Avon Protection warns of lower revenue after missing first-half expectations

Avon Protection reported improved first-half profitability in its first half on Tuesday, although its revenue came in below expectations for the period as the firm warned of lower full-year revenue.

The FTSE 250 company said that at constant currency, orders received were up 11.9% in the 26 weeks ended 1 April at $125.6m, while its closing order book grew 20.1% to $160.7m.

Revenue declined 3.9% to $116.2m, while adjusted EBITDA rose 30.2% to $11.2m and adjusted operating profit jumped 108% to $4.2m.

Additionally, adjusted profit before tax reached $0.9m, swinging from a loss of $2.8m in the same period of the 2022 financial year.

Adjusted basic earnings per share rose 15.3% at constant currency to 1.4 cents, while the board left the interim dividend unchanged at 14.3 cents per share.

Net debt, excluding lease liabilities, increased 26.9% to $71.8m.

On a statutory basis, Avon Protection reported an operating loss of $1.6m from continuing operations, narrowing from $10.7m a year earlier.

When excluding armour at constant currency rates, Avon said revenue declined 14.2% to $101.6m.

However, adjusted EBITDA on the same basis showed growth of 6.7% to $15.9m, while adjusted operating profit increased 14.1% to $8.9m.

Looking ahead, Avon said it expected good year-on-year revenue growth in its head protection segment, supported by strong order intake in the first half.

However, softer demand for mask systems in the first half led to a more cautious view on respiratory revenue in the second half, which was now expected to be lower than initially expected for the full financial year.

As a result, Avon Protection forecast that its full-year group revenue, excluding armour, would be about 9% lower than the prior period, reflecting the demand backdrop for respiratory products and potential risks to shipment timings in the second half.

Despite the lower revenue, the firm said it had taken action to right-size its respiratory segment, and thus it was expecting full-year group EBITDA margins excluding armour to be broadly consistent with the 14.7% reported in the prior year.

“Avon Protection is a business with strong foundations and extraordinary potential,” said chief executive officer Jos Sclater.

“We have moved fast to develop our new STAR strategy and have already taken meaningful steps forward, focusing initially on strengthening the fundamentals with a view to building short term momentum.

“In addition, we have developed strategic initiatives to further improve the business over the medium term to accelerate growth, improve margins and returns on capital, and protect more lives through the sale of our innovative products.”

Sclater said revenue during the first half was below expectations, but a better second half was supported by its strong order book, the steps the firm had taken to strengthen the factories focussed on shipping the first lots of NG IHPS helmet to the US Department of Defence, and the discontinuation of its armour business.

“During the last four months we have increased the pace of change, so I would like to thank everybody across the business for their help and determination to realise our full potential.

“I am confident that, together, we are setting Avon Protection up for a successful future.”

At 1118 BST, shares in Avon Protection were down 10.84% at 864.84p.

Reporting by Josh White for Sharecast.com.