FOR IMMEDIATE RELEASE 8 FEBRUARY 2005
CHEMRING GROUP PLC
PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 OCTOBER 2004
Results
Profit before tax from continuing operations �14.0m (2003*: �11.5m), up 22%
Exceptional loss on disposal �0.7m (2003*: �1.3m profit)
Profit before tax �13.3m (2003*: �11.8m), up 13%
Basic earnings per ordinary share from continuing operations 35.02p
(2003*: 29.51p), up 19%
Basic earnings per ordinary share 33.32p (2003*: 30.48p), up 9%
Net debt �30.0m (2003*: �38.7m), down 22%
Gearing reduced significantly to 47% from 74%
Dividend per ordinary share 9.00p (2003*: 7.40p), up 22%
Highlights
Record year for the Group's Countermeasures businesses, with a 23% increase in
combined turnover
US defence turnover $106 million, up 43%
Kilgore's post-tax earnings doubled
US businesses' closing order book 28% up on last year
Strong operational cash flow
Kilgore insurance claim settled with Royal and Sun Alliance
Group Board strengthened with appointment of two new independent non-executive
directors
Commenting on the results, Ken Scobie, Chemring Group Chairman, said: "It was a
very good year for most of the Group. Each of the Group's countermeasures
businesses performed at a record level, with a 23% increase in combined
turnover to �78.7 million. Unfortunately, the issues affecting the marine
division, to which I referred in my interim statement, resulted in an
unacceptable performance by that business.
Alloy Surfaces had another record year. Since the opening of its production
plant for special material decoys in 1999, the business has increased its
post-tax earnings ten-fold. With the opening of a second facility this month
and an opening order book double that of last year, Alloy Surfaces is well
placed to continue its impressive growth.
Kilgore had an excellent year, demonstrating its singular ability as the volume
producer of the industry. In the last two years Kilgore has delivered three and
a half million flares to the US military and to export customers. In the year
under review, the business doubled post-tax earnings, fully justifying the
Group's acquisition and subsequent investment in this operation.
The combined marine pyrotechnics and lights businesses performed well in the
year, with the slightly weaker pyrotechnics performance offset by strong sales
of lights. The marine electronics business had a bad year, and three
significant issues combined to create an overall loss in the marine division.
Major changes have now taken place in the marine division, including management
restructuring, and a thorough review of its profitability and investment is
underway, to enable the Board to decide on the most profitable future strategy
for the business.
Our defence businesses have entered 2005 with strong order books and great
confidence forming the base for another year of excellent results. Resolution
of the issues affecting our marine electronics business will result in these
products contributing to Group profitability. I have every confidence in the
outcome for next year."
Note:
*All comparisons are for the full year to 31 October 2003 as restated following
the adoption of FRS5 Application Note G and UITF Abstract 38.
For further information:
Ken Scobie Chairman 0207 930 0777
David Evans Chief Executive 0207 930 0777
Paul Rayner Finance Director 0207 930 0777
Jonathan Rooper Cardew Group 0207 930 0777
CHEMRING GROUP PLC
PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 OCTOBER 2004
Results
Turnover from continuing operations was �125.6 million (2003*: �110.2 million),
an increase of 14%. A significant proportion of the Group's turnover is now
generated in the US and, at constant rates of exchange, the reported Group
turnover would have been approximately �7.0m higher, a 20% increase on last
year's reported turnover.
Net operating margins from continuing operations were 13.5% (2003*: 12.7%). Net
operating profits from continuing operations were �16.9 million (2003*: �14.0
million), an increase of 21%.
Profit before tax from continuing operations was �14.0 million (2003*: �11.5
million), an increase of 22%. The exceptional loss on disposals during the year
was �0.7 million (2003*: �1.3 million profit). Profit before tax was �13.3
million (2003*: �11.8 million), an increase of 13%.
Basic earnings per ordinary share from continuing operations were 35.02p (2003
*: 29.51p), an increase of 19%. Basic earnings per ordinary share were 33.32p
(2003*: 30.48p), an increase of 9%.
The dividend per ordinary share of 9.00p (2003*: 7.40p) is covered 3.5 times
(2003*: 4.1 times).
Turnover by Business Area
2004 2003*
�m �m
Countermeasures 78.7 64.3
Military pyrotechnics 19.8 19.5
Marine safety and security 27.1 26.4
Continuing operations 125.6 110.2
Discontinued operations - 8.2
Total 125.6 118.4
Countermeasures
Countermeasures turnover increased to �78.7 million, up �14.4 million
Continuing growth in the countermeasures business reflects the Group's position
as the worldwide market leader in providing expendable decoys to protect
valuable military platforms, particularly to the US Department of Defense (US
DoD). This is now by far the largest customer, representing in excess of 60% of
our total countermeasures turnover, and growing. The turnover of the US
businesses was $106 million (2003*: $74 million), contributing 47% to the total
Group turnover. The US performance is evidence of our prominent position in the
US countermeasures market.
All three of our countermeasures operations increased turnover in 2004.
There is continuing strong demand, particularly in the US, for our products to
protect military aircraft from missile attack. Our decoys are in use in the
Iraq and Afghanistan campaigns, where there are threats to both helicopters and
fixed wing transport aircraft.
Alloy Surfaces' second plant and new technology centre is now complete, and its
current order book, deliverable in 2005, is double that of last year. Further
investment in equipment and facilities will ensure that Alloy Surfaces
satisfies the increasing demand for its decoys. Alloy Surfaces' exports in the
year included sales to Canada, Australia and Japan, and six other countries are
now trialling its decoys. In November 2004, the UK Ministry of Defence (UK
MoD) awarded Alloy Surfaces a contract for BOL-IR decoys valued at $5.9
million, with further options valued at $6.4 million, which could be exercised
in 2005.
Kilgore was successful in winning $18.4 million of decoy orders from the US Air
Force in November 2004. The contract also provides the US DoD with options to
place further orders over a four year period from 2005 to 2008, which, if taken
up, could bring the total value of the contract to over $104 million. Kilgore
is in production on the new F22 decoy, and is developing decoys for the Joint
Strike Fighter and the B52 bomber. New naval IR decoy manufacturing facilities
were completed in the year to enable Kilgore to deliver its first naval decoy
export order in 2005. Kilgore is also supporting the US Navy on future ship
expendable decoys.
Our UK-based business, Chemring Countermeasures, had another excellent year
with turnover growth of 24%. Export sales were two-thirds of the total,
demonstrating the prominent position of the business in the worldwide market.
Demand is increasing throughout the world for Chemring Countermeasures' IR and
RF aircraft decoys, including variants to protect the Typhoon and other new
fighter aircraft.
During the year, the UK MoD awarded Chemring Countermeasures a �12 million
contract for the design and supply of an improved shipborne RF countermeasure,
for deployment in Royal Navy frigates, destroyers and larger ships. Following
an initial design certification phase, deliveries under the contract are
anticipated to commence in 2008.
As a result of our policy to invest in research and development, as well as
production facilities, our countermeasures businesses have grown significantly
over the last four years, and have the order book to support future growth.
This investment policy will continue, to ensure the protection of the Group's
prominent position as the international market leader in countermeasures, and
to enable us to pursue the many opportunities available to us by offering our
customers the most comprehensive RF and IR countermeasures solutions.
Military Pyrotechnics
Military Pyrotechnics turnover increased to �19.8 million, up �0.3 million
Our military pyrotechnics business is a leading supplier of specialist military
pyrotechnic products used in illumination, screening, signalling and training.
Overseas sales were 75% of total military pyrotechnics turnover.
At our UK operation, PW Defence, demand from the UK MoD was lower because of
deployment of armed forces overseas, reducing UK training. In 2003, the UK
business also benefited from a significant order for military vehicle
protection grenades into the US, which was not repeated at the same level this
year. However, this was partially offset with increased sales to the Middle
East and the Far East.
PW Defence is currently supporting the UK MoD on an operational requirement for
a pyrotechnic product to create a distraction in crowd threatening scenarios.
Products have been successfully tested and initial orders are anticipated this
year. Given the Iraq experience, urban battlefield training is attracting
increased focus, particularly in the US, and this presents an opportunity for
our military pyrotechnic expertise.
Kilgore's military pyrotechnics sales increased by $3.0 million during the
year, and should increase further this year following the award of a
development and initial production contract for improved air-deployed flares,
which enhance a pilot's ability to see targets whilst using night vision
goggles. Annual requirements could be in the region of $7 million to $9
million.
Kilgore is the main supplier to the US Navy of Mk58 pyrotechnic marine location
markers, and is involved in supporting future military vehicle protection in
the high profile US Army Future Combat Systems programme.
Marine Safety and Security
Marine Safety and Security turnover increased to �27.1 million, up �0.7 million
The Group is a leading supplier of legislated marine electronic and safety
equipment worldwide for commercial and leisure markets. The marine safety and
security business is made up of three product groups - electronics, marine
safety lights and pyrotechnics.
Growth in 2004 was disappointing, particularly after three years of good growth
where electronics had been the main driver. Further growth in electronics
turnover in 2004 had been expected to come from increased sales of personal
locating beacons (PLBs) with global positioning system (GPS) capability, and
automatic identification system (AIS) transponders. Unfortunately however, the
GPS PLB and GPS EPIRB were impacted by external trials of the products in the
US. The trials highlighted that, despite our products meeting technical
specification, enhancements to the GPS performance would be beneficial. A
decision was therefore taken to make some minor design modifications, and offer
upgrades to the units currently in service.Despite this, the publicity
generated by the pr�cis of the trials report adversely affected sales volumes
and resulted in additional costs being incurred, which impacted profitability
in the year. In September 2004, the upgraded PLB was by far the best
performing beacon in tests carried out by the state of Vermont in conjunction
with Air Force Rescue Coordination Centre (AFRCC), with a GPS fix being
acquired in less than two minutes. McMurdo's GPS EPIRB has also been credited
with several successful rescues in 2004, the most notable being the four
British rowers rescued off the Isles of Scilly.
Delays in completing the development of a lower cost Mk2 AIS transponder also
impacted turnover and profitability in the year, as the business continued to
sell the lower margin Mk1 variant. The product is heavily software dependent
and issues arose during the complex independent approval testing, which
necessitated frequent software modifications and delayed final approval.
European approval was secured in December 2004, and the product is now
competitively placed to support future marine profitability. US Coast Guard
approval is in place and FCC approval is pending; these approvals will enable
us to pursue the heavily-policed US market.
Demand for lights products was high in the year, particularly for military
customers. However, increased competition in international pyrotechnics markets
resulted in a small loss of market share, which we aim to recover.
The Group has invested significantly in the development of new electronics
products over the last three years to improve the product range and reduce
manufacturing costs. This investment is written-off over three years.
Demand for 406MHz EPIRBs and PLBs will increase due to a combination of the
phasing-out of 121.5MHz beacons, and increasing use of 406MHz PLBs for marine,
land, government, utilities and aviation use. Demand will also increase for AIS
technology as its place in increased policing of the maritime arena is
recognised.
Dividends
It was indicated last year that, following resolution of the Kilgore insurance
claim, the Board would review its dividend policy. Accordingly, this year the
Board is recommending a final dividend of 6.20p per ordinary share, a 28%
increase on the final dividend for last year. This, together with the interim
dividend of 2.80p paid in September 2004, gives a total dividend for the year
of 9.00p, a 22% increase on last year. The dividend is over 3.5 times covered.
The Board
During the year the Group has continued to plan the future structure of the
Board and senior management. Two new independent non-executive directors have
been appointed. Air Marshal Sir Peter Norriss, whose experience of the
military, not least its procurement practices, is proving very valuable, as
is Ian Much with his years of relevant experience as a chief executive of
public companies.
Recently it was announced that Dr David Price will join us in April 2005 as
Chief Executive, with David Evans becoming Non-Executive Deputy Chairman after
thirteen years as Managing Director and Chief Executive of the Group. The Board
conveys its thanks to David Evans for his major contribution to the success of
the Group. David Price joins us from a senior position in Rolls-Royce, with
years of previous experience in defence electronics, and we believe he will be
of great benefit in assisting the Board to deliver its future strategy.
General Sir John Stibbon will retire as a non-executive director at the Annual
General Meeting after eleven years of diligent service, through both the bad
and good times. The Board will miss his pertinent questioning of difficult
issues and we wish him well in retirement.
Kilgore Insurance Claim
After a vast amount of effort and substantial cost, the Kilgore insurance claim
against Royal and Sun Alliance was finally settled for a sum which the Board
believed was acceptable when taking all issues into account. This leaves
certain amounts outstanding, for which we are now pursuing a claim against our
former insurance brokers, Willis, concerning their placement of the insurance
cover for Kilgore and their subsequent handling of the claim. Discussions are
in progress and, in anticipation of an acceptable resolution to these
discussions, the Group has carried forward in its balance sheet a reasonable
estimate of the final recovery.
Research and Development
Research and development expenditure totalled �6.0 million (2003*: �4.7
million), an analysis of which is set out below:
2004 2003*
�m �m
Customer funded research and development 2.4 1.9
Non-funded research and development 2.2 1.6
Capitalised development costs 1.4 1.2
Total research and development expenditure 6.0 4.7
The Group's policy is to write-off capitalised development costs over a three
year period. Amortisation of development costs was �1.6 million (2003*: �1.2
million)
Exceptional (Loss)/Profit on Disposal
On 8 November 2003, the entire issued share capital of Kembrey Wiring Systems
Limited was sold for a net asset value of �1.9 million before costs, generating
a loss on disposal of �0.7 million. �1.2 million was received on completion of
the sale, with �0.4 million received during the 2004 calendar year, and a
further �0.3 million receivable in November 2005.
In July 2003, a profit of �0.7 million was made on the disposal of the Chemical
Coatings division of Alloy Surfaces.
In 2003, �0.6 million was accounted for as a net profit on disposal of assets
which were destroyed in the April 2001 incident at Kilgore.
Interest
The interest charge for the year was �3.1 million (2003*: �3.4 million).
Interest was covered 5.5 times (2003*: 4.1 times) by operating profits from
continuing operations.
Taxation
The tax charge of �3.8 million (2003*: �3.5 million) represents a rate of 29%
(2003*: 30%). Despite significant profits arising in the US, where there is a
higher tax regime, the Group has benefited from tax credits on research and
development expenditure and these, together with the release of surplus
provisions relating to prior years, have reduced the tax rate.
Change of Accounting Policies
As reported at the half year, the Group has changed its revenue recognition
criteria to comply with FRS5 Application Note G. Sales to US Government
agencies are now recognised when formally accepted by the US Government. The
change reduced previously reported profits for the financial year ended 31
October 2003 by �152,000, and resulted in a prior year adjustment of �771,000
to reduce shareholders' funds at 31 October 2002.
In addition, UITF Abstract 38 relating to the treatment of ESOP shares has been
adopted. As a result, a prior year adjustment of �174,000 to reduce
shareholders' funds at 31 October 2002 was required.
Pensions
In accordance with FRS17 Accounting for pension costs, the Group has disclosed
the additional information required in Note 9 of the financial statements.
Under FRS17, the calculated deficit on the Group's two defined benefit pension
schemes after tax was �12.3 million (2003*: �10.8 million).
Actuarial valuations as at 6 April 2003 for the two defined benefit schemes -
the Staff Pension Scheme and the Executive Pension Scheme - were completed
during the year. Taking into account the results of these valuations,
employers' contributions to the Staff Pension Scheme were increased to 16% from
11.5% with effect from January 2004, and it was also agreed that the Group
would make additional contributions to the two schemes totalling �35,000 per
month. The cash impact of the increase in contributions is in the region of �
0.7 million per annum. Employee contributions have also been increased to 8%
from 6% on both schemes.
Cash Flow and Net Debt
Operating cash flow was �14.5 million (2003*: �18.1 million), with �20.2
million of operating cash flow generated in the second half of the year,
compared to an out flow in the first half of �5.7 million. Working capital
balances reduced in the second half and this, together with the �5.1 million
receipt from Royal and Sun Alliance, assisted with net debt reduction.
Fixed asset expenditure in the year was �5.6 million (2003*: �5.5 million), �
0.5 million of which related to the investment in a second facility for Alloy
Surfaces. A further �1.4 million has been spent in the first quarter of the
current financial year to complete this investment.
Net debt was reduced by 22% to �30.0 million (2003*: �38.7 million). Gearing
is 47% (2003*: 74%).
During the year the repayment profile of �2.0 million of medium term debt was
extended by two years to 31 October 2008, providing additional headroom in the
Group's cash facilities.
In January 2005, the Group converted $15.0 million of overdraft into term debt,
repayable over five years.
Foreign Exchange
The Group's principal foreign exchange exposure is to the US dollar. During
the year sterling appreciated by 9% against the dollar.
At constant exchange rates, sales would have been approximately �7.0 million
higher than reported. The impact on dollar earnings translated into sterling
has been mitigated by partial hedging of sterling against the dollar. The net
impact on operating profits, after this hedging, is approximately �0.5 million.
Forward exchange currency contracts have been entered into for the next two
financial years to reduce the Group's exposure to further depreciation of the
US dollar against sterling.
Prospects
The defence businesses have entered 2005 with strong order books and great
confidence forming the base for another year of excellent results. Resolution
of the issues affecting the marine electronics business will result in these
products contributing to Group profitability. The Board has every confidence
in the outcome for next year.
SUMMARY FINANCIAL INFORMATION
2004 2003 2002
As restated As restated
* *
�000 �000 �000
Turnover
Countermeasures 78,724 64,264 47,023
Military pyrotechnics 19,788 19,540 17,942
Marine safety and security 27,068 26,366 21,345
Continuing operations 125,580 110,170 86,310
Discontinued operations - 8,240 11,315
125,580 118,410 97,625
Operating profit/(loss) -Continuing 16,927 14,026 7,431
-Discontinued - (216) 684
16,927 13,810 8,115
Profit/(loss) before -Continuing 14,005 11,463 5,299
taxation
-Discontinued (690) 381 542
13,315 11,844 5,841
Dividend per ordinary share 9.00p 7.40p 6.70p
Basic earnings per ordinary share - 35.02p 29.51p 13.78p
continuing
Basic earnings per ordinary share 33.32p 30.48p 15.19p
Diluted earnings per ordinary share 33.14p 30.05p 15.03p
Net debt (�000) 30,008 38,681 47,277
Shareholders' funds (�000) 63,357 52,423 47,726
* See Note 2
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 October 2004
2004 2003
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations operations operations
As As
restated* restated*
�000 �000 �000 �000 �000 �000
Turnover 125,580 - 125,580 110,170 8,240 118,410
Operating 16,927 - 16,927 14,026 (216) 13,810
profit/
(loss)
Associated 151 - 151 178 - 178
undertaking
(Loss)/
profit on
disposal:
- insurance
claim - - - 565 - 565
- sale of - (690) (690) - 724 724
subsidiary
undertaking
/division
Profit /
(loss) on
ordinary 17,078 (690) 16,388 14,769 508 15,277
activities
before
interest
Interest (3,073) - (3,073) (3,306) (127) (3,433)
payable
Profit/
(loss) on
ordinary 14,005 (690) 13,315 11,463 381 11,844
activities
before
taxation
Tax on (4,029) 207 (3,822) (3,387) (113) (3,500)
profit/
(loss) on
ordinary
activities
Profit/
(loss) on
ordinary 9,976 (483) 9,493 8,076 268 8,344
activities
after
taxation
Equity
minority 15 23
interest
Profit for 9,508 8,367
the
financial
year
Dividends (2,690) (2,034)
Retained 6,818 6,333
profit
Basic
earnings
per 35.02p 29.51p
ordinary
share -
continuing
operations
Basic 33.32p 30.48p
earnings
per
ordinary
share
Diluted 33.14p 30.05p
earnings
per
ordinary
share
Dividend 9.00p 7.40p
per
ordinary
share
* See Note 2
ADDITIONAL FINANCIAL PERFORMANCE STATEMENTS
For the year ended 31 October 2004
2004 2003
As
restated*
�000 �000 �000 �000
Statement of total recognised gains and
losses
Profit on ordinary activities after taxation 9,508 8,367
Currency translation differences on foreign
currency net investments
(1,945) (1,636)
Total recognised gains and losses relating 7,563 6,731
to the year
Prior year adjustment
(1,097) -
Total recognised gains and losses since last
annual report and financial statements 6,466 6,731
Reconciliation of movements in shareholders'
funds
Profit on ordinary activities after taxation 9,493 8,344
Equity minority interest 15 23
Dividends (2,690) (2,034)
Retained profit 6,818 6,333
Other recognised losses (1,945) (1,636)
Ordinary shares issued 77 -
Share premium arising
5,984 -
Net addition to shareholders' funds 10,934 4,697
Opening shareholders' funds as previously 53,520 48,671
stated
Prior year adjustment (1,097) (945)
Opening shareholders' funds as restated 52,423 47,726
Closing shareholders' funds 63,357 52,423
* See Note 2
CONSOLIDATED BALANCE SHEET
As at 31 October 2004
2004 2003
As
restated*
�000 �000 �000 �000
Fixed assets
Intangible assets:
Development costs 2,841 2,996
Goodwill 27,984 28,442
30,825 31,438
Tangible assets 41,810 42,879
Investments 1,073 1,063
73,708 75,380
Current assets
Stock 25,090 24,962
Debtors 27,036 30,059
Cash at bank and in hand 9,933 5,821
62,059 60,842
Creditors due within one year (49,915) (57,199)
Net current assets 12,144 3,643
Total assets less current liabilities 85,852 79,023
Creditors due after more than one year (18,174) (21,489)
Provisions for liabilities and charges (4,057) (4,832)
Equity minority interest (264) (279)
63,357 52,423
Capital and reserves
Called-up share capital 1,511 1,434
Reserves
Share premium account 26,710 20,726
Special capital reserve 12,939 12,939
Revaluation reserve 2,410 2,446
Revenue reserves 19,787 14,878
61,846 50,989
Shareholders' funds 63,357 52,423
Attributable to equity shareholders 63,295 52,361
Attributable to non-equity shareholders 62 62
63,357 52,423
* See Note 2
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 October 2004
2004 2003
�000 �000 �000 �000
Net cash inflow from operating 14,462 18,084
activities
Returns on investments and servicing (3,045) (3,420)
of finance
Taxation (2,291) (686)
Capital expenditure (5,580) (5,497)
Acquisitions and disposals 485 1,475
Equity dividends paid (2,219) (1,866)
Cash inflow before use of liquid resources
and financing
1,812 8,090
Financing - issue of shares 6,061 -
- decrease in debt (4,478) (5,645)
1,583 (5,645)
Increase in cash 3,395 2,445
Reconciliation of net cash flow to
movement in net debt
Increase in cash 3,395 2,445
Cash outflow from the decrease in 4,478 5,645
debt
Change in net debt resulting from 7,873 8,090
cash flows
New finance leases (354) (1,153)
Translation difference 1,157 1,964
Amortisation of debt finance costs - (305)
Cash disposed with subsidiary (3) -
undertaking
Movement in net debt 8,673 8,596
Opening net debt (38,681) (47,277)
Closing net debt (30,008) (38,681)
RECONCILIATION OF OPERATING PROFIT/(LOSS) TO NET CASH FLOW FROM OPERATING ACTIVITIES
2004 2003
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations operations operations
As As
restated* restated*
�000 �000 �000 �000 �000 �000
Operating 16,927 - 16,927 14,026 (216) 13,810
profit/
(loss)
Amortisation 1,555 - 1,555 1,210 - 1,210
charge
Depreciation 3,229 - 3,229 3,229 66 3,295
charge
Loss on sale 128 - 128 - - -
of tangible
fixed assets
(Increase)/ (1,169) - (1,169) (5,132) 375 (4,757)
decrease in
stock
Decrease/ 1,116 - 1,116 (1,931) 325 (1,606)
(increase)
in debtors
(Decrease)/ (7,324) - (7,324) 6,107 25 6,132
increase in
creditors
14,462 - 14,462 17,509 575 18,084
* See Note 2
ANALYSIS OF NET DEBT
Other
At non-cash Exchange At
1 Nov Cash changes movements 31 Oct
2003 flow 2004
�000 �000 �000 �000 �000
Cash at bank and in hand 5,821 4,394 (3) (279) 9,933
Overdrafts (16,766) (999)
- 302 (17,463)
(10,945) 3,395 (3) 23 (7,530)
Debt due within one year (6,260) 5,057 (2,000) 133 (3,070)
Debt due after one year (18,065) (1,892) 2,000 902 (17,055)
Finance (3,411) 1,313 (354) 99 (2,353)
leases
(38,681) 7,873 (357) 1,157 (30,008)
Other non-cash changes represent the movement of debt due after one year to
within one year and the disposal of cash balances with subsidiary undertakings.
Notes
1. Accounts and Auditors Report
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 October 2004 or 31 October 2003 but is
derived from those accounts. Statutory accounts for 2003 have been delivered
to the Registrar of Companies, and those for 2004 will be delivered following
the Company's Annual General Meeting. The auditors have reported on those
accounts; their reports were unqualified and did not contain statements under
s237(2) or s237(3) of the Companies Act 1985. The auditors reports in both
years included an emphasis of matter paragraph drawing attention to a
fundamental uncertainty in respect of amounts recoverable related to insurance
matters.
The financial information has been prepared on the basis of the accounting
policies set out in the audited full year accounts to 31 October 2003, except
for the adoption of FRS5 Application Note G Revenue recognition and the
adoption of UITF Abstract 38 Accounting for ESOP trusts.
2. Comparative Figures
All comparisons are for the full year to 31 October 2003 as restated following
the adoption of FRS5 Application Note G and UITF Abstract 38.
3. Insurance Claim
Following the manufacturing incident at Kilgore Flares Company LLC on 18 April
2001, resulting in material damage and suspension of operations, the Group
lodged a claim with its insurers for property damage and business
interruption. As previously reported, at 31 October 2003, payments totalling �
5,700,000 had been received from the Group's insurers. On 3 August 2004, the
Group received a further payment of �5,056,000 in settlement of the claim with
the Group's insurers, bringing the total received to �10,756,000.
The Group is now pursuing a claim against its former insurance brokers,
concerning the insurance cover for Kilgore Flares Company LLC and the brokers'
subsequent handling of the claim.
At 31 October 2004 the Board has made an estimate of the additional proceeds
which it believes the Group is entitled to receive from its insurance brokers,
after taking advice from its professional advisers, of which �678,000 has been
recognised in these financial statements.
The balance of the claim that had not been recovered from the Group's insurance
brokers at the year end was �2,689,000 (2003:�7,486,000), which has been
included within other debtors. Foreign exchange movements of �419,000 have
been recognised through the statement of total recognised gains and losses in
these financial statements, due to the claim being denominated in US dollars.
4. Earnings per Ordinary Share
The earnings and shares used in the calculations are as follows:
2004 2003
Ordinary Ordinary
shares shares
Earnings Number EPS Earnings Number EPS
As
restated*
�000 000s Pence �000 000s Pence
Basic 9,504 28,521 33.32 8,363 27,436 30.48
Additional shares
issuable other than at
fair value in respect of
options outstanding - 160 (0.18) - 391 (0.43)
Diluted 9,504 28,681 33.14 8,363 27,827 30.05
* See Note 2
Earnings comprise profit for the financial year after deducting preference
dividends of �4,000 (2003: �4,000). Ordinary shares are calculated by
reference to the average number of shares in issue in the year.
Reconciliation from basic earnings per share to basic earnings per share -
continuing:
2004 2003
Ordinary Ordinary
shares shares
Earnings Number EPS Earnings Number EPS
As
restated*
�000 000s Pence �000 000s Pence
Basic 9,504 28,521 33.32 8,363 27,436 30.48
Profit/(loss) on ordinary
activities after taxation
- discontinued operations 483 - 1.70 (268) - (0.97)
Basic - continuing 9,987 28,521 35.02 8,095 27,436 29.51
* See Note 2
5. Dividend
Subject to shareholder approval, the final dividend of 6.20p per ordinary share
will be paid on 10 June 2005 to all shareholders registered at the close of
business on 13 May 2005. The ex-dividend date will be 11 May 2005.
6. 2004 Financial Statements
The financial statements for the year ended 31 October 2004 will be posted to
shareholders on 22 February 2005 and will also be available from that date at
the registered office, 1650 Parkway, Whiteley, Fareham, Hampshire PO15 7AH.
7. Annual General Meeting
The Annual General Meeting will be held at 2.30pm on 24 March 2005 at The
Solent Hotel, Rookery Avenue, Whiteley, Fareham, Hampshire PO15 7AJ.
END
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