INTRODUCTION

Avon has made significant progress during the first half of 2009. The Group has returned to profit, and importantly has secured significant additional orders from both the US DoD and the UK MoD which have added to the Protection & Defence order book. Our Dairy business has continued to be profitable and cash generative.

RESULTS

Revenue from continuing operations increased by 103% in the half year to £44.1m (2008: £21.7m) driven by the stronger US$ and a successful full period of operation of our US Protection & Defence facility in Cadillac following the move to full rate production in the second half of the 2008 financial year.

The Group made an operating profit from continuing operations of £1.8m (2008: £1.7m loss) with Cadillac and the US Dairy business, Avon Hi-Life, contributing strongly. Earnings before Interest, Tax, Depreciation and Amortisation (‘EBITDA’) were £3.4m (2008: £0.0m).

Net finance costs were £0.8m (2008: £0.4m) reflecting the higher margins prevailing in the current capital markets. The non cash finance credit on our net retirement benefit surplus reduced to £0.1m (2008: £0.6m) due to changed actuarial assumptions.

This resulted in a profit before tax of £1.0m (2008: £1.6m loss) and after a tax charge of £0.5m (2008: £0.1m credit) the Group recorded a profit for the period from continuing operations after tax of £0.5m (2008: £1.5m loss).

A profit of £0.2m (2008: £4.4m loss) was recorded on discontinued operations which in the first half of 2009 related to the US Engineered Fabrications business which is held for sale.

The Group profit for the period was £0.8m (2008: £5.9m loss). The basic earnings per share was 2.7p (2008: 20.7p loss) and the earnings per share from continuing operations was 1.9p (2008: 5.3p loss).

NET DEBT AND CASHFLOW

Net debt increased from £15.1m at the 2008 year end to £16.5m at 31 March 2009. The stronger dollar added £4.2m to our reported net debt. Total bank facilities are £24m, the majority of which are US$ denominated and committed to 30 June 2010.

Continuing operating activities generated cash of £4.1m (2008: £1.4m absorbed) as a result of an EBITDA of £3.4m and working capital which decreased by £0.6m despite receivables being high at 31 March 2009 as significant shipments to both the UK MoD and US DoD were made in the latter part of the second quarter.

The net proceeds from the sale of the UK Mixing business of £2.0m and the sale and leaseback of our US warehouse of £1.4m generated net cash from investing activities of £2.0m (2008: £0.7m) after capital expenditure of £1.4m (2008: £1.3m).

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