Interim Results
Chemring Group PLC
13 June 2000
CHEMRING GROUP PLC
Interim Results for the Twenty-Six Weeks ended 28 April 2000
* Profit before taxation trebled to £3,223,000 from £1,095,000
* Total operating profit doubled to £4,011,000 from £2,089,000
* EPS increased 168% to 10.02p from 3.74p
* Interim dividend of 2.30p, up by 15% increased from 2.00p
Ken Scobie, Chemring Chairman commented on the results:
'Order prospects are encouraging for all business activities and this will
provide sales growth across the Group. The ongoing policy of investment in
new products, combined with cost reductions, is reflected clearly in the
first half performance and is expected to continue.
Our strong strategic position within our respective markets and high order
book gives me confidence that the Group's exciting growth is set to
continue.'
For further information:
David Evans Chief Executive 020 7930 0777
Paul Rayner Finance Director 020 7930 0777
Peter Gaze Cardew & Co. 020 7930 0777
STATEMENT BY THE CHAIRMAN
All the Group's businesses performed well in the first half. Our continuing
investment in new products and activity related to cost reductions has had a
significant impact on improving the Group's performance. The order book
stands at £59 million, up 62% since the start of the year and with the
opportunities that this brings, I am confident of future growth.
RESULTS FOR THE 26 WEEKS ENDED 28 APRIL 2000
Profit before taxation trebled to £3,223,000, from £1,095,000 in the first
half of last year.
Total operating profit doubled to £4,011,000, from £2,089,000 in the first
half of last year.
The tax rate is estimated at 26% (1999: 19%).
Earnings per ordinary share increased to 10.02p, up 168% (1999: 3.74p).
In spite of growth in working capital to support anticipated increased
activity in the second half, operating cash inflow was £3,309,000 (1999:
£2,059,000).
Interest costs of £788,000 (1999: £994,000) were covered by operating profit
5.09 times (1999: 2.10 times).
Net debt reduced to £20,856,000 (1999: £21,125,000) representing gearing of
67% (1999: 77%).
DIVIDEND
The directors have declared an interim dividend of 2.30p per ordinary share
(1999: 2.00p), up 15%, payable on 16 August 2000 to holders on the register
at 11 August 2000.
BUSINESS PERFORMANCE
* DEFENCE BUSINESSES
The defence order book is now £49 million, an increase of 89% from the start
of the year.
The Countermeasures business performed well in the first half. In the UK
several new products entered the production phase, including two naval rounds
- the UK MoD MK 36 130mm IR round and the innovative combined 130mm RF/IR
round. Deliveries commence this year. Substantial ongoing orders for Tornado
BOZ chaff have been received from a European NATO customer. Operational and
clearance trials, both in Europe and elsewhere in the world, for our airborne
Modular Expendable Block decoy systems have gone very well, with the products
now being specified on several significant helicopter programmes.
In the US, Alloy Surfaces received initial production orders for flares
developed in support of the Advanced Strategic and Tactical Expendables
programme, where the products will be in service with both US Air Force and
Navy tactical aircraft. The decoy order from the US Navy, announced recently,
will provide good sales growth in the second half. The US BOL IR decoy has
completed its operational acceptance for the US Navy F14 Tom Cat and initial
production orders have been received. Qualification tests for the BOL IR
decoy on the US Air Force F15 are ongoing.
Our overall integrated support and technology expertise within our
Countermeasures business, coupled with our manufacturing capabilities, will
ensure that we are well placed to benefit from any industry restructuring in
this market sector.
In March 2000 we completed the planned relocation of the Military
Pyrotechnics business into our Derby site. This constrained first half sales,
however, the move has reduced the cost base and these cost savings, along
with a strong order book, will provide good growth in the second half.
Current international order opportunities are good, helped by increasing oil
prices in the Middle East. Demand for vehicle discharge smoke grenades is
particularly high, and we have received significant export orders for these
products.
Because of our strength in the UK in both Countermeasures and Military
Pyrotechnics, we are in industry partnership discussions with the UK Ministry
of Defence in support of the smart procurement initiative and improved
logistics support. We believe that the rest of NATO in Europe will follow the
UK lead in this initiative.
* NON-DEFENCE BUSINESSES
The Marine business is an international market leader in providing legislated
marine safety products to both commercial and recreational markets to aid
location and rescue. Our extensive range of products includes pyrotechnics,
marine electronics and location lights.
Sales of marine electronic products, in particular the award-winning 406
EPIRB, were strong, and the Group benefited from the higher margins that this
new cost-reduced product attracted. We continue to focus on developing
innovative low cost products and in January 2000 a new 406 EPIRB with
integrated GPS was launched. This product has been designed to further
enhance the lifesaving capabilities of conventional beacons to improve the
speed of alert and increase accuracy, typically to within 100 metres.
In addition, a new Manoverboard (MOB) lifebuoy self-activating signal was
introduced in April 2000. The MOB features a proprietary lighting system that
far exceeds the legislated requirements for light output.
There is excellent growth opportunity for electronic products in support of
legislated Global Maritime Distress and Safety Systems, where digital
technology and automatic monitoring by shore stations will significantly
improve safety at sea.
The Wiring Harness business has benefited from the BAE Systems Military
Aircraft strategic partnership, where it is currently supporting the Hawk and
Tornado mid-life update aircraft programmes. Work on the initial wiring
harnesses for the Nimrod and Eurofighter programmes will also commence
towards the end of this calendar year. We have recently signed a three-year
supply agreement with Rolls-Royce to support them on a range of aero engine
harnesses.
FUTURE
Order prospects are encouraging for all business activities and this will
provide sales growth across the Group. The ongoing policy of investment in
new products, combined with cost reductions, is reflected clearly in the
first half performance and is expected to continue.
Our strong strategic position within our respective markets and high order
book gives me confidence that the Group's exciting growth is set to continue.
K C SCOBIE - Chairman
13 June 2000
UNAUDITED CONSOLIDATED PROFIT & LOSS ACCOUNT
FOR THE 26 WEEKS TO 28 APRIL 2000
Audited Unaudited Unaudited
Year to 26 weeks to 26 weeks to
31 Oct 1999 28 April 2000 1 May 1999
£000 £000 £000
Turnover
62,082 Continuing operations 29,540 29,297
3,316 Discontinued operations - 2,762
65,398 29,540 32,059
Operating profit/(loss)
7,766 Continuing operations 4,011 2,858
(1,551) Discontinued operations - (769)
6,215 Total operating profit 4,011 2,089
70 Associated undertaking - -
Profit on ordinary
6,285 activities before interest 4,011 2,089
(1,979) Interest payable (788) (994)
Profit on ordinary activities
4,306 before taxation 3,223 1,095
Tax on profit on ordinary
(871) activities (838) (210)
Profit on ordinary activities
3,435 after taxation 2,385 885
(1,308) Dividends (550) (473)
2,127 Retained Profit 1,835 412
14.49p Basic earnings per ordinary share 10.02p 3.74p
Diluted earnings per
13.98p ordinary share 9.73p 3.74p
Net dividend per ordinary
5.50p share 2.30p 2.00p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Audited Unaudited Unaudited
Year to 26 weeks to 26 weeks to
31 Oct 1999 28 April 2000 1 May 1999
£000 £000 £000
Profit on ordinary activities
3,435 after taxation 2,385 885
Currency translation differences
on foreign currency net
(118) investments 260 361
3,317 2,645 1,246
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Audited Unaudited Unaudited
Year to 26 weeks to 26 weeks to
31 Oct 1999 28 April 2000 1 May 1999
£000 £000 £000
Profit on ordinary activities
3,435 after taxation 2,385 885
(1,308) Dividends (550) (473)
2,127 1,835 412
1 Ordinary shares issued 11 -
24 Share premium arising 268 -
(118) Other recognised gains/(losses) 260 361
2,034 2,374 773
UNAUDITED CONSOLIDATED BALANCE SHEET
AS AT 28 APRIL 2000
Audited Unaudited Unaudited
As at As at As at
31 Oct 1999 28 April 2000 1 May 1999
£000 £000 £000
Fixed assets
18,795 Intangible assets 18,894 18,892
17,219 Tangible assets 17,845 16,960
880 Investments 880 863
36,894 37,619 36,715
Current assets
9,597 Stock 12,976 10,971
17,928 Debtors 17,237 15,383
2,408 Cash at bank and in hand 1,509 1,616
29,933 31,722 27,970
Creditors due within one year
5,805 Bank loans and overdraft 4,964 5,831
44 Loan stock 44 44
14,600 Other 15,333 13,953
20,449 20,341 19,828
9,484 Net current assets 11,381 8,142
Total assets less
46,378 current liabilities 49,000 44,857
Creditors due after
(17,089) more than one year (17,337) (16,769)
Provisions for
(440) liabilities and charges (440) (500)
28,849 31,223 27,588
Capital and Reserves
1,247 Called up share capital 1,258 1,246
27,602 Reserves 29,965 26,342
28,849 Shareholders' funds 31,223 27,588
UNAUDITED CONSOLIDATED CASHFLOW STATEMENT
FOR THE 26 WEEKS TO 28 APRIL 2000
Audited Unaudited Unaudited
Year to 26 weeks to 26 weeks to
31 Oct 1999 28 April 2000 1 May 1999
£000 £000 £000
Net cash inflow from
5,834 operating activities 3,309 2,059
Fundamental reorganisation
(494) of operations - (494)
5,340 3,309 1,565
Returns on investments and
(2,006) servicing of finance (951) (1,027)
(495) Taxation (592) (346)
(2,842) Capital expenditure (1,384) (1,179)
2,813 Acquisitions and disposals - 2,843
(1,186) Equity dividends paid (836) (710)
Cash(outflow)/inflow before use
1,624 of liquid resources and financing (454) 1,146
25 Financing - issue of shares 279 -
- (decrease)/increase
318 in debt - (55)
1,967 (Decrease)/increase in cash (175) 1,091
INDEPENDENT REVIEW REPORT BY THE AUDITORS
TO CHEMRING GROUP PLC
Introduction
We have been instructed by the Company to review the financial information
for the 26 weeks ended 28 April 2000, and 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.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The Listing
Rules of the UK Listing Authority require that the accounting policies and
presentation applied to the interim figures should be 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. 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 Auditing Standards 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 26
weeks ended 28 April 2000.
DELOITTE & TOUCHE, Chartered Accountants, 13 June 2000
Mountbatten House, 1 Grosvenor Square, Southampton, Hampshire SO15 2BZ
NOTES TO THE INTERIM STATEMENT
1. SEGMENTAL ANALYSIS OF TURNOVER
Audited Unaudited Unaudited
Year to 26 weeks to 26 weeks to
31 Oct 1999 28 April 2000 1 May 1999
£000 £000 £000
Defence
25,180 Countermeasures 11,311 11,248
Military pyrotechnics
10,616 and explosives 4,535 5,341
35,796 15,846 16,589
Non-defence
16,765 Marine safety 8,522 8,264
7,197 Wiring harnesses 3,968 3,153
2,324 Chemical coatings 1,204 1,291
26,286 13,694 12,708
62,082 Continuing operations 29,540 29,297
3,316 Discontinued operations - 2,762
65,398 29,540 32,059
2. OPERATING PROFIT/(LOSS)
Audited Unaudited Unaudited
Year to 26 weeks to 26 weeks to
31 Oct 1999 28 April 2000 1 May 1999
£000 £000 £000
Turnover
62,082 Continuing operations 29,540 29,297
3,316 Discontinued operations - 2,762
65,398 29,540 32,059
Gross profit
17,097 Continuing operations 9,043 8,098
1,252 Discontinued operations - 785
18,349 9,043 8,883
Net operating expenses
(9,331) Continuing operations (5,032) (5,240)
(2,803) Discontinued operations - (1,554)
(12,134) (5,032) (6,794)
Operating profit/(loss)
7,766 Continuing operations 4,011 2,858
(1,551) Discontinued operations - (769)
6,215 4,011 2,089
3. 1999 RESULTS
The figures for the year to 31 October 1999 are abridged from the Group's
full Financial Statements for that period which carry an unqualified
Auditors' Report and have been filed with the Registrar of Companies.
4. CORPORATE WEBSITE
Further information on the Group and its activities can be found on the
corporate website at www.chemring.co.uk
5. DIVIDEND DATES
The interim dividend of 2.30p per ordinary share will be paid on 16 August
2000 to holders on the register at 11 August 2000. The ex dividend date will
be 7 August 2000.
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