Avon Protection

Website: Avon Protection
Index: FTSE 250
EPIC: AVON
Supersector: Industrial Goods and Services
Sector: Aerospace and Defense
Subsector: Defense
Market Cap: £526.49M
Payout Frequency: Semi-Annual

Avon Protection Dividend Analysis and Summary

Declared dividend and timetable

Final dividend: 17.0c per share (USD), to be paid in GBP at the prevailing FX rate (to be announced before payment).
Ex-dividend date: 05/02/2026.
Record date: 06/02/2026.
Payment date: 06/03/2026.
Interim dividend (already paid): 7.6c on 05/09/2025.
Total FY25 dividend: 24.6c (vs 23.3c in FY24), up 5.6%.
Adjusted EPS (FY25): 91.2c; adjusted dividend cover: 3.7x (company policy targets 2.5x–3.0x through the cycle).
Dividend cash outflow FY25: $7.2m.

Financial support for the dividend

Order book: record $262.8m (+16.7%), providing good revenue visibility into FY26.
Revenue/Profitability: revenue $313.9m (+14.1%); adjusted operating margin 12.8% (targeting 14–16% in FY26).
Cash and leverage: cash conversion 90%; net debt ex-leases $50.1m; bank leverage 0.86x (<1x), with ample RCF headroom.
Returns: ROIC 18.6% (>17% target).
Currency: dividends declared in USD but paid in GBP; sterling receipts will vary with FX.

Policy and capital allocation

Stated priorities: invest in R&D and transformation first, then maintain a progressive dividend targeting 2.5x–3.0x cover; deploy excess cash to EPS-accretive M&A or other returns.
FY25 cover at 3.7x suggests headroom to grow the dividend if trading and cash generation remain robust and if M&A does not absorb excess capital.

Short, focused analysis

Sustainability: Strong cover, solid cash conversion, low leverage and a large order book underpin the final dividend. Ongoing transformation costs are falling (guided to c.$6m in FY26), improving free cash capacity.
Growth trajectory: DPS grew 5.6% YoY. With margins guided into the 14–16% range in FY26 and ROIC already above target, modest further dividend growth looks achievable within policy constraints.
Support from performance: Adjusted EPS growth (+30% YoY) and improved operating metrics (scrap down, productivity up) support distribution capacity, though statutory earnings remain lower due to transformation charges.
Capital allocation fit: Management remains disciplined—prioritising operational improvement and potentially bolt-on M&A. This suggests steady, not aggressive, dividend growth while investment opportunities are pursued.

Structural changes and commentary relevant to dividends

Irvine, CA site closure completed; expected to deliver margin benefits from FY26.
IT/ERP rationalisation (SAP exit and IT optimisation) with targeted cost savings, supportive of medium-term cash flows.
Explicit intent to pursue bolt-on acquisitions when returns thresholds are met; could re-prioritise cash toward M&A over outsized dividend increases.
Ongoing purchase of own shares relates to LTIP hedging, not broad capital returns.

Risks and flags for dividend stability

US government shutdown: temporarily prevents deliveries (but not production), creating working-capital swings; management notes DoW receivables have been collected post year-end.
Operational ramp-up risk at Cleveland (ACH Gen II) and need for continued line optimisation in FY26.
Competitive pressure on NG IHPS from potential new entrants beyond 2028.
Pension cash commitments: FY26 c.£4.7m, FY27 c.£5.1m, consuming some free cash.
FX risk to GBP dividend receipts (USD-declared), and exposure to defence procurement cycles and large customers (US DoW).

Dividends Used in Calculation:

Ex-Dividend Date	Payment Date	Type	Amount	Currency
06/02/2025	07/03/2025	Final	16.10¢	USX
07/08/2025	05/09/2025	Interim	7.60¢	USX

Total (Annual Dividends Per Share): 17.38p (Using exchange rate on 16/02/2026 $ = £0.73351)

Dividend Yield = Annual Dividends Per Share (17.38p) ÷ Share Price (1738p) = 1%

Ex Dividend Date	Payment Date	Type	Amount	Currency
05/02/2026	06/03/2026	Final	17.00¢	USX
07/08/2025	05/09/2025	Interim	7.60¢	USX
06/02/2025	07/03/2025	Final	16.10¢	USX
08/08/2024	06/09/2024	Interim	7.20¢	USX
08/02/2024	08/03/2024	Final	15.30¢	USX
10/08/2023	08/09/2023	Interim	14.30¢	USX
09/02/2023	10/03/2023	Final	30.60¢	USX
04/08/2022	02/09/2022	Interim	14.30¢	USX
10/02/2022	11/03/2022	Final	30.60¢	USX
05/08/2021	03/09/2021	Interim	14.30¢	USX
11/02/2021	12/03/2021	Final	18.06¢	USX
06/08/2020	04/09/2020	Interim	9.02¢	USX
13/02/2020	13/03/2020	Final	13.89¢	USX
08/08/2019	06/09/2019	Interim	6.94¢	USX
14/02/2019	15/03/2019	Final	10.68¢	USX
09/08/2018	07/09/2018	Interim	5.34¢	USX
15/02/2018	16/03/2018	Final	8.21¢	USX
10/08/2017	08/09/2017	Interim	4.11¢	USX
16/02/2017	17/03/2017	Final	6.32¢	USX
04/08/2016	05/09/2016	Interim	3.16¢	USX
18/02/2016	18/03/2016	Final	4.86p	GBX
06/08/2015	04/09/2015	Interim	2.43p	GBX
19/02/2015	20/03/2015	Final	3.74p	GBX
06/08/2014	05/09/2014	Interim	1.87p	GBX
19/02/2014	21/03/2014	Final	2.88p	GBX
07/08/2013	06/09/2013	Interim	1.44p	GBX

Year	Interim	Final	Currency	Total	Change
2024	7.200	16.100	USX	23.300	-21.280
2023	14.300	15.300	USX	29.600	-34.070
2022	14.300	30.600	USX	44.900	0.000
2021	14.300	30.600	USX	44.900	65.800
2020	9.020	18.060	USX	27.080	30.000
2019	6.940	13.890	USX	20.830	30.020
2018	5.340	10.680	USX	16.020	30.030
2017	4.110	8.210	USX	12.320	29.950
2016	3.160	6.320	USX	9.480	30.040
2015	2.430	4.860	GBX	7.290	29.940
2014	1.870	3.740	GBX	5.610	29.860
2013	1.440	2.880	GBX	4.320

Number of Shares:

Payment	Paid	Amount
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