TIDMAVON
RNS Number : 1866T
Avon Rubber PLC
13 November 2019
AVON RUBBER P.L.C.
UNAUDITED PRELIMINARY RESULTS FOR THE YEAR
ED 30 SEPTEMBER 2019
A TRANSFORMED OUTLOOK
Paul McDonald, Chief Executive Officer:
"2019 has been a transformational year for Avon Rubber. We have
delivered strong results ahead of expectations, secured $340m of
long-term contracts, announced the $91m acquisition of 3M's
ballistic protection business, and continued to build our order
book to provide excellent visibility for 2020.
These results reflect the success of our strategic focus on
growing our presence in our core markets and investing further in
our product portfolio to meet more of the requirements of our
expanding customer base. In the last two years, we have built
visibility and breadth within our contract portfolio, enabling us
to deliver another record performance, and we enter the new year
from a position of strength.
The acquisition of 3M's ballistic protection business will
significantly bolster our personal protection offering and
accelerate our long-term growth prospects. The transformation
during the year leaves us well positioned to deliver further
success in 2020 and beyond."
30 Sept 30 Sept % Increase % Increase
2019 2018 Reported Constant
Currency
------------------------------ ---------- ---------- ----------- -----------
Orders received GBP181.9m GBP173.3m 5.0% 1.4%
Closing order book GBP40.4m GBP37.8m 6.9% (0.7%)
Revenue GBP179.3m GBP165.5m 8.3% 4.2%
Adjusted(1) operating profit GBP31.3m GBP27.3m 14.7% 10.4%
Operating profit GBP14.4m GBP22.8m (36.8%) (39.4%)
Adjusted(1) profit before
tax GBP31.4m GBP27.2m 15.4% 11.2%
Profit before tax GBP13.7m GBP21.6m (36.6%) (39.2%)
Adjusted(1) basic earnings
per share(2) 91.7p 77.1p 18.9% 14.1%
Basic earnings per share(2) 46.9p 64.9p (27.7%) (37.3%)
Diluted basic earnings
per share(2) 46.5p 64.4p (27.8%) (37.3%)
Dividend per share 20.83p 16.02p 30.0% 30.0%
Net cash GBP48.3m GBP46.5m
------------------------------ ---------- ---------- ----------- -----------
Operational highlights
-- $91m agreement to acquire 3M's ballistic protection business expected to complete during H120
-- First deliveries under the $246m, 5-year M53A1 mask and
powered air system contract with the U.S. Department of Defense
("U.S. DOD")
-- First deliveries under the $93m, 5-year M69 aircrew mask contract with U.S. DOD
-- U.K. General Service Respirator ("U.K. GSR") user acceptance testing passed
-- Law Enforcement revenues impacted by the U.S. Government partial shutdown
-- Strategic decision to exit the Self-Contained Breathing
Apparatus ("SCBA") product line in the Fire market and focus on our
core Military and Law Enforcement SCBA markets
-- Improved farmer confidence reflected in milkrite | InterPuls
order book growing ahead of revenue
Financial highlights at constant currency
-- Strong financial delivery - revenue up 4.2%, adjusted(1)
operating profit up 10.4% and adjusted(1) earnings per share up
14.1% - all ahead of expectations
-- Operating profit and basic earnings per share impacted by
exceptional items, up GBP12.4m, due to the Fire SCBA exit , one-off
pension benefit equalisation, and acquisition costs
-- Avon Protection revenue grew by 5.9% with Military revenue growing by 26.1%
-- First deliveries of higher margin M53A1 mask systems and
lower volumes of lower margin M50 systems, contributed to
adjusted(1) EBITDA margin growing to 22.0%
-- Adjusted(1) basic earnings per share up 14.1% to 91.7p,
benefitting from a reduced tax rate of 10.8%
-- Operating cash conversion from adjusted(1) EBITDA of 63.5%,
impacted by the timing of the fulfilment of the $16.6m Rest of
World mask contract, resulting in net cash of GBP48.3m up
GBP1.8m
-- Final dividend per share of 13.89p up 30%, resulting in full
year total dividend of 20.83p, also up 30.0%
Outlook
-- A strong opening order book of GBP40.4m provides confidence for 2020
-- Full year of revenue and follow-on orders expected for M53A1 and M69 contracts
-- M50 sustainment contract negotiations progressing with the U.S. DOD, award expected in 2020
-- Strong pipeline of Rest of World opportunities with first
orders and deliveries of U.K. GSR expected in early 2020
-- Return to growth for Law Enforcement, with positive momentum entering 2020
-- Stabilising dairy market conditions support improved farmer
confidence and growth expectations for milkrite | InterPuls in
2020
-- Acquisition of 3M's ballistic protection business expected to
complete in the first half of 2020
-- Post-acquisition expect to return to a net cash position by early 2021
Notes:
(1) The Directors believe that adjusted measures provide a more
useful comparison of business trends and performance. Adjusted
results exclude exceptional items, defined benefit pension scheme
costs, the amortisation of acquired intangibles and discontinued
operations. The term adjusted is not defined under IFRS and may not
be comparable with similarly titled measures used by other
companies. A reconciliation of reported numbers to adjusted numbers
is provided in note 2 to the half year financial statements.
(2) Earnings per share and adjusted earnings per share are
presented on a continuing operations basis.
For further enquiries, please contact:
Avon Rubber p.l.c.
Paul McDonald, Chief Executive Officer 01225 896300
Nick Keveth, Chief Financial Officer
Ryan Mahoney, Deputy Chief Financial Officer
MHP Communications
Andrew Jaques/Charlie Barker/Peter Lambie 020 3128 8570
Analyst meeting
An analyst meeting will be held at 9.00am this morning at the
offices of MHP Communications, 6 Agar Street, London, WC2N 4HN. The
analyst meeting will be webcast live on:
https://webcasting.brrmedia.co.uk/broadcast/5da5985034a3cf1389e7d7a5
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 Rubber is an innovative technology group which designs and
produces specialist products and services to maximise the
performance and capabilities of its customers. We specialise in
Chemical, Biological, Radiological and Nuclear ("CBRN") and
respiratory protection systems, as well as milking point solutions
through our two businesses, Avon Protection and milkrite |
InterPuls.
Avon Protection is the recognised global leader in advanced CBRN
respiratory protection systems for the world's Military, Law
Enforcement and Fire markets.
milkrite | InterPuls is a global leader providing complete
milking point solutions to dairy farmers across the world with the
aim of improving every farm it touches.
For further information, please visit our website:
www.avon-rubber.com.
CHIEF EXECUTIVE OFFICER'S REVIEW
I am delighted to report on a transformational year for Avon
Rubber where we have delivered against all three elements of our
growth strategy. The results reflect our ongoing initiatives to
grow our core revenue and selected product development to create a
business that is more sustainable for the future, with improving
operating profits and cash flows.
Our strategy has been focused on enhancing the future visibility
and sustainability of our growth through diversifying the revenue
we generate from our product portfolio by delivering more products
to our existing customers, as well as broadening our customer base.
This has supported the growth in our order intake and revenue in
2019, as well leaving us well positioned for 2020 with a strong
opening order book. The broader range of products and customers
provides the Group with more flexibility to deliver consistent
growth in revenue and operating profits going forward. This was
evidenced by our performance in the second half of 2019, following
the challenging market conditions experienced earlier in the
year.
The strong balance sheet position and cash generation from the
business has allowed us the scope and confidence to pursue both
acquisition opportunities and invest in product development to
support future growth. The acquisition of 3M's ballistic protection
business is a milestone moment for Avon Rubber which will
significantly add to our personal protection portfolio and greatly
accelerate our future growth prospects. We remain committed to
research and development and investing in our product portfolio
maintaining the competitive advantage for our existing range, as
well as continuing to develop new products in partnership with our
customers to meet their ongoing needs.
I am confident that our achievements this year have transformed
the outlook for the business. We have a greater and wider range of
opportunities for both Avon Protection and milkrite | InterPuls to
continue delivering value for our customers, our people and our
shareholders in the future.
STRATEGY
Our strategy is based upon creating shareholder value through
three key elements:
-- Growing the core by maximising organic sales growth from our
current product portfolio and improving our operational
efficiency;
-- Pursuing selective product development to maintain our innovation leadership position; and
-- Targeting value enhancing acquisitions to complement our existing businesses.
GROWING THE CORE
Avon Protection
Excellent growth across our Military business with both the U.S.
Department of Defense and our Rest of World customers has resulted
in Avon Protection delivering another record year. This was
achieved through our strategic focus on improving and expanding our
product offering to provide a broader portfolio of products to meet
more of the needs of our customer base.
Expanding our Military product portfolio and customer base
The award of two very significant long-term contracts with the
U.S. DOD for the M69 aircrew mask and the M53A1 mask and powered
air system, which have a combined maximum contract value of $340m,
confirm Avon Protection as the sole source provider of General
Purpose Masks, Tactical Masks, Powered Air Systems and Tactical
SCBAs across the entire U.S. DOD.
The M53A1 framework contract, which also covers additional Avon
Protection products, including the ST54 self-contained breathing
apparatus, has a maximum value of $246m and a minimum 5-year
duration. This framework is accessible to a number of different and
new customers within the U.S. DOD, including all four military
service branches and other national and federal agencies. We
received the first order under the contract earlier in the year,
worth $20.2 million, which we have partially completed during the
year and expect further orders during 2020.
The M69 sole source contract to supply the U.S. DOD with the M69
Joint Service Aircrew Mask for Strategic Aircraft, related
accessories and engineering support, extends Avon Protection's
portfolio reach into the aviation sector for the first time and has
a maximum value of $93m and a minimum 5-year duration. As with the
M53A1, we received the first order under the contract, worth
$17.8m, earlier in the year and we also partially completed the
first deliveries this year.
These important contract awards from the U.S. DOD mark our
transition away from the historic focus on the M50 mask system, to
a multi-product modular portfolio meeting a wider range of needs
across all military branches of the U.S. DOD. Notwithstanding this,
the M50 mask system remains an important part of the portfolio and
positive discussions regarding the future requirements of the U.S.
DOD and their anticipated sustainment volumes are ongoing and we
expect to receive a contract award in the new financial year. In
addition, we have a highly visible pipeline of Rest of World
military opportunities and are in active dialogue with a broad
range of customers who are looking to upgrade their capability to
the FM50 mask system.
We re-established our relationship with the U.K. Ministry of
Defence ("U.K. MOD") when we were successful winning the contract
last year to re-supply their GSR mask. Subsequent to the award, we
have been preparing the tooling and processes for the full
manufacturing requirements as well as undertaking customer
acceptance testing, which was completed in the final quarter of the
year. We expect the first orders and deliveries to follow in early
2020. Through those activities we have been able to demonstrate to
the U.K. MOD our focus on quality and technical expertise, and as a
result, we see further opportunities to deepen our relationship
with the U.K. MOD, leveraging from our wider product portfolio.
We launched our MCM100 deep-water rebreather in 2018 and
completed the first large order from the Norwegian Military during
this year. The MCM100 has opened up a significant number of new
opportunities with the U.S. DOD, European and Rest of World
Militaries. We have had an active year of dive trials and supplied
a number of evaluation units, which has enabled us to demonstrate
our leading next generation technology to this demanding user group
of military divers.
Our continuing strong relationship with all branches of the U.S.
Military has enabled us to develop and bring to market a full suite
of respiratory protection products including masks, PAPRs and
SCBAs. Due to the modularity of our product offering, we can offer
a unique and combined product solution to meet the budgets and
differing usage requirements of other potential Military
customers.
The breadth of our product offering, and commitment to ongoing
investment in research and development in partnership with our
customers is a core strength of our model. This means we are in a
very strong position to continue to deepen our existing customer
relationships and pursue new opportunities that our world-leading
reputation is continuing to generate.
Growing our Law Enforcement business
This year the strong momentum in our Law Enforcement business
was interrupted by the impact of the partial shutdown of the U.S.
Government at the start of 2019, restricting some of our key user
communities' access to their operational funding and their
administrative capability to place orders. The shutdown had a
significant impact during 2019 and whilst purchasing activities
returned to normal in the second half, affected customers were
unable to accelerate their procurement processes to fully mitigate
the first half delays. Despite the interruption, the Law
Enforcement community is still showing a strong demand for our
protection products as the elevated environment of CBRN threats
remains high on the agenda.
We continue to see good market penetration with U.S. and Rest of
World Law Enforcement customers, where we have been able to
demonstrate the benefits our market leading portfolio and modular
product range to meet the diverse needs of a broader section of
customers who are responding to the changing threat levels. We
expect to continue to grow our market share in all of our key
markets, which will support a return to growth in 2020 in
anticipation of a more stable political environment to allow us to
leverage from our product innovation leadership position.
Exiting the Fire SCBA market
Given the breadth of our personal protection offering following
the acquisition of 3M's ballistic protection business, we have
reviewed our participation in the Fire SCBA market. Participation
in this market has helped us develop and advance our capability
with our SCBA portfolio while meeting the needs of our Fire
customers. The capabilities and knowledge that we have gained
during our participation in the Fire market has supported the
development of the ST53 and ST54 SCBA products for users in our
core Military and Law Enforcement customer base. In 2019 we sold
more of our current range of SCBA products to Military and Law
Enforcement customers than to the Fire market. The ST54 is one of
the central products attached to the framework $246m M53A1 contract
award this year to meet all the tactical requirements of the U.S.
DOD. The expertise we have generated in SCBA technology now sits
within our wider Military and Law Enforcement R&D teams who
will ensure we retain our technology leadership in this area.
The Fire market remains highly competitive with a fragmented
customer base where we have a small market position and compete
against much larger players. This means we generate margins and
returns that are significantly below our strategic targets. We have
therefore taken the decision that it is the right time to move away
from our participation in the Fire SCBA market and reallocate
resources to focus on our core growth opportunities with our
Military and Law Enforcement customers. In 2019 revenues relating
to the Fire SCBA product line were GBP6.7m.
We will continue to stay committed to the argus thermal imaging
camera technology which continues to contribute to our revenues and
profit. The argus range is a trusted brand for firefighters and the
full range of NFPA approved products provides customers with
multiple entry points on a cost or capability basis. During the
year we saw increased volumes across our full range of products
from the premium Mi-TIC S to the more cost effective Mi-TIC E
solution to maintain Avon Protection's position as a leading global
supplier of certified thermal imaging cameras.
Moving forward to the half year results in May 2020, we will
report on a combined 'First Responders' line of business that
incorporates both Law Enforcement and Fire.
milkrite | InterPuls
We have continued to focus our strategy on enhancing our
position as the globally recognised milking point experts. The
dairy market is increasingly moving towards industrialised farming
with greater levels of closures and consolidation of smaller farms
but importantly with no reduction to cow numbers as mega dairies
grow. At the same time, the growing global population and
increasing consumption of dairy products per capita has resulted in
increasing demand for dairy-based products which support these
market dynamics and the drive to deliver improvements in farm
efficiency and animal welfare. The milkrite | InterPuls product
portfolio is primarily focused on efficiency and animal welfare
and, combined with our knowledge of our customers and service
focus, we see medium and long-term opportunities for broadening the
geographic reach of our products to maximise the benefit from these
changing market dynamics.
Maintaining our Interface leadership
We have a global market-leading position in Interface, with our
Impulse and Impulse Air ranges designed to maximise animal health
and milking efficiency. Our focus on innovation in Interface
products ensures that we maximise our competitive advantage and
maintain our market leadership position. In addition, we continue
to focus on expanding our global dealer network to maximise market
coverage and access to new customers.
Expanding Precision, Control & Intelligence (PCI) sales
support
We have an advanced range of PCI products designed to deliver
milking point efficiency and our emphasis is on establishing
reference farms alongside a specially trained and focused sales
force who can support a broad technical dealer network to provide
an upgraded sale and support capability to our customer base across
all geographies. During the year, we have continued the progress
from 2018 by focusing on our technical sales specialists and
capability in our North American team. We are focused on leveraging
from our established PCI reference farms and market leading
Interface platform to align the more technical PCI products to the
benefits they can bring to our customers in the performance and
efficiency of milk production. The PCI products are importantly
fully compatible with legacy OEM dairy systems which provides
farmers and dealers flexibility to choose the best equipment
solution.
Growing the Farm Services lease ownership model
The unique Farm Services model was developed to offer farmers an
alternative entry point to some of the core elements of our product
portfolio including our clusters, pulsators and tags on a lease
hire basis. The model offers a fully incorporated service and
warranty scheme managed directly with the farm and provides farmers
with an additional option of accessing the whole product portfolio
and the full purchase model of Interface and PCI.
This year we have seen a pause in the growth of this model due
to difficult market dynamics particularly in North America during
the first half of the year. Our customers continue to see the
benefit of accessing our product range on a lease hire basis but
the growth from farms taking up Farm Services was offset by
closures of smaller farms, as dairy farms consolidate.
Farm services ultimately represents the future delivery platform
for our increasingly advanced products, which provides a direct
contact for service and support with our customers.
With stabilising market conditions we expect Farm Services to
return to growth in 2020.
Continuous focus on operational efficiency
Ensuring we deliver maximum operational efficiency whilst not
compromising on excellent customer service is a constant strategic
focus across the manufacturing and service operation for Avon
Protection and milkrite | InterPuls.
For Avon Protection our well established and efficient
manufacturing operation has enabled us to maintain excellent
product quality control and reliability across our product range.
As we continue to expand our product portfolio and move up the
value chain in personal protection, with greater focus on more
technical solutions for mask systems and supplied and powered air
products, we are focused on ensuring that we maintain high
productivity levels whilst being able to meet all of our customers'
requirements. To better align product development and
manufacturing, we will be relocating our Chelmsford, U.K. thermal
image camera development facility to our main U.K site in
Melksham.
For milkrite | InterPuls to achieve a greater level of
production efficiency and customer service levels, during the year
we took the opportunity to consolidate all our European commercial
operations into our existing Italian facility. This provides a
single customer service point for all customers. At the same time,
we have also transferred the European liner production in house to
support our operational efficiency.
SELECTIVE PRODUCT DEVELOPMENT
Continued investment to maintain our competitive advantage and
to expand our product range
We have continued our investment this year in enhancing the
technical capability of our existing portfolio and developing new
products that will deliver future growth for the business. The
majority of our development pipeline is designed in partnership
with our customers to ensure that their performance requirements
are met whilst ensuring we deliver the highest commercial returns
on our investment.
The development expenditure in the year has predominantly
focused on Avon Protection, with significant investment in the U.K.
GSR, MCM100 and next generation hood programmes. Development
expenditure for milkrite | InterPuls included the compact milk
meter to address the market for smaller milk producing animals.
In 2019, we invested a total of GBP8.2m (2018 GBP9.7m),
representing 4.6% of revenue (2018: 5.9%), in research and
development. Over the medium-term we expect to maintain the level
of funding at around 5% of revenue for product development. This
reflects our confidence in our ability to innovate to meet the
future technical needs of our customers thereby generating revenue
and profit growth.
VALUE ENHANCING ACQUISITIONS
Milestone acquisition of 3M's ballistic protection business
The acquisition of 3M's ballistic protection business is an
important strategic step for the Group and Avon Protection. The
business we are acquiring is high quality, backed by leading
proprietary technology, established contract platforms and well
invested manufacturing operations which will accelerate the growth
prospects for the Group.
This acquisition will significantly strengthen our current
technology and our personal protection product offering by adding
the leading next generation helmets and body armour. It also
deepens our already strong relationship with the U.S. DOD as a key
supplier of helmets and body armour. Avon Protection will also be
able to cross sell the helmets and body armour to its existing Rest
of World and Law Enforcement customers.
3M's ballistic protection business enhances the Group's research
and development capability and supports further growth and an
expected combined and integrated future product range. The
acquisition ultimately places Avon Protection at the forefront of
future evolution in CBRN and ballistic armour protection. In the
short term however we will be focused on ensuring a successful and
efficient integration of the business, including the realisation of
identified financial synergies.
We will continue to explore other acquisition opportunities
where we see the potential to deliver significant strategic and
financial value. Following the acquisition of 3M's ballistic
protection business we will continue to maintain a strong balance
sheet, with leverage not expected to exceed one times EBITDA at
close, together with an extended bank facility of $85m and a larger
cash generative business supporting an expected return to a net
cash position during 2021. This financial position, our strong cash
conversion, as well as our willingness to extend leverage up to two
times EBITDA, means we are well positioned to pursue other
potential acquisitions that also meet our criteria and act quickly
and decisively where we identify them.
PEOPLE
We continue to evolve the Executive leadership of both
businesses as we look to deliver on the clear strategic direction
and alignment for the Group as a whole.
In recognition of the extensive Law Enforcement growth
opportunities within Avon Protection, I am delighted to welcome
David Mack to the Executive leadership team to lead our global Law
Enforcement business. David is an internal appointment who comes
with extensive experience in this market and his addition will
greatly enhance our strategic delivery in Avon Protection to
support our ambitious and exciting growth strategy in our core Law
Enforcement business in the future.
OUTLOOK
Our strong opening order book of GBP40.4m provides good
visibility as we enter the new financial year, and we are well
positioned to continue our strong momentum into 2020.
Within Avon Protection, we expect to complete the acquisition of
3M's ballistic protection business in the first half of the
financial year as we continue to make good progress with the
regulatory clearance process. We expect to receive follow-on orders
for the M69 aircrew masks and M53A1 mask and powered air system
together with the 5-year sustainment contract for the M50 mask
system during the financial year. We expect the revenue
opportunities from a full year of delivery of the M69 and M53A1
mask systems to offset the impact of the anticipated reduction in
M50 mask system sustainment volumes. We also expect to receive the
first orders for the U.K. GSR and to make the first deliveries to
the U.K. MOD together with the receipt of further orders for the
MCM100 following the extensive trials in 2019. Alongside this, we
expect a return to sustainable growth from the widening customer
and product base in Law Enforcement in a more stable political
environment. We will see a reduction in Fire revenues following our
strategic review of our participation in the Fire SCBA market but
the benefits of refocusing our resources will support growth and
overall returns in Avon Protection.
Dairy market conditions have stabilised over the last six months
and although there remains market caution around the wider
political environment, we currently anticipate that the growth
trends experienced by milkrite | InterPuls in the second half of
2020 will continue in the new financial year.
We have transformed the business over the last year through
delivering against our strategic priorities of growing the core and
selective product development and value enhancing acquisitions.
This leaves us looking ahead with confidence, well positioned to
deliver further success in 2020 and beyond.
OPERATIONAL REVIEW
AVON PROTECTION
Financial Performance
% Change
at constant
2019 2018 % Change currency
--------------------------- ---------- ---------- --------- -------------
Orders received GBP129.8m GBP124.6m 4.2% 0.2%
Closing order book GBP36.7m GBP35.3m 4.0% (1.1%)
Revenue GBP128.4m GBP115.7m 11.0% 5.9%
Adjusted EBITDA GBP31.4m GBP26.6m 18.0% 13.4%
Adjusted EBITDA margin 24.5% 23.0% 1.5% 1.6%
Adjusted operating profit GBP26.2m GBP21.5m 21.9% 17.6%
Operating profit GBP17.0m GBP19.5m (12.8%) (16.5%)
--------------------------- ---------- ---------- --------- -------------
Orders received of GBP129.8m (2018: GBP124.6m) supported an
increase in revenue to GBP128.4m (2018: GBP115.7m). On a constant
currency basis, revenue grew by 5.9% with Military revenue growing
by 26.1%, more than offsetting a 27.1% decrease in Law Enforcement
and 5.3% decline in Fire, reflecting the more challenging
conditions in both markets.
Our adjusted EBITDA margin strengthened to 24.5% (2018: 23.0%),
being an increase of 1.6% on a constant currency basis. This
primarily reflected the benefits of the new higher margin products,
with the first deliveries of M53A1 mask and powered air systems
offsetting the reduced volumes of the lower margin M50 mask systems
shipped in 2019 compared to last year. Adjusted EBITDA was GBP31.4m
(2018: GBP26.6m); eliminating the currency movements, adjusted
EBITDA grew by 13.4% at constant currency.
Adjusted operating profit grew very strongly to GBP26.2m (2018:
GBP21.5m), whilst operating profit was down to GBP17.0m (2018:
GBP19.5m) due to the impact from the one-off exit costs of GBP5.4m
from the fire SCBA market. Eliminating the benefit of currency
movements, adjusted operating profit grew by 17.6% on a constant
currency basis.
Military
Military revenue grew significantly to GBP87.2m (2018: GBP66.1m)
and was up 26.1% on a constant currency basis.
DOD revenue totalled GBP54.8m versus GBP52.7m in 2018,
reflecting the first deliveries of the new M69 aircrew mask and
M53A1 mask and powered air system products. This was offset by the
expected lower volumes of the M50 mask system although there was an
increased volume of spares and accessories reflecting the
significant installed base of M50 mask systems.
As expected, we delivered 96,000 M50 mask systems and 166,000
filter pairs, compared with 179,000 mask systems and 150,000 pairs
of filter spares in 2018 with the new programmes coming through to
offset the lower volumes of mask systems. DOD spares and
development costs revenue increased to GBP12.2m (2018:
GBP12.0m).
Revenue from our Rest of World Military business totalled
GBP32.4m (2018: GBP13.4m), a significant 142.8% increase on the
prior year, on a constant currency basis. The growing Rest of World
pipeline of opportunity is reflected in the $16.6m Rest of World
mask system contract. Together with other mask system and hoods
sales, the fulfilled orders for the MCM100 underwater rebreathers
and sales of our powered and supplied air range, this supported
significant revenue growth over 2019.
The award of the M69 and M53A1 mask system contracts and the
receipt and partial fulfilment of the first orders during the year
has provided us with a strong opening order book and excellent
visibility for the outlook of Military sales for 2020. Discussions
with the DOD for the replacement M50 mask system sustainment
contract are continuing and we expect to receive a new contract
award in the first half of 2020.
Law Enforcement
Law Enforcement revenue reduced to GBP27.3m (2018: GBP35.4m), a
27.1% decline on a constant currency basis. This was significantly
impacted by both the extended U.S. Government partial shutdown
during the first half of the year, which blocked the availability
of Government funds and created the permanent timing impact of the
delayed order intake from our U.S. customers, and the strong
comparator of our 2018 performance. The permanent delay in the
timing of orders received resulted in the anticipated 12.0%
reduction in order intake on a constant currency basis. The
carryover of orders into 2020 has resulted in an increased opening
order book of GBP4.3m (2018: GBP3.5m).
We expect a stronger performance in 2020 for Law Enforcement due
to the stronger opening order book and other identified
opportunities for respirators, hoods and powered air systems.
Fire
Fire order intake grew on a constant currency basis by 5.0% to
GBP15.4m due to increased sales in the Rest of World markets. The
scheduling of fulfilment for those orders meant that Fire revenue
dropped to GBP13.9m (2018: GBP14.2m) a reduction of 5.3% on a
constant currency basis.
The decision to focus our SCBA portfolio on our core growth
markets of Military and Law Enforcement customers, and exit from
the fire market, means that our future fire orders and revenues
will be from our leading thermal image camera range together with
fulfilling the ongoing user requirements of our legacy SCBA
customers. In 2018 revenues from the sale of original SCBA
equipment to Fire customers was GBP6.3m, with exit costs in 2019 of
GBP5.4m.
The strength of our opening order book of GBP3.0m (2018:
GBP1.6m) from the ongoing Fire product portfolio gives us
confidence that we will be able to continue to grow the non SCBA
portfolio.
OPERATIONAL REVIEW
MILKRITE | INTERPULS
Financial Performance
% Change at
2019 2018 % Change constant currency
------------------------ --------- --------- --------- -------------------
Orders received GBP52.1m GBP48.7m 7.0% 4.5%
Closing order book GBP3.7m GBP2.5m 48.0% 48.1%
Revenue GBP50.9m GBP49.8m 2.2% (0.3%)
Adjusted EBITDA GBP10.5m GBP10.9m (3.7%) (6.6%)
Adjusted EBITDA margin 20.6% 21.9% (1.3%) (1.3%)
Adjusted operating
profit GBP7.5m GBP8.0m (6.3%) (9.5%)
Operating profit GBP3.8m GBP6.0m (36.7%) (38.9%)
------------------------ --------- --------- --------- -------------------
Revenue increased to GBP50.9m (2018: GBP49.8m); however,
excluding the impact of the favourable currency movements revenue
reduced marginally by 0.3% on a constant currency basis.
On a constant currency basis, Interface grew revenue by 0.8% but
there were reductions in PCI revenue of 3.8% and Farm Services of
1.6%. The line of business trends reflect the difficult global
dairy market trading conditions over the first half of the year.
Improved farmer confidence in the second half is a reflection of
increased global milk prices, with stable feed prices and moderate
production volume growth. This is highlighted by the order intake
growing ahead of revenue at GBP52.1m (2018: GBP48.7m), increasing
4.5% at constant currency and an opening order book of GBP3.7m
(2018: GBP2.5m) providing confidence into 2020.
Adjusted operating profit and adjusted EBITDA reduced to GBP7.5m
(2018: GBP8.0m) and GBP10.5m (2018: GBP10.9m) respectively, with
constant currency decreases of 9.5% and 6.6% respectively.
Operating profit was down to GBP3.8m (2018: GBP6.0m) taking into
account the impact of the one-off vacant property impairment of
GBP1.1m recognised in the year. The adjusted EBITDA margin of 20.6%
(2018: 21.9%) reduced by 1.3% on a constant currency basis. The
profit trends reflect the negative operational leverage from lower
revenues and the costs of consolidating the European commercial
operations into Italy.
Looking ahead, stronger market conditions and benefits from
improved operational efficiency in Europe put the business in a
strong position to return to growth in 2020.
Interface
Interface revenue increased to GBP36.9m (2018: GBP35.6m),
including the impact of favourable currency movements. On a
constant currency basis, Interface revenues grew by 0.8% driven by
a stronger performance in Europe and Asia Pacific in the second
half of the year highlighting the impacts of recovering farmer
confidence and our strong relationships with customers.
North America revenues of GBP18.5m (2018: GBP17.8m) declined by
1.5% on a constant currency basis, reflecting the challenging
market conditions over the year with increased farm closures and
consolidation in the sector.
In Europe, revenue grew by 7.4% to GBP11.1m at constant
currency. Asia Pacific liner revenues increased by 10.2%, at
constant currency, as a result of our continued market penetration
in these important Chinese and European markets during 2019.
Precision, Control & Intelligence
The sales of our PCI range were most affected by the difficult
trading over the first half of the year, with farmers more hesitant
to invest during uncertain market conditions. Revenue fell to
GBP8.7m (2018: GBP9.0m), a reduction of 3.8% at a constant currency
rate as dairy farmers sought to delay investment in our PCI
products until more certainty returned to the market. The
stabilising market conditions from the spring onwards meant that
farmers were more confident to invest in farm efficiency again,
highlighted by the order intake of GBP9.1m (2018: GBP8.3m), an
increase of 5.5% on a constant currency basis.
The strong closing order book of GBP1.4m (2018: GBP1.0m) gives
us confidence in the stronger performance of PCI looking into
2020.
Farm Services
The challenging market conditions in North America impacted Farm
Services and interrupted the growth of the lease model with the
addition of new farms offsetting farm closures and consolidations.
Reflecting the impact of the changing market dynamics, revenue of
GBP5.3m (2018: GBP5.2m) was down 1.6% at constant currency. The
constant currency decline was focused on North America which
reduced by 5.3%, offset by an increase of 6.0% in Europe. The
consolidation of the North American dairy market we've seen in 2019
will fundamentally support the return to growth in Farm services as
the larger dairies are most focused on labour and farm efficiency
and animal welfare which is well supported by the full service
model and direct to farm relationship of farm services.
FINANCIAL REVIEW
The Group has delivered a strong financial performance during
the year with revenue and adjusted operating profit increasing at
constant currency by 4.2% and 10.4% respectively. Given our US
businesses constitute over 70% of the Group's revenue and profit,
the weaker pound experienced across the year resulted in reported
revenue increasing by 8.3% to GBP179.3m (2018: GBP165.5m) and
reported adjusted operating profit increasing by 14.7% to GBP31.3m
(2018: GBP27.3m) at actual currency.
As a result of the benefits from the first deliveries of the
higher margin new products to the U.S. DOD, our adjusted EBITDA
margin of 22.0% was 0.7% higher than last year on a constant
currency basis.
After a tax charge of GBP3.4m (2018: GBP3.7m), an adjusted
effective rate of 10.8% (2018: 13.6%), the Group recorded an
adjusted profit for the year after tax of GBP28.0m (2018:
GBP23.5m). The reduced tax rate resulted in adjusted basic earnings
per share increasing to 91.7p (2018: 77.1p).
On a reported basis, after taking account of the amortisation of
acquired intangibles, defined pension and administration costs and
the one off charge for benefit enhancements and to equalise the
pension benefits for men and women, the 3M ballistic protection
acquisition costs, a one-off property valuation write-down and
asset impairments relating to discontinuing our Fire SCBA product
line, operating profit before tax was GBP14.4m (2018: GBP22.8m).
Profit before tax was GBP13.7m (2018: GBP21.6m) and, after a tax
credit of GBP0.6m (2018: GBP1.8m), which resulted in an effective
rate of tax of (4.4%) (2018: 8.3%), profit from continuing
operations was GBP14.3m (2018: GBP19.8m). Basic earnings per share
from continuing operations were 46.9p (2018: 64.9p).
Operational cash generation has been impacted by the timing of
the shipment of the $16.6m Rest of World Military mask system
contract which means we will receive payment in the first quarter
of 2020. As a result, adjusted EBITDA cash conversion was lower
than usual at 63.5% (2018: 108.2%). The operational cash
performance and the costs incurred in the year in relation to the
acquisition of 3M's ballistic protection business, resulted in a
GBP1.8m increase in net cash during the year and a closing net cash
balance of GBP48.3m (2018: GBP46.5m). This continuing strong cash
position provides funding to enable the completion of the
acquisition from 3M in the first half of 2020 and to support our
organic growth strategy, investment in new product development and
further value enhancing acquisitions.
Against this transformed outlook, the Board has increased the
final dividend by 30% to 13.89p (2018: 10.68p) resulting in total
dividends for the year of 20.83p (2018: 16.02p), also up 30% on
2018. This level of dividend increase is in line with our policy,
and reflects our ongoing confidence in the future performance of
the Group.
The closing order book of GBP40.4m reflects the continued strong
performances across all the markets in which we operate and
provides excellent visibility heading into the new financial
year.
Segmental Information
Growth
at constant
2019 2018 Growth currency
GBPm GBPm % %
----------------------------- ------- ------- -------- -------------
Orders received
Avon Protection 129.8 124.6 4.2% 0.2%
milkrite | InterPuls 52.1 48.7 7.0% 4.5%
----------------------------- ------- ------- -------- -------------
Total 181.9 173.3 5.0% 1.4%
Closing order book
Avon Protection 36.7 35.3 4.0% (1.1%)
milkrite | InterPuls 3.7 2.5 48.0% 48.1%
----------------------------- ------- ------- -------- -------------
Total 40.4 37.8 6.9% (0.7%)
----------------------------- ------- ------- -------- -------------
Revenue
Avon Protection 128.4 115.7 11.0% 5.9%
milkrite | InterPuls 50.9 49.8 2.2% (0.3%)
----------------------------- ------- ------- -------- -------------
Total 179.3 165.5 8.3% 4.2%
Operating profit
Avon Protection 17.0 19.5 (12.8%) (16.5%)
milkrite | InterPuls 3.8 6.0 (36.7%) (38.9%)
Unallocated corporate costs (6.4) (2.7) 137.0% 129.2%
----------------------------- ------- ------- -------- -------------
Total 14.4 22.8 (36.8%) (39.4%)
Adjusted operating profit
Avon Protection 26.2 21.5 21.9% 17.6%
milkrite | InterPuls 7.5 8.0 (6.3%) (9.5%)
Unallocated corporate costs (2.4) (2.2) 9.1% 8.3%
----------------------------- ------- ------- -------- -------------
Total 31.3 27.3 14.7% 10.4%
Adjusted EBITDA
Avon Protection 31.4 26.6 18.0% 13.4%
milkrite | InterPuls 10.5 10.9 (3.7%) (6.6%)
Unallocated corporate costs (2.4) (2.2) 9.1% 8.3%
----------------------------- ------- ------- -------- -------------
Total 39.5 35.3 11.9% 7.7%
Adjusted EBITDA margin
Avon Protection 24.5% 23.0% 1.5% 1.6%
milkrite | InterPuls 20.6% 21.9% (1.3%) (1.3%)
----------------------------- ------- ------- -------- -------------
Total 22.0% 21.3% 0.7% 0.7%
----------------------------- ------- ------- -------- -------------
PROFIT FOR THE YEAR
2019 2018
GBPm GBPm
----------------------------------- ------- ------
Adjusted operating profit 31.3 27.3
Adjustments (16.9) (4.5)
----------------------------------- ------- ------
Operating profit 14.4 22.8
Net finance costs (0.7) (1.2)
----------------------------------- ------- ------
Profit before taxation 13.7 21.6
Taxation 0.6 (1.8)
----------------------------------- ------- ------
Profit from continuing operations 14.3 19.8
Discontinued operations - 1.6
----------------------------------- ------- ------
Profit for the year 14.3 21.4
----------------------------------- ------- ------
Adjustments
Adjustments of GBP16.9m (2018: GBP4.5m) excluded from adjusted
operating profit comprise of: GBP2.9m (2018: GBPnil) of one off
cash costs incurred in the year related to the acquisitions;
GBP5.4m (2018: GBP0.9m) of one off non cash asset write down
related to the exit from the Fire SCBA market; GBP1.1m (2018:
GBPnil) in relation to a market driven surplus property non cash
write-down in Italy; amortisation of acquired intangible assets of
GBP3.5m (2018: GBP3.1m); pension administration costs of GBP0.5m
(2018: GBP0.5m); and the one off charge to equalise the pension
benefits for men and women and past service costs of GBP3.5m (2018:
GBPnil).
Finance costs
Net interest income was GBP0.2m (2018: GBPnil). Other finance
expenses of GBP0.9m (2018: GBP1.2m) primarily represents the unwind
of the discount on the net pension liability and, as in previous
years, have been excluded from adjusted profit for the year.
Taxation
Taxation was a credit of GBP0.6m (2018: GBP1.8m charge) which
consists of a GBP2.8m charge relating to the current year and a
GBP3.4m credit in respect of previous periods. The GBP3.4m credit
in respect of previous periods includes a GBP3.1m credit in
connection with the release of provisions following the successful
resolution of a number of prior year uncertain tax positions.
Profit from Discontinued Operations
The profit from discontinued operations of GBP1.6m in 2018 was
comprised of the profit after tax of AEF up to the date of disposal
on 30 March 2018 of GBP0.5m and the post tax gain on disposal of
GBP1.1m.
NET CASH AND CASH FLOW
Cash generated from operations was GBP23.2m, compared to
GBP37.9m in 2018 and was impacted by the timing of the cash receipt
in respect of the $16.6m Rest of World Military mask system
contract, which given the timing of the shipment of goods we will
receive in the first quarter of 2020. This also impacted operating
cash conversion from adjusted EBITDA which reduced to 63.5% (2018:
108.2%).
2019 2018
GBPm GBPm
------------------------------------------------------ ------ ------
Cash flows from continuing operations before the
impact of exceptional items 25.1 38.2
Cash impact of exceptional items and discontinued
operations (1.9) (0.3)
------------------------------------------------------ ------ ------
Cash flows from operations 23.2 37.9
Net interest 0.2 -
Payments to pension plan (1.5) (1.5)
Tax (6.1) (5.0)
Purchase of property, plant and equipment (3.9) (3.3)
Capitalised development costs and purchased software (4.0) (5.6)
Acquisitions - (1.4)
Divestments - 6.5
Purchase of own shares (1.3) (1.1)
Dividends to shareholders (5.4) (4.1)
Foreign exchange and other items 0.6 (0.6)
------------------------------------------------------ ------ ------
Increase in net cash 1.8 21.8
------------------------------------------------------ ------ ------
At the year end, the Group had net cash of GBP48.3m (2018:
GBP46.5m) and an undrawn extended US Dollar denominated bank
facility of $85.0m (GBP69.0m) (2018: $40.0m (GBP30.7m)), which is
committed to 6 August 2022, with an option to extend for a further
year.
Our strong balance sheet gives us the capacity to both complete
on the acquisition of 3M's Ballistic Protection Business in the
first half of 2020 as well as to fund our growth strategy and make
further acquisitions. Our policy is to maintain a strong financial
position and keep the ratio of net debt to adjusted EBITDA under
two times.
ACQUISITION OF 3M's BALLISTIC PROTECTION BUSINESS
We signed an agreement to acquire 3M's ballistic protection
business and the rights to the Ceradyne brand in August for an
initial cash consideration of $91.0m (GBP75.0m), with a further
potential contingent consideration of $25.0m (GBP21.0m). We expect
to complete the acquisition in the first half of 2020 once U.S.
regulatory approvals have been received. We have incurred
associated acquisition costs in the year of GBP2.8m.
RESEARCH AND DEVELOPMENT EXPITURE
We continue to invest for the future and our total investment in
research and development (capitalised and expensed) amounted to
GBP8.2m (2018: GBP9.7m) as shown below. Total research and
development as a percentage of revenue was 4.6% (2018: 5.9%).
2019 2018
milkrite milkrite
Avon Protection | InterPuls Group Avon Protection | InterPuls Group
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ---------------- ------------- ------ ---------------- ------------- ------
Total expenditure 7.3 0.9 8.2 8.6 1.1 9.7
Less customer
funded (2.5) - (2.5) (3.0) - (3.0)
---------------------- ---------------- ------------- ------ ---------------- ------------- ------
Group expenditure 4.8 0.9 5.7 5.6 1.1 6.7
Capitalised (3.2) (0.5) (3.7) (5.0) (0.5) (5.5)
---------------------- ---------------- ------------- ------ ---------------- ------------- ------
Income statement
impact of current
year expenditure 1.6 0.4 2.0 0.6 0.6 1.2
Amortisation 3.0 0.3 3.3 2.2 0.3 2.5
Total income
statement impact
before exceptionals 4.6 0.7 5.3 2.8 0.9 3.7
---------------------- ---------------- ------------- ------ ---------------- ------------- ------
Revenue 128.4 50.9 179.3 115.7 49.8 165.5
R&D spend as
% of revenue 5.7% 1.7% 4.6% 7.4% 2.2% 5.9%
---------------------- ---------------- ------------- ------ ---------------- ------------- ------
In Avon Protection, the most significant investments have been
in the production preparation for the GSR for the U.K. MOD the
continued development of the MCM100 and the next generation hood
programmes. In milkrite | InterPuls, investment expenditure has
been focussed on the compact milk meter for sheep and goats and
updating the software in our intelligence Farm Controller.
ACCOUNTING STANDARDS CHANGES
With effect from 1 October 2019 the way that leases are
accounted for changes for the Group with the underlying principal
being that all leases will be reported on the balance sheet from
that date. The Group will be required to recognise a right of use
asset for all the current operating leases above 12 months in
length and excluding those of low value and a lease liability
representing the present value of the lease payments to the end of
the lease life.
The impact of the changes on the financial statements from that
date are that GBP6.5m of leasehold assets and GBP10.2m of leasehold
liabilities will be added to the balance sheet with the GBP3.7m net
balancing figure reflected as an opening reserves adjustment. The
changes also impact the presentation of the income statement as the
current recognition of lease payments are moved to be included
within finance costs. This will improve the Group's EBITDA margin
by approximately GBP2m but with minimal impact on operating profit
and earnings per share. There are no changes to the cash flow
metrics as these are all non-cash presentational changes.
PENSIONS
The Group has a U.K. pension scheme which is closed to future
accrual. The net pension liability, as measured under IAS 19
(revised), is GBP43.0m (2018: GBP30.5m). The GBP12.5m increase in
the deficit over the last year is largely due to the decrease in
discount rates reflecting the lower corporate bond return outlook
which has been slightly offset by the lower actuarial mortality
assumptions which are being reflected in the market.
On October 26, 2018 the High Court handed down a judgement
involving the Lloyds Banking Group's defined benefit pension
scheme. The judgement concluded that pension schemes should be
amended to equalise pension benefits for men and women in relation
to guaranteed minimum pension ("GMP equalisation") benefits. Our
actuarial advisers have calculated the additional liability for
this amendment at GBP3.5m and this has been booked during the year
as an adjustment to operating profit for the year as this is an
exceptional non-recurring expense.
The results of the triennial funding valuation, as at 31 March
2016, showed the plan to be 90% funded on a continuing basis with a
deficit of GBP33.8m. As part of the deficit recovery plan
contributions of GBP1.5m were paid to the pension fund during the
year (2018: GBP1.5m). The level of contributions will be reassessed
following the conclusion of the triennial funding valuation which
started in March 2019 and will conclude during the 2020 financial
year, and are expected to be at least the same as the previous
year.
FINANCIAL RISK MANAGEMENT
The Group has clearly defined policies for the management of
foreign exchange risk. Exposures resulting from sales and purchases
in foreign currency are matched where possible and net exposure may
be hedged by the use of forward exchange contracts. The initial
consideration of $91m for the agreement to acquire 3M's Ballistic
Protection Business exposed the Group to foreign exchange risk on
the US$ equivalent of the Sterling net cash held on the balance
sheet and to match this risk the Group entered into a deal
contingent forward contract to hedge GBP35m of cash held at the
year end. The Group does not undertake foreign exchange
transactions for which there is no underlying exposure.
Credit and counterparty risk are managed through the use of
credit evaluations and credit limits. Cash deposits are made at
prevailing interest rates which are not generally fixed for more
than 1 or 2 months. Borrowings and overdrafts are at floating
interest rates. The Group does not carry out any interest rate
hedging.
CURRENCY EFFECT
The Group has translational exposure arising on the
consolidation of overseas company results into Sterling. Based on
the current mix of currency denominated profit, a one cent
appreciation of the US Dollar increases revenue by approximately
GBP1.1m and operating profit by approximately GBP0.2m. A one cent
appreciation of the Euro increases revenue by approximately GBP0.1m
and has nil impact on operating profit.
DIVIDS
The Board is recommending a final dividend of 13.89p per share
(2018: 10.68p) which together with the 6.94p per share interim
dividend gives a total dividend of 20.83p (2018: 16.02p), up 30% on
last year. The final dividend will be paid on 13 March 2020 to
shareholders on the register at 14 February 2020 with an
ex-dividend date of 13 February 2020.
Our policy is to maintain a progressive dividend policy
balancing dividend increases with the rates of adjusted earnings
per share growth achieved, taking into account potential
acquisition spend and the Group's financing position. Over recent
years, we have grown the dividend per share by 30% per annum and we
expect to continue to grow dividends ahead of earnings over the
medium-term. Our policy is to maintain dividend cover (the ratio of
dividend per share to adjusted earnings per share) above two times.
This year dividend cover was 4.4 times (2018: 4.8 times). Once
dividend cover has reduced to two times we intend to increase
dividends in line with the growth in adjusted earnings per
share.
Consolidated Statement of Comprehensive Income for the year
ended 30 September 2019
2019 2018
Adjusted Adjustments(1) Total Adjusted Adjustments(1) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ----- --------- --------------- -------- --------- --------------- -------
Continuing
operations
Revenue 2 179.3 - 179.3 165.5 - 165.5
Cost of sales (106.8) - (106.8) (99.9) - (99.9)
---------------------- ----- --------- --------------- -------- --------- --------------- -------
Gross profit 72.5 - 72.5 65.6 - 65.6
Selling and
distribution
costs (20.4) - (20.4) (20.3) - (20.3)
General and
administrative
expenses (20.8) (16.9) (37.7) (18.0) (4.5) (22.5)
---------------------- ----- --------- --------------- -------- --------- --------------- -------
Operating profit 2 31.3 (16.9) 14.4 27.3 (4.5) 22.8
---------------------- ----- --------- --------------- -------- --------- --------------- -------
Operating profit
is analysed
as:
Before depreciation,
amortisation
and impairment 39.5 (8.5) 31.0 35.3 (1.4) 33.9
Impairment - (4.9) (4.9) - - -
Depreciation
and amortisation (8.2) (3.5) (11.7) (8.0) (3.1) (11.1)
---------------------- ----- --------- --------------- -------- --------- --------------- -------
Operating profit 31.3 (16.9) 14.4 27.3 (4.5) 22.8
---------------------- ----- --------- --------------- -------- --------- --------------- -------
Finance income 0.4 - 0.4 0.2 - 0.2
Finance costs (0.2) - (0.2) (0.2) - (0.2)
Other finance
expense (0.1) (0.8) (0.9) (0.1) (1.1) (1.2)
---------------------- ----- --------- --------------- -------- --------- --------------- -------
Profit before
taxation 31.4 (17.7) 13.7 27.2 (5.6) 21.6
Taxation 5 (3.4) 4.0 0.6 (3.7) 1.9 (1.8)
---------------------- ----- --------- --------------- -------- --------- --------------- -------
Profit for
the year from
continuing
operations 28.0 (13.7) 14.3 23.5 (3.7) 19.8
Discontinued
operations
- gain for
the year 3 - - - - 1.6 1.6
---------------------- ----- --------- --------------- -------- --------- --------------- -------
Profit for
the year 28.0 (13.7) 14.3 23.5 (2.1) 21.4
Consolidated Statement of Comprehensive Income for the year
ended 30 September 2019 (Continued)
2019 2018
Adjusted Adjustments(1) Total Adjusted Adjustments(1) Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ----- --------- --------------- ------ --------- --------------- ------
Other comprehensive
income/(expense)
Items that
are not subsequently
reclassified
to the income
statement
Actuarial (loss)/gain
recognised
on retirement
benefit scheme - (9.2) (9.2) - 13.7 13.7
Deferred tax
relating to
retirement
benefit scheme 5 - 1.5 1.5 - (2.3) (2.3)
Items that
may be subsequently
reclassified
to the income
statement
Net exchange
differences
offset in reserves 2.3 - 2.3 1.3 - 1.3
Tax relating
to exchange
differences
offset in reserves (0.5) - (0.5) (0.3) - (0.3)
Cash flow hedges (0.9) - (0.9) (0.6) - (0.6)
Deferred tax
relating to
cash flow hedges 0.2 - 0.2 - - -
Other comprehensive
income/(expense)
for the year,
net of taxation 1.1 (7.7) (6.6) 0.4 11.4 11.8
----------------------- ----- --------- --------------- ------ --------- --------------- ------
Total comprehensive
income for
the year 29.1 (21.4) 7.7 23.9 9.3 33.2
----------------------- ----- --------- --------------- ------ --------- --------------- ------
Earnings per
share 4
Basic 91.7p (44.8p) 46.9p 77.1p (7.0p) 70.1p
Diluted 90.9p (44.4p) 46.5p 76.6p (7.0p) 69.6p
----------------------- ----- --------- --------------- ------ --------- --------------- ------
(1) See note 3 for further details of adjustments.
Consolidated Balance Sheet
2019 2018
Note GBPm GBPm
---------------------------------------- ----- ------ -----
Assets
Non-current assets
Intangible assets 35.3 41.5
Property, plant and equipment 21.4 22.6
Deferred tax assets 5 12.5 8.2
---------------------------------------- ----- ------ -----
69.2 72.3
---------------------------------------- ----- ------ -----
Current assets
Inventories 20.7 23.0
Trade and other receivables 35.4 24.2
Cash and cash equivalents 7 48.4 46.6
---------------------------------------- ----- ------ -----
104.5 93.8
---------------------------------------- ----- ------ -----
Liabilities
Current liabilities
Borrowings 0.1 0.1
Trade and other payables 31.1 34.5
Derivative financial instruments 1.3 0.4
Provisions for liabilities and charges 10 - 0.3
Current tax liabilities 4.1 6.1
---------------------------------------- ----- ------ -----
36.6 41.4
---------------------------------------- ----- ------ -----
Net current assets 67.9 52.4
---------------------------------------- ----- ------ -----
Non-current liabilities
Deferred tax liabilities 5 5.4 6.9
Retirement benefit obligations 43.0 30.5
Provisions for liabilities and charges 10 2.3 2.5
---------------------------------------- ----- ------ -----
50.7 39.9
---------------------------------------- ----- ------ -----
Net assets 86.4 84.8
---------------------------------------- ----- ------ -----
Shareholders' equity
Ordinary shares 8 31.0 31.0
Share premium account 8 34.7 34.7
Other reserves 9.8 8.0
Retained earnings 10.9 11.1
---------------------------------------- ----- ------ -----
Total equity 86.4 84.8
---------------------------------------- ----- ------ -----
Consolidated Cash Flow Statement
2019 2018
Note GBPm GBPm
--------------------------------------------------- ----- ------ ------
Cash flows from operating activities
Cash flows from continuing operating activities
before the impact of exceptional items 6 25.1 38.2
Cash impact of exceptional items (1.9) (0.1)
--------------------------------------------------- ----- ------ ------
Cash flows from continuing operations 6 23.2 38.1
Cash flows (used in) discontinued operations - (0.2)
--------------------------------------------------- ----- ------ ------
Cash flows from operations 6 23.2 37.9
Interest income received 0.4 0.2
Finance costs paid (0.2) (0.2)
Retirement benefit deficit recovery contributions (1.5) (1.5)
Tax paid (6.1) (5.0)
--------------------------------------------------- -----
Net cash flows from operating activities 15.8 31.4
--------------------------------------------------- ----- ------ ------
Cash flows used in investing activities
Proceeds from disposal of discontinued operations 11 - 6.5
Purchase of property, plant and equipment (3.9) (3.3)
Capitalised development costs and purchased
software (4.0) (5.6)
Acquisition 11 - (1.4)
--------------------------------------------------- -----
Net cash used in investing activities (7.9) (3.8)
--------------------------------------------------- ----- ------ ------
Cash flows used in financing activities
Net movements in loans - (1.7)
Dividends paid to shareholders 9 (5.4) (4.1)
Purchase of own shares 8 (1.3) (1.1)
--------------------------------------------------- -----
Net cash used in financing activities (6.7) (6.9)
--------------------------------------------------- ----- ------ ------
Net increase in cash, cash equivalents and
bank overdrafts 1.2 20.7
Cash, cash equivalents, and bank overdrafts
at beginning of the year 46.6 26.5
Effects of exchange rate changes 0.6 (0.6)
--------------------------------------------------- -----
Cash, cash equivalents, and bank overdrafts
at end of the year 7 48.4 46.6
--------------------------------------------------- ----- ------ ------
Consolidated Statement in Changes in Equity
Share Share Other Retained Total
capital premium reserves earnings equity
Note GBPm GBPm GBPm GBPm GBPm
---------------------------- ----- --------- --------- ---------- ---------- --------
At 30 September 2017 31.0 34.7 7.0 (17.1) 55.6
Profit for the year - - - 21.4 21.4
Net exchange differences
offset in reserves - - 1.3 - 1.3
Tax relating to exchange
differences offset in
reserves - - (0.3) - (0.3)
Cash flow hedges - - - (0.6) (0.6)
Actuarial gain recognised
on retirement benefit
scheme - - - 13.7 13.7
Deferred tax relating
to retirement benefit
scheme - - - (2.3) (2.3)
----------------------------- ----- --------- --------- ---------- ---------- --------
Total comprehensive income
for the year - - 1.0 32.2 33.2
Dividends paid - - - (4.1) (4.1)
Own shares acquired - - - (1.1) (1.1)
Fair value of share based
payments - - - 1.2 1.2
Deferred tax relating - - - - -
to employee share schemes
---------------------------- ----- --------- --------- ---------- ---------- --------
At 30 September 2018 31.0 34.7 8.0 11.1 84.8
----------------------------- ----- --------- --------- ---------- ---------- --------
Profit for the year - - - 14.3 14.3
Net exchange differences
offset in reserves - - 2.3 - 2.3
Tax relating to exchange
differences offset in
reserves - - (0.5) - (0.5)
Cash flow hedges - - - (0.9) (0.9)
Deferred tax relating
to cash flow hedges - - - 0.2 0.2
Actuarial loss recognised
on retirement benefit
scheme - (9.2) (9.2)
Deferred tax relating
to retirement benefit
scheme 5 - - - 1.5 1.5
----------------------------- ----- --------- --------- ---------- ---------- --------
Total comprehensive income
for the year - - 1.8 5.9 7.7
Dividends paid 9 - - - (5.4) (5.4)
Own shares acquired 8 - - - (1.3) (1.3)
Fair value of share based
payments - - - 0.4 0.4
Deferred tax relating
to employee share schemes 5 - - - 0.2 0.2
----------------------------- ----- --------- --------- ---------- ---------- --------
At 30 September 2019 31.0 34.7 9.8 10.9 86.4
----------------------------- ----- --------- --------- ---------- ---------- --------
Other reserves consist of the capital redemption reserve of
GBP0.5m (2018: GBP0.5m) and the translation reserve of GBP9.3m
(2018: GBP7.5m).
All movements in other reserves relate to the translation
reserve.
NOTES TO THE FINANCIAL STATEMENTS
1. General Information and Basis of Preparation
Basis of preparation
The financial information set out in this document does not
constitute the Group's statutory accounts for the year ended 30
September 2019 or 30 September 2018. Statutory accounts for the
year ended 30 September 2018 were approved by the Board of
Directors on 14 November 2018 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. Statutory accounts for the year ended 30 September 2019
have not yet been delivered to the Registrar nor have the auditors
yet reported on them. The expectation is that the report of the
auditors on these accounts will be unqualified.
This financial information has been prepared in accordance with
International Financial Reporting Standards as adopted by the EU
(Adopted IFRS) and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
Certain statements in this announcement constitute
forward-looking statements. Any statement in this announcement that
is not a statement of historical fact including, without
limitation, those regarding the Company's future expectations,
operations, financial performance, financial condition and business
is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially. These risks and uncertainties include, among
other factors, changing economic, financial, business or other
market conditions. These and other factors could adversely affect
the outcome and financial effects of the plans and events described
in this announcement and the Company undertakes no obligation to
update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this
announcement should be constructed as a profit forecast.
Recent accounting developments
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts
with Customers both became applicable for the Group from 1 October
2018.
-- IFRS 15 Revenue from Contracts with Customers
IFRS 15 provides a comprehensive framework for recognizing
revenue from contracts with customers. The application of IFRS 15
had no impact on revenue recognition within the consolidated
financial statements. As such, no adjustments to equity have been
made on adoption of IFRS 15.
The Group's accounting policy in relation to revenue recognition
has been updated to reflect the new standard.
-- IFRS 9 Financial Instruments
IFRS 9 sets out new rules for valuing financial instruments and
a new approach to hedge accounting aligned to an entity's risk
management activities.
The application of IFRS 9 did not impact the classification,
measurement or recognition of financial assets and financial
liabilities within the consolidated financial statements.
The Group's hedging policy and documentation of hedging
relationships has been updated to reflect the new standard. As a
result the Group's forward exchange contracts continue to qualify
as cash flow hedges upon adoption of IFRS 9 and therefore continue
to be accounted for as such.
The Group's accounting policy in relation to Financial
Instruments has been updated to reflect the new standard.
At the balance sheet date there are a number of new standards,
and amendments to existing standards in issue, but not yet
effective. The Directors plan to adopt these standards in line with
their effective dates.
-- IFRS 16 Leases - applicable from year ending 30 September 2020
IFRS 16 introduces the principle that all leased assets should
be reported on the balance sheet of the lessee, recognising an
asset for the right to use the leased item and a liability for the
present value of its future lease payments.
The change in treatment will impact the balance sheet, the
income statement and related performance measures and will be
applicable from 1 October 2019.
As reported previously a number of leases currently in operation
within the Group will fall under the scope of IFRS 16 with
leasehold property being the most material.
The Group intends to apply the lease standard retrospectively
allowing comparability with prior period reported numbers in the
2020 Annual Report. This transition choice results in a one off
impact on opening reserves on adoption to reflect the retrospective
impact of the existing leases.
-- IFRIC 23 Accounting for uncertain tax positions - applicable
from year ending 30 September 2020
IFRIC 23 is a new interpretation applying to both current and
deferred taxes.
Under the new regulation accounting for uncertain tax positions
is only permitted where the likelihood of a tax treatment being
challenged is greater than 50%, with new guidance around how a
value should be assigned to the uncertainty.
The interpretation is not expected to have a significant impact
on the level of provisions held in relation to uncertain tax
positions.
Segment Reporting
The Group Executive team is responsible for allocating resources
and assessing performance of the operating segments. Operating
segments are therefore reported in a manner consistent with the
internal reporting provided to the Group Executive team. The Group
has two clearly defined business segments, Avon Protection and
milkrite | InterPuls, and operates primarily out of Europe and the
U.S.
2. Operating segments
Year ended 30 September 2019
Avon milkrite
Protection | InterPuls Unallocated Group
GBPm GBPm GBPm GBPm
--------------------------------------- ------------ ------------- ------------- ------
Revenue 128.4 50.9 - 179.3
--------------------------------------- ------------ ------------- ------------- ------
Operating profit before depreciation,
amortisation and adjustments 31.4 10.5 (2.4) 39.5
Depreciation of property,
plant and equipment (2.0) (2.4) - (4.4)
Amortisation of development
costs and software (3.2) (0.6) - (3.8)
--------------------------------------- ------------ ------------- ------------- ------
Operating profit before adjustments 26.2 7.5 (2.4) 31.3
Amortisation of acquired
intangibles (0.9) (2.6) - (3.5)
Exceptional impairment (3.8) (1.1) - (4.9)
Other exceptional items (4.5) - - (4.5)
Defined benefit pension scheme
costs - - (4.0) (4.0)
--------------------------------------- ------------ ------------- ------------- ------
Operating profit 17.0 3.8 (6.4) 14.4
Finance income 0.4
Finance costs (0.2)
Other finance expense (0.9)
--------------------------------------- ------------ ------------- ------------- ------
Profit before taxation 13.7
Taxation 0.6
--------------------------------------- ------------ ------------- ------------- ------
Profit for the year 14.3
--------------------------------------- ------------ ------------- ------------- ------
Segment assets 79.2 46.7 47.8 173.7
--------------------------------------- ------------ ------------- ------------- ------
Segment liabilities 26.6 10.2 50.5 87.3
--------------------------------------- ------------ ------------- ------------- ------
Other segment items
Capital expenditure
- intangible assets 3.3 0.5 - 3.8
- property, plant and equipment 2.2 1.7 - 3.9
--------------------------------------- ------------ ------------- ------------- ------
The Avon Protection segment includes GBP54.8m (2018: GBP52.7m)
of revenues from the U.S. DOD, the only customer which individually
contributes more than 10% to Group revenues.
Year ended 30 September 2018
milkrite
Avon Protection | InterPuls Unallocated Group
GBPm GBPm GBPm GBPm
---------------------------------- ---------------- -------------- ------------- ------
Revenue 115.7 49.8 - 165.5
---------------------------------- ---------------- -------------- ------------- ------
Operating profit before
depreciation, amortisation
and adjustments 26.6 10.9 (2.2) 35.3
Depreciation of property,
plant and equipment (2.5) (2.4) - (4.9)
Amortisation of development
costs and software (2.6) (0.5) - (3.1)
---------------------------------- ---------------- -------------- ------------- ------
Operating profit before
adjustments 21.5 8.0 (2.2) 27.3
Amortisation of acquired
intangibles (1.1) (2.0) - (3.1)
Exceptional items (0.9) - - (0.9)
Defined benefit pension
scheme costs - - (0.5) (0.5)
---------------------------------- ---------------- -------------- ------------- ------
Operating profit 19.5 6.0 (2.7) 22.8
Finance income 0.2
Finance costs (0.2)
Other finance expense (1.2)
---------------------------------- ---------------- -------------- ------------- ------
Profit before taxation 21.6
Taxation (1.8)
---------------------------------- ---------------- -------------- ------------- ------
Profit for the year from
continuing operations 19.8
----------------------------------
Discontinued operations
- loss for the year 1.6
---------------------------------- ---------------- -------------- ------------- ------
Profit for the year 21.4
---------------------------------- ---------------- -------------- ------------- ------
Segment assets 57.4 49.5 59.2 166.1
---------------------------------- ---------------- -------------- ------------- ------
Segment liabilities 18.0 13.8 49.5 81.3
---------------------------------- ---------------- -------------- ------------- ------
Other segment items
Capital expenditure
- intangible assets 5.1 0.5 - 5.6
- property, plant and equipment 1.7 1.8 - 3.5
---------------------------------- ---------------- -------------- ------------- ------
Revenue analysed by geographic origin
Year ended 30 September 2019
Europe U.S. RoW Total
--------- ------- ------ ----- ------
GBPm GBPm GBPm GBPm
Revenue 38.3 136.6 4.4 179.3
Year ended 30 September 2018
Europe U.S. RoW Total
--------- ------- ------ ----- ------
GBPm GBPm GBPm GBPm
Revenue 41.2 120.4 3.9 165.5
3. Adjustments and discontinued operations
Adjustments
This document contains certain financial measures that are not
defined or recognised under IFRS including adjusted operating
profit, adjusted profit for the year and adjusted earnings per
share. The Directors believe that adjusted measures provide a more
useful comparison of business trends and performance. These
adjusted measures exclude the effect of exceptional items, defined
benefit scheme pension costs, the amortisation of acquired
intangible assets and discontinued operations. The Group uses these
measures for planning, budgeting and reporting purposes and for its
internal assessment of the operational performance of individual
businesses within the Group. Given the term adjusted is not defined
under IFRS, the adjusted measures may not be comparable with
similarly titled measures used by other companies.
The following tables show the adjustments made to arrive at
adjusted operating profit and adjusted profit for the year.
2019 2018
GBPm GBPm
---------------------------------------------- ------ ------
Operating profit 14.4 22.8
Amortisation of acquired intangibles 3.5 3.1
Defined benefit pension administration costs 0.5 0.5
Exceptional items:
Restructuring costs - 0.9
Defined benefit scheme past service costs 3.5 -
Acquisition costs 2.9 -
Exit costs re: Fire SCBA market exit 5.4 -
Property impairment 1.1 -
---------------------------------------------- ------ ------
Adjusted operating profit 31.3 27.3
---------------------------------------------- ------ ------
2019 2018
GBPm GBPm
---------------------------------------------- ------ ------
Profit for the year 14.3 21.4
Amortisation of acquired intangibles 3.5 3.1
Defined benefit pension administration costs 0.5 0.5
Defined benefit pension net interest cost 0.8 1.1
Exceptional items:
Restructuring costs - 0.9
Defined benefit scheme past service costs 3.5 -
Acquisition costs 2.9 -
Exit costs re: Fire SCBA market exit 5.4 -
Property impairment 1.1 -
Tax on exceptional items (4.0) (1.9)
(Profit)/loss from discontinued operations - (1.6)
---------------------------------------------- ------ ------
Adjusted profit for the year 28.0 23.5
---------------------------------------------- ------ ------
On October 26 2018 the High Court handed down a judgement
involving the Lloyds Banking Group's defined benefit schemes. The
judgement concluded that pension scheme benefits should be amended
to equalise guaranteed minimum pension benefits for men and women
("GMP equalisation"). Our actuarial advisors have calculated the
additional liability for this amendment at GBP2.9m and this has
been included as an adjustment during the period along with a
further GBP0.6m adjustment in relation to other past service costs
of the defined benefit scheme.
The signing of an agreement to acquire 3M's ballistic protection
business and the rights to the Ceradyne brand was announced on 6
August 2019 and is expected to close during FY20. GBP2.8m of
acquisition related costs have been expensed during the period in
relation to this agreement including legal, due diligence and tax
advisory fees. A further GBP0.1m of costs have been expensed in
relation to other acquisition opportunities that are no longer
being pursued.
At the year end the decision was taken to move away from our
participation in the Fire self contained breathing apparatus
market, resulting in one off exit costs of GBP5.4m being recognised
in the year. The exit costs include development cost impairment
GBP3.8m, inventory write downs GBP1.4m and receivables write offs
GBP0.2m.
The restructuring and alignment of the milkrite | InterPuls
European distribution business during 2019 created a vacant
property at our Italian operation. Changes in the local economy, as
highlighted by a subsequent valuation of the site, mean that it was
appropriate to write the carrying value of this property down by
GBP1.1m.
The restructuring costs in 2018 represent the relocation of the
West Palm Beach, Florida assembly facility to our Cadillac,
Michigan facility.
Defined benefit pension scheme costs relate to administrative
expenses of the scheme which is closed to future accrual.
The impact on the cash flow statement of the exceptional items
was GBP1.9m (2018: GBP0.1m).
Discontinued operations
In March 2018, the Group disposed of Avon Engineered
Fabrications, Inc. its U.S. based hovercraft skirt and bulk liquid
storage tank business. This non-core business was included in the
Avon Protection segment. The business has been classified as
discontinued and prior years have been restated to reflect this.
The results of discontinued operations are as follows:
2018
GBPm
--------------------------------------------------------- ------
Revenue 4.9
Total cost of sales, selling and distribution costs and
general administrative expenses (4.2)
--------------------------------------------------------- ------
Profit before taxation 0.7
Taxation (0.2)
--------------------------------------------------------- ------
Profit for the period 0.5
Gain on disposal 1.4
Tax on gain on disposal (0.3)
--------------------------------------------------------- ------
Profit from discontinued operations 1.6
--------------------------------------------------------- ------
Basic earnings per share 5.2p
--------------------------------------------------------- ------
Diluted earnings per share 5.2p
--------------------------------------------------------- ------
Cash flows from discontinued operations included in the cash
flow statement are as follows:
2018
GBPm
----------------------------------------------- ------
Net cash flows (used in) operating activities (0.2)
Net cash flows from investing activities 6.5
Net cash flows from discontinued operations 6.3
----------------------------------------------- ------
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 year, excluding those
held in the employee share ownership trust. The company has
dilutive potential ordinary shares in respect of the Performance
Share Plan. Adjusted earnings per share removes the effect of the
amortisation of acquired intangible assets, exceptional items,
acquisition costs and defined benefit pension scheme costs,
reflecting the basis on which the business is managed and measured
on a day to day basis.
Reconciliations of the earnings and weighted average number of
shares used in the calculations are set out below.
Weighted average number of shares
2019 2018
Weighted average number of ordinary shares in
issue used in basic calculations (thousands) 30,516 30,511
Potentially dilutive shares (weighted average)
(thousands) 260 218
--------------------------------------------------- ------- -------
Fully diluted number of ordinary shares (weighted
average) (thousands) 30,776 30,729
--------------------------------------------------- ------- -------
Earnings
2019 2018
Basic 14.3 21.4
---------------------------------- ----- -----
Basic - continuing operations 14.3 19.8
---------------------------------- ----- -----
Adjusted 28.0 23.5
---------------------------------- ----- -----
Adjusted - continuing operations 28.0 23.5
---------------------------------- ----- -----
Earnings per share (pence)
2019 2018
Basic 46.9 70.1
------------------------------------------
Basic - continuing operations 46.9 64.9
------------------------------------------
Diluted 46.5 69.6
------------------------------------------
Diluted - continuing operations 46.5 64.4
------------------------------------------
Adjusted 91.7 77.1
------------------------------------------ ----- -----
Adjusted - continuing operations 91.7 77.1
------------------------------------------ ----- -----
Adjusted diluted 90.9 76.6
------------------------------------------ ----- -----
Adjusted diluted - continuing operations 90.9 76.6
------------------------------------------ ----- -----
5. --Taxation
2019 2018
GBPm GBPm
------------------------------------------------ ------ ------
U.K. current tax 0.4 1.1
U.K. adjustment in respect of previous periods 0.1 -
Overseas current tax 6.4 4.1
Overseas adjustment in respect of previous
periods (3.4) (1.2)
------------------------------------------------
Total current tax charge 3.5 4.0
------------------------------------------------ ------ ------
Deferred tax - current year (4.0) (1.5)
Deferred tax - adjustment in respect of
previous periods (0.1) (0.7)
------------------------------------------------
Total deferred tax credit (4.1) (2.2)
------------------------------------------------ ------ ------
Total tax (credit)/charge (0.6) 1.8
------------------------------------------------ ------ ------
The overseas adjustment in respect of the prior period of
GBP3.4m includes a GBP3.1m credit in connection with the resolution
of a number of prior year uncertain tax provisions.
The tax on the Group's profit before taxation differs from the
theoretical amount that would arise using the standard U.K. tax
rate applicable to profits of the consolidated entities as
follows:
2019 2018
GBPm GBPm
------------------------------------------------ ------ ------
Profit before taxation 13.7 21.6
Profit before taxation at the average standard
rate of 19.0% (2018: 19.0%) 2.6 4.1
Tax allowances (U.K. and U.S.) (0.4) (0.5)
Non deductible expenses 0.2 -
Unrecognised tax losses 0.2 -
Changes in overseas tax rates during the
year - (0.9)
Differences in overseas tax rates 0.2 1.0
Adjustment in respect of previous periods (3.4) (1.9)
------------------------------------------------
Tax (credit)/charge (0.6) 1.8
------------------------------------------------ ------ ------
The income tax charged directly to Other Comprehensive Income
during the year was GBP0.3m (2018: GBP0.3m).
The deferred tax credited directly to Other Comprehensive Income
during the year was GBP1.5m (2018: GBP2.3m charge).
The deferred tax credited directly to equity during the year was
GBP0.2m (2018: Nil).
Deferred tax liabilities
Accelerated Other temporary
capital allowances differences Total
GBPm GBPm GBPm
At 1 October 2017 1.9 4.9 6.8
Charged/(credited) against profit
for the year (0.6) 0.7 0.1
At 30 September 2018 1.3 5.6 6.9
Charged/(credited) to profit for
the year 0.1 (1.8) (1.7)
Charged to Other Comprehensive
Income - 0.2 0.2
At 30 September 2019 1.4 4.0 5.4
----------------------------------- -------------------- ---------------- ------
Deferred tax assets have been recognised in respect of temporary
differences giving rise to deferred tax assets where it is probable
that these assets will be recovered.
Deferred tax assets
Retirement Accelerated Other
benefit Share capital temporary
obligation options allowances differences Total
GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ --------- ------------ ------------- ------
At 30 September 2017 7.5 0.4 0.3 - 8.2
Credited/(charged)
to profit for the
year - 0.2 - 2.1 2.3
Credited/(charged)
to Other Comprehensive
Income (2.3) - - - (2.3)
------------------------- ------------ --------- ------------ ------------- ------
At 30 September 2018 5.2 0.6 0.3 2.1 8.2
Credited/(charged)
against profit for
the year 0.6 0.1 (0.2) 1.9 2.4
Credited to Other
Comprehensive Income 1.5 - - 0.2 1.7
Credited to equity - 0.2 - - 0.2
------------------------- ------------ --------- ------------ ------------- ------
At 30 September 2019 7.3 0.9 0.1 4.2 12.5
------------------------- ------------ --------- ------------ ------------- ------
The standard rate of corporation tax in the U.K. is 19%.
A number of changes to the U.K. corporation tax system were
announced in the March 2016 Budget Statement, which reduce the main
rate of corporation tax to 17% by 1 April 2020. These changes were
substantively enacted at the balance sheet date.
The Group has no unrecognised deferred tax assets (2018:
Nil).
6. Cash and cash equivalents
The Group generates cash from its operating activities as
follows:
2019 2018
GBPm GBPm
--------------------------------------------------- ------ ------
Continuing operations
Profit for the year 14.3 19.8
Adjustments for:
Taxation (0.6) 1.8
Depreciation 4.3 4.9
Property impairment 1.1 -
Amortisation of intangible assets 7.4 6.2
Impairment of development costs 3.8 -
Defined benefit pension scheme cost 4.0 0.5
Finance income (0.4) (0.2)
Finance costs 0.2 0.2
Other finance expense 0.9 1.2
Loss on disposal of property, plant and equipment - 0.1
Fair value of share based payments 0.4 1.2
Impairment of inventory and receivables re:
exit Fire SCBA market 1.6 -
(Increase)/decrease in inventories 0.7 (2.1)
(Increase)/decrease in receivables (9.9) (1.8)
(Decrease)/Increase in payables and provisions (4.6) 6.3
---------------------------------------------------
Cash flows from continuing operations 23.2 38.1
--------------------------------------------------- ------ ------
Analysed as:
Cash flows from continuing operations prior
to the effect of exceptional operating items 25.1 38.2
Cash effect of exceptional operating items (1.9) (0.1)
--------------------------------------------------- ------ ------
Discontinued operations
Profit for the year - 1.6
Gain on disposal and net effect of operating
activities - (1.8)
Cash (used in) in discontinued operations - (0.2)
---------------------------------------------------
Cash flows from operations 23.2 37.9
--------------------------------------------------- ------ ------
7. Analysis of net cash/(debt)
This note sets out the calculation of net cash/(debt), a measure
considered important in explaining our financial position.
Cash Exchange
2018 flow movements 2019
GBPm GBPm GBPm GBPm
------------------------------ ------ ------ ----------- ------
Cash at bank and in hand 46.6 1.2 0.6 48.4
Debt due in less than 1 year (0.1) - - (0.1)
------------------------------ ------ ------ ----------- ------
Net cash 46.5 1.2 0.6 48.3
------------------------------ ------ ------ ----------- ------
8. Equity
Share capital
No. of Ordinary Share No. of Ordinary Share premium
shares shares premium shares shares
2019 2019 2019 2018 2018 2018
GBPm GBPm GBPm GBPm
-------------------------- ----------- --------- --------- ----------- --------- --------------
Called up allotted
and fully paid ordinary
shares of GBP1 each
At the beginning
of the year 31,023,292 31.0 34.7 31,023,292 31.0 34.7
At the end of the
year 31,023,292 31.0 34.7 31,023,292 31.0 34.7
-------------------------- ----------- --------- --------- ----------- --------- --------------
Ordinary shareholders are entitled to receive dividends and to
vote at meetings of the Company.
At 30 September 2019, 506,274 (2018: 499,264) ordinary shares
were held by a trust in respect of obligations under the 2010
Performance Share Plan. Dividends on these shares have been waived.
The market value of the shares held in the trust at 30 September
2019 was GBP8.4m (2018: GBP6.4m). These shares are held at cost as
treasury shares and deducted from shareholders' equity.
During 2019 the trust acquired 100,000 (2018: 100,000) shares at
a cost of GBP1.3m (2018: GBP1.1m).
92,990 (2018: 154,641) shares were used to satisfy awards
following the vesting of shares relating to the 2010 Performance
Share Plan.
3,364 (2018: 3,031) ordinary shares of GBP1 each were awarded in
relation to the annual incentive plan.
9. Dividends
On 1 February 2019, the shareholders approved a final dividend
of 10.68p per qualifying ordinary share in respect of the year
ended 30 September 2018. This was paid on 15 March 2019 utilising
GBP3.3m of shareholders' funds (2018: GBP2.5m).
The Board of Directors declared an interim dividend of 6.94p
(2018: 5.34p) per qualifying ordinary share in respect of the year
ended 30 September 2019. This was paid on 6 September 2019
utilising GBP2.1m
(2018: GBP1.6m) of shareholders' funds.
After the balance sheet date, the Board of Directors proposed a
final dividend of 13.89p per qualifying ordinary share in respect
of the year ended 30 September 2019, which will utilise an
estimated GBP4.2m of shareholders' funds. Subject to shareholder
approval, the dividend will be paid on 13 March 2020 to
shareholders on the register at the close of business on 14
February 2020. In accordance with accounting standards, this
dividend has not been provided for and there are no corporation tax
consequences.
10. Provisions for liabilities and charges
Property
Obligations
GBPm
-------------------------------------- -------------
Balance at 30 September 2017 2.0
Reclassification from other payables 1.5
Provision utilised (0.4)
Payments in the year (0.3)
-------------------------------------- -------------
Balance at 30 September 2018 2.8
Provision reversed during the year (0.4)
Payments in the year (0.1)
--------------------------------------
Balance at 30 September 2019 2.3
-------------------------------------- -------------
Prior year movements include a reclassification of GBP1.5m
property provisions from Other Payables.
2019 2018
Analysis of total provisions GBPm GBPm
Non-current 2.3 2.5
Current - 0.3
------------------------------ ----- -----
2.3 2.8
------------------------------ ----- -----
Property obligations previously included an onerous lease
provision of GBP0.9m in respect of unutilised space at the Group's
leased Melksham facility in the U.K. GBP0.1m of this provision was
utilised in 2019 with the remaining GBP0.8m being released as a
result of this facility now being fully utilised. Other 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. Such provisions were increased by
GBP0.4m during the year. Property provisions are subject to
uncertainty in respect of the utilisation, non-utilisation,
subletting of surplus leasehold property and any negotiated
settlement of any dilapidation claims with landlords.
11. Acquisition and disposals
Acquisition - 3M's ballistic protection business
The signing of an agreement to acquire 3M's ballistic protection
business and the rights to the Ceradyne brand was announced on 6
August 2019. The acquisition is subject to U.S. regulatory
approvals and is expected to close during the first half of 2020.
The results of the business are not consolidated within the 2019
financial statements as the purchase agreement does not transfer
control to the Group and therefore this announcement. However the
following transactions have been included and reported within these
financial statements.
Acquisition costs
The acquisition related costs are expensed in the periods in
which the services are received, in line with recognised accounting
practices. GBP2.8m of such costs, including legal, due diligence
and tax advisory fees, have been recognised during the year. These
acquisition costs are presented as an exceptional item and excluded
from adjusted profit measures.
Deal contingent forward
On signing the acquisition agreement the company entered a deal
contingent forward contract to hedge the foreign exchange risk on
the U.S. dollar equivalent of the GBP35m cash funded element of the
purchase price. The forward contract will only crystallise if the
deal completes within a specified timeframe, 3-12 months from
exchange. As a result, the fair value movements due to changes in
the currency rates to the balance sheet date of GBP0.9m, are held
on the balance sheet as a liability at year end rather than
impacting the income statement.
Disposal - Avon Engineered Fabrications
In March 2018, the Group disposed of Avon Engineered
Fabrications, Inc.
GBPm
------------------------------ ------
Total consideration received 7.1
Net assets disposed (5.1)
Disposal cost (0.6)
Gain on disposal 1.4
------------------------------ ------
Assets and liabilities at the date of disposal were:
GBPm
------------------------------- ------
Intangible assets 0.1
Property, plant and equipment 2.4
Inventories 1.2
Receivables 2.0
Payables (0.6)
-------------------------------
Total net assets disposed 5.1
------------------------------- ------
Acquisition - Merricks Inc. calf nurser product line
In June 2018, the Group acquired the Merrick's Inc calf nurser
product line. The consideration was $1.8m in cash and associated
costs of acquisition were $0.3m, giving a total cost of acquisition
of $2.1m. The acquisition involved the purchase of both tangible
assets - tooling equipment, and intangible assets comprising
customer lists, order book and the Merrick's brand.
GBPm
--------------------------- -----
Intangible assets 1.2
Tangible assets 0.4
Total net assets acquired 1.6
--------------------------- -----
12. Exchange rates
The following significant exchange rates applied during the
year:
Average Closing Average Closing
rate rate rate rate
2019 2019 2018 2018
------------- -------- -------- -------- --------
U.S. Dollar 1.276 1.232 1.346 1.305
Euro 1.131 1.126 1.132 1.127
------------- -------- -------- -------- --------
13. Annual Report & Accounts
Copies of the Directors' report and the audited financial
statements for the year ended 30 September 2019 will be posted to
shareholders who have elected to receive a copy and may also be
obtained from the Company's registered office at Hampton Park West,
Semington Road, Melksham, Wiltshire, SN12 6NB, ---England. Full
audited financial statements will be available on the Company's
website at www.avon-rubber.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GGGCPGUPBGBP
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