Interim Management Statement

RNS Number : 0217P

Chemring Group PLC

18 March 2009

 



FOR IMMEDIATE RELEASE                                                                                    18 MARCH 2009

CHEMRING GROUP PLC

INTERIM MANAGEMENT STATEMENT

Chemring Group PLC ('Chemring' or 'the Group') today issues its Interim Management Statement covering the period from 1 November 2008 to date, as required by Rule 4.3 of the Disclosure and Transparency Rules of the UK Listing Authority.

Current Trading

Trading in both the Energetics and Countermeasures divisions for the four month period to the end of February 2009 continued to be strong, with Group revenues and operating profits in excess of 50% higher than for the same period in 2008. This increase in revenue includes 21% growth from acquisitions made in the last twelve months and confirms the strong levels of organic growth reported in the last full year results. The Group's order book currently stands at £558 million, which is 39% higher than at this time last year. The Board is confident that the outlook for 2009 remains in line with its expectations.

Energetics

The Energetics division continues to expand rapidly and contributed 60% to Group revenue in the four month period to the end of February 2009. Simmel had an excellent start to the year, with higher than expected sales of 81mm illumination mortar rounds to BAE Systems plc and 120mm tank ammunition to another NATO country. With high levels of order intake and many emerging opportunities, it is expected that Simmel will continue to perform strongly during the rest of 2009.

Demand for the Group's signal, screening and illumination products continues to grow across a wide range of customers. Trading at Chemring Defence is significantly ahead of the previous year with strong demand from the UK Ministry of Defence and our NATO allies. Demand is also growing for disrupter and remote initiation systems from Chemring EOD, which has recently secured several important orders from the US Army for disarming improvised explosive devices (IEDs) or road-side bombs from stand-off distances.

The US Army has recently announced the award of two major contracts to the Group's newly-acquired business, NIITEK, with a total value of $51 million, for the supply and support of thirty Husky Mine Detection Systems (HMDS) for high reliability route clearance of buried mines in support of US peacekeeping operations around the world. The first three systems have been delivered to the customer and will be deployed shortly.

Countermeasures

The Countermeasures division has performed well with our UK countermeasures business continuing to operate at very high levels of production. Demand for flares for the Typhoon aircraft continues to grow and we have just secured our first major export production contract. Chemring Countermeasures plans to invest £18.5 million over the next eighteen months in the construction of a new world-class manufacturing facility in Salisbury, and initial work on the building foundations has now started.

During the period, Alloy Surfaces was awarded a five year IDIQ (Indefinite Delivery, Indefinite Quantity) contract from the US Air Force for the MJU-51 special material decoys, which are used for the covert protection of transport aircraft. The first two contract awards were for $27 million for delivery in 2009. More recently, Alloy Surfaces has received the second year option, worth $11 million, for the supply of M211 special material decoys, which are used to protect US Army helicopters from the latest infra-red guided missiles. Further long-term contracts from both the US Air Force and the US Navy are still under negotiation and are expected to be implemented over the next six months.

Kilgore Flares also continues to grow strongly, although its performance has been constrained by continuing delays in the placement of contracts by the US Air Force. A $23 million contract for the supply of M206 and MJU-7 decoys for the protection of F-16 and A-10 combat aircraft was recently awarded, and additional contracts for the F-22 flares suite and the C-17 transport aircraft are expected shortly.

In November 2008, Chemring Australia was awarded a long-term contract for the supply of countermeasures and pyrotechnics to the Commonwealth of Australia. The contract is worth A$160 million over an initial ten year period and, as part of the arrangement, Chemring Australia will invest A$17 million over the next two years in the establishment of a new, state-of-the-art manufacturing facility near Melbourne, as well as creating a research and development centre for the design of future products.

Acquisitions

The Group successfully completed the acquisition of NIITEK during the period. NIITEK, based in Virginia, USA, is a leading developer of robot and vehicle-mounted mine detection systems incorporating its advanced Ground Penetrating Radar (GPR) and metal detection technologies. The acquisition of NIITEK extends Chemring's detection capability in the £2.9 billion Explosive Ordnance Disposal (EOD) market. Initial consideration of $30 million was paid on completion of the acquisition, and additional deferred consideration of $8.5 million was paid on receipt of the HMDS production contract. The acquisition was funded utilising existing bank facilities, which contributed to an increase in the Group's gearing, on a short-term basis, to 75% at the end of February 2009. 

For further information:

Ken Scobie             Chairman, Chemring Group PLC             01489 881880

Dr David Price        Chief Executive, Chemring Group PLC    01489 881880

Rupert Pittman       Cardew Group                                           0207 930 0777 

Cautionary Statement: 

This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Chemring's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are; increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approvals for engineering or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects.

Chemring undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.

 

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