PRE-CLOSE TRADING UPDATE

RNS Number : 3084W

Chemring Group PLC

17 November 2010

 



FOR IMMEDIATE RELEASE                                                                                        17 NOVEMBER 2010

CHEMRING GROUP PLC

PRE-CLOSE TRADING UPDATE

Chemring Group PLC ("Chemring" or "the Group") today provides an update on trading before entering the close period in respect of its preliminary results for the year ended 31 October 2010, which are expected to be announced on 18 January 2011.

Trading

The Group performed strongly in the last quarter of the financial year with revenue in the period increasing substantially to £218 million, up 42% from £154 million in the same period last year. As identified in our interim management statement in September, this growth reflects the high second half weighting, following the delays in order placement by many of our European customers. The total revenue generated in the full year, subject to final audit, was £597 million, 18% higher than the previous year, and represents a satisfactory rate of growth in spite of the difficult European market conditions. Our US, Middle East and Far East revenues all grew strongly during the year.

Two separate incidents stopped production in September at our Kilgore Flares facility in Tennessee and our newly acquired subsidiary, Mecar, in Belgium. A number of safety improvements were identified to prevent similar occurrences and these have been implemented successively on each production line prior to re-start. At Mecar, each product re-start is being consecutively phased over the first half period and this is not expected to have any impact on the full year performance. At Kilgore, production re-start for all products not directly involved in the incident was approved at the beginning of October. A number of the safety improvement actions took longer to implement than originally expected, resulting in about £7 million of revenue and £3 million of operating margin being delayed into the first two months of the 2011 financial year. In addition, we have incurred non-recurring costs of £3 million associated with damaged product and inventory, as well as the safety improvements mentioned earlier. Apart from these two issues, the operating profit was in line with expectations.

The Group's order book at the end of the year was £803 million, which is 44% higher than at the end of 2009. Since most of the Group's contracts are placed with six to twelve months' duration, the Board considers this an important indicator that the prospects for further growth in 2011 continue to be strong.           

Update on Market Conditions

The market conditions have not changed significantly since we issued our last interim management statement in September 2010. However, in the last few weeks, the UK Government published its Strategic Defence and Security Review: Securing Britain in an Age of Uncertainty. The key implications for Chemring are broadly neutral, and the UK market will represent only 15% of Group revenue in 2011 and beyond.

The removal of the RAF Harrier fleet in 2011 will reduce our countermeasures revenues by about £1 million per year. However, the additional twelve Chinook helicopters will increase the support helicopter fleet and potentially increase demand for expendable decoys, particularly in support of the Afghanistan campaign. In the longer term, the demand for flares to support the twenty two new A400m transport aircraft should outweigh the reduction associated with the withdrawal of C130 aircraft. The reduction in numbers of JSF aircraft or its delayed timing will have a negligible impact on the decoy production that continues to be dominated by US requirements.   

The UK Government also announced its "commitment to ensuring that the peacekeeping campaign in Afghanistan is properly resourced, funded and equipped, so that the armed forces can do their job as effectively and as safely as possible". This commitment to the Afghanistan mission and the emphasis on Special Forces will maintain demand for improved pyrotechnic and counter-improvised explosive device ("C-IED") products that better meet our customers' operational requirements. The emphasis on C-IED and man-portable electronic warfare technology should also underpin our target market for the next generation Roke products.

Financial Position

The operating cash inflow across the Group in the last quarter of the year was in line with expectations. After allowance for the funding of the two acquisitions made in September of Mecar in Nivelles, Belgium and Roke in Romsey, UK, the net debt for the Group was £310 million, in line with the guidance given in our third quarter interim management statement.

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	020 7930 0777

 

END

 

 

TSTKKADNBBDBFDD