1. In the first version, the managed solution was deployed to prod with customisations enabled (as default).
2. After that, allow customisations was turned off and the managed solution was deployed again to prod.
3. As expected, the solution was showing as managed and the app was not editable within the solution, however it is editable in the 'Apps' tab.

I have researched and came across a community forum where other users have experienced the same issue but with no solution other than contacting microsoft support as the general consensus in the community is that this is a bug.

See forum here: https://powerusers.microsoft.com/t5/Power-Apps-Pro-Dev-ISV/Allow-Customization-is-off-and-a-managed-solution-is-exported/td-p/2130014