Half Year 2025 Avon Technologies PLC Earnings Call - Part 2

Operator: Good afternoon and welcome to the Avon Technologies PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send.

Okay.

Good afternoon, welcome see Avon Technologies plc, Investor presentation, Spotless record of presentation and that this will be an astounding right questions are encouraged and could be submitted at any time by the Q&A type situated on the right hand corner of the screen simply type in your questions Empress and the cup. He may not be in a position to answer every question during the meeting itself how about that.

Operator: The company may not be in a position to answer every question it receives during the meeting itself, however, the company can review all questions submitted today and publish responses where it's appropriate to do so.

Any comments or questions submitted today I'm published spoke just that's part Christy side before I begin I'd like to make the foreign policy and I know I like contract that you'll start to see.

Operator: Before we begin, I'd like to submit the following poll and I'd now like to hand you over to Joss See you, good afternoon. Hi there, and hello to everyone on the calls.

See I could off nature.

Speaker Change: Hi, Bob and Hello to everyone on the call.

Joss: I'm here today with Rich Cashin, our CFO, and also Steve Elwell, who runs the President of our Avon Protection business, which is over half of the group. We're very happy to talk to retail investors. We have a very long history of engaging with retail investors, being a 140-year-old company, so we do regard all of our investors as important.

Rick: I'm Gonna stay with Rick's question.

Speaker Change: And also Steve Oswald Ramos.

President of labor pressure.

Speaker Change: Oh great.

Speaker Change: We're very happy towards retail investors, we have a very long history of engaging with retail investors being at home.

Speaker Change: Nisource, we do regard all of our investors kind of important.

Joss: Those of you that didn't join in to the call this morning, we're going to go through the same slides but we'll do it in a slightly faster fashion. We will leave lots of time for questions. Despite the disclaimer at the beginning, actually we generally answer every question we get, so do feel free to... off the cliff.

Speaker Change: Those of you that didnt join in to the call. This morning, we're going to go through the same slides.

Speaker Change: Alrighty fast fashion, we will leave those final question. Despite the disclaimer at the beginning actually but generally answer every question we get.

Speaker Change: So do you feel free to.

Joss: So just some highlights. If I take the half we've just had compared to the same half in the prior year, we've made excellent progress across all of our financial metrics, revenues are, as Rich will describe in a second, profits are, cash flows are. Italian capital tops significantly and most excitingly because it supports future growth our order book is also which we'll give you the details in a second. We are creating a company with a winning mindset and a culture where all of our factories and all of our processes are improving all of the time. We used to give some examples of improvement activities actually with our results but we now have so many that every factory is improving every month so we can't really do that anymore but we have put some examples in the appendix to our results for those that are interested.

Speaker Change: Good question.

Speaker Change: So just some highlights.

Speaker Change: If I'd say the half we've just had compared to the same path in the prior year. We've made excellent progress across all of our financial metrics revenues off the ratio will describe the second profits or cash flows.

Speaker Change: The total capital cost significantly.

Speaker Change: Yes.

Speaker Change: Most excites me because it supports future order book as well.

Rich: Rich will give you the details in a second.

Speaker Change: We are.

Rich: Creating a company with a winning mindset and a culture of Wow.

Rich: All of our factories all of our processes are improving all the time.

Rich: We used to gain.

Rich: Some examples of improvement activities actually with our results, but we now have so many that have refractory is improving every month.

Rich: Don't really do that anymore, but we have put some examples in the front of the historical.

Joss: We are very focused on delivering on our promises to our customers and in particular ramping up production in our Cleveland plant on helmets, which is important because we've moved production from our California factory. And we're also very focused actually on delivering to our customers and our restaurant redevelopment because we have considerable demand for our products there and a lot of our lines are running flat out at the moment with the shift patterns they've got. The order book does give us confidence into the future, and as importantly for us, the size of the order book enables us to level load our factories, and when you level load factories, that also generates efficiency and helps drive margin progression, and all of those aspects together give us confidence.

Rich: Interesting.

Rich: We are very focused on delivering on our promises to our customers and in particular are ramping up production in all three of them songs.

Rich: On helmets, which is important because we've moved production from our California factory.

Rich: Also very focused actually on delivering thought processes on our respiratory question because we have considerable demand for all products that run a lot of our lines are running across all of the lineup of the ship.

Rich: No.

Rich: The order, but it does give us confidence into the future.

Rich: Perhaps as importantly for us.

Rich: The size of the order book enables us to level load our factories.

Rich: When you have a light factories, but also generates efficiency and helps drive margin progression.

Rich: And all of those aspects together.

Joss: Interestingly, those were our margin targets for 2027, but we've made more progress.

Rich: Interestingly that is where our margin targets for 2020 settlement that we've made more progress.

Joss: than we expected, or at least faster progress than we expected, so we pulled them forward to 2020.

Rich: Than we expected on these faster progress than we expected so we pulled them forward.

Rich: So with that, I'll hand over to Rich and he'll take you through the detail on... Thanks Josh. And just before we move on to the numbers, it's probably worth having a look at what's happened in what is a very dynamic global environment, both from a conflict and a trading perspective. Lots of stuff has been happening, as we all know. So government efficiency measures in the US have targeted several areas, including the military. We are closely watching what's happening, but we haven't yet seen anything that we think will lead to customers, our customers, changing their buying patterns.

Rich: Okay.

Rich: So with that I'll hand over to rich, who will take you through the detail on the numbers.

Rich: Yes, Josh.

Speaker Change: Before we move onto the numbers.

Speaker Change: It's probably worth having a look at what's happened in <unk>.

Speaker Change: It is a very dynamic.

Speaker Change: Global environment, both from a conflict in the trading perspective.

Speaker Change: Lots of stuff that's been happening so government efficiency measures in the U S have targeted several areas.

Speaker Change: <unk> military.

Speaker Change: Ill closely watching what's happening, but we haven't yet seen anything that we think will lead customers our customers changing their buying patterns.

Rich: One thing we have seen is that there is an increase in investment going into strengthening the US borders, which does have the potential to yield opportunities, particularly for our respiratory business, given our strong competitive position there. And then there are tariffs, which I know. We're not immune to the tariffs that have been announced so far. We have estimated that the direct impact on our business is at a gross level around $800,000. We do believe that we can largely offset that through pricing. Indirectly, could there be potentially some knock-on through the supply chain? Yes, I suppose so, but it's very hard for us to calculate that.

Speaker Change: One thing we have seen is that there is a an increase in investment getting into strengthening.

Speaker Change: The U S borders.

Speaker Change: Which does have the potential to yield opportunities, particularly for our respiratory business given our strong competitive position there.

Speaker Change: And then there were tariffs with China.

Speaker Change: Everyone is keen to understand the effects were not immune to the tariffs that have been announced so far we have estimated that the direct impact on our business is at a gross level.

Speaker Change: Dollars.

Speaker Change: We do believe that we can largely offset that through pricing.

Speaker Change: Indirectly could there be potentially some knock on the supply chain, yes, I suppose cyber week.

Rich: Frankly, I don't think it would be that significant. On a comparative basis, however, many of our products are compliant with the Berry Amendment, which requires certain product categories sold to the DoD to be 100% domestically sourced in North America. So, comparatively, I think we're in a reasonably robust position. Elsewhere, investment in defence spend in NATO ex-US is increasing, particularly towards the eastern side of Europe. This has created some opportunities for us recently and we believe will likely continue to do so in the foreseeable future. It is cemented by the widely publicised use by Russia of chloropicrin and other nasties, highlighting the importance of stronger respiratory protection, and we do have a market-leading technical solution, so we have seen some growth there, and we do believe that defence investment in Europe will actually outlive the Ukraine conflict.

Speaker Change: It's very hard for us to calculate that and frankly I think we can do that significantly.

Speaker Change: On a comparative basis. However, many of our products are compliant with the Berry Amendment, which requires certain product categories sold with DNP to people.

Speaker Change: 100% domestically sourced in North America.

Speaker Change: Comparatively I think we're in a reasonably robust position.

Speaker Change: Elsewhere investments in defense spending Nathan ex U S is increasing.

Speaker Change: Particularly towards the eastern side of Europe. This has created some opportunities for US recently and we believe we will likely continue to do so in the foreseeable future.

Speaker Change: It is cemented by the widely publicized used by Russia cohort pick rate another northeast.

Speaker Change: Highlighting the importance of strong respiratory protection.

Speaker Change: Do have a market leading technical solution. So we have seen some great.

Speaker Change: Do you believe the defense investment in Europe will actually outlaid.

Rich: So I think there's plenty of opportunities to go out there. More broadly, unrest does continue elsewhere in the world, including the Middle East and Asia, and our ability to manufacture in the UK insulates us from the potential negative effects of tariff reciprocity. from modern U.S. nations.

Speaker Change: Ukraine conflict.

Speaker Change: I think there's plenty of opportunities to go after that.

Speaker Change: Broadly unrest does continue elsewhere in the world, including the Middle East and Asia, and our ability to manufacture in the UK Insulates us from the potential negative effects of tariff policy.

Speaker Change: U S license.

Rich: So on to the numbers as promised, I mean the headlines are pretty strong, strategic and operational performance has led to. order book up 24%, revenue up 17%, operating profit up 48%, and that drops through nicely to EPS up 76%. As many of you may not know, because I don't get the opportunity to talk to you guys very often, but my preferred measure of performance is actually RoEIC and here we've seen excellent progress up 660 basis points to 16.3 percent. We do have some medium-term targets out there which suggest that RoEIC should be over 17 percent on a sustainable basis by the end of 2026.

Speaker Change: So I will answer the numbers as promised.

Speaker Change: I mean, the headlines are pretty strong strategic and operational performance was let's see.

Speaker Change: Order book up 24% revenue up 17% operating profit of 48% and that drops through nicely to EPS up 76%.

Speaker Change: As many of you may not know because I think <unk> talked to you guys very often but my preferred measure of performance is actually growing.

Speaker Change: And here, we've seen excellent progress up 660 basis points to 16, 3% we.

Speaker Change: We do have some medium term targets out there, which suggests that really should be over 17% on a sustainable basis. In 2026, clearly we are well on track to get to that metric now as expected cash conversion was a little bit would you used in the first half because we were building some buffer inventory ahead of the factory.

Rich: Clearly we are well on track to get to that metric now.

Rich: As expected, cash conversion was a little bit reduced in the first half because we were building some buffer inventory ahead of the factory consolidation from California into Cleveland. We also have had a particularly high receivables balance given the sort of increase in revenue accelerating through the first half. These effects will unwind as we go through the second half, so cash conversion will be meaningfully higher in the second half, but even after these headwinds in H1, net debt to EBITDA reduced by 0.7 of a turn in the first half, leaving leverage below one times. So a really good start.

Speaker Change: Consolidation from California into Cleveland.

Speaker Change: We also have a particularly high receivables balance.

Speaker Change: Given the.

Speaker Change: The sort of increase in revenue accelerating through the first half these effects will unwind as we get through the second half so cash conversion will be meaningfully higher in the second half, but even after these headwinds in each one.

Speaker Change: Net debt to EBITDA reduced by seven.

Speaker Change: In the first half, leaving leverage below one times. So a really good start we are growing fast we're generating good returns.

Rich: We are growing fast.

Rich: We're generating good returns, but there is, however, still much to achieve if we want to hit our medium-term aspirations.

Speaker Change: There is however, still much to achieve is the one that hits all medium term aspirations.

Rich: Just quickly on the divisions, I beg your pardon, moving on to the P&L first before we move to the divisions. Order intake of $170.5 million gives Book to build comfortably above one. $247 million record order book gives us confidence in delivering further growth for the balance of this year and beyond. Revenue of $148.7 million is up nearly 17% on last year with strong growth in both businesses and we'll look at that in a second. This has dropped through nicely to adjusted operating profit of $17.5 million giving margin of nearly 12% stronger than we have anticipated at this stage.

Speaker Change: Just quickly on the divisions.

Bob: Thank you Bob moving off the P&L for us before we move to the divisions.

Bob: Order intake of $175 million.

Speaker Change: <unk> book to Bill comfortably above one.

Speaker Change: $247 million record order book gives us confidence in delivering further growth for the balance of this year and beyond revenue of $148 7 million.

Speaker Change: 2017% on last year with strong growth in both businesses and we'll look at that in a second.

Speaker Change: This has dropped very nicely to adjusted operating profit of $17 5 million, giving.

Speaker Change: <unk> margin of nearly 12% stronger than we have anticipated at this stage.

Rich: Finance costs came down reflecting the lower average net debt and an effective tax rate as guided at 22 percent gives an adjusted EPS figure of 38.8 cents per share for the first half which is up over 76 percent.

Speaker Change: Finance costs came down reflecting the lower average net debt at an effective tax rate as guided at 22% Gibson adjusted EPS figure of $38.08 per share for the first off which is up 76%.

Rich: The dividend is up 5.6% to 7.6 cents per share, consistent with the increase at the On the divisions, Avon Protection has benefited from a very healthy order intake in the first half, order receipts totalling close to £100 million, which is a very strong half for this business. Around a third of this is from one-off demand, or what we call Unicorn. with the balance being recurring revenue as defined by our Capital Markets Day last year. But as a reminder, today's unicorns do feed into tomorrow's recurring revenue as we continue to grow the installed base. The order book of £94 million is particularly healthy for this business, which does have a fairly short win-and-ship cycle typically, which does support further growth into the second half and beyond.

Speaker Change: The dividend is up five 6% to seven six cents per share consistent with the increase of the full year results.

Speaker Change: So on the division's Avon protection has benefited from a very healthy order intake in the first.

Speaker Change: Order receipts totaling close to $100 million, which is a very strong half for this business around a third of the basis.

Speaker Change: From one optimal but what we call Unicorn.

Speaker Change: With the balance being recurring revenue as defined by our capital markets day last year, but as a reminder, today's unicorns do feed into Tomorrow's recurring revenue as we continue to grow the installed base.

Speaker Change: Book of $94 million is particularly healthy for this business, which does have a fairly short within ship cycle typically.

Speaker Change: Which does support further growth into the second half and beyond.

Rich: Revenue growth of over 12% to $75.5 million reflects the previously announced Australian respirator order and growth in rebreather deliveries offset by slightly lower demand in commercial Americas following a couple of very strong years. Adjusted OP at 14.3 million dropped through to a 28.8% increase year-on-year. That gives us margin of nearly 19% for the half with operational gearing and pricing and a helpful product mix tailwind all contributing to that growth. And then for the remainder of the year, we expect second half protection revenue to be a little higher than the second half last year, as we continue to work through that Ukraine and NATO back.

Speaker Change: Revenue growth of over 12% to $75 5 million reflects the previously announced Australian respirator order and growth in <unk> deliveries offset by slightly lower demand in commercial Americas. Following a couple of very strong.

Speaker Change: Adjusted IOP at $14 3 million.

Speaker Change: So with 28, 8% increase year on year.

Speaker Change: That gives us margin of maybe 19% for the off with the operational gearing and pricing.

Speaker Change: And a helpful product mix tailwind all contributing to that growth.

Speaker Change: And then for the remainder of the year, we expect second half.

Speaker Change: Actual revenues to be a little higher than the second half last year as we continue to work through that Ukraine and may take back.

Rich: in the first half compared to last year, but that was lapping a particularly tough comparator. Last year we received orders of more than 50 million from the U.S. DoD alone. Nevertheless, the backlog did continue to grow, up 7% to over $150 million, with future DoD orders of over $130 million already in the books. As expected, revenue was up strongly, over 20% as the ramp-up of one of our new helmet programs effectively started to kick in, with commercial helmets and pads also growing nicely. Higher direct costs reflecting learner curve and ramp-up inefficiencies offset lower scrap year on year, with operating leverage and lower SG&A driving improvement in operating margin.

Speaker Change: In the first half compared to last year, but that was lapping a particularly tough comparison last year, we received orders of more than $50 million from the USDA alone.

Speaker Change: Nevertheless, the backlog did continue to grow up 7% to over $150 million with future <unk>.

Speaker Change: As of over $130 million already in the book.

Speaker Change: As expected revenue was up strongly 20% as the ramp up of one of our new helmet program is effectively starting to kick in with commercial helmet. Some pads also growing nicely higher.

Speaker Change: Higher direct costs, reflecting learning curve and ramp up inefficiencies offset lower scrap year on year with operating leverage and lower SG&A driving improvements in operating margin.

Rich: The focus for the remainder of the year will be on improving our Cleveland and Salem ramp-up plans so that we can sustain the higher output volumes expected in the coming year. So for the second half, we do expect more of this growth versus last year, but we don't expect the reduced costs from having exited the Irvine facility to have a big effect on the full year 25 performance, although we are very comfortable with our guidance of 14 to 16% operating profit margin for next year at a group level, which clearly implies meaningful improvement in Salem.

Speaker Change: The focus for the remainder of the year will be on improving our Cleveland and Salem ramp up plans. So that we can sustain the higher output volumes expected in the coming year. So for the second half, we do expect modest growth versus last year, but we don't expect the reduced costs from having exited the facility. They have a big effect on the full year 2020 performance.

Speaker Change: Although we are very comfortable with our guidance of 14% to 16% operating profit margin for next year to group level, which clearly implies meaningful improvement in <unk>.

Rich: And then finally from me, just the guidance for the full year is essentially unchanged from the trading update that we put out in March, although it represents a very healthy uplift from our original outlook back in November. Revenue growth year to date, combined with that strength of order book that I mentioned in both businesses, gives us confidence in achieving revenue growth of above 10 percent for the full year. And the steps we've taken on improving the business in the first half should continue into H2, delivering a just operating profit margin for the full year of over 12.

Speaker Change: And then finally from me.

Speaker Change: Guidance for the full year was essentially unchanged from the trading update that we put out in March although it represents a very healthy uplift from our original outlook back in November revenue growth year to date combined with that strength of order book, what I mentioned in both businesses gives us confidence in achieving revenue growth of above 10% for the full year on the steps we've taken.

Speaker Change: Improving the business in the first half should continue into H two delivering adjusted operating profit margin for the full year of over 12%.

Rich: Investment in transformation remains broadly unchanged but with slightly less capex required and notwithstanding the relatively lower cash conversion in the first half we maintain our view that conversion for the full year will be at or above 80 percent as our investment in working capital to support the facility move starts to unwind in the second.

Speaker Change: <unk> and transformation remains broadly unchanged, but with slightly less capex required.

Speaker Change: Notwithstanding the relatively lower cash conversion in the first half we maintain our view that conversion for the full year will be at or above 80% as our investments in working capital to support the facility may start to unwind in the second half I'll hand that to Josh to talk about strategic partners.

Joss: I'll hand back now to Josh to talk about the strategic program. Thank you, Rich.

Joss: I'm actually going to split this bit up with Steve O'Rourke. Just a reminder of our strategy. The strategy is to strengthen the business through continuous improvement, which I'll talk about in a minute. We have a number of transformation projects which drive the margin improvement or contribute to the margin improvement that we're seeing, including a step change from this year to next as we finish the move out of our California factory and consolidate manufacturing into Cleveland. And then Envardson revolutionizes all about new product development and investing more into sales, marketing and business development to drive future growth.

Josh: Thank you rich.

Steve Barlow: The spinoff with Steve Barlow.

Steve Barlow: Just a reminder, our structure.

Steve Barlow: Strategy.

Speaker Change: The strategy is to strengthen the business through continuous improvement, which I will talk about in a minute.

Speaker Change: We have a number of transformation projects, which drives the margin improvement or contribute to the margin improvement that we're seeing in creating a step change.

Speaker Change: Finish the move outs.

Speaker Change: Our California factory and consolidate manufacturing in Cleveland.

Speaker Change: And that involves some regulation is it's all about new product development.

Speaker Change: Product.

Speaker Change: Hey morning sales marketing and business development.

Speaker Change: Got it.

Speaker Change: Okay.

Joss: We have developed what we call our Strengthened System. For those of you that are familiar with Continuous Improvement or the Toyota Production System, this is very closely based on that, although we have made it our own system and tailored it to our own needs. We also present it a bit differently.

Speaker Change: We have developed what we call our strengthened some.

Speaker Change: For those of you that for me.

Speaker Change: Continuous improvement all of the.

Speaker Change: Production services.

Speaker Change: Alright closely.

Speaker Change: It's still not although we have made in our own system and tie that to our needs.

Joss: I'm not going to go through all of this now. It would take too much of this call up, although it is a passion of mine. If any of you are particularly interested, do let us know. We have actually written a book on the Strengthened System. It is available to anyone who wants an e-book. It's not secret. Just let Gabby know if you want the e-book. The reason we don't mind making it public is because the magic in continuous improvement is not around knowing how the system works. Anybody can read books on the closed production system or indeed our own strengthened system.

Speaker Change: We also present a bit.

Speaker Change: Currently I'm not.

Speaker Change: Going to go through all of this now it would take too much of this call off will there is a passion of mine. So if any of you.

Speaker Change: The interesting thing is that a scenario we haven't actually written a book on the strength in system. It is available to anyone they want say an E book its not secret. So just luck Gavin if you want a book.

Speaker Change: The reason, we don't mind, making it public because the magic and continuous improvement is not around knowing how the system works anybody can refocus it looks like it's a production system or indeed, our own strengthen system.

Joss: The magic happens in aligning all thousand in our case of our employees to improve the businesses every day and that requires a cultural change and it requires excellent leadership from people like Steve and Rich our divisional president. in really leading the organisation forward so that they keep experimenting and improving the business every day. And that is what we are now seeing. Our factories literally change every single time I look at them. In fact, our mulching factory, every time I walk into it, it's changed.

Speaker Change: Magic happens and aligning all.

Speaker Change: And in our case of our employees to improve the businesses every day and that requires a cultural change on our costs.

Speaker Change: Excellent leadership from people like Steve and rich and operational presidents.

Speaker Change: And really leading the organization forward. So they keep experimenting on improving the business every day and that is what we are now saying all fought trade literally change every single time I looked at him.

Speaker Change: <unk> factory every time I walk into a strange.

Joss: So it's very hard for other companies to keep up with that level of change and we think it gives us an enduring competitive advantage. This is the vision for our strength and system on the left hand side, you will see a traditional batch manufacturing company. That's actually how most companies manufacture, including this one two years ago. The way that works is each process makes a product and is scheduled probably from some sort of central scheduling system. It makes a load of work in progress, which probably has to go back to the warehouse. Then they will come back out again and run through another process and so on.

Speaker Change: So it's very hard for other companies to keep up with that level of change and we think it gives us an enduring competitive advantage.

Speaker Change: This is the vision for our strength in the system.

Speaker Change: On the left hand side, you will see a traditional batch manufacturing company, that's actually how most companies manufacture, including this one two years ago.

Speaker Change: The way that works is each process.

Speaker Change: <unk> products.

Speaker Change: Youll, probably from some sort of central scheduling system. It makes a lot of work in progress probably has to get back to the warehouse.

Speaker Change: Later, we'll come back out again around through another process and so on.

Joss: Typically, there will be large amounts of work in progress between processes and there will also be very long lead times. We, our vision is that all of our production lines make to the beat of the customer, which means that we deliver just in time to the customer, and that's your suppliers deliver just in time to us. We have quality built into every stage of our processes, so we never have rejects at the end of the line. That improves quality and reduces rework rates, and we want our product to flow from the moment the raw material comes in the warehouse to the moment the finished product goes to the customer.

Speaker Change: Typically that will be large amounts of work in progress between processes and levels that would be very long lead times.

Speaker Change: We all vision is that all of our production lines.

Speaker Change: To the base of the customer, which means that we deliver just in time to the customer I'm not sure so bonds to the adjusted clients off.

Speaker Change: We have quality built into every stage of our processes.

Speaker Change: We never have rejected at the end of the line.

Speaker Change: Produce quality and reduces rework rights.

Speaker Change: And we want our product to flow from the mainland the raw material comes in the warehouse to the advisor of the finished product that the customer that reduces lead times improved sufficiency.

Joss: That reduces lead times, improves efficiency. reduces working capital and ultimately generates wealth for our employees and for our shareholders. We measure progress on our continuous improvement journey using operating metrics. We're very transparent in these, that's unusually transparent. We set out targets 18 months ago when we started this journey. You can see the targets from the bottom row of the slide and the sort of yellow boxes with the arrows. We're making good progress towards hitting our targets. Productivity has improved 26% over the last 18 months. scrap rates of hard and inventory terms were up 33%. have seen a bit of a flattening out or slowing of improvements over the last six months.

Speaker Change: Reduces working capital and ultimately generate as well for all employees on cross shareholdings.

Speaker Change: We measure progress on our continuous improvement journey using operation operating metrics.

Speaker Change: We're very transparent in these unusually transparent.

Speaker Change: We set out targets 18 months ago, when we started this journey.

Speaker Change: You can see the target from the bottom right of the slide and the sort of yellow boxes with the arrows.

Speaker Change: Making good progress towards hitting our targets productivity has improved 26% over the last 18 months scrap is Hart Scott right. So Paul on inventory time dropped 33%.

Speaker Change: We.

Speaker Change: Have seen base of flattening.

Speaker Change: Flattening out so slowing of improvements over the last six months the reasons for that.

Joss: The reason for that even facility and that has involved recruiting some people ahead of production ramp up. It's also meant that we have spent some time with training the large number of people that we're recruiting every single week at the moment and we've also had to build some inventory in order to provide buffer stock to support the factory move.

Speaker Change: Okay.

Speaker Change: Cleveland's facility and that has involved recruiting some people ahead of production ramp up.

Speaker Change: Also we have spent some time with training.

Speaker Change: Training.

Speaker Change: A large number of people that we're recruiting every single week of alignment and we will start to build some inventory.

Speaker Change: In order to provide buffer stock to support the factory move.

Joss: I do expect these metrics to start improving again as we run through the next six months. and beyond. We have focused very hard on scrap rates in Avon Protection, Steve's business, amongst other things. But this is just an example of what can be achieved. These are three very important production lines to us. Interestingly, two of them are 20 years old, one of them is five years old. All of these lines had high scrap rates historically. By shining a light on that, by building capability in our people, by encouraging them to experiment and teaching them continuous improvement methodologies, we have reduced the scrap rate on the filters line by about $260,000 a year.

Speaker Change: I expect these factories to stock and start improving again as we run through the next six months.

Speaker Change:

Speaker Change: We have focused very hard on scrap price in Avon protection Steve's business amongst other things.

Speaker Change: Just as an example of what can be achieved.

Speaker Change: Three very important production lines to us.

Speaker Change: Interestingly two of them <unk> one of them is five years old.

Speaker Change: All of these lines have higher scrap price historically.

Sean: Sean a light on that.

Sean: By building capability and our people by encouraging them to.

Speaker Change: Experiments.

Speaker Change: And teaching them continuous improvement methodologies, we have reduced the scrap price on the <unk> line by about 260000.

Joss: You can see similar numbers on faceplants and visor casting, and that's actually only three of our lines. All of our lines are improving all of the time.

Speaker Change: Yeah.

Speaker Change: You can see similar numbers on price volume and cost thing and Thats actually only three of our aligned all of our lines are improving over time.

Joss: We did have an interesting anecdote earlier actually. Because we pointed out that although tariffs will cost us maybe probably a bit less than $800,000 through, mostly because we make some components in the UK and ship to the US, we've already offset over half of that just by reducing the scrap rates on these three production lines, so we're not particularly worried about tariffs, it's definitely a manageable matter.

Speaker Change: We did have an interesting anecdote earlier actually.

Speaker Change: Because we pointed out, but although tariffs will cost us maybe.

Speaker Change: Probably a bit less than $800000.

Speaker Change: Through my C. Because we make some components in the UK and shipped to the U S. We've already offset over half of that just by reducing the scrap price zone phase III production lines. So, we're not particularly worried about targets and stuff.

Speaker Change: That would be a manageable number for us.

Joss: The strengthened system is one of four parts of our overall business system. This is the methodology that we use to improve businesses. We think it's very repeatable. We think it will work for really any business, although I suppose we're most interested in manufacturing businesses. We start with strategy. The way we do strategy is we teach our businesses a strategic process and a way of strategic thinking that enables them to build their own strategies. That contrasts to most companies, as I understand them, which often get expensive consultants in to tell them what their strategy is. We don't do that.

Speaker Change: Okay.

Speaker Change: The strength of the system.

Speaker Change: Is one a full path, although overall business system. This is the methodology that we use to improve businesses.

Speaker Change: We think it's very repeatable, we think will work really any business alone.

Speaker Change: They might be interested in manufacturing businesses.

Speaker Change: We start with strategy.

Speaker Change: The way we.

Speaker Change: Strategy as we teach our businesses.

Speaker Change: A strategic process on the way and strategic thinking.

Speaker Change: I will have them to build their own strategies.

Speaker Change: Contrast to most companies as I understand them, which often get expensive consultants and so our strategy is we.

Joss: The reason we don't do that is because we feel our way of enabling our own people to develop the strategies. leads to far better execution and far better delivery of the strategy. We feel that most companies fall down because they don't actually do their strategy. We feel we're different in that respect. Of course, we do need people that are capable of delivering the strategy, that's why we've built our own STAR Academy. We've spent a lot of time as a leadership team developing the courses in the STAR Academy, and the STAR Academy teaches people, for example, how to...

Speaker Change: We don't do that.

Speaker Change: The reason, we don't do that is because we feel our way of enabling our own people to develop the strategies.

Speaker Change: These too far better execution fall back to the delivery of the strategy, we feel that most companies pull down because they don't actually do that strategy.

Phil: Phil we're different in that respect.

Phil: Of course, we do need people that are capable of delivering the strategy. That's why we built our own Star Academy.

Phil: We spent a lot of time as a leadership team developing the courses and the Star Academy on the Star Academy teaches people for example, how to.

Joss: improve our production lines and how to improve processes. outside the shop floor, as well as other areas like how to think strategically, how to manage people and so on.

Phil: Improve all production lines and how to improve processes.

Phil: Outside of the shop floor as well as well as other areas like how to think strategically how to manage people and so on.

Joss: And then. We ensure that all thousand people across the whole organisation are aligned to our strategy through a process we call Objectives and Key Results, which cascades objectives. It is also a form of continuous improvement because we set objectives for every quarter and we have a look at what we've actually achieved during the quarter and we learn from things that have gone well and, equally, or perhaps more importantly, from the things that have gone badly. And then the last bit is our strength and system, which I've already mentioned. But that strength and system is important for the overall business system because it frees up both people and money to invest into new technology, sales, marketing and business development that helps us grow even faster.

Phil: And then.

Phil: We <unk>.

Phil: Sure.

Phil: Thousands of people across the whole organization are aligned to our strategy through a process, we call objectives and key results, which cascades objectives. It is also a pull on continuous improvement because we set objectives for our fourth quarter and we have a look at what we've actually achieved during the quarter and we learn from things that would go model equal.

Phil: Perhaps more importantly for the things that are going badly.

Phil: And then the last bit.

Phil: Our strength in system, which I've already mentioned.

Phil: Strength in our system is important so the overall business system, because it frees up both people and money.

Phil: To invest into new technology sales marketing and business development that helps us to grow even cost townhouse us level or the factories and win that way the virtuous circle, which you'll start to see come through in the numbers that rich described.

Joss: And that in turn helps us level the factories. And we end up with a virtuous circle, which you're starting to see come through in the numbers that Rich described.

Joss: And then I think the last slide for me, but I might be surprised.

Phil: Yes.

Phil: And then I think the last slide for me, but I am not surprised.

Joss: We have a transformation program. The horizontal lines here show the projects within that transformation program. The green, newly green shaded limbs to each star show progress from six months ago. We are making very good progress on footprint optimisation. We have now moved all production out of our Californian factory and the lease will actually end in June and then we will kind of shake off the cost of an expensive Californian facility. In operation, all of our factories have very ambitious transformation programmes and are making good progress towards flowing all of their lines. reducing lead times inventory and improving quality and delivery.

Phil: We have a transformation program the horizontal lines show the projects within that transformation program or the <unk>.

Phil: Green near the Green shaded lends story Star show progress from six months ago.

Phil: We are making very good progress on footprint optimization, we have now moved all production out of our California factory.

Phil: We will be.

Phil: The lease will actually end in June and then we will kind of shake off the cost of an expensive, California animals, So let's say.

Phil: All in operational excellence all of our factories are very ambitious transformation programs aandahl, making good progress towards flowing all of our lines.

Phil: Reducing lead times inventory and improving quality and delivery.

Joss: In functional excellence, Rich has made great progress. improving the efficiency of its function and getting us the monthly numbers in two days instead of seven. We're also seeing very good progress in HR. And perhaps most meaningfully from a financial perspective, we are taking out a legacy ERP system, which is extremely expensive for us to maintain. So that will save us about a million dollars a year. And we bring all that together through our program management approach. And on top of all that, we have driven good improvement to our gross margins through pricing where we have.

Phil: And functional excellence rich has made great progress.

Phil: Improving the efficiency of his function on getting us the monthly numbers in two days instead of seven we're also seeing very good progress in HR.

Speaker Change: Past mice, meaning from a financial perspective.

Phil: We are taking out legacy ERP system.

Phil: Which is extremely expensive for us to mine site, so that will save us about $1 million.

Phil: Yes.

Phil: And we bring all that together through our program management approach.

Phil: Top of all that we have driven.

Phil: Good improvement to our gross margins through pricing why we have.

Joss: seen historic contracts that haven't been priced correctly.

Phil: Seen historic contracts that haven't been priced correctly.

Joss: Excellent, I was right.

Steve: It's now over to Steve. Thanks, Justin. Delighted to be here. So this slide really represents the strategic progress that Avon Protection is making. I think most of you will know Avon Protection at the top left-hand side of this chart. We've got a pretty strong background in core marketing, chemical, biological, respiratory protection, good competitive market. Commanding Market Show around the world. Our strategies is really aimed at jumping off that and building on that position into three new markets, what we call here non-severe and non-chem-bio respiratory integrated chem-bio protection, and also our underwater respiratory protection market. Increasingly as well with the large install base we have for our products, the aftermarket support shown at the bottom here is really, really important not just to us, but it's also really important to our customers and their end users.

Phil: Excellent wells right now are at this stage.

Josh: Thanks, Josh.

Josh: The debate here.

Phil: So this slide really really represents.

Phil: So the strategic progress that Avon protection is making.

Phil: Most of you will know Avon protection at the top left hand side of this chart, we have got a pretty strong.

Phil: Background and co marketing the chemical biological respiratory protection.

Phil: Good competitive moat.

Phil: Demanding market shape.

Phil: Round the world.

Phil: <unk> is really aimed at jumping off of that and building on that position.

Phil: Into three new markets, what we call non <unk> and non kimberlite respiratory.

Phil: Integrated <unk> protection and also out of the water respiratory protection markets increase.

Phil: Increasingly as well with the large installed base, we have for our products the aftermarket channel.

Phil: From here.

Phil: Really really important not just to us, but it's also really important to our customers and their end users. So we expect.

Steve: So we expect a long-term repeatable sales model for around 10 years off of each product line where you've got consumables, things like filters, you've got training, you've got decontamination of equipment, all need to be conducted and offer us growth in the market. So, in that core market of CBRN respiratory protection, we continue to see some really strong demand for our core products. Our order book is up 69% year-on-year. Large chunks of that are related to Ukraine, but even without Ukraine, the order book would still be up around 20% year-on-year. We continue to see positive progress in Ukraine as well.

Phil: Long term.

Phil: Repeatable sales model around 10 years of Openreach product line.

Phil: <unk> got consumables things like filters training decontamination of equipment.

Phil: We'll need to or need to be conducted in force growth.

Phil: Marketplace.

Phil: So in our core market of.

Phil: CVR and respiratory protection, we continue to see some really strong demand for our core products. Our order book is up 69% year on year.

Phil: Large chunks of that all relates to Ukraine, but even without Ukraine.

Phil: Order book could still be up around 20% year on year.

Phil: We continue to see positive progress in Ukraine.

Steve: Russia continues to use chemical weapons. and the Ukrainians are pretty clear that the only masks that really work operationally on the ground are Avons and so we do expect further demand from Ukraine in the second half of the year. In our NATO contracts, NATO mask agreements, we've signed up three new countries in the first half of this year so that brings us to 13 nations will now supply under that contract and those nations are over and above the Ukraine contracts that are funded by by NATO countries. We were very pleased to sign a long-term contract with Thales in the first half to supply around 10 million dollars worth of parts over a six-year contract and we expect some further orders to flow from that.

Phil: As well, Russia continues to use chemical weapons.

Phil: And the Ukrainians are pretty clear that the only masks the <unk> <unk>.

Phil: Operationally on the ground are Ravens.

Phil: And so we do expect the demand from Ukraine in the second half of the year.

Phil: <unk> contracts night domestic agreements, we've signed up three new countries in the first half of this year.

Phil: That brings us to 13 nations when that supply under that contract.

Phil: And those patients are over and above the Ukraine contracts that are funded by NATO countries.

Phil: We're very pleased to sign a long term contract with tell us in the first half supply.

Phil: Around $10 million worth of parts over a six year contract.

Steve: The UK contract with GSR remains on track and as we'll go into in a little while the demand for our underwater breeders continues to be very strong. The program to equip the Australian military is progressing really well and we delivered around six million dollars in the first half of this year and we're also hoping that Australia will now add our filters to that contract alongside the FM54 masks that they've already taken. What the order book from the first half doesn't include is expected mask and filter orders from the U.S. DoD. We expect to receive these all U.S.

Phil: Expect some further orders to flow from that the UK contracts with GSO remains on track as well.

Phil: Go into that a little while.

Phil: And for our underwater fleet breeders continues to be very strong.

Phil: Programs that could be Australia, military progressing really well and we delivered around $6 million in the first half of this year.

Phil: More sites in the Australia will know addax doses to that contract alongside the SM 64 masks that they've already taken.

Phil: The order books in the first half. It doesn't include is expected Mexican third quarters from the U S. We expect to receive the full U S orders in the second half of the year.

Steve: orders in the second half of the year. We are working very closely with the U.S. DoD on an extension to our M50 product line and in the meantime some goods, spares and accessories orders from that customer continues at pace.

Phil: We are working very closely with USDA and extension so that sole source contract that the <unk> prototype.

Phil: In the meantime, some good space and accessories orders from that customer continues at pace.

Steve: Moving into the non-CVRN respiratory protection market, we made some exceptional progress in the first half where we launched a MITRE tactical half mask, which you can see top right hand side of this chart. So if you're not aware MITRE is a modular system which fills a capability gap as the top left of this chart seeks to show. For anybody who's operating in a lower protective environment, so teams like SWAT teams for example, where the existing high-end protective equipment can be cumbersome at times and impact on their mission effectively. We've seen some really good early market success.

Phil: Moving into the known <unk> and respiratory protection market, we made some exceptional progress in the first half where we launched at Mitek tactical half mask, which you can see top right hand side of this chart.

Phil: Conoco add Mike that the modular system sales a capability gap because the top left of this chart seeks to show.

Phil: For anybody who is operating in a lower protective environment site team.

Phil: Swat teams for example.

Phil: The existing high end protective equipment can be cumbersome and time.

Phil: <unk> had an impact on the ambition effectiveness, we've seen some really good early market success. We've run some initial supply contract suites special forces users across all advised community.

Steve: We've won some initial supply contracts with Special Forces users across the Five Eyes community, and we're now in advanced trials with US and European SWAT teams. I think most notably, what we're able to announce is we've secured a new program of record from the US DOD, and that program we call, or they call rather, Enhanced Fire Defence Respirator, or ENBD. So the goal of the ENBD program is to develop an innovative personal protective respirator that's based on the MITRE architecture you can see here, and we'll do that in collaboration with the DOD. It's designed to improve the user's comfort.

Phil: We know in advance Charles with U S. European Swat teams I think most notably what we're able to announce as we secured new program of record from the U S. Vod.

Phil: That program, we call <unk> enhanced Biodefense respirator.

Phil: NPD.

Phil: <unk> program is to develop an innovative postal protected respirator, that's based on the minds of our architecture you can see here.

Phil: And we'll do that in collaboration with the Doj.

Steve: It's designed to reduce physiological burden when they're operating in those lower threat environments. We're in the very early stages of that program, but we expect to move over the coming years to a production ready system and one that can be fielded across the US military. So we're so we're pretty excited about that program and pretty excited about the commercial potential for mine. and our integrated TBRN.

Phil: It's designed to improve the users' compressors designed to release.

Phil: Electrical burden, whether operating in those environments.

Phil: In the very early stages of that program, but we expect to move over the coming years to a production ready system and one that can be scaled across the U S. Military so with so we're pretty excited about that program and pretty excited about the commercial potential for monitor.

Phil: Yes.

Phil: And I think it's a great <unk>.

Steve: We launched our Exoskin suits, boots and gloves range. We previously, you're probably aware, we secured the NATO contract for CBRM boots and gloves. We're now up to eight NATO countries signed up to that contract where we're supplying and we've got some nice advanced discussions with a number of other NATO nations that we expect to secure over the next 12 months into that program. We won the U.S. DoD program for what they call their HMI or the Hood Mask Interface Program that's actually three new programs of record. board with the DoD and that win really puts Avon right at the heart of future ChemBio integration.

Phil: CVR Orion.

Phil: We launched our.

Phil: Extra skin suits boots and gloves range.

Phil: We previously you're probably aware, we secured the NATO contracts, the CPR on boots and gloves.

Phil: Now up to 8%.

Phil: NATO countries signed up to that contract way with <unk>.

Phil: Some nice advanced discussions with a number of other NATO nations do we expect to secure over the next 12 months into that program.

Phil: When the USDA program for what they call that <unk>. The Hood mask interface program, that's actually three new programs of record.

Phil: With the <unk> and that really puts Avon right to the heart of future Kim buyout integration protection.

Steve: Our Exoskin suit range is really popular with our customers, we're in very close collaboration with NATO and Five Eyes countries, and we're starting now to see requirements and specifications move in our favour. So actually we see our medium-term pipeline in that space starting to build quite nicely.

Speaker Change: Our extra skin suit range really popular with our customers.

Speaker Change: Very close collaboration with NATO and five ice countries.

Speaker Change: We started to see requirements and specifications moving out fiber side CVC, our medium term pipeline in that space and starting to build quite nicely.

Steve: And finally for me, a military underwater rebreather market is expanding with our deep-sea rebreathers. So in the first half, we did secure two new European NATO Navy wins, and they build on previous wins from Germany and New Zealand. Also very early in the second half, so it doesn't appear in our first half results, but we did also sign a contract and enter a partnership with the Royal Canadian Navy. on a working basis. So I think as Joss and Rich really presented, we're now showing some really good operational discipline. We've got a much stronger order book.

Speaker Change: And finally for me.

Speaker Change: Treat underwater rebreather market is expanding without <unk>. So in the first half we did secure two new European NATO.

Speaker Change: Navy wins.

Speaker Change: Previous wins from Germany, <unk> Zealand.

Speaker Change: Also very early in the second half doesn't appear in our first half results, but we did also signed a contract to enter a partnership for the rural Canadian Navy to supply that would agree the needs as well.

Speaker Change: Reduction lines are ramping up them, increasing output to meet that that rising demand.

Speaker Change: We continue to see a very strong pipeline for this product area.

Speaker Change: Many more upcoming tenders with night finalized nations alongside growing number of opportunities go international export So think as Johnson rich really presented we're now showing some really good operational discipline.

Steve: We're executing on our growth strategy and we're building a pipeline and really accelerating. Thank you very much Dave.

Speaker Change: A much stronger order book, we are executing on our growth strategy and we are building a pipeline and really accelerates and some momentum.

Speaker Change: Thank you very much.

Rich: Question on the order book in Team Wendy around order intakes actually decline. Order intake did decline a bit but only really because the first half of last year was exceptionally strong as the DoD programs came online. It's actually the order book that matters though and that is actually up about 10 million in Team Wendy, driven by next-generation IHERTS and ACH but also really good demand across our bump helmets, the US Navy and pads and commercial helmets.

Speaker Change: Question on the order book and see when they.

Speaker Change: Around order intake, it's actually decline.

Speaker Change: Order intake did decline a bit but really because the first half of last year was exceptionally strong.

Speaker Change: D programs came online.

Speaker Change: It's actually the order book the masses, though and that is actually up about $10 million and team when they driven by X generation I had some CRE, but also really good demand across a bump commerce the U S Navy and pods and commercial outlets.

Rich: We have also, just in the last six months, launched our new RifleTech helmet. This is probably the most advanced helmet in the world. It can stop typical rounds from a rifle such as an AK-47 or, for those of you more familiar with the UK, the SA80. It is about 2½ pounds lighter than the previous helmet that provided that type of ballistic protection. It is a reassuringly expensive helmet but it does provide unrivaled time. holistic threat. We have a good pipeline developing on that, both from military and also from SWAT teams and police forces.

Speaker Change: We are also.

Speaker Change: Just in the last six months launched on new rifle Comat. This is the probably the most advanced helmet in the world.

Speaker Change: It's come stop.

Speaker Change: Typical rounds from a rifle sauces, and AK 47 of those even more familiar with the FAA.

Speaker Change: It is about two and a half pounds lighter than the previous helmet that provided that type of ballistic protection.

Speaker Change: As a ratio on the expense comment, but it does provide.

Speaker Change: Rival.

Speaker Change: Action against.

Speaker Change: Ballistic threats.

Speaker Change: We have a good pipeline developing on that both from military on wholesale from savings on the base forces. So we stopped it should stop manufacturing now.

Rich: So we should start manufacturing that commercially in the next... We're also working hard to develop new pad systems and to carry out R&D on how we can protect people's brains even better from the impact of a bullet strike.

Speaker Change: <unk> in the next six months.

Speaker Change: We're also working hard to develop new pod systems.

Speaker Change: <unk>.

Speaker Change: Our R&D on how we can protect.

Speaker Change: People's brains, even better from the product to them for that.

Speaker Change: Striking outlets.

Rich: This slide just shows the last 12 months compared to the full year of 2024. The middle line is perhaps the important one. You can see that the margin is progressing nicely. ROIC is actually nearly in our target range of 17% to 20%. Cash conversion in the last 12 months has continued to be very strong and leveraging in a rock-solid financial position with leverage of the loan.

Speaker Change: This slide just shows the last 12 months compared to the full year 2020 fold. The middle line is perhaps the important one.

Speaker Change: See the margin is progressing nicely.

Speaker Change: In our target range of 17% to 20% cash conversion of the last 12 months continued to be very strong.

Speaker Change: Leverage.

Speaker Change: Our rock solid financial position with leverage for that work.

Rich: We are unusually transparent about risks and opportunities. We keep hoping we're going to set a trend amongst listed companies, but for the moment I think they're still an outlier.

Speaker Change: We are unusually transparent.

Speaker Change: Risks and opportunities, we keep timeframe, we're going to set a trend amongst listed companies, but for the moment I think there is still an outlier.

Rich: I'd say our biggest risk at the moment is the ramp up in Cleveland, where we need to triple production over the next three and a half months or so. That is a big challenge, not least finding the amount of workers that we need, or at least good workers. tariffs haven't really impacted us so far. I don't think we're particularly worried about them, but if there were reciprocal tariffs put in place by, for example, Europe, that would be inconvenient for us. That said, we do manufacture masks in the U.S. and in the U.K., and we can move production fairly easily.

Speaker Change: I'd say our biggest risk at the moment is the ramp up in Cleveland, why we need to triple production over the next three months full size.

Speaker Change: <unk> challenged not least finding.

Speaker Change: Amounts of work is that we need all these good workers.

Speaker Change: Paris.

Speaker Change: Haven't really impacted us so far but then it would be particularly worried about them, but if they were reciprocal tariffs put in place by for example, Europe.

Speaker Change: That would be inconvenient for us outside we do manufacture most in the U S and in the UK and we can move production fairly easily we also make filter that show on both sides of the Atlantic.

Rich: We also make filters, actually, on both sides of the Atlantic. Helmets, we currently only make in the U.S., but we do have room for helmets in the U.K. and could move them if necessary, but we're not going to do anything like that until we're a bit clearer on where the tariffs are going.

Speaker Change: How much we can.

Speaker Change: Currently only make in the U S. But we do have room for <unk> in the UK and could move them if necessary.

Speaker Change: We're not going to do anything like that until were clear on why the <unk>.

Rich: Well, the opportunities are actually an opportunity for us because we can manufacture on both sides of the Atlantic and do, whereas some of our competitors are trying to access the US market from Europe. And we do have good opportunities around. Exporting our helmets from the U.S. into the non-U.S. markets, that's not really something we have tried to do before because we've had so much demand from the U.S. DOD, but as we successfully ramp up production we will have more capacity to try and access international markets that should drive further growth.

Speaker Change: Got it.

Speaker Change: When the opportunities alright, so actually an opportunity for us because.

Speaker Change: We can manufacture on both sides of the Atlantic and do whereas some of our competitors.

Speaker Change: Trying to access the U S market from Europe.

Speaker Change: And we do have good opportunities around.

Speaker Change: Exporting on how much from the U S.

Speaker Change: Into the non U S markets, that's not really something we have tried to do before because we've had so much demand from the U S. They are day, but as we successfully ramp up production, we will have more capacity to.

Speaker Change: Trying to access international markets should drive further growth.

Rich: So, in summary, our businesses are improving very fast. We're doing what we said we would do two years ago. It's good that now investors can start to see that come through in the numbers.

Speaker Change: So in summary al.

Speaker Change: Businesses are improving very fast we're doing what we said we would do two years ago.

Speaker Change: It's good.

Speaker Change: Now investors can start to see that come through in the numbers. So hopefully that gives people confidence that we will do what we say we'll do.

Rich: Hopefully that gives people confidence that we will do what we say we'll do. Our transformation program is on track, in fact, the closure of our California factory is actually three months early. Our markets are growing well, it's always nice to be swimming with the current, and our business system is delivering improved margins and higher quality products to our customers, which in turn supports growth.

Speaker Change: Our transformation program is on track and closure of our California functions, obviously three months early.

Speaker Change: Markets are growing well.

Speaker Change: It's nice to be swimming with the current.

Speaker Change: Our business system is delivering improved margins.

Speaker Change: High quality product, so our cost position Tom.

Operator: So with that, I was going to say we'll hand over to questions but they're actually online so I think we'll have to leave the questions out and we'll...

Speaker Change: That's correct.

Speaker Change: So with that.

Speaker Change: Okay. So on one hand, those questions, whether I should be online so well have to wait the questions envelope.

Operator: Josh, Rich, Steve, thank you very much for your presentation this afternoon.

Speaker Change: Joseph Rich Steve. Thank you very much for your presentation itself and then if I may just jump back in the ladies and gentlemen.

Operator: If I may just jump back in there. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab situated on the top right hand corner of your screen.

Speaker Change: Your questions just buys in the Q&A tab situated on the top right hand corner of the screen just about the comps you take the maintenance tricky questions Mitch I'd.

Operator: Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and a published Q&A can be accessed via your investor dashboard. As you can see, we received a number of questions throughout today's presentation and if I could just hand back to you to read out the questions and give responses where appropriate to do so and I'll pick up from you at the end.

Speaker Change: I'd like to remind you that a recording of this presentation.

Speaker Change: The slides on the public Q&A can be accessed by Investor dashboard. As you can see we received number of questions. Rob today's presentation. If I could just hand back to read out the questions that gave her spot to spot price today, so on OPEC.

Rich: So Rich, I think the first one's for you. To what extent is the US, sorry, is the business exposed to the UK and the US military? Yeah, that's fine.

Speaker Change: So I think with vessels.

Speaker Change: To what extent is the U S is the business exposed to the U K and the U S military.

Rich: We do actually publish this exposure once a year, so it will be in the full year numbers when we put that out in November. But at the last time we published it, the OSDOD accounted for about 45% of group revenue. We don't really break out the UK in isolation, I'll tell you why in a moment, but European military in total was around 13% of group revenue. The reason why we don't break out the UK is it's not actually that significant for us right now. So we are the supplier of the UK general service respirator, but the UK in the context of global customers isn't actually that massive.

Speaker Change: Yes.

Speaker Change: We do actually publish this exposure will see yes.

Speaker Change: It will be in the full year numbers when we let me put that from November.

Speaker Change: But at the last of the last published it.

Speaker Change: <unk> accounted for about 45% of group revenue.

Speaker Change: We don't really break out the U K.

Speaker Change: Isolation, I'll tell Ya automobiles, but European military in total was around 13% of group revenue. The reason why we don't break out in the UK. This is not actually that significant for US right. Now. So we are the supplier of the UK General service respirator.

Speaker Change: But the UK in the context.

Speaker Change: Our global customers isn't actually that massive.

Rich: We're always looking at opportunities to grow it clearly, but it does mean that the exposure isn't that significant.

Speaker Change: We're looking at opportunities to grow that clearly, but it doesn't mean, we exposure isn't that significant.

Rich: The exposure within the two divisions is a bit different, and that's really a comment on the maturity of the two divisions. So if we look at Avon Protection, the respiratory business, that's a very mature business. The business cycle goes something along the lines of designing a product, working with the USDOD as your key customer. And then over time, as you complete the rollout into that key customer of your product, you seek to commercialize it and to internationalize it. I'm there for at a much earlier stage of that maturity cycle and therefore a lot of their deliveries last year and again this year will be DoD focused but the commercialization and the internationalization piece is yet to follow.

Speaker Change: The exposure within the two divisions is a bit different.

Speaker Change: And that's really a comment on the maturity of the two divisions.

Speaker Change: If we look at.

Speaker Change: I, even protection respiratory business, that's a very mature business.

Speaker Change: The business cycles go something along the lines of <unk>.

Speaker Change: Designing a product working with the USDA as your key customer.

Speaker Change: And then over time as you complete the rollout into that key customer of your products you seek to commercialize it and to internationalize it and.

Speaker Change: And therefore.

Speaker Change: Just at a much earlier stage of that maturity cycle, and therefore, a lot of their deliveries.

Speaker Change: Last year and again this year it will be <unk> focused but the commercialization and the net internationalization piece is yet to follow having said that they do have a very strong position in commercial Americas.

Rich: Having said that they do have a very strong position in commercial Americas and actually I'm pleased to say that that position is growing. market share gains. So, I hope that helps.

Speaker Change: And actually I'm pleased to say that our position is growing quite nicely with market share gains.

Rich: Thank you, Rick.

Speaker Change: Yes.

Rich: You mentioned plans to grow commercial sales internationally and in North America.

Speaker Change: Thank you rich.

Speaker Change: You mentioned promised to grow commercial sales and lastly on North America wholesale the key growth drivers and how do they compare in terms of margin.

Rich: What are the key growth drivers and how do they compare in terms of margin? This person clearly was an analyst because they've asked two questions in one. I think, I mean, maybe I'll tackle that.

Speaker Change: Both incredibly was nonetheless, because they've asked two questions in one.

Rich: Well, I'll tackle the helmets bit and Steve can talk about the NSPA contract driving growth internationally. In helmets, we drive growth internationally through our advanced technology and the quality of our helmets and actually increasingly our ability or our capacity to manufacture helmets for delivery into other markets. We are also now, for the first time, investing into a sales team in Europe for helmets. We just recently recruited three people to support that sales side, so that should help us access those markets as well.

Speaker Change: I think I mean, maybe I'll tackle that well I'll talk about homeless that and Steve can talk about the NFPA contract driving growth internationally.

Speaker Change: And how we drive growth internationally through our advanced technology, and the quality of our homeless im actually increasingly.

Speaker Change: Our ability or our <unk>.

Speaker Change: <unk> too finite Berkshire helmets, both delivery and so all of the markets we are.

Speaker Change: Also now for the first time investing into a sales team.

Speaker Change: For <unk>, we just recently recruited three people to support.

Speaker Change: Sales side, so that should help us access those markets as well.

Steve: of products.

Speaker Change: In terms of margin on helmets margin in commercial outlets as goods.

Speaker Change: I expect that VIP is kind of business volume discounts.

Steve: Do you want to talk about accessing Europe or NATO through NSPA? Yeah, well, I could talk about some of the market drivers because I think they're kind of similar. Product quality is clearly a big thing on respiratory protection. Very, very open customers that we want to buy our product, but they definitely want to use it when they do need to use it. It needs to work first time. So so having the best products on the market is a major, major driver for us. And we know we have.

Speaker Change: Steve you want talk about accessing euro NATO through NFPA, yes.

Speaker Change: So, but some of the market drive us because in that kind of similar.

Speaker Change: Product quality.

Speaker Change: Clearly a big thing on respiratory protection.

Speaker Change: Very very open customers that we want to buy a product with a different and when to use it when they do need to use it it needs to work for those times site.

Speaker Change: The best products on the market is a major major driver for us.

Steve: that current portfolio in terms of future portfolio and the sort of business one Rich talked about. of having good footprint, good advanced technology partnered with the DoD and then bringing that internationally. I just talked about a number of new DoD programs of record and of course I touched on MITO which is the commercial launch of a new product and again we'll see that product grow internationally quite nicely. I think the other drivers for growth, particularly in the chem-bio protection market, being conscious there is a threat, and Ukraine has played a big part in reminding Europe that threat is real.

Speaker Change: We haven't got that current portfolio.

Rich: In terms of future portfolio in the business World Rich talked about in terms of having good footprint. Good advance to LNG partners with the Doj and then bringing that internationally just talked about a number of new.

Rich: The Dod programs of record.

Rich: Of course, I touched on my side, which is.

Rich: The commercial launch of the new products and again, we'll see that.

Rich: That product grow internationally quite nicely.

Rich: I think the other drivers for growth, particularly in the Chem bio protection market.

Rich: Being conscious there is a threat in Ukraine has played a big part in reminding Europe that <unk> will be the real problem for the.

Steve: It has been a real problem for the Ukrainians. It doesn't matter how much advanced technology you have, when a can of CS gas can pretty much destroy that technological advantage. So having the ability to protect yourself is really, really important, and that conflict has reminded Europe of the need for chem-bio protection, which I think perhaps maybe five plus years ago was perhaps starting to dwindle. And then against that context, growing European defence investment will clearly help us to capitalise on that. We have the right contracts in place internationally, so Richard touched on the UK, and Josh just mentioned the NATO contract.

Rich: The Ukrainians is just about how much advanced technology you have.

Rich: When it kind of CX gas pretty much destroy that technological advantage, so having the ability to protect yourself from the really important.

Rich: And that that complex is reminded Europe.

Rich: The need for <unk> bio protection, which I think perhaps maybe five plus years ago.

Rich: It was perhaps starting to dwindle.

Rich: And then against that context growing European defense investment.

Rich: Clearly help us to capitalize on that we have the right contracts in place internationally.

Rich: Richard touched on the UK just mentioned the NATO contract.

Steve: We've taken out our FM50, which is a derivative of a US mask. That's what's sold into the NSPA contract. That's the 13 countries I mentioned, and that is just 13 countries that are on that NATO contract. We do also sell to NATO countries outside of that contract if they don't want to use the NSPA. So, what we did was apply to this margin drivers, the margin is, what do I want to say, healthy on all of those contracts.

Rich: Our FMT.

Rich: <unk>, which is a derivative of our U S mask, that's what sold into the NFPA contract versus 13 countries I mentioned.

Rich: And that is just 13 countries.

Rich: NATO contract with you.

Rich: Such cell to NATO countries that size of that contract.

Rich: Don't want to use the NFPA mechanism.

Rich: So.

Rich: What was the cost of this margin drivers.

Rich: Margin is what we want to stay healthy and all of those contracts.

Rich: I'm going to go much more to set up that looks good.

Rich: Next question is how does management view the current share price compared to intrinsic value? It's another double question coming.

Rich: Next question is how does management view, the current share price compared to intrinsic value some of the double question coming.

Rich: Are there plans for further share repurchases? I'll let Rich answer the second one, but on the first one I don't think it's really for us to comment on intrinsic value. I'd say the analyst notes I saw this morning seem to be around £18, anyway. We're very focused and incentivised. To increase earnings per share and improve return on capital, that's really what we're interested in. I think your view on intrinsic value probably depends a bit on how likely you think we are.

Rich: And all of our plans for further share repurchases all of that ratio for the second one but on the first one.

Rich: I don't think its really for us to comment on intrinsic value.

Rich: Sorry, the analyst Tonight. So I saw this morning seemed to be around 18 pounds got a number of them anyway.

Rich: We're very focused on obviously incentivized.

Rich: To increase earnings per share and improve return loan capsule.

Rich: Really what we're interested in I think youll view on intrinsic value probably depends a bit on.

Rich: Now how likely you think we are to achieve them.

Rich: and on share repurchases? Yeah, always a good question. I mean, the starting point is that we don't have an inefficient balance sheet, so I don't think we're forced to do anything too quick around that. But our priority right now is delivering organic growth. And there are things that we can invest in to accelerate the delivery of that growth, including high quality R&D programs. And Steve mentioned that we've recently been pretty successful with the USDOD on a number of funded development programs. They're only partly funded. We put money into those as well. And by the way, we're more than happy to do so because of course, working with a customer such as the DOD significantly de-risks.

Rich: On share repurchases.

Rich: Or was it always a good question.

Rich: The starting point is that we don't have an inefficient balance sheets, where do I think we are forced to do it contains two quick.

Rich: <unk>.

Rich: But.

Rich: Our priority right now is delivering organic growth.

Rich: And there are things that we can invested to accelerate the delivery of that growth, including high quality R&D programs.

Rich: Steve mentioned that we've recently been pretty successful with the USDA on a number of funded development programs.

Rich: Got it.

Rich: We put money into those as well as by the way we are more than happy to decide because of course working with our customers such as of the end of day significantly de risks.

Rich: the range of possible outcomes from our perspective.

Rich: The range of possible outcomes from our perspective.

Rich: We would dearly love to invest yet more in new, innovative products to bring to market. That will help secure organic growth well into the future, and frankly, growing growth at today's level of margins, and even more so at next year's levels of margins, assuming we hit our 14-16% goings, will deliver very, very healthy returns to shareholders. Beyond that, we have been investing quite a lot in our strength and system that Josh was talking about. We do think that that system is delivering well, we don't even think it we know it's delivering significant benefits within the Avon Technologies portfolio.

Rich: Dave you have to invest more in new innovative.

Rich: Products to bring to market that will help secure organic growth well into the future and frankly growing growth at today's level of margins.

Rich: And I'll leave most of it next year as the Hoser margins, assuming we hit our 14% to 16% guidance.

Rich: We will deliver very very healthy returns to shareholders.

Rich: Beyond that we have been investing quite a lot in our.

Rich: Our strength in system that Jos was talking about we do think so.

Rich: That system is delivering what we.

Rich: We know it is delivering significant benefits within the protective packaging technologies portfolio now we do think it is equally applicable to businesses that are not currently within the apron technological funding so that is.

Rich: Now, we do think it is equally applicable to businesses that are not currently within the So that is an area of capital deployment that we would consider over the medium. um so right here right now we've got a lot of ideas on how to invest money if if we find that we're throwing off excess cash beyond which we have ideas for the investment of, we will certainly look to return capital shareholders one way or another.

Rich: The area of capital deployment, we would consider over the medium term.

Rich: So right here right now we've got a lot of ideas on how to invest money. If we find that we're throwing off excess cash.

Rich: Beyond which we have ideas for the investment we will certainly look to Joe.

Rich: So in cash to shareholders, one way or another.

Steve: Our next question is Howard Schiff in the Department of Defense Procurement. priorities affecting your order, work and product. We're not really seeing as much or has any shift in US procurement activities insofar as they affect us. We have seen quite a lot of those. But it doesn't seem to be making any difference to the order flow that we're getting or our program. So if you want to add a bit more color, Steve, I was going to be a little bit facetious, actually, after that question. My answer would be actually really positively. We really we just signed what I talked about, the NBD contract with the DoD.

Speaker Change: Thank you rich.

Rich: Our next question is how it shifts and the department of Defense for June.

Rich: Priority is affecting your order book.

Rich: We're not really seeing much or any shift in U S procurement activities insofar as they affect us.

Rich: We have seen quite a lot of large.

Rich: But it doesn't seem to be making any difference to the order flow that we're getting overall program. So if you want to add a bit more color, Steve I was going to be a little bit facetious actually asked that question Mark minus will be actually maybe positively.

Speaker Change: Really we just signed well I talked about the NBD contract.

Steve: And we signed that after Doge had worked with our customer base in DoD. So we've sort of had the efficiency treatment and every program we care about has survived and started to come to fruition. We have some other programs in the pipeline that we can't really talk about publicly right now, but it's survived. scrubbing brush if you like.

Speaker Change: With the DSD and we signed that at the stage.

Speaker Change: With with our customer base in the data.

Speaker Change: We've sort of had the efficiency treatments on every program. We care about is the volume and start to come to fruition. We have some other programs and pipeline that we call really talk about publicly right now.

Speaker Change: But could you survive.

Speaker Change: <unk>.

Steve: I think the other one is probably not necessarily related directly to BOD but... broader U.S. turmoil and priorities. We did see the initial announcement that NIOSH, the independent respiratory certification body in the U.S., was going to be disbanded. We were worried about that, and then, for those of you who track that kind of thing, that decision was overturned. last week, two weeks ago, and so NIOSH remains in place. But that's a key discriminator for us. It creates barriers to entry for our competition. We're the only qualified respiratory protection product, NIOSH protection product in the U.S.

Speaker Change: The scrubbing in Russia.

Speaker Change: If you like.

Speaker Change: I think this one is probably not necessarily relate directly to the <unk>, but in terms of.

Speaker Change: Broader U S turmoil and priorities.

Speaker Change: The.

Speaker Change: The initial announcement that non independent respiratory certification body in the U S was going to be disbanded.

Speaker Change: We were worried about that and then for those of you track that kind of thing.

Speaker Change: That decision the value returned.

Speaker Change: Last week two weeks ago.

Speaker Change: <unk> remains in place that Thats, the key discriminator for us creates barriers to entry for our competition. We're the only.

Speaker Change: Quantified.

Speaker Change: Respiratory protection product Dosch protection products in the U S commercial market. That's one of the reasons why we have such a high market share so thats being back in place again keeps those barriers in place to a site.

Steve: commercial market. That's one of the reasons why we have such a high market share. So that being back in place, again, keeps those barriers in place to us. So, yeah, my facetious answer to that question is the procurement priorities on the Avon protection side have actually largely been a positive for the business. They were on the back end of that.

Speaker Change: <unk> answers that question.

Speaker Change: Kimball priorities on that paper.

Speaker Change: Protection side, it's actually largely being a positive for the business.

Rich: Thank you, Steve. Our next question is why have UK and international revenues in Team Wendy declined? I think that's largely because We have a large customer outside North America. The orders regularly that the contract ended and there's been a bit of a gap between that and the new contract. We have now got the new contract, so I don't expect that to be a long-term solution. We did also have another country that had some one-off orders last year because they particularly needed. helmet, so we haven't had those repeat this year. Although, interestingly, I think they may come back with some different...

Speaker Change: Another one on the back end of that.

Steve Barlow: Thank you Steve.

Speaker Change: Our next question is why is the U K and international revenues.

Speaker Change: The decline.

Speaker Change: That's largely because.

Speaker Change: We have a large customer outside North America.

Speaker Change: The orders regulated contract ended in what's been a bit of a gap.

Speaker Change: Train back on the new contract, we have now got the new contract.

Speaker Change: So I don't expect lots, we have a long term solution. We did also have another country that has some one off orders last year, because they particularly they needed.

Speaker Change: So we have an outsize repeated this year, although interesting I think when I come back with some different alloys.

Rich: second half of this year.

Speaker Change: In the second half of this year.

Rich: question's gone there was another limb to that question. I'm not sure, but well done for getting to the bottom of node 2, I don't know the script, that's great. You can, we'll move on to the next one.

Speaker Change: Questions Goldman with another leg to that question.

Speaker Change: Im not sure well done for getting to ultimately lead to great.

Speaker Change: Great.

Kevin: Hey, Kevin.

Steve: You touched on resource, how difficult is it finding the right people to join the business? It's not. It's too difficult to find people. that want to join the business, it's harder to find people. that want to work on the factory floor and some of them do a month and then decide that it's not ready for them. So we do get quite high attrition in the first month or two.

Speaker Change: Thanks, Sean.

Speaker Change: It's also in our results public school funding.

Speaker Change: Finding the right people to join the business.

Speaker Change: It's not.

Speaker Change: It's difficult to find people.

Speaker Change: Wanted to join the business, it's harder to find people.

Speaker Change: One of the work on the factory floor in some of them do amongst them and decided that it is.

Speaker Change: Not ready for them.

Speaker Change: So we do get quite high attrition in the first month or two.

Steve: where people can get through that we actually have very low attrition it's about 1% a month which is very good for a manufacturing business so the second limit this question was do we need higher prices sorry higher wages no we don't think that our wages are too low because of the very low attrition once people get through the first month or two our bigger problem is actually people have never worked in a factory come into a factory and think like this isn't ready for me and my labor wages wage increase is going to make any difference though either People like that type of work or they don't and perhaps they need to try before they work Josh, Rich, Steve, thank you for answering all those questions you can from investors and of course the company can review all questions submitted today and we'll publish those responses on the InvestorMeet company platform.

Speaker Change: Where people can get through that we actually have already a lot of attrition that's about 1% of the moments, which is very good for manufacturing business. So the second question was do we need higher prices, sorry, higher wages, but we don't think our wages.

Speaker Change: Our two low because of the very low attrition once people get through the first month, let's say a bigger problem is actually people who've never worked in a factory to come into the factory and saying this isn't really familiar.

Speaker Change: Wages wage increase is going to make any difference either.

Steve Barlow: Steve a lot of that talk to work all the time.

Speaker Change: I need to draw on the floor.

Speaker Change: Josh Rich Steve. Thank you Paul answering all those questions your CASM investors and of course, the company coming to questions. Later today and will compensation just wanted to ask on the investment company platform just before redirecting investments to provide you. The feedback question is particularly important to the company just completion ask FERC spacing comments.

Operator: Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Josh, could I please just ask you for a few closing comments? Josh, Rich, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete and I'm sure will be greatly valued by the company.

Speaker Change: Josh Thank you for updating investors today, please ask investors not to place. This session I shall not be automatically redirect gets provide you'll see.

Speaker Change: He noted that the management team that's on Spaniel piece of expectations. Despite the amendment to complete and I'm sure will be greatly valued by the company.