PROTECTION & DEFENCE

Revenue for the division was £43.3m (2009: £35.7m) an increase of 21% (28% at constant currency). This generated an operating profit of £3.0m (2009: £2.0m) and EBITDA of £4.9m (2009: £3.4m). Return on sales (as defined in the Results page) improved to 11.3% compared to 9.4% in 2009.

 

The US operation performed well in the period, securing orders for 34,000 mask systems under the ten year DoD requirements option as well as having the 100,000 mask systems confirmed for year three of the five year contract. Orders valued at $5.5m for spares and mask accessories were also won from the DoD. In addition to the DoD business, orders and sales of the homeland security / foreign military variants of the M50 mask were at a level higher than any previous half year with significant orders received from Saudi Arabia, the Canadian Police and the Italian Navy. Avon’s respiratory protection products are clearly becoming the mask of choice in defence and homeland security markets around the world and we expect the proportion of revenues from these sources to increase significantly from the current 20% over the medium term.

 

In the UK, the MoD exercised the second year of its three year contract for S10 masks worth £3.0m. In addition an incremental delivery of £1.3m was made to support operational requirements. We also celebrated the one millionth S10 mask delivery to the MoD with no recorded quality problems and an excellent on time delivery record. Despite this track record and the availability of the world leading replacement product in the 50 series respirator, the UK MoD appear to remain committed to changing to an alternative product and supplier from 2012.

 

Avon ISI experienced difficult market conditions and incurred an operating loss in the first half of 2010. The actions taken in the second half of 2009 have, however, seen an improvement in ISI’s performance both year on year and from the second half of 2009 to this period to the extent that it reached breakeven at an EBITDA level in the current period.

 

In the previous financial year, AEF returned to profitability and a divestment process was initiated, with the business disclosed as held for sale and its results shown as discontinued operations in the 2009 financial statements. As a result of uncertainty created by a contractual dispute with one of its major customers, we have not been able to conclude a transaction on satisfactory terms.

 

The Board has therefore withdrawn AEF from the sale process and its results have been shown within continuing operations for the half year to 31 March 2010. The dispute has had no impact on current trading, which shows an improvement over 2009, and we expect a favourable resolution in due course.

 

The division continues to enjoy a healthy order book, which stood at £69.5m at the period end.

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