Interim Management Statement

RNS Number : 8170K

Chemring Group PLC

28 August 2012

 



FOR IMMEDIATE RELEASE                                                                                      28 AUGUST 2012

CHEMRING GROUP PLC

INTERIM MANAGEMENT STATEMENT

Chemring Group PLC ("Chemring" or "the Group") today issues its Interim Management Statement covering the period from 1 May 2012 to date, as required by Rule 4.3 of the Disclosure and Transparency Rules of the UK Listing Authority.

Current Trading

Trading for the three month period to the end of July 2012 saw steady growth, with revenue in the period up 4% to £165 million from £158 million in the same period last year. Revenue from continuing operations in the nine month period to the end of July 2012 was, therefore, £498 million, 4% higher than in the same period last year. However, we have recently discovered errors within a new Enterprise Resource Planning (ERP) system being installed at our subsidiary in Florida. In addition, we have been informed of several months of delay in the start of production of the MK7 MOD 2 Anti-Personnel Obstacle Breaching System ("APOBS"). Largely as a result of these developments, we have reduced our current expectations for full year operating profit by approximately £15 million, equivalent to about 6 pence of earnings per share.

The Group's order book at the end of July was £910 million, which is 9% lower than at this time last year. This reflects a lower than expected order intake in the period, with orders delayed by the growing length of the export license approval cycle in many European countries and the impact of the early start to Ramadan on Middle East customers. The outlook for the US defence market continues to be uncertain with the majority of our customers indicating that they have no visibility of funding in the next financial year until the funding for the FY2013 defence budget is eventually resolved.    

Counter-IED

Our counter-IED business continues to grow rapidly, with revenue 119% higher than for the same period last year, more than recovering the shortfall at the half year. NIITEK made a   strong contribution, with high levels of activity on the new Husky Mounted Detection System ("HMDS") ground penetrating radar IDIQ contract. Revenue in the period was 92% higher than in 2011. A strong performance from Chemring Detection Systems was also evident with the increased rates of production of both our chemical and biological detection systems for the US customer. However, production of APOBS at Chemring Ordnance, which was expected to start in July, will not now start until the first quarter of the next financial year.  This delay has been caused by the extended work still needed to achieve site safety approval for a government-directed supplier that provides a key component for the system.  Despite this delay, a further award of $40.4 million of production has just been received, taking the total orders to date on this contract to over $114 million.

Countermeasures

Our countermeasures business contracted over the period, with revenue decreasing 11% compared to 2011, and year-to-date revenue is now similar to the previous year. Our US businesses delivered 30% lower revenues than last year, reflecting the falling demand from the US Government for flares to protect helicopter and transport aircraft and the delays in order placement. Furthermore, continued delay by the regulatory authorities in approval of the new MJU-7 production facility has constrained some production at Kilgore. However, the new production facility in Australia started operation successfully, and has satisfactorily increased production to its expected capacity. Roke has also delivered an excellent performance, with revenue 67% higher than in the same period driven by sustained demand for both its products and engineering services.

Munitions

Trading at our munitions business was rather slow during the period with revenues of £39 million, down 45% on the same period in 2011, although year-to-date revenues are still 9% ahead of last year. The majority of the difference was at Mecar, where delays in order intake from slow export license approvals reduced revenues in the period, and where we had an unusually high revenue in the same period last year following resumption of production following the incident in September 2010. Simmel, however, performed well with revenue up 168%, driven by increased production levels of 76mm naval rounds.

Pyrotechnics

Our pyrotechnic business recovered from its subdued first half performance, generating revenues 38% higher than for the same period last year. Year-to-date revenues are broadly in line with 2011. This recovery was led by a 49% increase in revenues from sales of 81mm and 120mm smoke and illuminating mortar rounds to both our European and Middle East customers. Good growth was also achieved in our smoke and signal grenades for export customers, as well as our 40mm pyrotechnic rounds to the US Army.

Disposal

On 31 July 2012, the Group successfully completed the sale of its marine interests to Drew Marine for £32 million, having received all necessary regulatory approvals.

Current Financial Position

Net debt at 31 July 2012 was £315 million (31 July 2011: £305 million).

There has been a net outflow of cash since the half year, despite the inflow from the sale of our marine interests. Significant operating cash inflow is expected in the last three months of the financial year.  

Approach from Carlyle

As announced on 17 August 2012, the Group has received an approach from the Carlyle Group.

For further information:

Rupert Pittman            Director of Communications & Investor Relations     01489 881880

Emma Crawshaw        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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