AGM Trading Update

RNS Number : 9111E

Chemring Group PLC

04 March 2020

 

FOR IMMEDIATE RELEASE                                         4 MARCH 2020

CHEMRING GROUP PLC ("Chemring", the "Group" or the "Company")

AGM - Trading Update

Chemring issues the following update on current trading and outlook for the year, to coincide with the Company's Annual General Meeting taking place later today.

Outlook and current trading

The Board's expectations for the current year are unchanged.

The Group continues to make good progress in the execution of its strategy and is well placed to take advantage of the growth opportunities that are available. Current trading has been in line with our expectations in both segments.

In Sensors & Information, Roke continues to see growing demand for its services and the US Programs of Record continue to progress in line with our expectations.

In Countermeasures & Energetics, our Australian facility has successfully delivered its first batches of training countermeasures for the F-35 program to the US DoD and has commenced production of the first batch of operational countermeasures. Our UK facility continues to ramp up output following the phased restart in 2019 and is now focused on operational efficiency. In the US, our focus has been on our capital investment programme in Tennessee which, when commissioned in H2/FY21, will provide additional automated capacity for the manufacture of F-35 countermeasures.

The Covid-19 outbreak is not currently having any material impact on our businesses or their supply chains. However, we are monitoring the situation closely.

Markets

The backdrop of continued geopolitical unrest supports the need for government spending on defence and national security in all our target markets.

In the key US market, current defence spending, future 2021 budget and longer-term projections to 2025 remain at high levels (see note 1). The 2020 Defence budget may lead to the US DoD procuring additional F-35 Joint Strike Fighters, which should be a medium term positive for the Group's supply of countermeasures to the F-35 program.

Orders

Continuing order intake in the period to 29 February 2020 was £132m (2019: £120m), with a book to bill ratio of 125% (2019: 154%). Expected FY20 revenue is now 88% (2019: 86%) covered by period to date revenue and the order book, split 92% (2019: 93%) in Countermeasures & Energetics and 80% (2019: 72%) in Sensors & Information.  The order book for continuing operations stood at £478m at 29 February 2020 (2019: £421m).

In line with our strategic priority of securing longer term high quality customer relationships and orders, during the period the Group secured a number of notable order wins:

After two years of extensive trials Chemring has secured its first order to supply its Resolve electronic warfare product into the US market. Establishing a foothold in the electronic warfare market in the US was a key strategic objective for the Sensors & Information sector in FY20. Further orders are anticipated as the equipment is deployed.

The US Sensors & Information business received a further delivery order of $32m under the 3 year HMDS IDIQ contract which provides visibility on this Program of Record well into FY21.

Chemring Countermeasures USA was awarded four contracts totalling $50m to supply expendable countermeasures to the US Air Force and US Navy.   Deliveries under these contracts will be made in FY20 and FY21.

Under the $60m Undefinitised Contract Action ("UCA") for F-35 countermeasures announced on 10 May 2019, Chemring Australia has agreed a definitisation of this contact at a total value of $98.5m. Deliveries are expected to be fulfilled in FY20 and FY21.

Chemring Energetic Devices, Inc. has been awarded a $24m, 7 year indefinite-delivery/indefinite-quantity contract for supply of various Cartridge Actuated Devices/Propellant Actuated Devices for various U.S. and Foreign Military Sales ("FMS") aircraft. An initial delivery order of $5.6m has been received against this contract.

Chemring Countermeasures UK and Chemring Energetics UK both signed long term framework contract agreements with the UK MOD covering the next five years, with a further two year option. Initial delivery orders under these frameworks are expected later this year.

Net debt

Net debt at 29 February 2020 was £85.9m (28 February 2019: £84.4m; 31 October 2019: £75.7m). The 29 February 2020 net debt level reflects the initial recognition of a £6.5m finance lease liability as a result of applying IFRS 16 Leases (effective 1 November 2019), and the previously announced high level of capital expenditure in 2020 which has been funded by continued strong operating cash generation.

Interim results date

The Group will report its interim results for the six months ended 30 April 2020 on 3 June 2020.

- ENDS -

 

 For further information:

Rupert Pittman	Group Director of Corporate Affairs, Chemring Group PLC	[phone]
Andrew Jaques Oliver Hughes	MHP Communications	[phone]

 Cautionary statement

This announcement contains unaudited information based on management accounts and 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.

 

 Notes to editors

1.  In the key US market, the 2020 Defence budget was approved by the President, comprising $633bn base budget and $71bn war funding (2019: $616bn base budget and $69bn war funding). The "plus up" on the F-35 joint Strike Fighter program may lead to the US DoD procuring additional aircraft, a medium term positive for the Group's supply of countermeasures to the F-35 program. President Trump has requested $636bn and $69bn for 2021, in line with a two-year budget deal struck by Congress and the White House last year. This, combined with the top-line projections for the Future Years Defense Program ("FYDP") to FY25, gives the Group confidence in its core US market.

2.  Chemring is a global business that specialises in the manufacture of high technology products and the provision of services to the aerospace, defence and security markets

· Employing approximately 2,500 people worldwide, and with production facilities in four countries, Chemring meets the needs of customers in more than fifty countries

· Chemring is organised under two strategic product segments:  Countermeasures & Energetics, and Sensors & Information

· Chemring has a diverse portfolio of products that deliver high reliability solutions to protect people, platforms, missions and information against constantly changing threats

· Operating in niche markets and with strong investment in research and development, Chemring has the agility to rapidly react to urgent customer needs

www.chemring.co.uk

 

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