Half-yearly Report
FOR IMMEDIATE RELEASE 26 June 2007
CHEMRING GROUP PLC
Interim Results for the Six Months to 30 April 2007
Chemring Group PLC today announces its interim results:
* Revenue from continuing operations up 29% to £106.8 million (2006: £82.6
million)
* Underlying profit before tax from continuing operations* up 68% to £20.3
million (2006: £12.1 million)
* Profit before tax from continuing operations up 66% to £19.5 million (2006: £
11.8 million)
* Record order book of £293 million, up 36% on the last year end
* Underlying earnings per share* up 55% at 42.2p (2006: 27.2p)
* Basic earnings per share from continuing operations up 54% at 40.7p (2006:
26.5p)
* Interim dividend per ordinary share up 50% at 7.20p (2006: 4.80p)
Divisional Highlights
* Countermeasures
* Order book of £145 million (2006: £121 million)
* Production reached record levels in all three Countermeasures businesses in
the first half
* UK spectral flare production facility completed and output of over 20,000
units per month now being achieved
* Energetics
* Order book of £148 million (2006: £65 million) - higher than the
Countermeasures division for the first time
* Organic growth of 40% achieved over a twelve month period
* Simmel Difesa acquisition performing well, strengthening Chemring presence in
the Italian market
* Operating margins of 18% (2006: 9%) in this division, benefiting from
integration of newly acquired businesses
Results for the Half Year to 30 April 2007
2007 2006 % increase
£m £m
Continuing operations:
Revenue 106.8 82.6 29
Underlying operating profit* 23.3 14.7 59
Finance expense (3.0) (2.6)
Underlying profit before tax* 20.3 12.1 68
Underlying earnings per share* 42.2p 27.2p 55
Basic earnings per share 40.7p 26.5p 54
(continuing)
* See Note 2 below
Ken Scobie, Chemring Group Chairman, commented:
"The prospects for both our divisions remain excellent. We have a record order
book of £293 million and the order book for our Energetics division is running
ahead of the Countermeasures division for the first time.
The unstable political climate in the Middle East and other parts of the world
continues to drive peacekeeping operations and the consequent demand for our
products. The FY08 US defence budget proposals include significant growth in
the funding potentially allocated to decoy programmes. The vulnerability of
helicopters and transport aircraft to shoulder-launched missiles of increasing
sophistication provides a secure future for our Countermeasures business. In
Energetics, the growing order book and rapidly improving margins are most
encouraging, and our ability to generate organic growth and leverage our
international presence within a £4.5 billion Energetics market provides growing
confidence in the potential for this business. Against this background and
recognising the opportunities for further complementary acquisitions, the
future for the Group is enormously encouraging."
Notes:
1. All comparisons are for the half year to 30 April 2006.
2. Excludes intangible amortisation arising from business combinations of £0.7
million (2006: £0.3 million). Underlying earnings per share is reconciled
to basic earnings per share in note 4 of the interim statement.
3. The interim dividend of 7.20p per ordinary share will be paid on 27 July
2007 to holders on the register at 6 July 2007. The ex-dividend date will
be 4 July 2007.
For further information:
David Price Chief Executive, Chemring Group 0207 930 0777
PLC
Paul Rayner Finance Director, Chemring Group 0207 930 0777
PLC
Rupert Pittman Cardew Group 0207 930 0777
Statement By the Chairman
Results for the Half Year to 30 April 2007
2007 2006
£m £m
Continuing operations:
Revenue 106.8 82.6
Underlying operating profit* 23.3 14.7
Finance expense (3.0) (2.6)
Underlying profit before tax* 20.3 12.1
Underlying earnings per share* 42.2 27.2
Basic earnings per share (continuing) 40.7 26.5
*Excludes intangible amortisation arising from business combinations of £0.7
million (2006: £0.3 million)
I am delighted to report that the Group has enjoyed another excellent first
half, with underlying profit before tax* increasing by 68% to £20.3 million
(2006: £12.1 million) in the first half. Underlying earnings per share*
increased by 55% to 42.2p following the 54% growth achieved in the full year
ended 31 October 2006. Both divisions, Countermeasures and Energetics,
performed well, with the Countermeasures business increasing revenue by 5% and
underlying operating profit* by 13%, in spite of the negative translation
impact of the dollar exchange rate. The performance of the Energetics division
improved significantly, with revenue up 79% and underlying operating profit*
more than trebling to £8.6 million, as the earnings generated through our
acquisition programme came through.
In March the Group completed the acquisition of Simmel Difesa in Italy for an
enterprise value of €72 million (£49 million). The acquisition was principally
funded with new bank facilities, which raised our debt/equity ratio to 100% in
the short term, although interest was covered over seven times by current
operating profit. With the strong operational cash flow forecast in the second
half of the year, in line with last year, our borrowings are expected to reduce
to acceptable levels.
The Board deems it appropriate that dividends move forward in line with growth
in earnings. Accordingly, the Board is declaring an interim dividend of 7.20p
per ordinary share (2006: 4.80p), an increase of 50%. The interim dividend will
be paid on 27 July 2007 to shareholders on the register at 6 July 2007.
Countermeasures
Our UK Countermeasures business had an excellent start to the year with an
increase in sales of 24%, principally driven by the requirements of NATO
countries engaged in peacekeeping operations in Afghanistan. Our new spectral
flare production facility was completed in just five months and has now
successfully increased production to over 20,000 units per month. The first
production contracts for the European Typhoon aircraft have been received.
Qualification of an advanced kinematic flare has also been completed and an
initial production contract has recently been awarded.
Alloy Surfaces and Kilgore continued their impressive advances with revenues
increasing, in dollar terms, by 16% and underlying operating profits* by 23%.
There was substantial and encouraging 39% growth in the order books for these
two businesses to $233 million from $168 million at the end of April 2006. I am
delighted to report that the order book at Kilgore grew by 48% over the same
period.
Production reached record levels at all three of our Countermeasures businesses
in the first half. I am particularly pleased, however, to report that Alloy
Surfaces delivered its two millionth flare to the UK Royal Air Force and that
there is considerable drive to fit the BOL/IR system to the Typhoon, F-18 and
Gripen aircraft. Alloy Surfaces' third plant is now complete and has commenced
production. Kilgore secured the first production contract for a new flare that
will be used on the F-18 aircraft.
Energetics
With the combination of both organic and acquisitive growth, the Energetics
division increased its sales by 79% and its underlying operating profit* more
than trebled to £8.6 million. It is very pleasing that this division has
achieved over 40% organic growth over a twelve month period, with all of the
businesses performing well. Our US company, Technical Ordnance, had
considerable success in the development of its relationships with major US
ammunition prime contractors, winning a number of competitive contracts from
previously sole-source suppliers. It has also just become the primary supplier
of the M55 detonator, and production is expected to grow to two million units
per month by the end of 2008.
The rationalisation and integration of the newly acquired businesses continues
to be a major operational priority. We have now successfully completed the
transfer of manufacturing of our marine pyrotechnic products to Germany.
Considerable improvement in our operating margins has already begun to emerge.
Acquisitions
The acquisition of Simmel Difesa brings the Group additional complementary
products, strengthens our relationship with a number of major prime
contractors, and improves our presence in the Italian market as well as several
export territories. Earlier this month we announced the acquisition of Dyno
Nobel's High Energy Materials business in Norway for a cash consideration of £
2.8 million. The business is Europe's largest producer of primary explosives
and will boost the Group's capability in the increasingly important field of
insensitive munitions ("IM").
We continue to search for new acquisition opportunities which meet our stated
strategic objectives.
Company Names
The name of Chemring is now well recognised in defence circles throughout the
world and many of our operating subsidiaries, which have previously traded
under their own brand names, believe their position could be further enhanced,
and their own marketing efforts assisted, if they carried the Chemring name. A
programme to achieve this is therefore underway, although important product
brand names will be retained. Future reports may, therefore, contain slightly
altered subsidiary company names.
Pensions
The Board has recently been engaged in discussions with the trustees of the UK
final salary pension schemes, together with all appropriate advisors, on the
scheme valuations and funding requirements. In previous reports I have
indicated that I did not believe that our obligations to continue funding our
UK final salary schemes for the existing members would present any financial
problems, and this position remains unchanged.
People
The Group continues to search for and employ experienced personnel to
strengthen its operational management, to manage the growth opportunities and
to be available as required to integrate acquisitions.
Prospects
The prospects for both our divisions remain excellent. We have a record order
book of £293 million and the order book for our Energetics division is running
ahead of the Countermeasures division for the first time.
The unstable political climate in the Middle East and other parts of the world
continues to drive peacekeeping operations and the consequent demand for our
products. The FY08 US defence budget proposals include significant growth in
the funding potentially allocated to decoy programmes. The vulnerability of
helicopters and transport aircraft to shoulder-launched missiles of increasing
sophistication provides a secure future for our Countermeasures business. In
Energetics, the growing order book and rapidly improving margins are most
encouraging, and our ability to generate organic growth and leverage our
international presence within a £4.5 billion Energetics market provides growing
confidence in the potential for this business. Against this background and
recognising the opportunities for further complementary acquisitions, the
future for the Group is enormously encouraging.
K C Scobie - Chairman
26 June 2007
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the half year to 30 April 2007
Note Unaudited Unaudited Audited
Half year Half year Year to
to to
30 April 30 April 31 Oct 2006
2007 2006
£000 £000 £000
Continuing operations
Revenue -continuing 103,993 82,584 187,733
-acquired 2,841 - -
Total revenue 2 106,834 82,584 187,733
Operating -continuing 22,070 14,351 37,779
profit
-acquired 518 - -
Total operating profit 2 22,588 14,351 37,779
Operating profit is analysed as:
Underlying operating profit 23,288 14,683 38,502
before intangible amortisation
arising from business
combinations
Intangible amortisation arising (700) (332) (723)
from business combinations
Total operating profit 22,588 14,351 37,779
Share of post-tax results of - - 84
associate
Finance expense (3,044) (2,587) (6,103)
Profit before tax for the period 19,544 11,764 31,760
/year from continuing operations
Tax 3 (6,418) (3,830) (9,873)
Profit after tax for the period/ 13,126 7,934 21,887
year from continuing operations
Discontinued operations
Loss after tax from discontinued 10 (1,926) (129) (8,090)
operations
Profit after tax for the period/ 11,200 7,805 13,797
year
Attributable Equity holders of 11,214 7,803 13,795
to: the parent
Minority (14) 2 2
interests
Earnings per ordinary share 4
From continuing operations:
Underlying 42.19p 27.19p 71.89p
Basic 40.67p 26.45p 70.33p
Diluted 40.39p 26.24p 69.87p
From continuing and discontinued
operations:
Basic 34.71p 26.02p 44.33p
Diluted 34.47p 25.81p 44.04p
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the half year to 30 April 2007
Note Unaudited Unaudited Audited
Half year to Half year Year to
to
30 April 30 April 31 Oct 2006
2007 2006
£000 £000 £000
Profit after tax for the period/year 11,200 7,805 13,797
Other recognised income and expense
Gains on cash flow hedges 133 619 340
Movement on deferred tax relating to (40) (186) (98)
cash flow hedges
Exchange differences on translation (3,786) (2,529) (5,230)
of foreign operations
Actuarial gains on defined benefit 3,467 4,420 4,685
pension schemes
Movement on deferred tax relating to (1,040) (1,326) (1,406)
pension schemes
Tax on items taken directly to 620 - 1,868
equity
Total recognised income and expense 10,554 8,803 13,956
for the period/year
Attributable to:
Equity holders of the parent 6 10,568 8,801 13,954
Minority interests (14) 2 2
UNAUDITED CONSOLIDATED BALANCE SHEET
as at 30 April 2007
Unaudited Unaudited Audited
As at As at As at
30 April 30 April 31 Oct 2006
2007 2006
As restated As restated
** **
£000 £000 £000
Non-current assets
Goodwill 97,295 56,303 59,662
Other intangible assets 37,898 22,044 24,865
Property, plant and 59,980 56,632 57,681
equipment
Investments 1,037 1,065 1,033
Deferred tax 11,668 6,432 9,649
207,878 142,476 152,890
Current assets
Inventories 51,902 37,518 36,252
Trade and other 56,961 35,013 39,015
receivables
Cash and cash equivalents 14,430 10,023 13,411
Derivative financial 311 470 178
instruments
123,604 83,024 88,856
Assets held for sale 2,505 15,154 6,516
Total assets 333,987 240,654 248,262
Current liabilities
Bank loans and overdrafts (8,694) (13,852) (11,523)
Obligations under finance (254) (874) (435)
leases
Trade and other payables (64,612) (35,400) (39,538)
Provisions (1,267) (170) (286)
Current tax liabilities (3,476) (1,363) (1,928)
Liabilities held for sale (1,998) (1,813) (2,338)
(80,301) (53,472) (56,048)
Non-current liabilities
Bank loans (113,484) (70,271) (71,698)
Obligations under finance (96) (458) (309)
leases
Other payables (492) (209) (210)
Deferred tax (13,730) (9,846) (9,486)
Provisions (4,547) - -
Preference shares (62) (62) (62)
Retirement benefit (12,960) (16,762) (16,345)
obligations
(145,371) (97,608) (98,110)
Total liabilities (225,672) (151,080) (154,158)
Net assets 108,315 89,574 94,104
Equity
Share capital 1,634 1,611 1,612
Share premium account 60,314 53,524 53,540
Special capital reserve 12,939 12,939 12,939
Hedging reserve 323 433 230
Revaluation reserve 1,585 1,640 1,604
Retained earnings 31,255 19,148 23,900
Equity attributable to equity holders of 108,050 89,295 93,825
the parent
Minority interest 265 279 279
Total equity 108,315 89,574 94,104
** see Note 7
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
for the half year to 30 April 2007
Note Unaudited Unaudited Audited
Half year Half year Year to
to to
30 April 30 April 31 Oct 2006
2007 2006
£000 £000 £000
Cash flows from operating
activities
Cash generated from operations A 13,801 13,397 45,629
Tax paid (4,718) (3,626) (10,588)
Net cash inflow from operating 9,083 9,771 35,041
activities
Cash flows from investing
activities
Dividends received from associate 84 107 107
Purchases of property, plant and (5,097) (4,882) (10,148)
equipment
Purchases of intangible assets (194) (922) (1,798)
Proceeds on disposal of subsidiary 3,227 - 2,570
undertaking/division
Proceeds on disposal of property, - - 98
plant and equipment
Acquisition of subsidiaries (net 7 (37,790) (51,650) (62,808)
of cash acquired)
Net cash outflow from investing (39,770) (57,347) (71,979)
activities
Cash flows from financing
activities
Dividends paid (3,610) - (3,695)
Interest paid (2,841) (2,372) (5,261)
Proceeds on issue of shares 3 26,402 26,419
New borrowings 47,385 29,549 38,112
Repayment of borrowings (3,758) (354) (5,983)
Net cash inflow from financing 37,179 53,225 49,592
activities
Increase in cash and cash 6,492 5,649 12,654
equivalents during the period/year
Cash and cash equivalents at start 8,995 (2,970) (2,970)
of the period/year
Effect of foreign exchange rate (1,057) (112) (689)
changes
Cash and cash equivalents at end 14,430 2,567 8,995
of the period/year
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 30 April 2007
A. Cash generated from operations Unaudited Unaudited Audited
Half year to Half year Year to
to
30 April 30 April 31 Oct 2006
2007 2006
£000 £000 £000
Operating profit from continuing 22,070 14,351 37,779
operations
Operating profit from acquired 518 - -
operations
Operating loss from discontinued (89) (177) (646)
operations
Loss on disposal/impairment of (1,548) - (7,970)
discontinued operations
Adjustment for:
Depreciation of property, plant and 3,498 3,006 5,776
equipment
Amortisation of intangible assets 1,067 659 2,044
Impairment of goodwill - - 4,890
Impairment of intangible assets - - 782
Difference between pension (70) - (939)
contributions paid and amount
recognised in income statement
Loss on disposal of property, plant - 50 -
and equipment
Increase/(decrease) in provisions 55 (170) (170)
Operating cash flows before movements 25,501 17,719 41,546
in working capital
Increase in inventories (7,690) (2,860) (1,362)
Increase in trade and other (9,099) (2,469) (693)
receivables
Increase in trade and other payables 5,089 1,007 6,138
Cash generated from operations 13,801 13,397 45,629
Reconciliation of net cash flow to
movement in net debt
Increase in cash and cash equivalents 6,492 5,649 12,654
during the period/year
Cash inflow from increase in debt and (43,627) (29,195) (32,129)
lease financing
Change in net debt resulting from cash (37,135) (23,546) (19,475)
flows
Increase in debt and finance leasing (49) (202) (247)
Translation difference (281) 1,117 2,252
Amortisation of debt finance costs (140) (27) (310)
Movement in net debt in the period/ (37,605) (22,658) (17,780)
year
Net debt at start of the period/year (70,554) (52,774) (52,774)
Net debt at end of the period/year (108,159) (75,432) (70,554)
Analysis of net debt
As at Cash flow Non-cash Exchange As at
1 Nov 2006 Changes movement 30 April
2007
£000 £000 £000 £000 £000
Cash at bank and in hand 13,411 2,076 - (1,057) 14,430
Overdrafts (4,416) 4,416 - - -
Cash and cash 8,995 6,492 - (1,057) 14,430
equivalents
Debt due within one year (7,107) 3,363 (4,979) 29 (8,694)
Debt due after one year (71,698) (47,385) 4,790 747 (113,546)
Finance leases (744) 395 - - (349)
(70,554) (37,135) (189) (281) (108,159)
INDEPENDENT REVIEW REPORT
To Chemring Group PLC
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 April 2007 which comprises the Consolidated Income
Statement, the Consolidated Statement of Recognised Income and Expense, the
Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Notes to
the Consolidated Cash Flow Statement and the related Notes 1 to 11. We have
read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the Company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the Company, for our review work, for this report, or for the conclusions
we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of Group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 April 2007.
DELOITTE & TOUCHE LLP
Chartered Accountants
Southampton, United Kingdom
26 June 2007
NOTES TO THE INTERIM STATEMENT
1. BASIS OF PREPARATION
The unaudited financial information for each of the six month periods does not
amount to full accounts within the meaning of section 240 of the Companies Act
1985 and has not been delivered to the Registrar of Companies. The interim
report was approved by the Board of Directors on 26 June 2007. Full accounts
for the year ended 31 October 2006, which include an unqualified audit report
have been delivered to the Registrar of Companies.
The accounting policies applied by the Group in these interim financial
statements are the same as those applied by the Group in its consolidated
financial statements for the year ended 31 October 2006.
These interim financial statements have been prepared on a going concern basis
under the historical cost convention, as modified by the revaluation of certain
properties and financial instruments.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
2. SEGMENTAL ANALYSIS
A segmental analysis of revenue and operating profit is set out below:
Unaudited Unaudited Audited
Half year Half year Year to
to to
31 Oct
30 April 30 April 2006
2007 2006
Continuing operations: £000 £000 £000
Revenue
Countermeasures 58,443 55,588 118,384
Energetics 48,391 26,996 69,349
Total 106,834 82,584 187,733
Underlying operating profit
Countermeasures 17,680 15,610 33,876
Energetics 8,641 2,337 10,361
Charge for share based payments (1,575) (1,244) (2,215)
Unallocated head office costs (1,458) (2,020) (3,520)
Underlying operating profit before 23,288 14,683 38,502
intangible amortisation
arising from business combinations
Intangible amortisation arising from (700) (332) (723)
business combinations
Operating profit 22,588 14,351 37,779
3. TAX
The estimated tax rate for the Group for continuing operations for the year
ending 31 October 2007 is 33% (2006: 33%).
4. EARNINGS PER SHARE
Earnings per share are based on the average number of shares in issue of
32,305,968 (2006: 29,990,590) and profit on ordinary activities after taxation
and minority interests of £11,214,000 (2006: £7,803,000). Diluted earnings per
share has been calculated using a diluted average number of shares in issue of
32,531,707 (2006: 30,233,031) and profit on ordinary activities after taxation
and minority interests of £11,214,000 (2006: £7,803,000).
The earnings and shares used in the calculations are as follows:
2007 2006
From continuing Ordinary Ordinary
operations
shares shares
Earnings Number EPS Earnings Number EPS
£000 000s Pence £000 000s Pence
Basic 13,140 32,306 40.67 7,932 29,991 26.45
Additional shares
issuable other than at
fair value in respect - 226 (0.28) - 242 (0.21)
of options outstanding
Diluted 13,140 32,532 40.39 7,932 30,233 26.24
Reconciliation from basic earnings per share to underlying earnings per share:
Underlying earnings has been defined as earnings before intangible amortisation
arising from business combinations. The directors consider this measure of
earnings allows a more meaningful comparison of earnings trends.
2007 2006
From continuing Ordinary Ordinary
operations
shares shares
Earnings Number EPS Earnings Number EPS
£000 000s Pence £000 000s Pence
Basic 13,140 32,306 40.67 7,932 29,991 26.45
Intangible amortisation 490 - 1.52 224 - 0.74
arising from business
combinations (after
tax)
Underlying 13,630 32,306 42.19 8,156 29,991 27.19
2007 2006
From continuing and Ordinary Ordinary
discontinued operations
shares shares
Earnings Number EPS Earnings Number EPS
£000 000s Pence £000 000s Pence
Basic 11,214 32,306 34.71 7,803 29,991 26.02
Additional shares
issuable other than at
fair value in respect - 226 (0.24) - 242 (0.21)
of options outstanding
Diluted 11,214 32,532 34.47 7,803 30,233 25.81
5. DIVIDENDS
2007 2006
£000 £000
Dividends on ordinary shares of 5p each
Interim dividend for the half year ended 30 - 1,565
April 2006 4.80p
Final dividend for the year ended 31 October 3,610 2,130
2006 11.20p (2005:7.30p)
Total dividends 3,610 3,695
The proposed interim dividend in respect of the half year ended 30 April 2007
of 7.20p per share will, if approved, absorb approximately £2.4 million of
shareholders' funds. No liability for the proposed interim dividend has been
included in these interim financial statements.
6. STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Half year Half year Year to
to to
30 April 30 April 31 Oct
2007 2006 2006
£000 £000 £000
Total recognised income and 10,568 8,801 13,954
expense for the period/year
Dividends (3,610) (2,130) (3,695)
Retained profit for the period/ 6,958 6,671 10,259
year
Ordinary shares issued 22 152 153
Share premium arising 6,774 26,250 26,266
Other recognised gains/losses 471 (339) 586
Net addition to shareholders' 14,225 32,734 37,264
funds
Opening shareholders' funds 93,825 56,561 56,561
Closing shareholders' funds 108,050 89,295 93,825
7. ACQUISITIONS
On 30 March 2007 the Group acquired the entire share capital of Simmel Difesa
S.p.A. A summary of the assets acquired and consideration paid is set out
below:
£000
Intangible assets 14,706
Property, plant and equipment 1,979
Net cash 4,662
Working capital 1,786
Deferred tax (1,146)
Provisions falling due within one year (1,095)
Provisions falling due in more than one (4,378)
year
16,514
Goodwill 36,863
53,377
Consideration
Cash 46,584
Share issue 6,793
Total consideration 53,377
Cash consideration consisted of £42,171,000 paid on completion, with a further
£4,413,000 payable within 90 days of completion. The acquisition was funded by
an additional medium term loan and by the issue of 373,551 new ordinary shares.
At 30 April 2007 the estimated fair value of assets and liabilities are
provisional and will be updated following the completion of the fair value
exercise.
Summary of cash flows:
£000
Cash paid for acquisitions in the period (42,171)
Cash acquired 4,662
Cash paid for acquisitions reported in (281)
prior periods
Net cash outflow (37,790)
**Prior period balance sheet restatement
During the prior year the Group acquired Technical Ordnance Inc.. The fair
value of intangible assets acquired of £6,721,000 was recognised at 30 April
2006 based on provisional values. The fair values have been finalised since
April 2006 and in accordance with IFRS3 an increase of £13,002,000 has been
made retrospectively to the value of intangible assets, principally due to the
recognition of additional customer relationship assets. Goodwill has been
retrospectively decreased by £13,002,000. Amortisation charges on acquired
intangible assets for the period to 30 April 2007 are such that the cumulative
amortisation charged is appropriate for the revised fair value of intangible
assets. This is the only adjustment relating to prior periods.
8. POST BALANCE SHEET EVENT
On 4 June 2007 the Group announced the conditional acquisition of Dyno Nobel's
High Energy Materials business in Norway for £2.8 million. The acquisition is
expected to complete in July following the transfer of certain key operating
licences and business contracts.
9. INSURANCE CLAIM
The Group is pursuing a claim against its former insurance brokers, concerning
the insurance cover for Kilgore Flares Company LLC and the brokers' subsequent
handling of a claim following a manufacturing incident at Kilgore Flares
Company LLC on 18 April 2001. During the half year the Group incurred costs of
£34,000 (2006: £33,000) in relation to the claim, which were written-off.
The balance of the claim that had not been recovered from the Group's insurance
brokers at 30 April 2007 was £2,476,000 (2006: £2,712,000), which has been
included within other debtors. Foreign exchange movements of £119,000 (2006: £
84,000) have been recognised through the Statement of Recognised Income and
Expense.
10. DISCONTINUED OPERATIONS: MARINE BUSINESS
The results of the discontinued marine business for the period, or to the date
of disposal, which have been included in the consolidated income statement,
were as follows:
Unaudited Unaudited Audited
Half year Half year Year to
to to
30 April 30 April 31 Oct
2007 2006 2006
£000 £000 £000
Revenue 3,785 5,104 11,348
Trading loss (including finance (137) (177) (984)
expense)
Loss on disposal (1,548) - (7,970)
Loss before tax (1,685) (177) (8,954)
Tax (241) 48 864
Loss after tax (1,926) (129) (8,090)
The loss on disposal in the period ended 30 April 2007 includes £0.7 million in
respect of closure provisions, predominantly relating to leased premises which
the Group no longer occupies.
On 30 June 2006, the Group sold its McMurdo Lights business to Daniamant
Limited for the sum of £2.8 million; £0.2 million of the consideration is
receivable in July 2007.
On 15 December 2006, the Group announced the conditional sale of its McMurdo
Marine Electronics business to Signature Industries Limited for £2.8 million.
The sale completed on 5 April 2007. Deferred contingent consideration of up to
£1.5 million, receivable in December 2007, is dependent on revenue targets
being achieved and has not been recognised in the interim financial statements
at 30 April 2007.
On 21 December 2006, the Group sold the entire share capital of Leafield Marine
Limited for £436,000.
On 18 May 2007, post period end, the Group sold the entire share capital of
I.C.S. Electronics Limited for £1.
Amounts included within `Assets held for sale' and `Liabilities held for sale'
in the Consolidated Balance Sheet at 30 April 2007 relate to a receivable for
deferred consideration following the sale of the McMurdo Lights business and
recoverable working capital balances, provisions and taxation balances retained
following the sale of the McMurdo Marine Electronics business.
11. CORPORATE WEBSITE
Further information on the Group and its activities can be found on the
corporate website at www.chemring.co.uk.
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