Trading Update

RNS Number : 9567Y

Chemring Group PLC

15 September 2020

 

FOR IMMEDIATE RELEASE                                                                                                15 SEPTEMBER 2020

CHEMRING GROUP PLC

TRADING UPDATE

Chemring Group PLC ("Chemring" or "the Group") today issues a scheduled trading update for the period to 14 September 2020.

COVID-19 update

The health, safety and well-being of our people, their families, our customers and the communities in which we operate, remain our first priority. All our facilities remain open, are operating in accordance with Government and State guidelines, and are applying stringent safeguards to minimise the spread of the virus. To date, our supply chain has remained robust and we have maintained deliveries of essential products and services to our customers.

Current trading

Despite the challenging environment, trading in the period has progressed as planned. The expected outturn for the year ending 31 October 2020 is towards the upper end of current analyst expectations. ^*

Order intake to 31 August 2020 was up 4% on the same period last year and the Group's order book at the same date was £452m (31 October 2019: £449m), providing full visibility for the remainder of the current financial year based on expected delivery schedules. Order cover for FY21 is building, with Countermeasures & Energetics having 82% order cover of expected revenue and the shorter cycle Sensors & Information sector having 47% cover.  

Financial position

Investment in safety, including the modernisation and automation of our manufacturing sites has continued. This has been funded by continued strong operating cash conversion, with net debt at 31 August 2020 at £59m, which includes £6.5m in respect of the first adoption of IFRS16 (31 October 2019: £76m; 30 April 2020: £61m). We expect to be able to maintain this strong level of operating cash conversion and net debt level through to year end.

Sector Update

Sensors & Information

The period has seen continued strong performance in the Sensors & Information sector, with order intake up 32% compared to the same period last year.

Roke's information security market has remained buoyant, with strong customer demand in the national security domain. Roke has delivered on new programmes for Electronic Warfare ("EW") and Electronic Countermeasures. Deliveries of the first "Resolve Light" EW system were made to our US customer and another Five Eyes nation.

Our US Sensors business continues to make good progress on its US Programs of Record. Delivery milestones on the sole source HMDS explosive hazard detection programme have been met throughout the period and the customer has issued a $200m IDIQ contract, with a $21m first delivery order. We progressed into the low rate initial production phase on the sole source EMBD biological agent detection programme slightly earlier than expected. We continue to support the US DoD in their testing activities as we progress through the Engineering Manufacturing and Development phases of the JBTDS biological and AVCAD chemical agent detection programmes.

Countermeasures & Energetics

Performance across the Countermeasures & Energetics sector is progressing in line with the Board's expectations.

Our global Countermeasures business continues to perform well with delivery targets across all product lines being met. The Australian business has made excellent progress in the delivery of countermeasures for the US F-35 program, further strengthening our reputation with the US DoD. Our UK business is meeting its manufacturing volume objectives and is now focused on driving improved operational efficiency. Our two US businesses continue to work through some COVID-19 related challenges associated with the timely completion of customer acceptance tests and staffing levels, but to date these have not had a material impact on our ability to deliver.

The Tennessee capacity expansion program is progressing as planned, with various major construction milestones being met. The first incremental revenues from this new facility are expected in FY22.

Our niche Energetics businesses are performing well, with order intake and deliveries remaining robust. Our devices business in Chicago has strengthened its position in the space market and saw its products play critical roles on both the SpaceX NASA Crew Dragon mission to the International Space Station and NASA's latest mission to Mars, where we have a number of mission critical devices on NASA's Atlas V launch vehicle and Perseverance Rover.

Michael Ord, Chief Executive of Chemring, commented:

"This has been a busy period in which the resilience of the Group has been demonstrated as we continue to make good progress despite the challenges presented by COVID-19. Our expectations for FY20 are towards the upper end of current analyst expectations . ^*  

"We have good momentum as we near the end of FY20 and move into FY21 and, despite the near-term uncertainty that COVID-19 presents, I remain confident that our leading technologies, deep long-term customer relationships and sole-source or market leading positions mean Chemring's long-term prospects remain strong."

-ENDS-

^* The current range of analyst expectations for adjusted operating profit for FY20 is £47m to £53m.

For further information:

Rupert Pittman  Group Director of Corporate Affairs,  01794 463401

    Chemring Group PLC 

Andrew Jaques   MHP Communications  0203 128 8100

James Bavister

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.

Notes to editors

· Chemring is a global business that specialises in the manufacture of high technology products and the provision of services to the aerospace, defence and security markets

· Employing approximately 2,500 people worldwide, and with production facilities in four countries, Chemring meets the needs of customers in more than fifty countries

· Chemring is organised under two strategic product segments: Sensors & Information and Countermeasures &  Energetics

· Chemring has a diverse portfolio of products that deliver high reliability solutions to protect people, platforms, missions and information against constantly changing threats

· Operating in niche markets and with strong investment in research and development ("R&D"), Chemring has the agility to rapidly react to urgent customer needs

www.chemring.co.uk

 

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