Interim Results

Chemring Group PLC
19 June 2001

                                                         19 June 2001
 
                              CHEMRING GROUP PLC                              
                  RESULTS FOR THE HALF YEAR TO 30 APRIL 2001                  
 
-    Group profit before tax increased to £4.30 million from £3.22 million,
     up 33% 
 
-    Earnings per ordinary share increased to 12.77p from 10.02p, up 27% 
 
-    Turnover increased to £45.37 million from £29.54 million, up 54% 
 
-    Interim dividend of 2.45p, up 6.5% from 2.30p 
 
 
Ken Scobie, Chemring Group Chairman, commented: 
 
'I remain extremely confident about the prospects for the Group. Nothing has
happened since my last report to vary these views. Countermeasures activity
and growing interest from the armed forces around the world continue to
support our strategy for this niche within the defence industry, where we are
the clear market leaders. Our other companies are confident of sound
performance in the second half and I believe that when I report to
shareholders for the full year we will have made further significant
progress.' 
 
 
For further information: 
 
Ken Scobie          Chairman, Chemring Group PLC               0207 930 0777 
David Evans         Chief Executive, Chemring Group PLC        0207 930 0777 
Paul Rayner         Finance Director, Chemring Group PLC       0207 930 0777 
Jonathan Rooper     Cardew & Co.                               0207 930 0777 

Notes

1.  All comparisons are for the half year to 28 April 2000.
2.  The interim dividend of 2.45p per ordinary share will be paid on 15
    August 2001 to holders on the register at 10 August 2001. The ex-dividend
    date will be 8 August 2001.


STATEMENT BY THE CHAIRMAN  

The first six months show Group operating profit increasing by 29% to £5.2
million on turnover of £45.4 million, 54% ahead of last year. Our newly
acquired US company, Kilgore Flares, contributed £8.1 million of turnover. A
healthy order book supports second half expectations. 

The defence businesses performed well, with good results from both
Countermeasures and Military Pyrotechnics. The acquisitions of Kilgore and
the flares business of Martin Electronics enhance our leading position in the
international countermeasures market against a background of increasing focus
on protection of military platforms. 

Kilgore has been integrated smoothly into the Group and traded profitably in
the first half. Regrettably, there was a manufacturing incident at Kilgore in
April resulting in the loss of a life. Operations were suspended to carry out
safety reviews and manufacture is now recommencing. Costs associated with the
incident are being covered by our insurance arrangements. 

There are exciting opportunities for Alloy Surfaces' proprietary special
material decoys, notably in a pre-emptive mode to protect aircraft operating
at low level. Manufacturing problems which impacted Alloy Surfaces last year
have been resolved.  

The half year ended with strong demand for Marine products after a quiet
start. New electronic products continue to be developed for market launch
later in the year. 

Kembrey Wiring Systems returned to profit as expected, as the BAE Systems
Nimrod programme gained momentum.  
  
  RESULTS FOR THE HALF YEAR TO 30 APRIL 2001 
 
                               2001                 2000                 %
                               £000                 £000          Increase 
Turnover                     45,370               29,540                54 
Operating profit              5,185                4,011                29 
Profit before tax             4,300                3,223                33 
Profit after tax              3,134                2,385                31 
Earnings per share            12.77p               10.02p               27 
      
An exceptional profit of £369,000 was made on the disposal of one of the
Group's properties. 

Interest costs increased to £1,254,000 (2000: £788,000). Interest was covered
by operating profit 4.13 times (2000: 5.09 times).  

The tax rate is estimated at 27% (2000: 26%). 

Due to financing of the Kilgore acquisition and increases in working capital
to support underlying business growth, net debt rose to £38,658,000 from
£20,118,000 at the end of the last financial year. 
 
  DIVIDEND 
The directors have declared an interim dividend of 2.45p per ordinary share
(2000: 2.30p), up 6.5%, payable on 15 August 2001 to holders on the register
at 10 August 2001. 
 
  BUSINESS PERFORMANCE 
 
  DEFENCE BUSINESSES
Turnover of our defence businesses doubled to £32
million compared with last year's interim and these businesses generated more
than 70% of the Group's total turnover. 88% of defence turnover was overseas,
with significant sales to the US Department of Defense, demonstrating our
strong US and global market position. 
 
  Countermeasures
Turnover increased by 130% to £26 million. Continuing Countermeasures
businesses' sales increased 59% to £18 million and Kilgore provided £8.1
million of additional sales.  

Against a background of increasing use of aircraft expendable decoys
worldwide, Chemring Countermeasures (CCM) continues to expand its overseas
markets with its innovative products. There is strong demand for Alloy
Surfaces' proprietary special material decoys. Qualification tests for
Alloy's BOL IR decoy on the US Air Force F15 are due to complete this year.
The application of Alloy's technology in a pre-emptive mode to protect
low-flying aircraft is an exciting development. The US Air Force's Air Combat
Command division is conducting trials on a new pod mounted decoy to provide
extended pre-emptive capability.  

The Kilgore acquisition and the complementary acquisition of the infra-red
decoy business and assets of Martin Electronics have been well received by
the US customer. The Martin Electronics business provides $15 million of
orders to Kilgore, where the products will be manufactured.  

The incident at Kilgore in April, resulting in the loss of a life, arose at a
stage of manufacturing previously considered safe. The Kilgore facility had
been given a clean bill of health by the State safety authorities in February
of this year. The manufacture of magnesium based infra-red flares can be
potentially dangerous, and the level of accidents at US manufacturers,
including Kilgore, over the years has been unacceptably high. In contrast,
the Group in the UK has many years of safe manufacturing history. 

A review of all safety aspects of Kilgore's manufacturing has been carried
out by our experienced UK personnel, resulting in plant modifications to
protect the employees and bring safety up to our high UK standards. This will
not only provide a safer working environment for employees but also help
reduce the involvement of direct operators in the manufacturing process.
Production of certain products has recommenced. Modifications to the
infra-red plant will provide low volume manufacture this summer and higher
rate production by the end of 2001. Whilst the incident will delay sales in
the second half, Kilgore's results should not be affected as costs and any
loss of profit will be covered by the Group's insurers. Our customers are
fully supportive and relationships remain good. Kilgore has been an excellent
acquisition for the Group and also provides a conduit for CCM's naval decoys
and chaff products into the US Department of Defense. 

On naval countermeasures, significant development costs have been incurred in
extending the widely used MK 36 decoy system range of naval decoys. The
development phase has completed and production deliveries have commenced
against current order book and there are many new opportunities for these
naval decoys. The 'bought out' content of naval decoys is much higher than in
air decoys and this contributed to a reduction in overall margins for the
first half.  

To strengthen CCM's total customer support capability, the Group has recently
taken a 25% stake in DT Media Ltd, a UK based company that specialises in
high quality computer based training solutions, especially in the fields of
electronic warfare, information warfare and other defence related training. 

To exploit synergies, marketing and technical working groups have been
established, encompassing expertise from across the expanded Countermeasures
companies.  
 
  Military Pyrotechnics
Turnover increased by 32% over last year to £6 million. International order
opportunities continue to look healthy and investment has been made in new
production facilities to cope with the increase in demand. In Europe we are
now in discussions with a number of companies in order to form strategic
alliances. We continue to discuss ways of helping the UK MOD in their long
term plans for SMART procurement.  

  NON-DEFENCE BUSINESSES

Turnover of our non-defence businesses at £13.3 million was at a similar
level to last year's interim and represents 29% of the Group's total
turnover. 
 
  Marine Safety
Demand for Marine products picked up strongly in the second quarter,
particularly in the US for the new 406 EPIRB with integrated GPS, following a
slow start to the year. 

Our growth strategy is to expand our Marine electronics range against known
legislation and maintain our strong market position on safety pyrotechnics
and location lights.  

The award winning EPIRB with GPS is selling well. A Personal Locating Beacon
(PLB) based on similar technology has completed development, and will enter
the market in the second half. Increasing demand for electronic products will
provide turnover increase in future years. Products in development include
VHF radios with Digital Selective Calling (DSC) and Automatic Identification
Systems (AIS) products.  

In May the Group acquired 51% of Pirotecnia Oroquieta, a manufacturer of a
range of marine safety products based in Spain. The acquisition will
strengthen our market position in Southern Europe and provide access to a
lower cost manufacturing facility.  
 
  Wiring Harnesses
Kembrey Wiring Systems returned to profit. It is benefiting
from increased Nimrod and Tornado activity with BAE Systems. Rolls-Royce is
providing additional business and Kembrey is held up as a successful example
of their Challenge Partnership initiative. These important relationships will
ensure growth for Kembrey along with new partnerships being developed. 

  OUTLOOK

I remain extremely confident about the prospects for your Group. Nothing has
happened since my last report to vary these views. Countermeasures activity
and growing interest from the armed forces around the world continue to
support our strategy for this niche within the defence industry, where we are
the clear market leaders. Our other companies are confident of sound
performance in the second half and I believe that when I report to
shareholders for the full year we will have made further significant
progress.  

K C SCOBIE - Chairman 
19 June 2001 



UNAUDITED CONSOLIDATED PROFIT & LOSS ACCOUNT 
for the half year to 30 April 2001 
 
                                         Unaudited      Unaudited      Audited
                                      Half year to   Half year to      Year to
                                     30 April 2001  28 April 2000  31 Oct 2000
                                              £000           £000         £000
Turnover
Continuing operations                       37,293         29,540       67,169
Acquired operations                          8,077              -            -
                                            45,370         29,540       67,169

Operating profit
Continuing operations                        4,363          4,011        8,806
Acquired operations                            822              -            -

Total operating profit                       5,185          4,011        8,806
Profit on disposal                             369              -            -
Associated undertaking                           -              -           30

Profit on ordinary activities
before interest                              5,554          4,011        8,836
Interest payable                           (1,254)          (788)      (1,709)

Profit on ordinary activities
before taxation                              4,300          3,223        7,127
Tax on profit on ordinary activities       (1,166)          (838)      (1,866)

Profit on ordinary activities
after taxation                               3,134          2,385        5,261
Dividends                                    (629)          (550)      (1,511)

Retained profit                              2,505          1,835        3,750

Basic earnings per ordinary share           12.77p         10.02p       22.04p

Earnings per ordinary share
before profit on disposal                   11.33p         10.02p       22.04p

Diluted earnings per ordinary share         12.57p          9.73p       21.19p

Dividend per ordinary share                  2.45p          2.30p        6.30p

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

                                         Unaudited      Unaudited      Audited
                                      Half year to   Half year to      Year to
                                     30 April 2001   28 April 2000 31 Oct 2000
                                              £000            £000        £000
Profit on ordinary activities
after taxation                               3,134           2,385       5,261
Currency translation differences
on foreign currency net investments            311             260         388
                                             3,445           2,645       5,649

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 

                                         Unaudited      Unaudited      Audited
                                      Half year to   Half year to      Year to
                                     30 April 2001  28 April 2000  31 Oct 2000
                                              £000           £000         £000

Profit on ordinary activities
after taxation                               3,134          2,385        5,261
Dividends                                    (629)          (550)      (1,511)
                                             2,505          1,835        3,750
Ordinary shares issued                          88             11           11
Share premium arising                        4,225            268          306
Other recognised gains                         311            260          388
Net addition to shareholders' funds          7,129          2,374        4,455

Opening shareholders' funds                 33,304         28,849       28,849

Closing shareholders' funds                 40,433         31,223       33,304

UNAUDITED CONSOLIDATED BALANCE SHEET 
as at 30 April 2001 
 
                                         Unaudited      Unaudited      Audited
                                             As at          As at        As at
                                     30 April 2001  28 April 2000  31 Oct 2000
                                              £000           £000         £000
Fixed assets
Intangible assets                           25,384         18,894       19,248
Tangible assets                             29,107         17,845       19,199
Investments                                    893            880          883
                                            55,384         37,619       39,330

Current assets 
Stock                                       17,826         12,976       14,235
Debtors                                     25,954         17,237       20,794
Cash at bank and in hand                     1,768          1,509        2,062
                                            45,548         31,722       37,091

Creditors due within one year
Bank loans and overdraft                     7,014          4,964        4,832
Loan stock                                      40             44           44
Other                                       19,805         15,333       20,884
                                            26,859         20,341       25,760

Net current assets                          18,689         11,381       11,331

Total assets less current liabilities       74,073         49,000       50,661

Creditors due after more than one year    (33,372)       (17,337)     (17,089)
Provisions for liabilities and charges       (268)          (440)        (268)
                                            40,433         31,223       33,304

Capital and reserves
Called up share capital                      1,346          1,258        1,258
Reserves                                    39,087         29,965       32,046

Shareholders' funds                         40,433         31,223       33,304

UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
for the half year to 30 April 2001 

                                         Unaudited      Unaudited      Audited
                                      Half year to   Half year to      Year to
                                     30 April 2001  28 April 2000  31 Oct 2000
                                              £000           £000         £000

Net cash (outflow)/inflow from
operating activities                         (784)          3,309        7,937
Returns on investments and
servicing of finance                       (1,054)          (951)      (1,694)
Taxation                                     (343)          (592)        (881)
Net capital expenditure                    (1,679)        (1,384)      (3,130)
Acquisitions and disposals                (14,063)              -            -
Equity dividends paid                      (1,007)          (836)      (1,380)

Cash (outflow)/inflow before use 
of liquid resources and financing         (18,930)          (454)          852
Financing    - issue of shares                 775            279          317
             - increase/(decrease) in debt  19,157              -        (884)
Increase/(decrease) in cash                  1,002          (175)          285

Reconciliation of operating profit to 
net cash flow from operating activities 
 
Operating profit                             5,185          4,011        8,806
Amortisation charge                            198             67          139
Depreciation charge                          1,044            830        1,555
Profit on sale of tangible fixed assets          -           (27)         (68)
Decrease/(increase) in stocks                  909        (3,379)      (4,638)
(Increase)/decrease in debtors             (2,872)             63      (3,517)
(Decrease)/increase in creditors           (5,248)          1,744        5,660
Net cash (outflow)/inflow 
from operating activities                    (784)          3,309        7,937

Reconciliation of net cash flow
to movement in net debt 
Increase/(decrease) in cash                  1,002          (175)          285
Cash (inflow)/outflow from the 
increase/(decrease) in debt 
and lease financing                        (19,157)              -         884
Change in net debt resulting
from cash flows                           (18,155)          (175)        1,169
New finance leases                               -             47        (259)
Translation difference                       (385)          (160)        (347)
                                          (18,540)          (288)          563

Analysis of net debt 
                                      As at    Cash   Exchange           As at
                                 1 Nov 2000    flow   movement   30 April 2001
                                      £'000   £'000      £'000           £'000

Cash at bank in hand                  2,062   (298)          4           1,768
Overdrafts                          (4,832)   1,300          -         (3,532)
                                    (2,770)   1,002          4         (1,764)
Debt due within one year               (44) (3,478)          -         (3,522)
Debt due after one year            (16,889)(15,875)      (389)        (33,153)
Finance leases                        (415)     196          -           (219)
                                   (20,118)(18,155)      (385)        (38,658)

INDEPENDENT REVIEW REPORT BY THE AUDITORS 

To Chemring Group PLC 
 
Introduction 
We have been instructed by the Company to review the financial information on
pages 2 to 5 for the 6 months ended 30 April 2001, 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 6
months ended 30 April 2001. 
 
DELOITTE & TOUCHE, Chartered Accountants, 19 June 2001 
Mountbatten House, 1 Grosvenor Square, Southampton, Hampshire SO15 2BZ 
 
 
 
NOTES TO THE INTERIM STATEMENT 

1.  ACCOUNTING POLICIES
    The interim accounts to 30 April 2001 have been prepared on the basis
    of the accounting policies set out in the full year accounts to 31 October
    2000 with the following exception. 
 
    The accounting policy for revenue recognition has been broadened to
    include long term contracts in accordance with SSAP9 (revised), whereby a
    prudent level of income is recognised based on the estimated percentage
    completion of contracts where the final outcome can be reasonably 
    assessed. The directors believe that this change is necessary, to reflect
    certain major countermeasures contracts which have been in production in
    the period, in order to give a more accurate representation of the results
    of the Group. The effect of adopting this policy on the comparative
    figures at 31 October 2000 and 28 April 2000 is not significant.
    Accordingly no restatement of the comparative figures has been made. 
 
2.  SEGMENTAL ANALYSIS OF TURNOVER 
      
       
                                        Unaudited       Unaudited      Audited
                                     Half year to    Half year to      Year to
                                    30 April 2001   28 April 2000  31 Oct 2000
                                             £000            £000         £000
    Defence 
    Countermeasures 
               - continuing operations     17,990          11,311       28,538
               - acquired operations        8,077               -            -
     Military pyrotechnics                  5,971           4,535       11,169
                                           32,038          15,846       39,707
     Non-defence 
     Marine safety                          8,478           8,522       17,700
     Wiring harnesses                       4,249           3,968        7,608
     Chemical coatings                        605           1,204        2,154
                                           13,332          13,694       27,462

     Continuing operations                 37,293          29,540       67,169
     Acquired operations                    8,077               -            -
                                           45,370          29,540       67,169

3.   PURCHASE OF SUBSIDIARY 
     The Group acquired Kilgore Flares Company LLC on 5 February 2001. The
     initial analysis of the fair value of assets acquired is as follows: 

                                                                    Fair value
                                                                      to Group
                                                                          £000
 
     Fixed assets                                                       10,196
     Stock                                                               4,500
     Debtors                                                             2,288
     Creditors                                                         (4,139)

     Net assets                                                         12,845

     Consideration:                                                       £000
          1,200,000 5p ordinary shares allotted                          3,538
          Cash                                                          14,053
          Total consideration                                           17,591

          Goodwill arising                                               4,746
 
     The fair value adjustments are provisional and may be subject to
     revision in the full year accounts to 31 October 2001. Any adjustment
     made will be reflected in the goodwill calculation. 

4.   2000 RESULTS 
     The figures for the year to 31 October 2000 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. 

5.   CORPORATE WEBSITE 
     Further information on the Group and its activities can be found on the
     corporate website at www.chemring.co.uk.