Avon is a very different company to that of 12 months ago. We are customer driven and continue to strive to become more so; we are innovative and market focused in our product development activity and operate with an increasingly appropriate cost base. However, whilst we have changed, we still retain the best of our long and successful heritage; talented and motivated people, a great brand name and excellence in materials science and manufacturing all remain fundamental to our success.

In 2009 we capitalised on these strengths to deliver the first stage in transforming the performance of the Group. We concentrated on delivering the opportunities outlined in 2008 and creating a secure platform for future growth. Revenue has grown by 68% to £91.7m and this delivered a £4.6m operating profit (before exceptional items) compared to the £4.1m operating loss (before exceptional items) last year. Our order book has grown to £69m providing good visibility on future sales. The loss making mixing operation has been sold and we have outlined a clear strategic vision for the Group. Our balance sheet has strengthened through debt reduction.

At ISI we have so far been unable to turn around the fortunes of our US based self contained breathing apparatus (SCBA) business. We have however reduced the cost base of the business and appointed an experienced General Manager providing a greater focus on industrial and defence related opportunities which should result in an improved performance in 2010. Avon Engineered Fabrications (AEF) has yet to be divested despite considerable interest. The intention is still to dispose of this business, but with it returning to profit this year, we will only do so if an acceptable valuation can be agreed.

Our strong order book, dominant market positions in defence respiratory protection and dairy liners, supported by technologically superior products, growing brand strength and high competitive entry barriers, should enable us to continue to improve profit margins. We are increasing investment in product development and routes to market to aid our business growth.

RESULTS

Revenue from continuing operations increased by 68% to £91.7m (2008: £54.6m) with Protection & Defence up 105% to £66.9m (2008: £32.6m) and Dairy up 13% to £24.8m (2008: £22.0m). We have benefited from the translation impact of the stronger US dollar as our business is predominantly US based. At constant exchange rates the revenue growth would have been 36%. The Protection & Defence growth came primarily from a full year’s supply of masks and filters under the 5 year sole source DoD contract which entered full production in May 2008, together with strong demand under the 10 year option contract. Dairy growth was largely currency related, with lower demand driven by market conditions for much of the 2009 calendar year after a strong first quarter.

The operating profit before depreciation, amortisation and exceptional items (EBITDAE) rose from a £0.7m loss in 2008 to a £8.6m profit in 2009; operating profit before exceptional items improved by £8.7m to £4.6m (2008: £4.1m loss) and after exceptional operating items of £2.5m (2008: £8.5m), the operating profit was £2.1m (2008: £12.6m loss). The return to profitability resulted from the higher revenues, a significant improvement in gross profit percentage and operating expenses held at prior year levels. EBITE was split £3.6m from Protection & Defence (2008: £5.6m loss), £3.0m from Dairy (2008: £3.5m) less unallocated central costs of £2.0m (2008: £1.9m).

Net debt reduced to £13.6m (2008: £15.1m). At 2008 exchange rates net debt would have reduced to £10.8m. We now have headroom of £5.6m, facilities agreed through to June 2011, debt levels at less than 2 times continuing EBITDAE and opportunities for further reduction through the proceeds of the AEF disposal.

DIVIDEND

Our intention is to build a long term sustainable and growing business. With the current credit markets and cash requirements from the legacy of losses and restructuring and further investment planned for 2010, the Board believes it remains appropriate to continue to strengthen the Group balance sheet and further reduce debt. Accordingly we are not proposing to pay a dividend in 2009 but remain committed to resuming a dividend at the appropriate time.

EMPLOYEES

Revenues have grown significantly this year yet our headcount has shrunk to 686 from 842 last year. The reduction is due to the outsourcing of dairy manufacture to the Czech Republic, improving production efficiencies and a trend towards the outsourcing of component supply. Our production employees are increasingly concentrating on high end value adding assembly and quality control processes, and there is less emphasis on administrative tasks and more focus on customer service. All this means an increased demand on our people both in terms of skills and productivity . They have responded magnificently and I thank them on behalf of the Board.

OUTLOOK

We have delivered the return to profitability predicted last year through substantial growth from our core long term protection contracts supported by a modern lean manufacturing culture, despite some challenges in our dairy and fire protection markets.

We are seeing some encouraging revival in milk prices which we expect will feed through in higher demand for our dairy products in 2010. This, together with the cost reductions from the outsourcing of European production, should result in an improved performance from our Dairy business.

Our Protection & Defence businesses have strong order books entering 2010 and the potential to benefit from homeland security and foreign military demand for our market leading products around the globe. Funding levels in the fire services market in the US may remain low but improvement at ISI will come from increasing opportunities in the defence and industrial sectors.