing investment into innovation. We do that by using our strengthened system to free up cash and resources, some of which we then put back into the business in the form of investment in engineering. And we now have an ability because of our rock solid balance sheet to accelerate through inorganic growth as well or acquiring other companies. Last year, AVON Protection saw a 63% increase in its order book. Its pipeline of opportunities beyond that was also up 80%.

19:56 A lot of that demand is for masks from the US military and Australia, which is a new military that we won a year ago, Rich, was it? Mhmm. Continue to sell masks under our NATO framework contracts and are now up to how many countries, Kathy? 16. 16 countries boots and gloves and masks and filters under the NATO framework contract. We won three new navies last year for rebreathers. We bid for two more and hope that we will win win one of those or both of those this year. And looking a bit further out, we're still working with the Department of War on filters. Although our filters line actually are maxed out at the moment on one shift, but we could add another shift to that if we can win more work from the Department of War. And we are expecting to win more from them this year. Our new Miter mask and goggles, we are actively working with four out of five of the special forces groups across the Five Eyes nations, and typically, general purpose troops tend to follow special forces.

21:09 And in Ensemble, we have interest from The Middle East, Europe, and America on our chemically resistant suits. We developed the MITRE system using our own money. But interestingly, we've now won two programs of record from the Department of War to take the MITRE system forward and add functionality to it, like hot swapping filters, filters that mold closer to your face so that you can get a better cheap world on rifles, new communications system, and increased protection generally.

21:57 The important thing is that they are actively trialing our products, giving us feedback on it, and paying for the development of that system to meet their needs, which increases the likelihood that they will then take it up and purchase it once we finish the development stage. In Ensemble, there's a couple of pieces of good news. The first is that our strategy of selling complete systems involving chemically resistant boots and gloves and suits and masks and powered air systems, has paying off. We have won orders with Turkey for that system, and we are working actively at the moment with the US Department of War on two suit programs. Well, one suit program, but they're looking at two of our suits as potentials to sell into the US military, and they're actually funding a testing program with us at the moment, which will run through this year, we hope, and could possibly result in the sale of around 700 suits this year. It could be less depending on how we get on in the first phase of that project.

23:22 We did lean forward and spend more on r and d during the year. We spent $14,000,000 of on r and d, up a couple of million dollars. With that money, we developed a new generation of our CS PAPA system, which is multi mode. When when you don't when there's oxygen in the environment, it will pump air through our filters into the mask that enables users to breathe more freely and exert. They're able to exert more than they would be breathing through normal gas masks. But in addition to that, if they suddenly find themselves in an an area with no oxygen, they can switch to supplied air systems and carry on their activities.

24:12 We've also developed a new communication system for our masks. It actually goes across all of our masks and enables users to protect project their voice out to an audience. Very useful, for example, for Riot Place. It also connects to their communication system so that they can talk to other people wearing our systems. In rebreathers, we are working on a shallow water rebreather system. We're also working with various militaries to try and get some more funding for that development. And we are working on a novel new filter which actually replaces three existing filters with one, considerably reducing the logistics burden for people using our masks.

25:04 Team Wendy, we've got plenty of demand for the IHEPS helmet for our general purpose helmet for the US military, ACH, and for Axel from the Australian forces. One of the other things we probably haven't talked enough about is we sell a very large amount of bump helmets to the US Navy, which they deploy across the fleet to users. In In fact, fact, if you do an if you see an aerial view of an aircraft carrier in the US Navy, you'll see each team has different colored bump helmets on them. We make those helmets. We actually sold 25,000 of them last year to the US Navy. And looking forwards, we've got good demand for our epic helmets from militaries internationally and from police and first responders in The US.

26:01 We launched a brand new helmet last year called RifleTech, and we're seeing good demand from that. From foreign militaries, when we say foreign, we mean non US. But also interestingly from police forces in America, which is a bit of a surprise to us because it's reassuringly expensive helmet. And we are gaining market share in The US police force market. Last year, we were up 15% in that market, and the market was probably up four or 5%. This is the new RifleTech helmet. It's innovative in many ways. It can stop an AK 47 bullet at muzzle velocity. It also has an innovative pad system, which makes it cooler to wear and also more comfortable. It's so comfortable that when we were testing it, somebody forgot to take it off at the end of their shift and went home with it on their head.

27:01 It also looks great, which is very important. One of the first rules of being in the military is to look cool. I'm told the second rule is not to get lost. And the third rule is if you do get lost, make sure you look cool. So RifleTech does meet on those requirements. Well, I'm not sure it helps people not get lost, but the other requirements. We continue to invest in helmets of the future. We are being funded to carry out research on how you minimize traumatic brain injury, from blasts, for example, from improvised bombs. What does all that add up to? So in 2023, we set up targets originally actually for 2027, where we said we thought we could grow the business on the top line by more than 5%.

27:59 We said we thought we could get margin to 14 to 16%. So we'd get ROIC or return on invested capital above 17%, and we thought thought we we could could deliver deliver about about 80 to a 100% cash conversion over that period. And we thought we could get leverage below or within a range of one to two times our profit. We've actually achieved all of those two years early apart from the margin one where we got a little way to go. In fact, if we were to look at the exit rate for the last quarter, we would have been pretty well there. But we think we'll get there for the full year in 2026. So we will have delivered every target, at least the year early, most of them two years early.

28:45 So in in oh, risks. Well, yes, we're unusual. I think possibly still unique. I'm still hoping someone might copy us, but they haven't yet, as far as I know. But we are quite front and center about our risk and opportunities. We think that every business has risks and opportunities. In our case, the the thing we're still worrying about most is how do we successfully, increase production yet again in Cleveland. That means we've gotta sweat the assets harder. We've gotta run the lines faster. We need to avoid having to rework any products. We need to make sure the quality is 100% perfect. We have struggled to to recruit the people we need. We've recruited 300 people in the last year.

29:35 Many of them are amazing. Some of them, perhaps perhaps are not what we want. So there will be some selective increases in capability as we go through this year. So I think that's probably our biggest risk. The other risks are a bit more minor. We are seeing a new entrance potentially into the IHEPS program. And irritatingly, that's actually nothing to do with us. Our competitor failed to pass first article testing first time around, and the Department of War was very keen to have two suppliers. So they actually funded another supplier to get them into the program. That third supplier hasn't yet passed first article test, but they are in testing. So we'll see if they get that.

30:26 We don't expect it to have a big impact on our volumes over the next couple of years. On the opportunity side, we still see plenty of opportunities to expand our helmets internationally, and we do see opportunities to for further margin expansion If the strength in system continues to deliver as well as it has been, we could see some upside there. Similarly, if volumes were a bit higher than expected, we'd get some drop through, and that would help our margins. So with that, well, over to you guys. Oh, Oh, no. Not with that. There's a summary. And the summary, we are coming to the end of the transformation stage of our strategy.

31:13 We have fantastic world beating products, and we are investing in technology to deepen the competitive moat around the business, and we continue to invest in patents. We are increasing market share, and we have supportive growing markets. And we have a business improvement system, which we think is a recipe for success both in our own businesses and if we were ever to acquire another business. So with that, I'll hand over to you guys. That's great, Josh, Rich. Thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated in the top right corner of your screen. While the company take a few moments to view those questions submitted today, I I would like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

32:06 I'm Joss Rich. As you can see, we have received several questions throughout today's presentation. If I may not hand back to you and kindly ask you to read out the questions where appropriate to do to do so, and I'll pick up for you both at the end. Thank you. Well, the first question in front of us is how do we balance product development between meeting known program requirements and pursuing disruptive innovation? I think in general, we try to deeply understand the needs of our customers. The US Department of War is particularly helpful in that they run events that they invite us to where we can show our prototypes to the users, and they will actually trial them sometimes for two or three days, and we get feedback on them that enables them to improve them.

32:58 We don't always develop stuff in response to programs of record, but we generally do develop things in response to a customer need. Good examples of that of MITRE was actually originally a program that the Department of War never actually went went forward with, but we thought the idea was good and we thought the need was real, so we developed that with our own money. That's been interesting to us because once they've seen the product we've developed, they now are funding for its development to go further. Similarly, chemically resistant suits, we knew there was a program in America. We weren't on it, but we thought we could make a better suit.

33:43 We understood the customer need very deeply. We developed the suits with our own money, but now the Department of War has invited us to submit that suit in response to bids because they can see the technology we've got. So I think, overall, to to spend money wisely, we like to make sure we're very close to the customer, but we will lean forward ahead of a program of record. The next question is much of the current backlog benefits from contractual inflation pass through? Well, I mean, there'll be a bit of inflation in there, about 3%, I guess. Yeah. Not not much. Not Not much is the short answer, though. Yeah.

34:30 How much competition do we have for our various products? Very much depends on the products. In masks, there isn't a lot of competition for masks as high end as ours. In filters for the Department of War, there's directly two suppliers, although the other supplier, three m, appears to have multiple its filter line. We're not too sure whether they're going to compete with us going forwards. There are cheap Chinese filters, and probably from other countries as well. However, they're not built for military applications and not as robust as our filters, so I wouldn't advise anyone to buy them. In rebreathers, there's one, possibly two competitors, although none of them have our technology and we have a patent moat around our rebreather that makes it pretty hard, perhaps impossible for anyone else to catch up with us.

35:25 In helmets, there's a lot more competition, especially at the lower end of the market. Lots of people can make aramid helmets. That's Kevlar. A few people can make polyethylene helmets, which is what we make, high molecular strength polyethylene. There's only one manufacturer that can make a rifle resistant helmet, and that's a company called Gentex who we respect a lot. They're very good. Although we would say their rifle helmet isn't as good and doesn't look as cool. What else? Let's think about it. Yeah. That's that's largely it. Now the next question is linked. I mean, what are your current market shares and what do you think are realistic market share targets over the next few years?

36:12 I mean, if you just split the business in two and look at respiratory on gas masks, we have a pretty strong market share currently. Our our market share in North America is probably around 91%, 92%. Even in Europe, it's it's pretty high between sixty and seventy. And the reason why it isn't higher is because number of nations choose to buy domestically sourced product, which is entirely understandable. I'm not gonna put the market share target for respiratory, but I I I can guarantee that it's unlikely to go much above 100%. So if we're looking to grow respiratory, we need to not just grow market share, but also grow wallet share, which we are seeking to do. And Josh has touched on a few of the the innovations that we we come out with around boots and gloves, suits, powered and supplied air products.

37:08 So that's that's how we're seeking to grow that business. On rebreathers, we our market share, I don't actually know the answer to that question, but it probably isn't that high. Rebreathers get installed into the market, and then they last quite a long time. We're a relatively new entrant to that market, probably having sold our first rebreather in about 2018, 2019. But what I will say is that of all of the bids that we have entered in the last five years, we've only lost one, and it was quite a small one. So that market share is growing very, very nicely. And then in helmets, just looking at The US, our market share is probably 25% or thereabouts within the US military. It's growing from around that level to 50% over the next few years based on contracts we are already supplying under.

38:04 We have seen market share growth in US commercial, as Josh alluded to, but our homeless business is largely US centric. And so market share outside The US is is minimal, but we do think that there's a huge opportunities to grow that over time. So we've been investing in sales and marketing activities quite heavily in 2025. We will continue to do so in '26. And hopefully, we'll be able to report back with some market traction outside North America when we talk to you next year, of course. Thank you, Rich. Next question is, is there a shelf life of helmets? The answer is yes. Well, they're warranted for a period. It depends a bit on the helmet actually. Some helmets are warranted for five years, some for ten. Our epic helmets are actually warranted for ten.

38:52 In America, especially, they won't use the helmet beyond the warranted period because they're worried about liability. However, some countries will refurbish helmets. Australia is a good example. They have a very good refurbishment program for our exfil helmet that we sell them. That's also good for us though. They bring them in after five years. They sand them down. They repaint them and they put new pads in them, maybe new retentions and we make pads and retentions so we get good aftermarket on them. And actually, we are expanding that into masks as well. We've got we've just done a deal actually with the UK police force where after five years, they've sent the masks back to us and we refurbished them, make them as good as new and sell them to a game sell them to them again.

39:44 The next question is when the Department of War funds development, do they own the IP? The answer to that is it depends a bit on the contract. Sometimes they will own the IP that they have paid for, but they never own the IP that we've already developed, what we call background IP. MITRE is a good example of this, actually. So we develop MITRE on our own dime. If they pay us to develop a new communication system or something, then that IP might be at least shared with them. But they can't make the mask because we already developed that before we started working with them. Let's move on to the next one. Thank you, Pete. Al, we're sore about we're sore about this.

40:33 If Pete's question is, as industry veterans, if you saw us through your thinking on m and a, with there was a recent Berenberg note that she initiated. Investo. Sorry. Investo. They initiated coverage on us. They they called us industry veterans and then more recently, The Times, also called me an industry veteran, which I'm bit sore about. We're very bitter about this. Otherwise, agent, nothing else. But anyway, we have been around defense and industrials a long, long time. I've been in industrials my whole career. Our thinking on m and a is we firstly, we're not in a hurry to do anything, but we do see some areas of our supply chain that we could usefully derisk if we acquire companies.

41:30 That's particularly there's a bit of that in rebreathes actually, but it's particularly true in suits where we have quite a complicated consortium of partners. We may be able to increase supply chain reliability by buying some of those. There are also areas where we would like to control the IP a bit more, and that may lead to acquisitions. So I would look at those as small acquisitions to bolster bolster supply chain resilience and get more control of the technology. And then we're also we would also be interested in bolt on acquisitions that expand market share, most likely in helmets because we already have very high market share in in the respiratory products. And the the final piece of that, think, is we do have very strong distribution channels that we've built over twenty odd years of supplying into The US.

42:30 If if we can find opportunities to push more through those distribution channels, that feels potentially very synergistic if it's aligned to our core areas of business. I think we've probably answered what's the ideal acquisition. Yeah. I mean, I could probably embellish the answer. We we believe that most companies in the industrial space still manufacture in batches, and that includes AVON when we, when we came in. Interestingly, when we arrived in AVON, I was told categorically by the factory manager in The UK that there was no further room for improvement because they'd already been doing continuous improvement for the last twenty years.

43:22 And, And, yeah, we have managed to improve every single operating metric in that factory. We have relayed out absolutely everything. There's no piece of equipment that is in the same place as three years ago. And just to give you a a real example, three years ago, they scrapped 40% of every filter they made for the, UK MOD. And as of last week, they scrapped point 5% of what they made, which obviously considerably enhances our profitability. We think there are lots and lots of companies out there that are similar to how we found AVON three years ago, running batch manufacturing with high levels of scrap, poor quality, and high inventory.

44:13 If we could find a company that had some good contracts and some good contacts, but was manufacturing inefficiently and had high levels of inventory, we would for sure be interested in that because we'd be very confident we could improve them. That's great. Fantastic, Joss. Rich, if I may just jump back in there and thank you for addressing all those questions from investors today. Over, Joss, before I redirect investors to provide you with a feedback, which is particularly important to the company, could I please ask you for a few closing comments? We forgot one more question, actually. Given the Department of War and Trump localizing reduction, do you see AVON being a US target?

45:00 Not not really. It's not something we we worry about. Our job is to keep improving the revenue and the profit. The share price will follow. If we're priced right, shouldn't be particularly attractive to other people. And And and and just to be clear, I mean, the localization of supply for The US is not new. And we we make in The US for The US, and we always have done. So to all intents and purposes, when US Department of War is acquiring from AVON, they're acquiring from a US company. Yeah. Not too sure how to interpret Bob's question. How many of these lots and lots companies can you and your colleagues cope with? I mean, in terms of acquisitions, that's gonna we'll build the capability over time.

45:46 Obviously, Rich and I, many of you know our history from as industry veterans. We've we've both got mergers and acquisitions backgrounds. We're very familiar with it. I actually started life as a mergers and acquisitions lawyer, though that was quite a long time ago. But, yeah, we certainly feel we have the capability, but we wouldn't be looking more than one or two acquisitions a year. Certainly not. When can we expect the adjustments of profit? Oh, I think I I answered this question earlier. But when can we expect the adjustments to profit for the reorganization to end? And the answer is 2026. So investment in transformation in 'twenty four was $13,000,000 in 'twenty five, it was $15,000,000 In 'twenty six, it will be $6,000,000 as set out in the results, and it will be zero from there on.

46:37 Very good. Well, thank you, for your questions. We appreciate them a lot. Very interesting to talk to all of you guys. We think 2026 will be another year of progress for this company. We think we see it moving forward on all metrics, actually, and we have probably the biggest pipeline of opportunities that we've ever had partly helped by the market, partly helped by the investment we made into research and development. So we look forward to moving out of transformation and focusing on growing the company. That's great, Josh, Rich. Thank you for picking up those questions, and thank you once again for updating investors today. Could I please ask investors not to close this session as as you will now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations.

47:27 This will only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of AVON TECHNOLOGIES PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.