Avon Hits Its Targets Early, Now Looks to Put the Transformation Behind It
H1 2026: Revenue +7%, margins +300bps, ROIC 20.8% — as the group shifts from internal fixes to external growth ambitions.
AVON.L · Earnings Call · 2026-05-13
A Recovery That's Come Early
Avon Technologies reported a strong first half, with revenue up 7% and adjusted operating profit up 39% on a constant currency basis. The headline numbers are underpinned by a 300bp margin expansion to 15.2% (within the 14–16% target range) and EPS growth of 45%. Perhaps more telling, ROIC came in at 20.8%, up 450bps, comfortably ahead of the 17% goal the company had set for 2026. CFO Richard Cashin summarized the quarter as “The headlines are closing order book down a bit as we work through some of the Team Wendy military backlog, revenue up 7%, operating profit up 39% and EPS up 45%, all compared to the same period last year on a constant currency basis.” — Richard Cashin, Executive (likely CFO or Finance Director) · 2026-05-13 The transformation program, which has been the central story for the past few years, is now essentially complete. CEO Mark Sclater noted that they have achieved their financial targets 18 months ahead of schedule, and the focus is shifting from fixing operations to scaling them.Production Scaling and Its Growing Pains
Team Wendy, the helmet business, is at the heart of the scaling story. production rate have doubled over the past six months, with the Cleveland factory now delivering both IHPS and ACH at or above contractual rates. But this ramp has come with a set of challenges. The company is dealing with supply chain bottlenecks — from plastic skins to glue — and machine reliability issues. Sclater was candid about the situation: “I'm super happy with the team we've got there. I think we need another month or 2 until it is really, really reliable every week. But even with the unreliable, we're smashing our targets.” — Mark Sclater, CEO or Senior Executive · 2026-05-13 The production rate increases have also put pressure on Raw materials and inventory turns, but the company remains confident of hitting its full-year cash conversion target of above 80%. On the demand side, the U.S. government shutdown have delayed grant funding for law enforcement customers, weakening commercial orders at Team Wendy. That is expected to ease as the One Big Beautiful Bill Act takes effect, and the company is already helping police forces write grants.A Wave of Product Innovation
On the product front, Avon continues to expand its portfolio. The MITR half mask has achieved independent certification and is now adopted by Canada, the first Five Eyes nation to do so. Steve Elwell highlighted the growing demand: “This is the first Five Eyes nation to fully adopt the capability, and we expect other Five Eyes nations to do so very soon.” — Steve Elwell, Executive (likely Commercial or Operations) · 2026-05-13 The company also launched two new helmets — RECON and EXFIL Endurance — designed for multi-mission use. The new digital Voice Projection Unit is another differentiator, as it automatically tunes to the mask it is attached to, cutting the need for multiple SKUs. Alongside the product launches, Avon won 100% of a $14 million filter order from the U.S. Department of War, a first for the company, and the filter production lines are running at full capacity. The margin dynamics remain favorable, but the CFO cautioned that the mix tailwind may not persist:The mix tailwind that we saw was around sort of particularly commercial sales outstripping military and filter sales. And we already know that filter orders are now strong.