Avon Protection (LON:AVON) reported a 51% increase in adjusted operating profit for fiscal 2026 and forecast higher free cash flow in the coming year, as the protective equipment group completed its STAR transformation program and prepared for the next phase of growth.
Adjusted operating profit rose to $60.7 million on reported revenue growth of 13%, while adjusted operating margin increased by 4.4 percentage points to 17.2%. Adjusted basic earnings per share rose 57% to $1.433, Chief Financial Officer Rich Cashin said on the earnings call.
Order intake edged up to $354 million, and the closing order book remained in line with the previous year’s record $263 million. The board recommended a 10% increase in the final dividend, bringing the full-year dividend to $0.268 per share, up 9%.
2027 Outlook and Cash Flow
Cashin said the company expects mid-single-digit revenue growth in fiscal 2027, supported by increased helmet deliveries and further growth in its Avon Protection business. He expects growth in that business to be more muted than in 2026, when sales benefited from unusually high filter volumes and $13 million in Ukraine-related revenue.
The company expects its operating margin to remain within its 16% to 18% target range. Continued improvements at helmet maker Team Wendy are expected to be partly offset by a more normal sales mix at Avon Protection and growth in lower-margin Advanced Combat Helmet, or ACH, shipments.
Free cash flow is forecast at $50 million to $60 million in 2027, compared with $31 million in 2026. The outlook assumes no prolonged U.S. government shutdown and reflects expected working-capital improvements, lower pension contributions and no planned transformation costs.
Net debt fell by more than 30% during 2026, while leverage declined to approximately 0.4 times. Cash conversion was 93%, and return on invested capital was 27.6%, Cashin said.
Helmet Orders and Production
Team Wendy’s order intake rose 23%, helped by a strong second half. Its two main U.S. Department of War helmet programs received combined awards of more than $80 million. Revenue grew 12.6%, and operating margin increased by more than six percentage points to 11%.
ACH Gen II production rose from 4,000 to 9,000 helmets a month during the year. The company expects further delivery growth in 2027 as it benefits from a full year at higher production levels.
Cashin cautioned that Team Wendy’s order book is likely to decline in the coming year because the ACH program has reached its contract ceiling. He also expects orders to slow as the current Integrated Head Protection System contract transitions to a potential follow-on program, but said existing orders provide coverage well into 2028.
Management said the Cleveland factory’s annual helmet capacity has increased from 20,000 to 200,000 over three years. It expects capacity to exceed 300,000 this year without significant additional capital investment, partly through changes to tooling and press controls.
Protection Business and Inventory
The Avon Protection business posted 13% organic revenue growth and an operating margin of 22.5%. Demand from commercial customers in the Americas and NATO customers contributed to growth, while two filter orders from the U.S. Department of War and a Middle Eastern customer totaled $27 million.
Cashin said the margin benefited from productivity improvements and non-recurring high-margin product sales. He expects it to ease as the sales mix normalizes, although he said the business remains positioned for further growth.
Management identified inventory reduction as a priority for 2027. Inventory rose in 2026 as the company bought raw materials to support higher helmet production and held finished goods awaiting government inspection. Cashin said he expects both factors to diminish and sees a greater immediate opportunity to improve inventory turns at Team Wendy, while expecting progress in both businesses.
Longer-Term Strategy
Following the completion of STAR, management outlined an “improve, grow, and compound” strategy centered on operational improvements, organic investment and selective acquisitions in protection technology.
For the current portfolio, the company is targeting annual organic revenue growth above 5%, annual earnings-per-share growth above 10% and cumulative free cash flow of more than $175 million over three years. Its five-year ambition is to build a group with more than $600 million in revenue and returns on capital above 18%, with acquisitions helping to accelerate earnings growth.
Cashin said organic investment remains the first capital-allocation priority, followed by a progressive dividend. Excess cash could be used for disciplined acquisitions or returned to shareholders, with target leverage of no more than two times.
