Interim Management Statement

RNS Number : 7098D

Chemring Group PLC

18 September 2008

 



FOR IMMEDIATE RELEASE                                                                                      18 SEPTEMBER 2008

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 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 August 2008 continues to be encouraging, with year to date revenues 38% above and operating cash flow 63% above the same period in 2007. This increase in revenue includes 13% growth from acquisitions made in the last twelve months and confirms the strong levels of organic growth reported in the interim results statement. The Group's order book has further increased to a record £448 million, which is 53% higher than at this time last year. The Board is confident that the outlook for 2008 remains in line with its expectations.

Energetics

The Energetics division continues to perform well with revenues exceeding those of the Countermeasures division. In the interim results statement, it was reported that the restart of production at Simmel Difesa SpA ('Simmel') during the first four months of the financial year had been successful but trading would be weighted towards the second half period. Trading at Simmel has increased in line with expectations and deliveries of 81mm illumination mortar rounds to BAE Systems plc have met all of the UK Ministry of Defence delivery requirements. 

Production of rocket motors for the UK/Swedish NLAW anti-armour missile programme at Chemring Energetics UK Ltd in Scotland has also increased substantially in volume during the current trading period and will meet all of the customer's delivery requirements.

The installation of improved, automated manufacturing capability at Titan Dynamics Systems, Inc. ('Titan'), which was acquired in January, is proceeding to schedule and a 300% increase in production of battlefield effects simulation cartridges has been successfully achieved. The US Army and US Marine Corps continue to install growing numbers of launchers at their digital training ranges, and demand for a wide variety of realistic battlefield simulation cartridges is increasing rapidly.

Countermeasures

The Countermeasures division has also continued to perform well. Demand from NATO countries for conventional and spectral infra-red (IR) decoys remains strong and our UK countermeasures business has now reached record levels of production.

During the period, Alloy Surfaces Company, Inc. ('Alloy') was awarded a five year IDIQ (Indefinite Delivery, Indefinite Quantity) contract from the US Army for the M211 special material decoys that are used for the protection of helicopters from the latest IR guided missiles. Negotiations are nearing completion with the US Air Force on a five year IDIQ for the MJU-51 special material decoys that are used for the protection of large transport aircraft. Similar long term contracts for combat aircraft with both the US Air Force and the US Navy are still being negotiated and are now expected to be completed in early 2009.

Kilgore Flares Company LLC ('Kilgore') continues to grow strongly with revenues weighted to the second half period. The new C-17 flare recently passed first article testing and is now in full volume production. The F-22 flare suite production rate has also increased and the new advanced material facility, with its highly automated production, has completed commissioning and will be operated in parallel with the existing line to further increase the production volumes. These programmes will mitigate the delay in start-up of production of the new B-52 flare suite; this has been deferred by the US Air Force which has decided to undertake additional tests on the product before proceeding to full volume production.  

The second part of the US FY08 supplemental funding is working its way through the acquisition process following US Government approval in July 2008. Consequently, in excess of $60 million of flare orders are expected to be awarded to Kilgore or Alloy before the end of October. This will be in addition to the $42 million of firm orders placed by the US Air Force and US Navy since the beginning of May, for special material decoys used in the protection of combat aircraft.  

Acquisitions

The Group successfully completed two acquisitions during the period:

• Scot, Inc. ('Scot'), a leading manufacturer of cartridge-actuated and propellant-actuated devices (CAD/PADs) used in aircraft emergency systems, missiles and space launch vehicles, based in Illinois, USA, was acquired for $40 million. The acquisition of Scot provides an important US centre-of-excellence for the design, development, qualification and manufacture of pyrotechnic devices and sub-systems used in aircraft, missile and space platforms. Scot's engineering capability also complements the existing high volume manufacturing and automation skills within Chemring North America, and significantly enhances the Group's position in the US pyrotechnic market. 

• Martin Electronics, Inc. ('Martin'), a specialist manufacturer of ammunition, fuzes, signaling and other pyrotechnically activated devices for use in the defence sector, based in Florida, USA, was acquired for $70 million. Martin positions the Group strongly within key niches in the US munitions component market, increasing the Group's capabilities by providing a platform from which to develop niche prime contract opportunities in the US.  

The acquisitions were funded by a £60 million equity fund raising which substantially strengthened the Group's balance sheet and, at the end of August, reduced gearing to approximately 75%, compared with 104% at the end of April 2008. 

Both of the acquired businesses are performing well.  

The Board remains confident that the prospects for 2008 continue to be strong.

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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