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ANNUAL REPORT AND ACCOUNTS 2020 Focusing on protection Avon Rubber p.l.c. | Annual Report & Accounts 2020 Overview Governance 152 Parent Company Balance Sheet 01 Highlights 58 Board of Directors 153 Parent Company Statement 02 At a Glance 60 Corporate Governance Report of Changes in Equity 04 Strategy in Action 64 Nomination Committee Report 154 Parent Company Accounting Policies 10 Why Invest in Avon Rubber? 66 Audit Committee Report 157 Notes to the Parent Company 12 Chair’s Statement 71 Remuneration Report Financial Statements 96 Directors’ Report 162 Glossary of Financial Terms Strategic Report 163 Abbreviations 16 Military Market Financial Statements 18 First Responder Market 102 Independent Auditor’s Report Other Information 20 Product Portfolio 110 Consolidated Statement 164 Notice of Annual General Meeting 22 Delivering Our Strategy of Comprehensive Income 172 Shareholder Information 24 Chief Executive Officer’s Review 111 Consolidated Balance Sheet 30 Financial Review 112 Consolidated Cash Flow Statement 38 How We Measure Our Performance 113 Consolidated Statement 40 Principal Risks and Risk Management of Changes in Equity 46 Environmental, Social 114 Accounting Policies and Critical For the latest investor relations information, and Governance Accounting Judgements go to our website at: 54 Section 172(1) Statement 120 Notes to the Group Financial Statements www.avon-rubber.com/investors Overview Highlights £160.8m £79.8m £168.0m £124.6m £129.8m £128.4m £115.7m £35.3m £36.7m 18 19 20 18 19 20 18 19 20 Orders received Closing order book Revenue £160.8 m £79.8m £168.0m £30.2m £16.3m £93.2m £22.6m £18.3m £9.9m £34.3m £35.4m £5.9m 18 19 20 18 19 20 18 19 20 Adjusted operating profit Operating profit Net cash £30.2m £5.9m £93.2m 76.5p 447.4p 27.08p 67.2p 20.83p 52.3p 16.02p 46.1p 46.2p 18 19 20 18 19 20 18 19 20 Adjusted basic earnings per share Basic earnings per share Dividend per share 76.5p 4 47.4 p 27.08 p The Directors believe that adjusted measures provide a more useful comparison of business trends and performance. Adjusted results exclude exceptional items, costs associated with acquisitions, defined benefit pension scheme costs, the amortisation of acquired intangibles and discontinued operations. A reconciliation of adjusted performance measure is available on page 34. The term adjusted is not defined under IFRS and may not be comparable with similarly titled measures used by other companies. 2019 has been restated to reflect the continuing operations of the Group following the divestment of milkrite | InterPuls on 25 September 2020, to reflect the impact of adopting IFRS 16 Lease accounting which came into effect on 1 October 2019 and to reflect the impact of the Barber pension equalisation adjustment. A full glossary of terms is available on page 162. 04 06 08 GROWING SELECTIVE PRODUCT VALUE ENHANCING THE CORE DEVELOPMENT ACQUISITIONS Leveraging our Developing Acquisition existing product portfolio to next generation products in of Team Wendy widen our customer base. partnership with our customers COVID-19 UPDATE The business has continued to operate with only minor disruption throughout the year, despite the unprecedented challenge of COVID-19, thanks to the dedication of our employees. Where you see this icon, we will explain our response to the global pandemic. 01 Avon Rubber p.l.c. | Annual Report & Accounts 2020 At a Glance We are an innovative technology group, which designs and produces life critical personal protection systems to maximise the performance and capabilities of our customers, with leading positions in the global respiratory and ballistic protection markets. OUR PRODUCT CATEGORIES Respiratory Protection Ballistic Protection Our leading range of respiratory protection includes Our ballistic protection portfolio includes next respirators, powered and supplied air systems, filters, generation helmets and body armor as well as spares and accessories. helmet liner and retention systems. 76% of revenue 24% of revenue More information on page 21 More information on page 20 OUR MARKETS Military First Responder We are a leading provider of respiratory and We are a trusted supplier of respiratory and ballistic ballistic protection to the U.S. DOD and other protection and have a robust network of distributors and Rest of World Military customers. agents selling to first responder agencies, correctional facilities, SWAT and other tactical police units. More information on page 16 More information on page 18 OUR BRANDS Avon Protection is a leading provider of life As a leading global supplier of helmets and critical personal protection systems with leading helmet liner and retention systems for Military positions in the global respiratory and ballistic and First Responder markets, Team Wendy is protection markets for the world’s militaries dedicated to providing exceptional head protection and first responders. systems, designed from the inside out, for those that risk their lives every day. 02 Overview 7 60+ 1,000 Sites Countries Employees OUR PURPOSE: Our purpose is to create sustainable value for all our stakeholders. This purpose unites us, guides our decisions and inspires us wherever we operate. We create sustainable value for: Our shareholders Our customers Our employees Our suppliers Our communities who benefit from who use our products who advance their careers that we engage with for that we support strong financial returns to protect themselves in safe, inclusive and continuous improvement through charitable and a progressive in the most extreme collaborative workplaces and responsibly sourced contributions dividend policy environments materials and services OUR STRATEGY Our strategy is to generate shareholder value through growing the core business by maximising revenue growth, supported by selective product development and value enhancing acquisitions. Growing the core Selective product Value enhancing development acquisitions Read more on page 04 Read more on page 06 Read more on page 08 How we do it: Our people and culture Robust risk management Responsible approach Effective governance Our people are at the heart of We have an established process to sustainability We are committed to high everything we do. for the identification and We are committed to standards of corporate management of risk. minimising the impact of our governance, as set operations on the environment out in the U.K. Corporate and our employees. Governance Code. Read more on page 50 Read more on page 40 Read more on page 46 Read more on page 60 Creating value for all our key stakeholder groups 03 Avon Rubber p.l.c. | Annual Report & Accounts 2020 Strategy in Action GROWING THE CORE NATO Support and Procurement Agency Contract Leveraging our existing product portfolio to widen our customer base We continue to leverage our technology leadership position to attract new and legacy Rest of World customers and as a result continue to build a strong pipeline of customers for our respiratory protection products. The collaborative development programme with the NATO Support and Procurement Agency (NSPA), which provides support to NATO nations, NATO military authorities and partner nations, is an exceptional example of our ability to maximise growth from our existing product portfolio and widen our customer base. The 10-year framework contract with the NSPA, which was awarded in the second half of the year, will enable NATO countries and NATO affiliated nations to purchase our market leading respirator system, based around the FM50 mask system, full suite of filters, MP-PAPR (Powered Air Purifying Respirator), ST53 Self-Contained Breathing Apparatus and accessories. “We are proud to be awarded this strategically important contract from the NSPA and we look forward to working with NATO and their partners to continue to support world leading military capability.” 04 Overview “Enabling nations to counter the multiple CBRN threats encountered in modern warfare, anti-terrorist and peacekeeping operations.” 30 10 NATO year member contract countries Access to our broad respiratory portfolio The procurement was led by Finland and Norway to establish technical requirements and complete demanding end user testing. Understanding the operational flexibility required by NATO forces was key to meeting these requirements, with our unique modular respirator system chosen to protect NATO troops in the most demanding environments. There is now a strong pipeline of Rest of World opportunities with first orders and deliveries under the new 10-year NATO Support & Procurement Agency contract which provides access to our broad respiratory portfolio including: FM50 mask system Powered and supplied air Filters and accessories The most advanced general service Our range of Powered Air Purifying Our filters provide protection from respiratory protection mask to date Respirators and Supplied Air CB agents, toxins and a number of with a twin filter designed to significantly products provide clean breathable air Toxic Industrial Materials/Chemicals reduce breathing resistance and and maximum operational flexibility such as particulate matter including improve weight distribution. for the end user. radioactive hazards. For the latest investor relations information, go to our website at: www.avon-rubber.com/investors 05 Avon Rubber p.l.c. | Annual Report & Accounts 2020 Strategy in Action continued SELECTIVE PRODUCT DEVELOPMENT Developing products in partnership New contract awards in the year demonstrate our ongoing focus to meet the needs of our customers