Interim Management Statement

RNS Number : 1763N

Chemring Group PLC

30 August 2011

 



FOR IMMEDIATE RELEASE                                                                                      30 AUGUST 2011

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 2011 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 2011 remained strong, with revenue in the period increasing by 33% to £164 million from £123 million in the same period last year. Without the unfavourable impact of the dollar exchange rate, revenue growth for the three month period on a constant basis would have been 37%. Revenue in the nine month period to the end of July 2011 was £494 million, 30% higher than in the same period in 2010, and 34% higher on a constant dollar exchange rate. With Roke, Mecar and Chemring Detection Systems all fully contributing to the final quarter for the first time, the Board is confident that the outlook for the financial year ending 31 October 2011 remains in line with its previous expectations. 

The Group's order book is currently £996 million, which is 43% higher than at this time last year. The majority of the Group's business is short-cycle, with most of its contracts covering six to twelve months' duration. The value of the order book remains the most relevant forward-looking indicator and, accordingly, the Board continues to believe that the prospects for the Group for the 2012 financial year are good.

Counter-IED

Our counter-IED business continues to grow rapidly, with revenue 32% higher than for the same period last year. Our largest US subsidiary, NIITEK, again made the principal contribution to the division with high levels of spares sales and engineering support delivered to the US Army on the Husky Mounted Detection System ("HMDS") ground penetrating radar programme.  In the nine month period to the end of July 2011, NIITEK generated revenue that was 68% higher than for the same period in 2010.  Further deliveries of an enhanced performance variant of the HMDS system and the continued demand for spares to support the existing HMDS fleet will provide growth during the remainder of the financial year.  A strong performance from Roke and our newly acquired Chemring Detection Systems ensured that a substantial rate of growth continued during the period.

Countermeasures

Our countermeasures business grew steadily over the period, with revenue increasing 12% compared to 2010. Our US businesses delivered revenues similar to last year, reflecting the delays in order placement by the US Government as a consequence of the continuing resolution issues that affected the US budget approvals. Furthermore, no production of the MJU-7 flare was possible during the period and delays in approvals of the new MJU-7 production facility mean that production will not restart until the new financial year. Our UK subsidiary, Chemring Countermeasures, largely contributed to the growth, with increased demand for spectral flares for combat aircraft and further development work on the next generation of naval countermeasure rounds.

Munitions

Our munitions business grew substantially during the period as new supply contracts for Middle East customers got underway and Mecar restarted production on a number of products. Revenue grew 112% compared to the previous year with 80% of the revenue derived from our prime contract work and 20% from component or sub-system deliveries. Over 70% of the revenue was attributable to non-NATO customers.

Pyrotechnics

Trading in our pyrotechnics business remained steady over the period, with revenue similar to the same period last year. Chemring Ordnance increased deliveries of training grenades and 40mm pyrotechnic rounds, and Kilgore delivered higher quantities of marine location markers. This was offset by reduced revenues at Hi-Shear, which achieved lower than expected deliveries of space initiation components because of a production welding issue. Simmel Difesa's revenue also decreased in the period, with a 10% reduction in production of 81mm illumination mortar rounds in line with the reduced demand from the British Army identified in our interim statement.

Acquisition

On 1 July 2011, the Group completed its acquisition of the Detection Systems operations and certain related assets of General Dynamics Armament and Technical Products, a subsidiary of General Dynamics Corporation. The business, which is based in Charlotte, North Carolina, is now operating as Chemring Detection Systems, Inc. It is a US leader in chemical and biological threat detection and has an advanced capability in stand-off detection of improvised explosive devices ("IEDs"). It is the incumbent supplier for two major US military vehicle-mounted detection programmes: the Joint Biological Point Detection System ("JBPDS") and the Joint Service Lightweight Stand-off Chemical Agent Detector ("JSLSCAD"). In addition, its products include a stand-off IED and explosives detector and the Juno hand-held chemical detector. The Board is extremely pleased with the positive contribution that this newly acquired business is making to the Group.

Current Financial Position

Net debt at 31 July 2011 was £305 million (31 July 2010: £286 million).

As expected, there has been a net outflow of cash across the Group since the half year, principally due to the completion of the acquisition of the Chemring Detection Systems operations for £56 million. Significant operating cash inflow is expected in the last three months of the financial year.  

For further information:

Dr David Price            Chief Executive, Chemring Group PLC          01489 881880

Paul Rayner               Finance Director, 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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