Company Profile

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STRATEGIC OVERVIEW

Group objectives

The Group is committed to generating shareholder value through developing new products and serving global markets that can deliver long-term sustainable revenues at higher than average margins. 

Business overview

The Group has transformed itself over the past five years into an innovative design and engineering group specialising in two core business markets, Protection & Defence and Dairy. With a strong emphasis on research and development we design, test and manufacture specialist products from a number of sites in the US and UK, serving markets around the world. We achieve this through nurturing the talent and aspirations of our staff to realise their highest potential.

Avon Protection is the recognised global market leader in advanced chemical, biological, radiological and nuclear (CBRN) respiratory protection systems for the world’s military, homeland security, first responder, fire and industrial markets. With an unrivalled pedigree in mask design dating back to the 1920s, Avon Protection’s advanced products are the first choice for personal protective equipment (PPE) users worldwide and are placed at the heart of many international defence and tactical PPE deployment strategies. Our expanding global customer base now includes military forces, civil and first line defence troops, emergency service teams and industrial, marine, mineral and oil extraction site personnel. All put their trust in Avon’s advanced respiratory solutions to shield them from every possible threat.

Our world-leading Dairy business and its Milkrite brand have a global market presence. With a long history of manufacturing liners and tubing for the dairy industry, Milkrite has become the leading innovator and designer for products and services right at the heart of milking.

Our goal is always to improve and maintain animal health. Working with the leading scientists and health specialists in the global industry, we continue to invest in technology to further improve the milking process and animal welfare. Our products provide exceptional results for both the animal and the milker, making the milk extraction process run smoothly. As our market share and milking experience continue to grow, so does our global presence.

Group strategy

We have two strategic priorities at Group level:

•      Expanding our Protection & Defence business in military and first responder markets globally; and

•      Developing our Dairy operation through its Milkrite brand in traditional and emerging markets with both existing and innovative new products.

We measure progress against our strategic priorities by reference to our financial performance and a broader set of key performance indicators (KPIs).

Protection & Defence strategy

We have a world-leading range of military respirators, developed over many years and funded partially by our customers, where we own the intellectual property. Our strategy is to build on this strong position in the military market, initially through our long-term sole-source mask systems contract to supply the US military, and subsequently through sales to, and further contracts with, other governments. Our range of filters and capacity for filter manufacture is increasing. Developing through-life revenues with greater consumable sales and service revenue is also a prime objective. Our status as a prime contractor to the US Department of Defense (DOD), which regards us as experts in our field, brings further development opportunities in other areas of respiratory protection. We believe that our expanding product range and customer base, together with our credibility and development expertise, will put us in a prime position to supply into all accessible global markets.

We are simultaneously targeting homeland security markets with non-military versions of these products. Our self-contained breathing apparatus (SCBA) products have the potential for greater integration with our other respiratory protection products and this has been initially demonstrated with the ST53 product. We aim to increase our range of modular product offerings, widen our routes to market and aggressively pursue further product approvals and certifications in new markets. In addition, successfully integrating our respiratory products with other CBRN protection products such as helmets and suits will provide further integrated solutions to our customer base. These developments will primarily be through organic growth in the short term although the Group’s strengthened balance sheet now enables the acquisition of complementary technologies such as the acquisition of VR Technology Holdings in 2013. 


Dairy strategy

Our strategy for long-term sustainable profit growth is to continue to grow our market-leading Milkrite brand in the US and to replicate that position in our European business. We are also investing in opportunities in developing markets such as China, Brazil, India, Russia and Eastern Europe to expand our global distribution capability to deliver growth in the longer term and we are expanding our in-country sales network around the world. Following its opening in February 2012, our sales and distribution facility in China has seen significant growth. Innovative new product and service offerings and continued world-class low-cost manufacturing excellence should enable this business to sustain continued growth, profitability and cash generation.

Group Business Model

Our management structure is decentralised and decision-making is delegated to the appropriate executive team. Our Board manages overall control of the Group’s affairs and is responsible for delivering the Group’s overall objective of generating shareholder value through developing new products and serving global markets that can deliver long-term sustainable revenues at higher than average margins. The Group Executive team which comprises the Executive Directors and three key members of our senior management team is responsible for assisting the Chief Executive in implementing our strategy and the day-to-day management of the Group. This team is supported by three executive teams, covering Protection & Defence, Dairy and Business Development.  

Protection & Defence business model

Markets

Our respiratory protection products are sold direct to military markets where our primary customer is the DOD (Army, Navy, Marines, Coastguard and Air Force) as well as a number of approved governments globally. Other significant markets are categorised under the first responder banner and include the police and other emergency services and are addressed either directly or through distribution channels. SCBA and thermal imaging equipment is targeted at fire services and other industrial users, primarily through a distribution network in the US. All of these products are safety critical and the markets are consequently highly regulated with the approval standards creating significant barriers to entry. Product life cycles are long and standardisation to a particular product by users is typical.

Products

Our Protection & Defence business consists of a growing range of respiratory products. The main products are respirators or gas masks (product names M50, C50, ST53, M53 and FM12) together with a range of spares and accessories; the CE-approved emergency hood (EH20) and NIOSH-approved emergency hood (NH15); and SCBA (primarily the Z7 and Deltair product ranges). We can also manufacture the consumable filters used by these products and thermal-imaging camera equipment. The respirators and escape hoods offer breathing protection to varying degrees against CBRN threats while the SCBA equipment offers protection in oxygen depleted environments. We also have a flexible fabrications business which manufactures fuel and water storage tanks and hovercraft skirts.

Product Development

Our product development programme, Project Fusion, combines the skills and expertise of our design and engineering teams to produce a modular personal protection system comprising smaller modules with multiple functionalities that can be combined or used independently in different threat scenarios.

We launched the first components of this system in 2013:

•        AvonAir, our new range of Powered Air Purifying Respirators (PAPRs) (NIOSH-approved, compact, battery-powered modular airflow units which reduce breathing resistance) 

•        Extending our own range of filters. The M61 filter supplied to the DOD provides CBRN protection to the US warfighter. We have extended our range of NIOSH and CE-approved filters to cover a wider variety of threat scenarios for military and LE users. The first NIOSH product approval was received late in 2013 and further approvals are expected in 2014

•        Deltair, our new fire service offering, designed to meet the new 2013 NFPA standard, was first shown at the major US fire show in April 2013 and was well received. The product is currently in the NIOSH certification and approval process and is expected to be approved for sale during the first half of our 2014 financial year

•        Further development activity is also expanding our respiratory product offering into the aerospace market (with an aircrew version of our existing M53 respirator) and the underwater diving market through a variety of breathing and monitoring technologies

We expect this modular approach to further extend our market reach into the military, law enforcement and first responder protective equipment market

Dairy business model

Markets

Our Dairy business designs, manufactures and sells products and services used in the automated milking process, primarily rubberware such as liners and tubing. These consumable products come into direct contact with the cow and are replaced regularly to ensure product hygiene, animal welfare and to maximise milk quality. Our customer base is split between original equipment manufacturer (OEM) customers and customers buying our own brand Milkrite products.

The global market is concentrated in high consumption automated markets in North America and Western Europe where we have significant market shares. Potential exists outside these traditional markets, in particular in China, India, Russia, Eastern Europe and South America, all of which are currently experiencing rapidly increasing demand for dairy products which is being satisfied through mechanised milking. During 2012 we established our first sales and distribution facility in Shanghai to enable us to service the Asian market more efficiently. 

Products

Our products are manufactured for major OEMs as well as being sold through distributors under our own Milkrite brand. We excel in product design, materials specification and manufacturing efficiency. We are working to bring a wider range of dairy products to market under our Milkrite brand, enhancing the farmer’s view of Milkrite as the primary technical solutions provider in this area. The success of the innovative Milkrite Impulse Mouthpiece Vented Liner, ImpulseAir, continues and this product has claimed a 19% market share in the US since its launch in 2010. 

Product development

We have invested considerably in product development resource. 

Our cluster exchange programme, recently launched in the US, means Milkrite is a complete solution provider, saving farmers time on low-value tasks, securing our relationships with our customers and managing the change cycle. Further opportunities are available for this exciting concept.

The ImpulseAir IP20 range of liners is a revolutionary product that enables on-farm performance that no other conventional liner can match. Widely recognised around the world for its innovative approach to milking machine and liner design, Milkrite’s IP20-AIR has been designed with high-yielding herds in mind.