Interim Management Statement

RNS Number : 6938I

Chemring Group PLC

17 March 2010

 



FOR IMMEDIATE RELEASE                                                                      17 MARCH 2010

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 2009 to date, as required by Rule 4.3 of the Disclosure and Transparency Rules of the UK Listing Authority.

Current Trading

Trading during the first four month period to the end of February 2010 was 5% higher than for the same period in 2009, when calculated on a constant currency basis. Severe adverse weather conditions in the first few weeks of 2010 disrupted production in most of our US and UK subsidiaries, which affected deliveries in January and February. The impact of this will be recovered in the next two to three months of trading.

The Group's order book has increased to a new record of £653 million, 17% higher than at this time last year. The Board is confident that the outlook for 2010 remains in line with its expectations. 

Countermeasures

Our US countermeasures businesses continued to perform well, with Alloy Surfaces generating significant growth in revenue compared with the previous year because of the early placement of multi-year contracts in 2009. Kilgore Flares was also highly successful with order intake levels considerably higher than expectations. 

At the beginning of the financial year, the US Department of Defense ("the DoD") awarded Kilgore Flares a four-year indefinite delivery, indefinite quantity ("IDIQ") contract for the supply of MJU-39 and MJU-40  infra-red ("IR") decoy flares that are used to protect the F-22 Raptor aircraft from the threat of IR guided missiles. This contract has a maximum potential value of $54 million, of which Kilgore Flares received a firm initial order valued at $24 million, for delivery over the 2010 and 2011 period. More recently, the DoD has also awarded Kilgore Flares a two-year, IDIQ contract for the supply of ALA-17 IR decoy flares that are used to protect the B-52 aircraft from the threat of IR guided missiles. This contract has a maximum value of $49.5 million and an initial delivery order of in excess of $25 million. The order book at Kilgore Flares is now 163% higher than at the same time last year and underpins the growth expected from this part of the business.

Energetics

Our Energetics division has also performed well with strong growth generated by our US subsidiary, Non-Intrusive Inspection Technology, Inc. ("NIITEK"). Production of the Husky Mounted Detection System ("HMDS") ground penetrating radar continues to be steady, with considerable emphasis now focused on spares production and delivery of training and technical support. In December 2009, NIITEK was awarded its first export order, with a maximum potential value of $34 million, to supply the HMDS to the Canadian Armed Forces. The first delivery of systems has now been made and considerable interest is being shown by NATO and other coalition forces.

Our US business, Chemring Energetic Devices, also had a very good start to the year with a considerable increase in production of components and sub-systems for deliveries to our US munitions prime contractors. Detonator production, in particular, has been significantly enhanced by completion of the first part of our new lead azide facility, which has allowed remote handling of existing stocks whilst extended qualification of the full production process continues.

Chemring Defence has signed a multi-year contract, worth just under £40 million, with the UK Ministry of Defence ("the MoD") for the supply of a wide range of pyrotechnics, including signal and screening smoke grenades. This contract underpins the long term partnering arrangement we have with the MoD and our product investment in developing new pyrotechnic products and technology.

Acquisitions

On 25 November 2009, the Group completed the acquisition of Hi-Shear Technology Corporation ("Hi-Shear") for a consideration of $132 million (£79 million). Hi-Shear, based in Los Angeles, USA, is a leading manufacturer of high reliability energetic solutions that perform critical functions in key US space and defence programmes, including satellites, space launch vehicles, missile defence and aircrew egress. In its first three months of ownership, Hi-Shear has performed well.

On 19 January 2010, the Group announced the conditional acquisition of The Allied Defense Group, Inc. ("ADG") for a cash consideration of $59 million (£36 million). ADG, which is headquartered in Virginia, USA, has two principal operating subsidiaries - Mecar S.A., based in Nivelles, Belgium, and Mecar USA, Inc., based in Marshall, Texas. Mecar S.A. is a niche manufacturer of medium and large calibre ammunition, particularly for modern, light armoured vehicles. Mecar USA provides load, assemble and pack and procurement services for the US Government and prime contractors. The acquisition of ADG is expected to complete during April 2010.   

Current Financial Position

On 19 November 2009, the Group completed the private placement of $280 million (£171 million) of fixed interest loan notes with a number of institutional investors. The proceeds were used to finance the acquisition of Hi-Shear, as referred to above, and to repay approximately $59 million (£36 million) of medium term debt falling due by the end of 2012. With the acquisition of Hi-Shear and seasonal working capital outflows, net debt at 28 February 2010 increased to £265 million (28 February 2009: £191 million). Net debt is expected to fall in the coming months.

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.

 

END

 

 

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