Avon Technologies (LSE:AVON) — Interim Results for the six months ended 31 March 2025

0:00 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 and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And then I'd like to hand you over to Josh Slater, CEO. Good afternoon, sir.

0:32 Hi there, and hello to everyone on the calls. I'm here today with Rich Cashion, 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. Those of you that didn't join in to the call this morning, we're gonna 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 ask us questions. So just some highlights.

1:20 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. Revenue's up, as Rich will describe in a second. Profit's up, cash flow's up. Return on capital's up significantly, and perhaps most excitingly because it supports future growth, our order book is also up. Rich will 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.

2:16 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. We're also very focused actually on delivering to our customers in our respiratory division 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.

2:45 The order book does give us confidence into the future, and perhaps most 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 very good confidence that we will hit our margin targets next year of 14 to 16%. Interestingly, those were our margin targets for 2027, but we've made more progress than we expected, or at least faster progress than we expected, so we'll pull them forward till 2026. With that, I'll hand over to Rich, and he'll take you through the detail on the numbers. Thanks, Josh. And just I mean, 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.

3:41 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. 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 everyone is keen to understand the effect of. 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.

4:30 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, and frankly, I don't think it'd 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 defense 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.

5:21 You know, it is cemented by the widely publicized 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 defense investment in Europe will actually outlive the Ukraine conflict. So I think there's plenty of opportunity 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 effect of tariff reciprocity from non US nations. So, 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%.

6:19 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 ROIC. And here we've seen excellent progress, up six sixty basis points to 16.3. We do have some medium term targets out there, which suggest that ROIC should be over 17% on a sustainable basis by the end of twenty twenty six. Clearly, are well on track to get to that metric now. 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 h one, net debt to EBITDA reduced by point seven of a turn in the first half, leaving leverage below one times. So, a really good start. We are growing fast. We're generating good returns.

7:31 But there is, however, still much to achieve if we wanna hit our medium term aspirations. Just quickly on the divisions. I beg your pardon, moving on to the P and L first, before we move to the divisions. Order intake of 170,500,000 gives book to bill comfortably above one. Dollars $247,000,000 record order book gives us confidence in delivering further growth for the balance of this year and beyond. Revenue of $148,700,000 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 $17,500,000 giving margin of nearly 12% stronger than we have anticipated at this stage. Finance costs came down reflecting the lower average net debt, and an effective tax rate as guided at 22% gives an adjusted EPS figure of 38.8¢ per share for the first half, which is up over 76%.

8:29 The dividend is up 5.6 to 7.6¢ per share, consistent with the increase of the full year results. So on the divisions, AVON Protection has benefited from a very healthy order intake in the first half. Order receipts totaling close to 100,000,000, which is a very strong half for this business. Around a third of this is from one off demand or what we call unicorns, 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 94,000,000 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.

9:17 Revenue growth of over 12% to $75,500,000 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 14,300,000 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 AVON protection revenue to be a little higher than the second half last year as we continue to work through that Ukraine and NATO backlog. Team Wendy has also seen some further progress this year.

10:05 Order intake did decline in the first half compared to last year, but that was lapping a particularly tough comparator. Last year, we we received orders of more than 50,000,000 from the US DOD alone. Nevertheless, the backlog did continue to grow, up 7% to over a $150,000,000, with future DOD orders of over $130,000,000 already in the book. 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 learning curve and ramp up inefficiencies offset lower scrap year on year, with operating leverage and lower SG and A driving improvement in operating margin.

10:52 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 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 team lending. 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% for the full year, and the steps we've taken on improving the business in the first half should continue into h two, delivering adjusted operating profit margin for the full year of over 12%.

11:56 Investment in transformation remained 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 as our investment in working capital to support the facility move starts to unwind in the second half. I'll hand back now to Josh to talk about the strategic progress. Thank you, Rich. I'm actually gonna split this bit up with Steve Arwell. Just a reminder of our strategy. The strategy is to strengthen the business through continuous improvement, which I will 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.

12:49 And then Advance and Revolutionize is all about new product develop new product development and investing more into sales, marketing, and business development to drive future growth.

13:05 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. 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, so if any of you are particularly interested, do let us know. We have actually written a book on the Strengthen system. It is available to anyone who wants it in the e book. It's not secret, so 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 Toyota Production System, or indeed our own strengthened system.

13:58 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, and our divisional presidents, in really leading the organization 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 our emulsion factory. Every time I walk into it, it's changed. 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.

14:43 This is the vision for our strengthened 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, is scheduled probably from some sort of central scheduling system and makes a load of work in progress, which probably has to go back to the warehouse, and then later will come back out again and run through another process, and so on. 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.

15:38 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. 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, perhaps unusually transparent.

16:23 We set out targets eighteen months ago when we started this journey.

16:28 You can see the targets on the bottom row of this slide in the sort of yellow boxes with the arrows. We're making good progress towards hitting our targets. Productivity's improved 26% over the last eighteen months. Scrap is hard scrap rates have halved, and inventory turns are up 33%. We have seen a bit of a flattening out or slowing of improvements over the last six months. The reason for that is that we have really focused on ramping up production in our Cleveland facility, and that has involved recruiting some people ahead of production ramp up. It's also meant that we have spent some time training the large number of people that we're recruiting every single week at the moment, We've also had to build some inventory in order to provide buffer stock to support the factory move.

17:24 I do expect these factories to start improving again as we run through the next six months and beyond.

17:35 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, and you can see similar numbers on face blanks and Pfizer casting, and that's actually only three of our lines, all of our lines are improving all of the time.

18:30 We did have an interesting anecdote earlier, actually, because we pointed out that although tariffs will cost us maybe 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 number for us. The strengthen 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.

19:23 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. 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, and we feel that most companies fall down because they don't actually do their strategy. We feel we're different in that respect.

20:10 Of course, we do need people that are capable of delivering the strategy. That's why we've built our own star academy. We 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 improve our production lines and how to improve processes

20:35 outside the shop floor, as well as well as other areas, how to think strategically, how to manage people, and so on. And then we ensure that all thousand 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 form of continuous improvement, because we set objectives for every quarter, we and 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 strengthened system, which I've already mentioned, but that strengthened system is important to 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 to grow even faster, and that in turn helps us level out the factories, and we end up with a virtuous circle, which you're starting to see come through in the numbers that Rich described.

21:44 Then I think the last slide for me, but I might be surprised. 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.

22:05 We are making very good progress on footprint optimization. We have now moved all production out of our Californian factory, and we'll be the lease will actually end in June, and then we will kind of shake off the cost of an expensive Californian facility, or in operational excellence, all of our factories have very ambitious transformation programs, and are making good progress towards flowing all of their lines, reducing lead times, inventory, and improving quality and delivery. In functional excellence, Rich has made great progress, improving the efficiency of his 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.

23:03 That will save us about a million dollars per year, and we bring all that together through,

23:09 our program management approach. On top of all that, we have driven, good improvement to our gross margins through pricing where we have seen historic contracts that haven't been priced correctly.

23:25 Excellent. I was right. It's now over to Steve. Thanks, Joss. Delighted to be here. So this this slide really really represents the sort of strategic progress that AVON protection is 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, the chemical, biological, respiratory protection, good competitive moat there, some long term sole source supply contracts with the right customer base, and a really strong commanding market share around the world. Our strategy is really aimed at jumping off that and building on that position

24:11 into three new markets, What we call here non CBRN or non chem bio respiratory integrated chem bio protection, and also our underwater respiratory protection markets. Increasingly as well, with the large install base we have for our products, the aftermarket support shown at the bottom here, is is really really important, not just to us, but it's also really important to our customers and and their end users. So we we expect a long term repeatable sales model around ten 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 all need to all need to be conducted and and offer us growth in the marketplace.

25:01 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. 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 contract, NATO mask agreements, we've signed up three new countries in the first half of this year, so that brings us to 13 nations. We now supply under that contract, and those nations are over and above the Ukraine contracts that are funded by NATO countries.

26:02 We were very pleased to sign a long term contract with Thales in the first half to supply around $10,000,000 worth of parts over a six year contract, and we expect some further orders to flow from that. The UK contract with GSR remains on track, and as we'll go into in a little while, the demand for our underwater rebreaters continues to be very strong. The program to equip the Australian military is progressing really well, and we delivered around $6,000,000 in the first half of this year, and we're also hoping that Australia will now add our filters to that contract alongside the FM 54 masks that they've already taken. What what the order book from the first half doesn't include is expected mask and filter orders from the US DOD.

26:49 We we expect to receive these for US orders in the second half of the year. We are working very closely with the US DOD on an extension to our sole source contract there for the m 50 product line, and in the meantime, some good spares and accessories orders from that customer continues at pace. Moving into the non Cray RN respiratory protection market, we made some exceptional progress in the first half, where we launched our 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, an impact on their mission effectiveness.

27:43 We've seen some really good early market success. We've won some initial supply contracts with special forces users across the Five Eyes community, and we're 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 bio defense 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. It's designed to reduce the physiological burden when they're operating in those lower threat environments.

28:30 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 pretty excited about that programme, and pretty excited about the commercial potential for MITRE. In our integrated CBRN, we launched our Exaskin suits, boots and gloves range. We previously, you're probably aware, we secured the NATO contract for CBRN 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 twelve months into that program. We won The US DoD program for what they call their HMI, or the hood mask interface program.

29:20 That's actually three new programs of record with the DOD, and that win really puts AVON right at the heart of future chem bio integration protection. Our exaskin suit range, 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 favor. So actually we see our medium term pipeline in that space starting to build quite nicely. And finally for me, a military underwater rebreather market is expanding with our deep sea rebreathers. So the first half, we did secure two new European NATO Navy wins, and they build on previous wins from Germany and New Zealand.

30:07 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, to supply their rebreathing needs as well. So our production lines are ramping up and increasing output to meet that rising demand. We continue to see a very strong pipeline for product area. There's many more upcoming tenders with NATO and Five Eyes nations, alongside growing number of opportunities for international export. So I think as Josh and Rich really presented, we're now showing some really good operational discipline. We've got a much stronger order book. We're executing on our growth strategy, and we're building a pipeline, and really accelerating some momentum. I think it's back to you, Chris. Thank you very much, Steve.

30:54 So in team Wendy, very good order book at the moment. I do see there's a question on the order book in team Wendy around order intakes actually declined. 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 10,000,000 in Team Wendy, driven by next generation iHits and ACH, but also really good demand across our bump helmets, the US Navy, and pads and commercial helmets. We have also, just in the last six months, launched our new RifleTech helmet.

31:42 This is the 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 SA 80. It is about two and a half pounds lighter than the previous helmet that provided that type of ballistic protection. It is a reassuringly expensive helmet, but it does provide unrivaled protection against ballistic threats. We have a good pipeline developing on that, both from militaries and also from SWAT teams and police forces, so we start we should start manufacturing that commercially in the next six months.

32:29 We're also working hard to develop new PAD systems, and to carry out R and D on how we can protect, people's brains even better from the impact of a bullet striking an outlet. This slide just shows the last twelve months compared to the full year 2024. The middle line is perhaps the important one. You can see that the margin is progressing nicely. ROIC is nearly in our target range of 17 to 20%. Cash conversion over the last twelve months has continued to be very strong, and leverage, and we're in a rock solid financial position with leverage below one. 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 we're still an outlier.

33:24 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 amounts 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 US and in The UK, and we can move production fairly easily. We also make filters actually on both sides of The Atlantic. Helmets, we currently only make in The US, but we do have room for helmets in The UK, 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.

34:18 On the opportunities, tariffs 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 US into the non US markets. That's not really something we have tried to do before because we've had so much demand from The US DoD, but as we successfully ramp up production, we will have more capacity to try and access international markets that should drive further growth. So in summary, our businesses are improving very fast. We're doing what we said we would do two years ago.

35:10 It's good that 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. Our transformation program is on track. In fact, 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. So with that, I was gonna say we'll hand over to questions, but actually online, so I think we'll have to read the questions out of them. Joss, Rich, Steve, thank you very much for your presentation this afternoon. If I may just jump back in there. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the top right hand corner of your screen.

36:00 Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. As you can see, we received number of questions throughout today's presentation. 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. Okay. So, Rach, 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. We we we do actually publish this exposure once a year, so it will be it will be in the full year numbers when we when we put that out from November. But at the last at the last time we published it, the US DOD accounted for about 45% of group revenue.

36:46 We 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 of The UK general service respirator, but The UK in the context of of global customers isn't actually that massive. We're always looking at opportunities to grow it, clearly, but it does mean that the exposure isn't that significant. 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 US DoD 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. And therefore, within AVON protection, actually the DoD was only 27% of revenue last year.

37:54 Team Wendy is 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 commercialisation and internationalisation piece is yet to follow. Having said that, they do have a very strong position in Commercial Americas, and and actually, I'm pleased to say that that that position is growing quite nicely with market share gains. So I hope that helps. Thank you, Rich. You mentioned plans to grow commercial sales internationally and in North America. 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. Well, I'll tackle the helmets a bit, and Steve can talk about the NSPA contract driving growth internationally. Internationally.

38:46 In 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, though, 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. In terms of margin on helmets, margin in commercial helmets is is good. As you might expect, the DOD does get a bit of a volume discount, so Steve, do wanna talk about accessing Europe or NATO through NSPA?

39:32 Yeah, well, I've talked about some of the market drivers, because I think they're kind of similar. So product quality is clearly a big thing on respiratory protection. Very, very open to customers that really wanna buy our product, or they definitely don't wanna use it. When they do need to use it, it needs to work first time. So, having the best products on the market is a major, major driver for us, we know we have that. With our current portfolio, in terms of future portfolio, and the sort of business model Rich talked about, in terms of having good footprint, good advanced technology partnered with the DOD, and then bringing that internationally. I 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.

40:24 I think the other drivers for growth, particularly in the chem bioprotection market, being conscious there is a threat in Ukraine has played a big part in reminding Europe that threat is real. It has been a real problem for the Ukrainians. It doesn't matter how much advanced technology you have, when a kind 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 bioprotection, 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 capitalize on that.

41:11 We have the right contracts in place internationally, so, Rich touched on The UK, and Josh just mentioned the NATO contract. We've taken our our FM 50, which is a derivative of our 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's on that NATO contract. We do also sell to NATO countries outside of that contract if they don't want to use the NSPA mechanism. So what was the other part of this margin drivers? The margin is, I do wanna say, healthy on all of those contracts. Haven't really got much more to say, I don't think. That's good. Next question is, how does management view the current share price compared to intrinsic value? It's another double question.

42:00 It's coming. And are there plans for further share repurchases? I'll let Rich answer the second one, but on the first one, I 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, quite a number of them anyway. We're very focused and actually incentivized 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 how likely you think we are to achieve that, and on share repurchases. Yeah. Always a always a good question. I mean, the 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 priority right now is delivering organic growth.

42:57 And there are things that we can invest in to accelerate the delivery of that growth, including high quality r and d programs. And Steve mentioned that we've we've recently been pretty successful with The US DOD on a number of funded development programs. They're only partly funded. We we we put money into those as well. And by the way, we are more than happy to do so because, of course, working with a customer such as the DOD significantly derisks, the the the range of possible outcomes from from our perspective. 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 to 16% guidance, will deliver very, very healthy returns for shareholders.

43:52 Beyond that, we have been investing quite a lot in our strengthened system that Joss was talking about. We do think that that system is delivering, well, we don't even think it, we know it, it's delivering significant benefits within the AVON TECHNOLOGIES portfolio now. We do think it is equally applicable to businesses that are not currently within the AVON TECHNOLOGIES portfolio. So that is an area of capital deployment that we would consider over the medium term. 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 to put the investment off, we will certainly look to return cash to shareholders one way or another. Thank you, Rich. Our next question is how are shifts in the Department of Defense procurement priorities affecting your order book and product development?

44:45 Steve can talk about respiratory, so I'll talk about home meds. We're not really seeing much or has any shift in US procurement activities insofar as they affect us. We have seen quite a lot of DOGE, but it doesn't seem to be making any difference to the order flow that we're getting or our programs. Do you wanna add a bit more color, Steve? Was gonna be a little bit facetious actually in the answers to that question. My my answer will be actually really positively. I we really we just signed what I talked about the ENVD contract with the DoD, and we signed that after Doge had worked with our customer base in DoD. So we've sort of had the efficiency treatments, 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, it survived the sort of the scrubbing rush, if you like.

45:52 I think the other one is probably not necessarily related directly to the OD, but in terms of broader US turmoil and priorities. We did see the initial announcement that NIOSH, the independent respiratory certification body in The US, 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. That's a key discriminator for us, creates barriers to entry from our competition. We're the only qualified respiratory protection product, NIOSH protection product, in The US 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 that procurement priorities on the AVON protection side have actually largely been a positive for the business, now that we're on the back end of that. Thank you, Steve.

46:52 Our next question is why have UK and international revenues in, Team Wendy decline? I mean, that's largely because we we have a large customer outside North America that orders regularly, but 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 helmets, so we haven't had those repeat this year. Although interesting, I think they may come back with some different helmets in the second half of this year. Question's gone. There was another limb to that question, wasn't there? I'm not sure of the world. I'm forgetting to the bottom of note two. I don't know if that's Anyway, we can move on to the next one.

47:42 You touched on resource. How difficult is it finding the right people to join the business? It it it's not 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. 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 who have never worked in a factory come into a factory and think, this isn't really for me, and then they leave, and I don't think wages wage increase is gonna make any difference, though. Either people like that type of work or they don't, and perhaps they need to try before they work that out.

48:49 Joss, Rich, thank you for updating investors today. 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. On behalf of the management team of AVON TECHNOLOGIES PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.