Avon Technologies PLC

Well, good morning everybody. Thank you for those of you that came to see us face-to-face and thank you for joining those on the telephone lines. A lot has happened in the last six months. Geopolitical and economic uncertainty have both increased substantially. But in the face of the turmoil, we remain resolute in pursuing our strategy and improving our businesses. We still control most of our own destiny and we're holding our medium-term guidance. We're growing sales and profit fast. And we're achieving this while increasing spend in R&D and developing exciting new products to drive future growth. And we're building our people's capability to enable our improvement activities to accelerate even more. We've moved all production out of our Californian helmet facility three months ahead of schedule. And we're busy ramping up production in Salem and Cleveland. Over the last year, we've effectively built and commissioned an entirely new factory in Cleveland. And we're also improving all of our other plants fast. Our order book has hit another record high. This does give us confidence that we will continue to grow into the future. We remain on track to achieve our margin targets in 2026, which is a year early. I'll now hand over to Rich. He'll take us through the numbers, and then Steve will come onto the stage and also talk about the respiratory business, which, as you would have seen, is performing extremely well.

Thanks, Josh. Good morning, everybody. So before moving on to the numbers, let's look at what has changed in a very dynamic global environment, both from a conflict and a trading perspective. Government efficiency measures in the U.S. have targeted several areas, including the military. We're closely watching what is happening, but we haven't yet seen anything which we think will lead to a significant change in our customers' buying patterns. Investment in strengthening borders and homeland security looks to be growing. which may yield opportunities, particularly in our respiratory business, given our strong competitive position there. And then there are tariffs. We're not immune to the effect of tariffs announced to date, with the direct impact of around $800,000, which we believe we can largely offset through pricing. Indirectly, there are likely to be some knock-on impacts through the supply chain, although, again, I don't believe this is going to be significant. On a comparative basis, many of our products are compliant with the Berry Amendment which requires certain categories of product sold to the USDOD to be 100% domestically sourced. Elsewhere, investment in defence spend in NATO ex-US is increasing, particularly towards Eastern Europe, and this has created opportunities for us recently and will continue to do so for the foreseeable future. This is cemented by the widely publicized use by Russia of the chloropicrin agent in Ukraine, highlighting the importance of strong respiratory protection where we have a market-leading technical solution. Defense investment growth in Europe is expected to outlive the Ukraine conflict. More broadly, unrest continues elsewhere in the Middle East and Asia. Our ability to manufacture in the UK insulates us from the potential negative effect of tariff reciprocity from non-U.S. nations. As Joss mentioned, we've had a good start to the year, with strategic and operational progress feeding through to strong financial performance. The headlines are closing order book up 24%, revenue up 17%, operating profit up 48%, and EPS up 76%, all compared to the same period last year on a constant currency basis. As many of you know, my preferred measure of performance is ROIC, and we've seen excellent progress here, up 660 basis points to 16.3%, which puts us within striking distance of our medium-term goal of 17% or above. As expected, cash conversion reduced in the first half due to building buffer stock to support our facility move plans and lapping the unwind of a particularly high receivables balance coming into 2024. Even after this, net debt to EBITDA has come in below one times, a reduction of 0.7 times from last first half. So, a good start. We're growing fast, and we're generating good returns on capital. There is, however, much still to achieve in H2 to ensure that we hit our 2026 guidance of 14% to 16% operating profit margin. So, starting with the P&L... And as usual, comparators will be on a constant currency basis. Order intake of $170.5 million gives a book to bill comfortably above one. The record $247 million order book gives us confidence in delivering further growth for the balance of this year and beyond. Revenue of $148.7 million is 16.8% up on last year, with strong growth in both businesses. This has dropped through nicely to adjusted operating profit of $17.5 million, giving margin of 11.8% stronger than we had expected at this stage. Finance costs came down reflecting the lower average net debt, with an effective tax rate of 22% as previously guided. This gives an adjusted EPS figure of 38.8 cents per share for the first half, up over 76%. The dividend is up 5.6% to 7.6 cents per share, consistent with the increase at the full year results. Avon Protection has benefited from a healthy order intake in the first half, with order receipts totaling close to $100 million. Around a third of this is from one-off demand, or unicorn orders as we like to call them, with a balance from recurring revenue as defined at the Capital Markets Day last year. As a reminder, today's unicorns feed into tomorrow's recurring revenue, as we continue to grow the installed base. The order book of 94 million dollars is particularly healthy for this business which typically has a fairly short winter ship cycle supporting further growth into H2 and beyond. Revenue growth of 12.2% to $75.5 million reflects the previously announced Australian FM54 respirator order and growth in rebreather deliveries, offset by lower demand in commercial Americas following a couple of very strong years. Adjusted operating profit of $14.3 million, 28.8% higher than last year, gives a margin of nearly 19% for the half, with operational gearing and commercial optimization gains underpinned by a helpful product tailwind. For the remainder of the year, we expect second-half Avon protection revenue to be a little higher than H2 last year as we start to work through the Ukraine and NATO backlogs. Team Wendy has also seen further progress in the last six months. Order intake did decline in the first half, lapping a particularly tough comparator from 2024, when we received DoD orders totaling more than $50 million. Nevertheless, the backlog showed continued growth, up over 7%, to over $150 million, with future DoD orders of over $130 million already in the book. As expected, revenue was up by over 20%, as the ACH ramp-up effect started to kick in, with commercial helmets and pads also growing nicely. Higher direct costs, reflecting learner curve and ramp-up in inefficiencies, offset lower scrap year-on-year, with operating leverage and lower SG&A costs driving the improvement in operating margin. The focus for the remainder of the year will be on stabilising production capability in our Cleveland and Salem plants so that we can sustain the higher output volumes expected in the coming 12 months. For the second half, we expect modest growth versus last year. We do not expect the reduced costs from the Irvine closure to have a big impact on the full year 2025 performance. though we are comfortable with our guidance of 14% to 16% operating profit margin in 2026 at a group level, which clearly implies meaningful improvement in Team Wendy. As usual, this bridge sets out the key moving parts in the reported adjusted operating profit from last year to this year. After a fairly negligible FX impact, the jumping-off point on a constant currency basis was $11.8 million. The effect of volume growth, which is essentially this year's volume at last year's gross margin, was $7.7 million. Operational gearing contributed a further $2.6 million, with modest growth in overheads at a group level being more than offset by revenue growth, resulting in stronger drop-through margin. Going the other way, the inefficiencies linked to the production ramp-up on the ACH program, which is really a learning curve effect, totaled $1.4 million in the half. Avon protection margin improvement contributed a further $3.6 million with better pricing, lower scrap, and a helpful mixed tailwind from higher specification products. This was partially offset by a $2.7 million investment in growth initiatives, with increased sales and marketing costs being the single largest contributor. Finally, the last other bar is a headwind of $4.1 million. As usual, this represents a number of things, but, in summary, includes growth in discretionary compensation schemes and IT costs. Going the other way, the finance function costs have continued to come down, which I will talk more about in a moment. Moving on to cash flow, net debt was down by $2.4 million compared to the same period last year. $5.7 million of EBITDA growth was partly offset by a $3.8 million increase in buffer inventory, as described earlier. The balance of the $13.7 million working capital increase is largely attributable to higher receivables as the revenue growth rate accelerated through the first half. This gives cash conversion of 56%, which is clearly below the full year guidance of 80%. However, as the Team Wendy business ramps up through the second half of the year, I would expect cash conversion to improve meaningfully from here. Cash costs of transformation activities in the first half were $6.5 million, and we remain confident in the great payback this investment will deliver. Beyond cash flow from operations, Pension contributions of $3 million were in line with guidance. As a reminder, the higher value in the first half, 24, reflected a top-up in the plan as part of the agreed triennial valuation. And the other big movements were lower capex, with last year's number including non-recurring investment in support of DOD programs and purchase of our own shares in support of discretionary compensation schemes. As usual, guidance on a number of these items is provided in the appendix. The important things to pick out on the balance sheet relate to inventory and pensions. As flagged earlier, the higher inventory negatively impacted cash flow and inventory turns in the first half, but this was deliberate and is short-term in nature. We expect to see this start to unwind in H2. On the retirement benefit scheme, the accounting deficit halved from the end of 2024 to $8.5 million following the adoption of a higher discount rate assumption reflecting changes in corporate bond yields. I can also confirm that we have exercised the first option year on a revolving credit facility established last year, which takes us through to May, 2028. At the full year results, we provided guidance on expected spend levels on our transformation program. We remain on track to have largely completed the planned program of investments by the end of 2025, with some spend going into 2026. The left-hand column shows OPEX spend year-to-date of $8.4 million against a planned annual total of $13 million unchanged from prior guidance. We therefore expect spend to decelerate through the second half. The only change versus prior guidance is that we now expect transformational CapEx costs of $1 million for the year versus prior guidance of $2 million as continuous improvement outcomes mean we no longer need to increase our floor space in Cleveland. As a reminder, we expect the footprint optimization program to deliver in the region of $10 million of annualized cost reduction, which represents an excellent payback on the investment over the last two years. So I've included this slide to bring a bit of balance to the way we talk about Kaizen activities when we present. And we're using Kaizen off the shop floor in all back office processes, as well as on the shop floor, which we talk about a lot. We performed a Kaizen on the close process within the finance team last year, with a focus on eliminating waste, defining requirements, aligning processes across the business, and removing over-processing. The results were impressive. Month-end close has gone from seven days to two days. Better defined and streamlined processes have largely eliminated rework, and the finance team, which is now 27% smaller than it was when we started, has significantly more time available for value-adding business partnering activity, which, of course, is way more fun than adding the numbers up at the end of the month. Other functions are embracing CI, and we look forward to updating you further in the future. So finally, for me, the guidance for the full year is essentially unchanged from the trading update we released in March, although represents a healthy uplift from our original outlook back in November. Revenue growth year to date. combined with the strength of the order book in both businesses, gives us confidence in achieving revenue growth above 10%, and the steps we've taken in improving the business in H1 should continue into the second half, delivering adjusted operating profit margin for the full year of over 12%. Investment in transformation remains broadly unchanged, but with less capex required. And notwithstanding the relatively lower cash conversion in H1, we maintain our view that the conversion for the full year will be at or above the 80% level as our investment in working capital to support the facility move starts to unwind in H2. I'll now hand back to Josh to talk about strategic progress.

Thank you, Rich. I'll say it's great to get the financial results within two days. We continue to execute the STAR strategy. Every six months, we review and refresh the underlying initiatives to reflect what we've learned. But the big picture is that the strategy is working. Growth is increasing, and so are returns on capital and cash flow. So we're going to stay the course. Excitingly, we still see lots more opportunity to improve our businesses. The S of STAR is now all about strengthening our businesses through continuous improvement. When implemented well, this is a very powerful way to improve our businesses. To that end, we've developed our own strengthened system to help us build capability across the organization and to drive improvement in safety, quality, delivery, inventory terms, and productivity. As those metrics improve, our financials will follow. This slide summarizes the key elements of our strengthened system. In the interest of time, I won't explain the system in detail now, though I would love to. We've written a book on the strengthened system aimed at building internal capability, but you are welcome to take a copy home with you if you want. There are some on the front. If you don't take them home, I won't be... too annoyed with you. For those on the phone lines, there is an e-book available as well. Just let Gabby know. This slide illustrates our vision for the strengthened system. We want to move from traditional batch manufacturing as illustrated on the left of this picture. Our end state is shown on the right. We want to manufacture to the beat of our customer's demand. with the materials flowing wherever possible, or pulling from the upstream processes. We want quality built into all of our processes. And this system will result in higher quality, shorter lead times, more reliable delivery to our customers, much lower inventory levels, happier employees, and wealth creation. We recently took all of our senior team to Japan to enhance their ability to lead the change that we want. This intense week-long training course featured a mixture of lectures, factory visits, and simulations. And I've seen a renewed burst of energy as a result with a much better understanding of what we want and all of our factories now improving fast. We're now running so many Kaizen that it would take too long to summarize them. All our plants are taking improvement steps all the time. We've included lots of examples in the appendix if you're interested. Overall, our operational metrics are improving. During the last six months, we built some buffer stock to support the factory move and we recruited ahead of the production ramp up in Cleveland. So improvement in our metrics has slowed a bit. Nonetheless, we're on track to achieve the operational targets we set out the Capital Markets Day. As we build stronger capability in Salem and Cleveland, I expect to see these metrics start to improve again. In Avon Protection, Steve's business, we focused on scrap reduction. As you can see, we are making excellent progress. The charts on this slide show the scrap reduction on three of our most important product lines. What's interesting to me is that these lines are very mature. Two of them are over 20 years old. In fact, we'd run them so long that the scrap levels had become normal to the people in the factories. But we knew they could be improved. So we set new targets and focus on taking steps towards them. The results speak for themselves and have helped Avon Protection's margins. And there is even more we can do from here. The strengthened system is part of a broader business system that we use to improve our businesses. This has four elements. We have a strong strategy process which involves using the power of our own people to develop the strategies for their businesses. We teach them how to do this. When compared to more typical consultant-led strategies, our approach increases ownership and therefore execution. We align the whole organization to the strategy through objectives and key results and measure progress each quarter, learning and course correcting where necessary. We build capability to deliver the strategy using our Star Academy. This now has a powerful set of unique courses designed to help us build the capability that we need to deliver our strategy. And we drive improvement every week through the strengthened system, which then frees up resource to invest into technology, sales, and marketing to drive growth and create future wealth. As our results show, this approach is working. Moving on to transformation, this slide is now familiar to you. The degree of shading on each star illustrates how far our initiatives have progressed. The green color points show changes since the end of last year. In footprint optimization, we've now stopped manufacturing in California. The lease ends in June of this year. We expect to see the cost reduction associated with this project drop through to the bottom line in 2026. In operational excellence, we're making good progress, as I've already discussed. And in functional excellence, we built the plan to remove SAP from the group, which is anticipated to save us over a million dollars a year. in commercial optimization. We remain of the view that we can accelerate sales in both North America and internationally. We're therefore very pleased that Stacey Stern has joined us to lead the global sales team. Stacey is well known to us, having been instrumental in building the very successful ultra-forensic technology business. We've also recently increased investment into sales, business development, and our marketing team. I'll now hand over to Steve to talk through the very good progress in his division.