Interim Results

FOR IMMEDIATE RELEASE 28 June 2005 CHEMRING GROUP PLC Interim Results for the Six Months to 30 April 2005 Chemring Group PLC today announces its interim results: Profit before tax and loss on disposal up 12% at Â£6.5 million (2004: Â£5.8 million) Profit before tax up 27% at Â£6.5 million (2004: Â£5.1 million) Basic earnings per share up 20% at 15.14p (2004: 12.63p) Interim dividend per ordinary share up 14% at 3.20p (2004: 2.80p) Divisional Highlights Countermeasures Record order book of Â£106 million (2004: Â£75 million) Record growth in turnover and profit at Alloy Surfaces Alloy Surfaces' second facility fully operational Contract appeal by Kilgore competitor on US multi-year procurement fully rejected Energetic Materials Current order book of Â£9 million (2004: Â£6 million) Marine Pyrotechnics business now included within Energetic Materials division Marine Lights and Electronics Restructuring nearing successful completion Results for the Half Year to 30 April 2005 2005 2004 Â£000 Â£000 Turnover 54,321 57,441 Operating profit 7,801 7,463 Profit before tax and loss on disposal 6,472 5,803 Loss on disposal - (690) Profit before tax 6,472 5,113 Basic earnings per share 15.14p 12.63p Ken Scobie, Chemring Group Chairman, commented: 'The results for the half year were satisfactory and would have been outstanding with a full contribution from Kilgore, PW Defence and the Marine division. The Countermeasures division, with its substantial order book, should perform well in the second half, and with a stronger performance from the Group's other businesses, we expect to achieve another year of excellent growth.' Notes: All comparisons are for the half year to 30 April 2004. The interim dividend of 3.20p per ordinary share will be paid on 23 September 2005 to holders on the register at 9 September 2005. The ex-dividend date will be 7 September 2005. For further information: David Price Chief Executive, Chemring Group PLC 0207 930 0777 Paul Rayner Finance Director, Chemring Group PLC 0207 930 0777 Jonathan Rooper Cardew Group 0207 930 0777 STATEMENT BY THE CHAIRMAN Results for the Half Year to 30 April 2005 2005 2004 Â£000 Â£000 Turnover 54,321 57,441 Operating profit 7,801 7,463 Interest (1,329) (1,660) Profit before tax and loss on disposal 6,472 5,803 Loss on disposal - (690) Profit before tax 6,472 5,113 Basic earnings per share 15.14p 12.63p I am pleased to report a satisfactory increase in the overall Group results for the six months to 30 April 2005. Operating profit increased to Â£7.8 million (2004: Â£7.5 million). Interest has reduced by 24% to Â£1.3 million (2004: Â£1.7 million). Profit before tax increased by 27% to Â£6.5 million (2004: Â£5.1 million) and basic earnings per share increased by 20% to 15.14p (2004: 12.63p). In the Countermeasures division in the US, Alloy Surfaces' continuing exceptional performance made up for a disappointing, if understandable, result from Kilgore. Kilgore's sales were significantly reduced as a result of a temporary 'stop work' being placed on two major contracts, following an appeal by a competitor, which was subsequently rejected by the US Department of Defense (DoD). UK-based Chemring Countermeasures again generated a solid profit. PW Defence and Pains Wessex Australia both had a quiet first half, as did the Marine division, where significant changes have been made to ensure improved profitability in the future. The directors have recommended an interim dividend of 3.20p per ordinary share (2004: 2.80p), an increase of 14%. The interim dividend will be paid on 23 September 2005 to shareholders on the register at 9 September 2005. The depreciation of the US dollar against sterling from $1.80 in the first half of 2004 to $1.90 in 2005 has reduced sales on translation by approximately Â£1.5 million. The adverse impact of this exchange rate movement has been offset through forward sales of US dollars. In addition, in November 2004, the Group converted Â£10 million of sterling overdraft into dollar overdraft, to protect against the possible fall in the US dollar, with its consequent impact on our translated earnings, and to enjoy the benefit of lower interest rates. These actions proved exceedingly successful and further transactions have subsequently been completed to protect the benefits secured in the first six months. In my last statement, I referred to the settlement of the Kilgore insurance claim against Royal & Sun Alliance, and our pursuance of a claim against our former insurance broker, Willis, for an additional amount. Willis has now agreed to a non-binding mediation in an attempt to resolve matters, which is provisionally scheduled for September 2005. Alloy Surfaces' second facility was completed and commenced production in February 2005. Â£2.5 million of capital expenditure was incurred on the facility during the period, and Â£4.5 million was invested in working capital. Working capital also increased by Â£3 million at Kilgore, as production ramped up for sales in the second half following the release of the 'stop work' order. Net debt at the end of the first half was Â£39.7 million (2004: 41.7 million). Reporting The Board has decided to restructure the Group's reporting to align more closely with our various business activities. Accordingly, the Marine Pyrotechnics business is now included within the Energetic Materials division. The Energetic Materials division currently comprises the following businesses: PW Defence Marine Pyrotechnics Kilgore Pyrotechnics Pains Wessex Australia PirotÃ©cnia Oroquieta The Marine Lights and Electronics division now includes McMurdo and ICS Electronics, our marine systems businesses. Countermeasures The Group continues to benefit from strong demand for its countermeasure decoys, with the order book for this division now standing at Â£106 million. Alloy Surfaces is the only company in the world producing an advanced, patented, covert special material decoy. The business had an exceptional six months, with turnover doubling and earnings increasing threefold. As more branches of the armed services come to appreciate the advantages of deploying these decoys, the order book continues to expand rapidly and has recently been boosted by the receipt of a $20.3 million order from the US Army. To date, Alloy Surfaces' expansion has been partially restricted because it has been able to supply only to immediate allies of the US. These restrictions are now gradually being relaxed, and this should provide substantial export opportunities in the longer term. Kilgore's production was seriously disrupted for most of the first half by a temporary 'stop work' order placed against two of its major contracts by the US DoD, following an appeal against the award of these contracts by a newcomer to the industrial base in the US. We did not believe that this protest was valid or that it had any chance of success. In February, the appeal was rejected in its entirety, and in April, the DoD placed $22m of contract options for the second year of these five year contracts. Kilgore returned to full production in April, and it is anticipated that the substantial shortfall in turnover in the first half will be recovered in the second half. Chemring Countermeasures continues to provide products for the military in many parts of the world, and has extensive research programmes in place to preserve its position at the forefront of the industry. During the first half, the business performed well and met our expectations. I have referred in previous statements to the US Department of Homeland Security's (DHS) initiatives in relation to the protection of commercial aircraft. The Group continues to be involved in this area and we are still hopeful of participating in the DHS project with Alloy Surfaces' special material decoys, particularly as funds have recently been made available for alternative solutions. Energetic Materials After a quiet 2004 at PW Defence, the expected improvement in orders in 2005 has not yet materialised, either domestically or from overseas. The business has experienced similar market conditions previously, and continues to compete vigorously for orders all around the world, whilst looking at new products to expand the range. The separation of the Marine Pyrotechnics business from the rest of our Marine division continued during the first half, and will be completed by the year end. Whilst only a small profit was generated in the first half, sales in the Marine Pyrotechnics business are biased to the second half, and a sound performance for the year is anticipated. After an excellent 2004 Pains Wessex Australia predicted a quieter 2005, both in its military and marine activities. The company now acts as an agent for both Alloy Surfaces and Kilgore with the military in Australia, following the expiry of the previous contract with an external agent. This should improve the profitability of the business as sales to Australia are significant. Marine Lights and Electronics The restructuring of the Marine division is proceeding satisfactorily, with costs of approximately Â£0.35 million being incurred during the first half. Marine Lights performed well, although not at the same, excellent level that they did in 2004. With the exception of one updated product range, Electronics achieved its anticipated sales, with improvements expected in the second half from the seasonal business. Board of Directors As referred to previously, on 4 April 2005, Dr David Price joined us as Chief Executive and David Evans was appointed Non-Executive Deputy Chairman. Tim Hayter resigned as Chief Operating Officer on 10 March 2005. Pensions The Board is obviously aware of all the changes currently affecting company pension schemes but in the absence of yet to be produced Government legislation, finds it impossible to judge the best course of action for the future. On the basis of current information before the Board, and taking into consideration the actions that we have already taken to improve the funding of our defined benefit schemes, we do not believe the Group is facing any material problem with long-term funding of the schemes. I will report more fully on pension issues in my next statement. Prospects The results for the half year were satisfactory and would have been outstanding with a full contribution from Kilgore, PW Defence and the Marine division. The Countermeasures division, with its substantial order book, should perform well in the second half, and with a stronger performance from the Group's other businesses, we expect to achieve another year of excellent growth. K C SCOBIE - Chairman 28 June 2005 *All comparisons are for the half year to 30 April 2004. UNAUDITED CONSOLIDATED PROFIT & LOSS ACCOUNT for the half year to 30 April 2005 Unaudited Unaudited Audited Half year Half year to Year to to 30 April 2004 31 Oct 30 April 2004 2005 Â£000 Â£000 Â£000 Turnover - continuing operations 54,321 57,441 125,580 Operating profit - continuing operations 7,801 7,463 16,927 Loss on disposal of subsidiary undertaking - (690) (690) Associated undertaking - - 151 Profit on ordinary activities before 7,801 6,773 16,388 interest Interest payable (1,329) (1,660) (3,073) Profit on ordinary activities before 6,472 5,113 13,315 taxation Tax on profit on ordinary activities (2,071) (1,616) (3,822) Profit on ordinary activities after taxation 4,401 3,497 9,493 Equity minority interest 13 (6) 15 Profit for financial period/year 4,395 3,510 9,508 Dividends (933) (811) (2,690) Retained profit 3,462 2,699 6,818 Basic earnings per ordinary share 15.14p 12.63p 33.32p Diluted earnings per ordinary share 15.09p 12.56p 33.14p Basic earnings per ordinary share - 15.14p 15.12p 35.02p continuing operations Dividend per ordinary share 3.20p 2.80p 9.00p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Unaudited Unaudited Audited Half year Half year Year to to to 31 Oct 30 April 30 April 2004 2005 2004 Â£000 Â£000 Â£000 Profit for the financial period/year 4,395 3,510 9,508 Foreign currency translation differences on net (2,708) (696) (1,945) investments 1,687 2,814 7,563 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Unaudited Unaudited Audited Half year Half year Year to to to 31 Oct 30 April 30 April 2004 2005 2004 Â£000 Â£000 Â£000 Profit on ordinary activities after taxation 4,401 3,497 9,493 Equity minority interest (6) 13 15 Dividends (933) (811) (2,690) Retained profit 3,462 2,699 6,818 Ordinary shares issued 6 73 77 Share premium arising 230 5,752 5,984 Foreign currency translation differences on (2,708) (696) (1,945) net investment Net addition to shareholders' funds 990 7,828 10,934 Opening shareholders' funds 63,357 52,423 52,423 Closing shareholders' funds 64,347 60,251 63,357 UNAUDITED CONSOLIDATED BALANCE SHEET as at 30 April 2005 Unaudited Unaudited Audited As at As at As at 30 April 2005 30 April 2004 31 Oct 2004 Â£000 Â£000 Â£000 Fixed assets Development costs 2,575 2,384 2,841 Goodwill 27,984 28,442 27,984 Tangible assets 42,236 41,525 41,810 Investments 1,073 1,063 1,073 73,868 73,414 75,708 Current assets Stock 31,123 24,456 25,090 Debtors 30,114 31,498 27,036 Cash at bank and in hand 327 4,093 9,933 61,564 60,047 62,059 Creditors due within one year Bank loans and overdrafts 16,825 24,021 20,493 Loan stock 40 40 40 Other 28,097 21,893 29,382 44,962 45,954 49,915 Net current assets 16,602 14,093 12,144 Total assets less current liabilities 90,470 87,507 85,852 Creditors due after more than one year (22,252) (21,638) (18,174) Provisions for liabilities and charges (3,601) (5,352) (4,057) Equity minority interest (270) (266) (264) 64,347 60,251 63,357 Capital and reserves Called-up share capital 1,517 1,507 1,511 Share premium account 26,940 26,478 26,710 Special capital reserve 12,939 12,939 12,939 Revaluation reserve 2,392 2,446 2,410 Revenue reserves 20,559 16,881 19,787 Shareholders' funds 64,347 60,251 63,357 UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the half year to 30 April 2005 Unaudited Unaudited Audited Half year Half year to Year to to 30 April 31 Oct 30 April 2004 2004 2005 Â£000 Â£000 Â£000 Net cash (outflow)/inflow from operating (2,460) (5,715) 14,462 activities Returns on investments and servicing of (1,320) (1,276) (3,045) finance Taxation (2,856) (748) (2,291) Net capital expenditure (3,673) (2,323) (5,580) Acquisitions 242 645 485 Equity dividends paid - - (2,219) Cash (outflow)/inflow before use of liquid resources and financing (10,067) (9,417) 1,812 Financing -issue of 236 5,825 6,061 shares -increase/ 5,340 (1,688) (4,478) (decrease) in debt (Decrease)/increase in cash (4,491) (5,280) 3,395 Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash (4,491) (5,280) 3,395 Cash (inflow)/outflow from the (increase)/ decrease in debt and lease financing (5,340) 1,688 4,478 Change in net debt resulting from cash flows (9,831) (3,592) 7,873 New finance leases - (231) (354) Translation difference 219 808 1,157 Amortisation of debt finance costs (85) (48) - Cash disposed with subsidiary undertaking - - (3) (9,697) (3,063) 8,673 Reconciliation of operating profit to net cash flow from operating activities Operating profit 7,801 7,463 16,927 Amortisation charge 625 1,044 1,555 Depreciation charge 1,939 1,891 3,229 Loss on sale of tangible fixed assets 47 - 128 Increase in stock (6,033) (535) (1,169) (Increase)/decrease in debtors (3,320) (3,347) 1,116 Decrease in creditors (3,519) (12,231) (7,324) Net cash (outflow)/inflow from operating (2,460) (5,715) 14,462 activities Analysis of net debt As at Cash Non cash Exchange As at 1 Nov flow changes movement 30 April 2004 2005 Â£000 Â£000 Â£000 Â£000 Â£000 Cash at bank and in 9,933 (9,477) - (129) 327 hand Overdrafts (17,463) 4,986 - - (12,477) (7,530) (4,491) - (129) (12,150) Debt due within one (3,070) 1,254 (2,753) 181 (4,388) year Debt due after one (17,055) (7,132) 2,668 - (21,519) year Finance leases (2,353) 538 - 167 (1,648) (30,008) (9,831) (85) 219 (39,705) 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 six months ended 30 April 2005 which comprises the consolidated profit and loss account, statement of total recognised gains and losses, reconciliation of movements in shareholders' funds, consolidated balance sheet, consolidated cash flow statement and associated notes, and the related notes 1 to 7. 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. This report is made solely to the Company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which 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 United Kingdom 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. Uncertainty relating to insurance claim In arriving at our review conclusion, we have considered the adequacy of the disclosure made in note 3 concerning the amounts recognised under a claim against the Group's former insurance brokers concerning the insurance for Kilgore Flares Company LLC and their subsequent handling of an insurance claim. The future settlement of the claim against the brokers could result in a shortfall, or a surplus, when compared with the recorded debtor at 30 April 2005. It is not possible to quantify the effect, if any, of this uncertainty. Details of the circumstances relating to this uncertainty and the amount of the related debtor recorded at 30 April 2005 are disclosed in note 3. 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 six months ended 30 April 2005. DELOITTE & TOUCHE LLP, Chartered Accountants, 28 June 2005 Southampton NOTES TO THE INTERIM STATEMENT 1. BASIS OF PREPARATION The interim accounts to 30 April 2005 have been prepared on the basis of the accounting policies set out in the audited full year accounts to 31 October 2004. The unaudited consolidated profit and loss account for each of the six month periods and the unaudited consolidated balance sheet as at 30 April 2005 do not amount to full accounts within the meaning of section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The interim report was approved by the Board of Directors on 28 June 2005. 2. SEGMENTAL ANALYSIS OF TURNOVER As discussed in the Chairman's Statement, segmental analysis of turnover has been amended and prior period results restated to reflect more accurately the current structure and management of the Group. Unaudited Unaudited Audited Half year to Half year to Year to 30 April 2005 30 April 2004 31 Oct 2004 Â£000 Â£000 Â£000 Countermeasures 34,050 34,303 78,724 Energetic materials 13,927 15,564 31,360 Marine lights and electronics 6,344 7,574 15,496 Total 54,231 57,441 125,580 All turnover is derived from continuing operations. 3. INSURANCE CLAIM The Group is pursuing a claim against its former insurance brokers, concerning the insurance cover for Kilgore Flares Company LLC and the broker's subsequent handling of a claim, following the manufacturing incident at Kilgore Flares Company LLC on 18 April 2001. At 31 October 2004 a balance of Â£2,689,000 was recognised with other debtors. This outstanding balance has been reduced by Â£98,000, to Â£ 2,591,000 at 30 April 2005, as a result of exchange rate movement against the US dollar. All further legal and professional costs incurred in the half year to 30 April 2005 have been taken to the profit and loss account. 4. 2004 RESULTS The figures for the year to 31 October 2004 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. TAXATION The estimated tax rate for the Group for the year ending 31 October 2005 is 32% (2004: 32%). 6. EARNINGS PER SHARE Earnings per share are based on the average number of shares in issue of 29,013,854 (2004: 27,765,886) and profit on ordinary activities after taxation, minority interests and preference dividends of Â£4,393,000 (2004: Â£ 3,508,000). Diluted earnings per share has been calculated using a diluted average number of shares in issue of 29,119,379 (2004: 27,922,564) and profit on ordinary activities after taxation, minority interests and preference dividends of Â£4,393,000 (2004: Â£3,508,000). 7. CORPORATE WEBSITE Further information on the Group and its activities can be found on the corporate website at www.chemring.co.uk.

Companies

Chemring Group (CHG)

Full Archive

UK 100

Latest directors dealings

All directors dealings today