TIDMCHG
RNS Number : 9076L
Chemring Group PLC
20 January 2009
+---------------------------------------+---------------------------------------+
| FOR IMMEDIATE RELEASE | 20 January 2009 |
+---------------------------------------+---------------------------------------+
CHEMRING GROUP PLC
PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 OCTOBER 2008
� Revenue from continuing operations up 39% to GBP354.2 million (2007: GBP254.7
million)
� Record current order book of GBP585 million, up 43% since the end of October
2008; year end order book up 38% at GBP409 million (2007: GBP297 million)
� Record operating cash flow up 38% to GBP83.7 million (2007: GBP60.6 million),
representing 99% conversion from underlying operating profit* of GBP84.9 million
(2007: GBP61.2 million)
� Underlying profit before tax from continuing operations* up 39% to GBP74.2
million (2007: GBP53.2 million)
� Profit before tax from continuing operations up 16% to GBP57.7 million (2007:
GBP49.8 million)
� Underlying earnings per share from continuing operations* up 43% at 160p
(2007: 112p)
� Basic earnings per share from continuing operations up 17% at 123p (2007:
105p)
� Dividend per ordinary share up 40% at 35p (2007: 25p)
Divisional Highlights
Both Energetics and Countermeasures performed strongly and achieved record years
Energetics
� Year end order book of GBP281 million, up 58% on 2007
� Revenue of GBP197 million, up 54% on 2007
� Simmel achieved an excellent second half performance with record sales and
profits
� Strong contribution from acquisitions made in 2008
� Divisional operating profits of GBP46 million in line with those of
Countermeasures
Countermeasures
� Revenue of GBP157 million, up 25% on 2007
� Chemring Countermeasures and Kilgore achieved record sales and profits
� Alloy Surfaces achieved record production volumes of decoys
� A$160 million contract for Chemring Australia
Ken Scobie, Chemring Group Chairman, commented:
"Once again I have the pleasure to announce another year of excellent
performance, with a 39% increase in underlying profit before tax* to GBP74.2
million and a 43% increase in underlying earnings per share* to 160p.
We enter 2009 with an excellent order book, an Energetics division growing
rapidly but still in its youth, and several newly-acquired businesses determined
to show the Group what they can achieve. The Countermeasures division will
continue to produce solid earnings and cash flow.
As a leading defence business, the issues associated with the current military
operations around the world make many judgments difficult but looking to the
future of the Group, these international tensions do not make the world look a
safer place. In rapidly changing economic circumstances there are many
imponderables which could affect the outcome for the next year. However, once
again I believe we will experience another year of above average growth, with
all-round solid financial performance."
* Before goodwill adjustment arising from recognition of tax losses, intangible
amortisation arising from business combinations and loss on fair value movements
on derivatives of GBP16.5 million (2007: GBP3.4 million)
For further information:
+--------------------+------------------------------------+-----------------+
| Ken Scobie | Chairman, Chemring Group PLC | 0207 930 0777 |
+--------------------+------------------------------------+-----------------+
| Dr David Price | Chief Executive, Chemring Group | 0207 930 0777 |
| | PLC | |
+--------------------+------------------------------------+-----------------+
| Paul Rayner | Finance Director, Chemring Group | 0207 930 0777 |
| | PLC | |
+--------------------+------------------------------------+-----------------+
| Rupert Pittman | Cardew Group | 0207 930 0777 |
+--------------------+------------------------------------+-----------------+
Results
Total revenue was GBP354.2 million (2007: GBP254.7 million), an increase of 39%.
Total underlying operating profit* was GBP84.9 million (2007: GBP61.2 million),
an increase of 39%.
Revenue, excluding acquisitions, increased 31% to GBP334.6 million (2007:
GBP254.7 million). Underlying operating profit*, excluding acquisitions,
increased 30% to GBP79.6 million (2007: GBP61.2 million). Net underlying
operating margins*, excluding acquisitions, were 24% (2007: 24%).
Revenue from businesses acquired in the year was GBP19.6 million and GBP5.3
million of underlying operating profit* was generated at a margin of 27%.
An analysis of total revenue and underlying operating profit* by business
segment is set out below:
+-----------------+----------------+------------+-----------+----------+------------+----------+
| Segment | 2008 | 2007 |
+ +-----------------------------------------+----------------------------------+
| | Revenue | Underlying | Margin | Revenue | Underlying | Margin |
| | GBPm | operating | | GBPm | operating | |
| | | profit* | | | profit* | |
| | | GBPm | | | GBPm | |
+-----------------+----------------+------------+-----------+----------+------------+----------+
| | | | | | | |
+-----------------+----------------+------------+-----------+----------+------------+----------+
| Energetics | 196.7 | 45.7 | 23% | 128.2 | 27.9 | 22% |
+-----------------+----------------+------------+-----------+----------+------------+----------+
| Countermeasures | 157.5 | 45.5 | 29% | 126.5 | 38.6 | 30% |
+-----------------+----------------+------------+-----------+----------+------------+----------+
| Share-based | - | (1.7) | | - | (2.4) | |
| payments | | | | | | |
+-----------------+----------------+------------+-----------+----------+------------+----------+
| Unallocated | | (4.6) | | | (2.9) | |
| head | - | | | - | | |
| office costs | | | | | | |
+-----------------+----------------+------------+-----------+----------+------------+----------+
| Total | 354.2 | 84.9 | 24% | 254.7 | 61.2 | 24% |
+-----------------+----------------+------------+-----------+----------+------------+----------+
The revenue of the Energetics division grew 54%, and the operating profit grew
64%. The revenue of the Countermeasures division grew 25% and the operating
profit grew 18%.
Interest income in the year was GBP1.8 million (2007: GBP0.6 million). The
interest charge for the year was GBP12.6 million (2007: GBP8.7 million).
Included within interest is GBP0.7 million (2007: GBP0.6 million) for retirement
benefit obligations. Net interest was covered 7.9 times (2007: 7.6 times) by
underlying operating profit*.
Underlying profit before tax* was GBP74.2 million (2007: GBP53.2 million), an
increase of 39%.
Tax on the underlying profit before tax* was GBP20.7 million (2007: GBP17.1
million), representing a rate of 28% (2007: 32%).
Underlying profit after tax* on continuing operations was GBP53.5 million (2007:
GBP36.1 million), an increase of 48%.
Energetics
� Orders: GBP249.2 million
� Revenue: GBP196.7 million
� Operating profit: GBP45.7 million
� Operating margin: 23%
Pyrotechnics and Explosive Ordnance Disposal (EOD)
The pyrotechnics and EOD business continues to grow strongly, with revenue up
45% year-on-year to GBP110.8 million. Simmel Difesa was a great success during
its first full year of ownership, generating GBP25.8 million of pyrotechnic
business. Demand for its pyrotechnic illumination mortar rounds continued to be
strong, driven by continued high levels of operational use during peacekeeping
operations by the UK Army. Over 60,000 rounds were delivered this year and the
award of a multi-year contract for the supply of another 140,000 white-light and
50,000 black-light illumination rounds will maintain volume production
throughout 2009 and 2010.
Chemring Defence also performed well, with encouraging growth in the sales of
both pyrotechnic and demolition stores products. Production of smoke products,
for signaling or screening, grew by 26% to record levels with over 800,000 units
delivered to the UK Ministry of Defence and other NATO countries. Qualification
of the L96/L97 vehicle discharge grenades for the US Army was completed to
schedule and volume production continues in line with the multi-year
requirements. Sales of demolition stores grew by 20% year-on-year, with a
significant expansion of the customer base in Europe and the Middle East. In
particular, the portable mine-breaching system, PEMBS, continued to be in
demand, with new orders from Australia, Spain, Poland and Slovenia.
Battlefield training products have also continued to be in strong demand. The
customer base for the MECS (multiple effects cartridge system) battlefield
simulation ammunition continued to expand, with France and Saudi Arabia becoming
important new customers. Record production levels were achieved for thunderflash
products, with deliveries of in excess of 1 million units to European and Far
Eastern customers. US Army usage continued to be strong and production reached
1.5 million units during the year. The US Army believes that realistic training
conditions are a vital component of future training, and plans to significantly
expand the capabilities of its training ranges. Towards the end of the year,
Chemring Defence received a $5 million contract from Unitech in the US for the
delivery of the new Improvised Explosive Devices (IED) simulator launchers for
installation at various US Army training ranges. Further opportunities for the
system and the associated MECS ammunition are expected to emerge over the next
twelve months as a large number of countries involved in peacekeeping activities
evaluate what type of training is needed prior to the deployment of troops.
All of the new acquisitions performed strongly during 2008. Richmond Electronics
was acquired at the start of the financial year and has made an encouraging
start, with a record level of sales and the successful capture of major orders
from the UK, Italy, Bangladesh and Kuwaiti governments. Titan Dynamics, in
Texas, has also made great progress since its acquisition, with a further 400
BES (battlefield effects systems) launchers installed at US Army ranges to take
the installed base to more than 1,500. The production of BES cartridges has also
been increased to 65,000 per month using the automated manufacturing expertise
at Technical Ordnance. Further increases to 100,000 per month are planned to
occur in 2009.
Scot also performed well, delivering strong sales and operating margins during
the latter part of 2008. It secured new contracts for the supply of BBU-63
impulse cartridges for use on the B-2 stealth bomber and a substantial contract
from Lockheed Martin for the aft and forward thrusters used on the Atlas V heavy
lift launch vehicle. The business also won some important contracts (canard
actuator, separation nuts) on the Orion Crew Expeditionary Vehicle, which is the
NASA successor to the Space Shuttle.
Munitions
The munitions business also grew strongly, with revenue up 66% year-on-year to
GBP85.9 million. The full year of trading from Simmel Difesa was an important
component of this growth, generating GBP26 million of revenue. Naval ammunition
continued to be the most important aspect of the business, with deliveries of
40mm ammunition to a number of Italian and Middle Eastern customers. Production
of 76mm naval ammunition remained steady during the year with deliveries to
several Far Eastern and South American countries. Simmel was also awarded its
first contract from the French Navy for the qualification of a range of 76mm
ammunition for the French Horizon and FREMM frigates.
Simmel had further success in its other niche markets. It delivered the first
batch of 120mm tank ammunition to a NATO customer to schedule, and received a
significant award for the supply of 125mm tank ammunition to a Middle East
customer. A qualification programme for the dual-mode warhead of the ASTER air
defence missile was also successfully completed during the year and volume
production has now started.
The munitions part of Chemring Energetics grew strongly in 2008, with good
progress made on the development of our rocket motor business. The qualification
of the NLAW rocket motors was completed in the early part of the year and
production increased to its steady-state requirement. A new rocket motor for an
84mm anti-tank weapon was developed in the year and the first batch delivered to
the European customer. In addition, good progress continues to be made to extend
the partnership with BAE Systems for the supply of detonators, primers and
energetic components for a wide range of their ammunition products. Chemring
Energetics is also working with BAE Systems and other prime contractors on the
development of new explosive materials, particularly those that are insensitive
to fire or high velocity impacts. During the year, a substantial contract was
received from Nexter for insensitive explosive material for use in the new
French 155mm ammunition.
Technical Ordnance also expanded its component supply business with the
principal US ammunition prime contractors, ATK and General Dynamics. Production
of explosive detonators, pellets and tracers increased by 24% year-on-year and
the business continues to explore the opportunity for more sub-system contracts,
such as complete fuzes.
The newly acquired Martin Electronics performed well during the last few months
of the year, increasing production and capturing a number of important new
orders. Production of the M228 training grenade fuze continued strongly at
300,000 units per month in its semi-automated facility. Full automation of the
assembly, inspection and packaging was introduced during 2008 and has
successfully completed all qualification testing. Contract options in excess of
$22 million were also awarded.
Martin Electronics also successfully manufactured 40mm illumination rounds for
the two US system prime contractors. Two further pyrotechnic rounds passed their
factory acceptance testing and will begin production shortly. $17 million of new
orders were also received, giving Martin a strong order book with which to start
the new financial year.
Countermeasures
� Orders: GBP155.2 million
� Revenue: GBP157.5 million
� Operating profit: GBP45.5 million
� Operating margin: 29%
The Countermeasures division showed strong growth during the year, with revenue
up 25% year-on-year to GBP157.5 million. However, some of this growth can be
attributed to the strength of the dollar during the last quarter and the growth
on a constant exchange rate is much closer to 20%, broadly in line with the
growth in the global market.
Chemring Countermeasures, the UK business, had another excellent year,
generating GBP42.4 million of revenue, which was 37% higher than the previous
year. This growth was driven by a record production of 240,000 spectral flares
for use by the UK and coalition partners in peacekeeping operations to protect
helicopters, transport aircraft and combat aircraft. Production of conventional
flare types also continued at record levels, with growing interest being shown
for our range of 26mm and 50mm flares for use on Russian made helicopters and
aircraft. A substantial number of flares for Typhoon were delivered to the
participating nations and good progress was made on the development of some
advanced flares for future qualification on that platform.
Revenue from 130mm naval countermeasures grew by over 170% year-on-year with
major deliveries to Denmark, Norway, Spain and Chile. Interest in both IR and
chaff rounds continues to grow, particularly for countries looking to operate in
crowded littoral operational theatres. Historically, the operating margins from
the naval countermeasures business have been considerably lower than that
usually associated with aircraft countermeasures. The strong growth in this area
has, therefore, contributed to the small decrease in operating margins compared
with 2007. However, company-funded programmes to develop alternative options to
the existing bought-in rocket motors and electronics sub-systems are underway
and should lead to higher margins over the next few years.
Kilgore also delivered a strong performance, with sales up 48% year-on-year to a
record level of $76.8 million. Production of the three high volume, conventional
MTV flares ran extremely well throughout, with total production exceeding 1.6
million flares. This performance would have been even stronger but for the fact
that production volumes had to be reduced during the latter part of the year, as
a consequence of administrative delays in the award of follow-on options.
Three new flares were scheduled to enter production in 2008. A flare for C-17
transport aircraft successfully passed flight qualification and factory
acceptance testing (FAT) during the year; full production started at the end of
the year and will continue throughout the current financial year. A set of
advanced flares for the B-52 also successfully passed its flight test and
factory acceptance testing but the US Air Force customer requested that a new
high altitude test be completed before volume production commenced. Since this
flight test could only be scheduled at the very end of the financial year, the
start of production was delayed into 2009. Similarly, problems with the
technical data package on the advanced flare for the F-18 aircraft have taken a
considerable length of time to resolve and production has been delayed until
2009.
Considerable progress has, however, been made on the advanced flares for the
F-22 and F-35 aircraft. Production of the flare set for F-22 increased steadily
to 700 units per month, although a problem with the US Government test facility
delayed delivery of several batches of flares in the last six weeks of the year.
The construction of the new advanced material facility at Kilgore, with its
highly efficient fully automated production process, was completed and fully
commissioned during the year. All F-22 production has now been transferred to
this new facility. Successful validation testing of the flares for the Joint
Strike Fighter (JSF) has been completed and the test results exceed
expectations. The transition to low rate initial production is now expected to
occur in 2009.
Another major success for Kilgore in 2008 was the capture of the multi-year
award to supply the M212 flare, which is a component of the current flare suite
used by the US Army and the US Air Force to protect helicopters from infra-red
guided missiles. This contract, with a maximum value of $382.9 million, is the
largest framework contract ever placed with the Group by the US Government. The
first delivery order was for just over 200,000 flares, production of which is
expected to begin in the latter part of 2009.
Finally, Alloy Surfaces had another satisfactory year, generating $128.5 million
of revenue, which was similar to last year. Decoy production rose to a record
level of over 1.7 million flares but a change of product mix affected total
revenue. The US Army awarded Alloy a multi-year contract to supply the M211
flare, which is another component of the current flare suite used by the US Army
for the protection of helicopters. This contract, with a maximum value of $347.9
million, provides the framework for continued production of this product over
the next five years. However, the US Air Force recently selected a modified
design, called the MJU64, for its future airlift protection requirements and has
placed an initial contract on Alloy for $22.9 million. This change in
requirement and the reduced demand from operations in Iraq, following the
apparent success of the US and Iraqi forces "surge" initiative, resulted in a
gradual decrease in the monthly production rate throughout 2008. Production of
the MJU64 is now 10,000 units per month and is likely to stay at this rate for
the foreseeable future.
In May 2008, the US Air Force awarded Alloy a $30 million contract for the
continued supply of MJU-50 decoys for protection of its transport aircraft.
Production has been ramped up to 33,000 units per month and negotiations for a
follow-on contract at higher rate production in 2009 have now started. The UK
Ministry of Defence has placed additional contracts for the BOL/IR special
material decoys and production has been increased to 40,000 units per month;
this level of production should continue throughout 2009.
Group Strategy
The Group strategy remains unchanged. It will continue to concentrate on its two
segments of Energetics and Countermeasures, combining organic growth with
acquisitions which fit the Group's designated market sectors and product
offering.
With the continuing development of the Group around the world, the Board has
identified the need to strengthen the senior executive team with the appointment
of a third divisional managing director. This individual will head up the
Group's international business outside of the UK, Europe and the US; in
particular, in Australia, India, Korea, Japan and the Middle East.
The Group already has customers in India, Korea and Japan but it is believed
that permanent production facilities in each of these countries will be required
in the future in order to maintain and increase the Group's presence in both
Countermeasures and Energetics. It is recognised that in these countries some
form of joint venture is likely to be the required structure.
Acquisitions
During the year the Group acquired 100% of the issued share or stock capital of
the following businesses:
+-----------------------------------------------------+------------------------+--------------------+
| | Date | Consideration |
| | acquired | (including |
| | | costs) |
| | | GBPm |
+-----------------------------------------------------+------------------------+--------------------+
| | | |
+-----------------------------------------------------+------------------------+--------------------+
| Richmond Electronics & Engineering Limited | 2 November 2007 | 12.5 |
+-----------------------------------------------------+------------------------+--------------------+
| Titan Dynamics Systems, Inc. | 17 March 2008 | 2.6 |
+-----------------------------------------------------+------------------------+--------------------+
| Scot, Inc. | 2 July 2008 | 20.8 |
+-----------------------------------------------------+------------------------+--------------------+
| Martin Electronics, Inc. | 1 August 2008 | 37.1 |
+-----------------------------------------------------+------------------------+--------------------+
| Total consideration | | 73.0 |
+-----------------------------------------------------+------------------------+--------------------+
A summary of the fair value of assets acquired and the goodwill arising on
acquisitions is as follows:
+-----------------------------------------------------------+----+------------------+
| | | 2008 |
| | | GBPm |
+-----------------------------------------------------------+----+------------------+
| | | |
+-----------------------------------------------------------+----+------------------+
| Intangible assets | | 37.6 |
+-----------------------------------------------------------+----+------------------+
| Fixed assets | | 8.1 |
+-----------------------------------------------------------+----+------------------+
| Cash | | 3.8 |
+-----------------------------------------------------------+----+------------------+
| Working capital | | 6.2 |
+-----------------------------------------------------------+----+------------------+
| Tax | | (0.2) |
+-----------------------------------------------------------+----+------------------+
| Provisions | | (5.2) |
+-----------------------------------------------------------+----+------------------+
| Fair value of assets acquired | | 50.3 |
+-----------------------------------------------------------+----+------------------+
| Consideration (including costs) | | 73.0 |
+-----------------------------------------------------------+----+------------------+
| Goodwill arising | | 22.7 |
+-----------------------------------------------------------+----+------------------+
Research and Development
Research and development expenditure totalled GBP9.3 million (2007: GBP6.7
million), an increase of 39%. An analysis of expenditure is set out below:
+------------------------------------------------+------------+-----------+
| | 2008 | 2007 |
| | GBPm | GBPm |
+------------------------------------------------+------------+-----------+
| | | |
+------------------------------------------------+------------+-----------+
| Customer funded research and development | 3.4 | 1.3 |
+------------------------------------------------+------------+-----------+
| Internally funded research and development | 3.3 | 4.1 |
+------------------------------------------------+------------+-----------+
| Capitalised development costs | 2.6 | 1.3 |
+------------------------------------------------+------------+-----------+
| Total research and development expenditure | 9.3 | 6.7 |
+------------------------------------------------+------------+-----------+
The Group's policy is to write-off capitalised development costs over a three
year period. Amortisation of development costs was GBP0.8 million (2007: GBP0.6
million).
Pensions
The deficit on the Group's defined benefit pension schemes before associated tax
credits, as defined by IAS19 Accounting for pension costs, was GBP13.6 million
(2007: GBP13.3 million), a slight increase of 2%.
During the year, the April 2006 actuarial valuation for the UK Staff Pension
Scheme was agreed with the scheme trustees, together with a funding plan to
address the deficit on the scheme over the period to June 2014. The Group's
ongoing contributions to the scheme were reduced under the funding plan.
However, the Group agreed to provide a GBP6 million bank guarantee to the
scheme, which can be called upon in certain events of default by the Company. In
addition, GBP5 million has been placed in an escrow account, to provide
additional security to the scheme in the event of a default.
The next triennial valuations of the UK Executive Pension Scheme and the Staff
Pension Scheme will be carried out as at 6 April 2009.
The Executive Pension Scheme is closed to new entrants. The Staff Pension Scheme
remains open for future accrual for current members but is only open to new
employees at the discretion of the Board.
A new defined contribution pension scheme was introduced in the UK during the
year. This scheme is now the main source of pension provision for the Group's UK
employees. The majority of our overseas pension arrangements are defined
contribution, save in those European countries where some element of defined
benefit retirement payments are required.
Foreign Exchange
The results of overseas subsidiary undertakings are translated into sterling at
weighted average exchange rates.
Currency denominated net assets are translated at year end rates.
Effective translation rates were as follows:
+-----------------------+------------------------+------------+------------+
| | 2008 | 2007 | % change |
+-----------------------+------------------------+------------+------------+
| Average rates | | | |
+-----------------------+------------------------+------------+------------+
| US dollar | 1.87 | 1.99 | 6 |
+-----------------------+------------------------+------------+------------+
| Euro | 1.26 | 1.44 | 12 |
+-----------------------+------------------------+------------+------------+
| | | | |
+-----------------------+------------------------+------------+------------+
| Year end rates | | | |
+-----------------------+------------------------+------------+------------+
| US dollar | 1.63 | 2.08 | 22 |
+-----------------------+------------------------+------------+------------+
| Euro | 1.27 | 1.44 | 12 |
+-----------------------+------------------------+------------+------------+
Underlying profit before tax* was improved in 2008 by approximately GBP3.7
million, primarily as a result of US dollar and Euro appreciation against
sterling.
Cash Flow
Operating cash flow was GBP83.7 million (2007: GBP60.6 million), which
represents a conversion rate of underlying operating profit* to operating cash
of 99% (2007: 99%). Working capital balances were well controlled in the year
and were kept below increases in Group revenues.
Fixed asset expenditure across the Group was GBP34.2 million (2007: GBP16.0
million).
Cash flow from operating activities was GBP36.1 million (2007: GBP32.6 million),
which represents a conversion rate of underlying operating profit* to cash flow
of 43% (2007: 53%).
A summary of Group cash flow is set out below:
+----------------------------------------------+--------------+------------+
| | 2008 | 2007 |
| | GBPm | GBPm |
+----------------------------------------------+--------------+------------+
| | | |
+----------------------------------------------+--------------+------------+
| Operating cash flow | 83.7 | 60.6 |
+----------------------------------------------+--------------+------------+
| Capital expenditure | (34.2) | (16.0) |
+----------------------------------------------+--------------+------------+
| Tax | (13.4) | (12.0) |
+----------------------------------------------+--------------+------------+
| Cash flow from operating activities | 36.1 | 32.6 |
+----------------------------------------------+--------------+------------+
| Interest | (8.2) | (7.4) |
+----------------------------------------------+--------------+------------+
| Dividends | (9.3) | (6.0) |
+----------------------------------------------+--------------+------------+
| Net cash inflow before acquisitions and | 18.6 | 19.2 |
| disposals | | |
+----------------------------------------------+--------------+------------+
Net Debt, Facilities and Going Concern
Net debt at the year end was GBP116.7 million (2007: GBP99.6 million), an
increase of 17%.
Gearing at the year end was 51% (2007: 80%). A summary of debt is set out below:
+----------------------------------------+-----------------+
| | 2008 |
| | GBPm |
+----------------------------------------+-----------------+
| | |
+----------------------------------------+-----------------+
| Cash | 69.6 |
+----------------------------------------+-----------------+
| Term loans | (96.9) |
+----------------------------------------+-----------------+
| US loan notes | (89.4) |
+----------------------------------------+-----------------+
| | (116.7) |
+----------------------------------------+-----------------+
A summary of the Group's main committed bank facilities and repayment dates is
set out below:
+--------------------+--------------+----------------+-------------+---------------+
| Facility type | Total | Repayment | Required | Renewal |
| | facility | dates | repayments | dates |
| | GBPm | | GBPm | |
+--------------------+--------------+----------------+-------------+---------------+
| Working capital | 50.0 | | | 2012 |
+--------------------+--------------+----------------+-------------+---------------+
| Term loans | 96.9 | 2009 | 19.7 | |
+--------------------+--------------+----------------+-------------+---------------+
| | | 2010 | 21.2 | |
+--------------------+--------------+----------------+-------------+---------------+
| | | 2011 | 34.9 | |
+--------------------+--------------+----------------+-------------+---------------+
| | | 2012 | 21.1 | |
+--------------------+--------------+----------------+-------------+---------------+
| | | | 96.9 | |
+--------------------+--------------+----------------+-------------+---------------+
| US loan notes | 89.4 | 2017 | 89.4 | |
+--------------------+--------------+----------------+-------------+---------------+
At the end of October 2008 the working capital facility was unutilised, due to
the availability of net cash balances. Terms loans and the US loan notes were
fully drawn.
On 14 November 2007, the Group completed a $150 million private placement of ten
year fixed interest loans in the US with a number of institutional investors.
The loan notes, which mature in 2017, carry an interest rate of approximately
6.30%. The proceeds were used to repay existing US dollar debt and provide
additional working capital facilities for the Group.
The directors have acknowledged the latest guidance on going concern. Whilst the
current volatility in financial markets has created general uncertainty, the
Group has significant working capital headroom, strong covenant compliance and a
record order book.
Accordingly, the directors have a reasonable expectation that adequate financial
resources will continue to be available for the foreseeable future.
Post Balance Sheet Events
Acquisition of NIITEK (Non Intrusive Inspection Technology, Inc.)
On 12 December 2008, the Group purchased the entire stock capital of NIITEK for
an initial consideration of $30 million. Further deferred contingent
consideration of up to $10 million is payable upon achievement of certain
financial targets.
The initial consideration was funded from existing bank facilities.
Dividends
The Board is recommending a final dividend of 25p per ordinary share, a 40%
increase on the final dividend for 2007. This, together with the interim
dividend of 10p paid in August 2008, gives a total dividend for the year of 35p,
a 40% increase over 2007. The dividend is over 4.6 times covered on underlying
profits after tax of the continuing operations. The shares will be marked "ex
dividend" on 25 March 2009 and the dividend is payable on 17 April 2009 to
shareholders on the register at the close of business on 27 March 2009.
Prospects
Our ongoing commitment to delivering total shareholder return has inevitably
been restricted by the performance of the Company's shares, although we believe
that shareholders will recognise that the external influences of the economic
and financial dramas were outside of our control. In the circumstances, we
believe our share price has held up relatively well compared to the stock market
as a whole.
The Board has examined thoroughly not only the plans for the current year but
also the next five years, and whilst recognising that we cannot remain
completely immune to economic recession, we are convinced that our growth
strategy, consistent with that articulated in previous years, is still soundly
based. Furthermore, as mentioned earlier in this statement, we believe that the
Group has adequate financial resources to deliver this strategy.
We enter 2009 with an excellent order book, an Energetics division growing
rapidly but still in its youth, and several newly-acquired businesses determined
to show the Group what they can achieve. The Countermeasures division will
continue to produce solid earnings and cash flow.
As a leading defence business, the issues associated with the current military
operations around the world make many judgments difficult but looking to the
future of the Group, these international tensions do not make the world look a
safer place. In rapidly changing economic circumstances there are many
imponderables which could affect the outcome for the next year. However, once
again we believe we will experience another year of above average growth, with
all-round solid financial performance.
* Before goodwill adjustment arising from recognition of tax losses, intangible
amortisation arising from business combinations and loss on fair value movements
on derivatives of GBP16.5 million (2007: GBP3.4 million) - see Note 2 below
SUMMARY FINANCIAL INFORMATION
Continuing operations
+-------------+---------------------------------+----------+---------+---------+
| Revenue | 2008 | 2007 | 2006 |
| | GBPm | GBPm | GBPm |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Energetics | - continuing operations | 177.1 | 128.2 | 69.3 |
+-------------+---------------------------------+----------+---------+---------+
| | - acquired | 19.6 | | |
| | | | - | - |
+-------------+---------------------------------+----------+---------+---------+
| Energetics total | 196.7 | 128.2 | 69.3 |
+-----------------------------------------------+----------+---------+---------+
| Countermeasures | 157.5 | 126.5 | 118.4 |
+-----------------------------------------------+----------+---------+---------+
| Total revenue | 354.2 | 254.7 | 187.7 |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Underlying operating profit* | | | |
+-----------------------------------------------+----------+---------+---------+
| | - continuing operations | 79.6 | 61.2 | 38.5 |
+-------------+---------------------------------+----------+---------+---------+
| | - acquired | 5.3 | | |
| | | | - | - |
+-------------+---------------------------------+----------+---------+---------+
| Total underlying operating profit* | 84.9 | 61.2 | 38.5 |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Underlying profit before tax* | 74.2 | 53.2 | 32.5 |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Operating profit | 68.4 | 57.8 | 37.8 |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Profit before tax | 57.7 | 49.8 | 31.8 |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Underlying basic earnings per ordinary share* | 160p | 112p | 72p |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Basic earnings per ordinary share | 123p | 105p | 70p |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Diluted earnings per ordinary share | 123p | 104p | 70p |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Dividend per ordinary share | 35p | 25p | 16p |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Net debt (GBPm) | 116.7 | 99.6 | 70.6 |
+-----------------------------------------------+----------+---------+---------+
| | | | |
+-----------------------------------------------+----------+---------+---------+
| Shareholders' funds (GBPm) | 230.6 | 124.0 | 94.1 |
+-------------+---------------------------------+----------+---------+---------+
* Before goodwill adjustment arising from recognition of tax losses, intangible
amortisation arising from business combinations and loss on fair value movements
on derivatives of GBP16.5 million (2007: GBP3.4 million)
CONSOLIDATED INCOME STATEMENT
for the year ended 31 October 2008
+-------------------------+-----------------+----------------------------------------+-------+------------+-------------+
| | Note | 2008 | 2007 |
| | | GBPm | GBPm |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Continuing operations | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Revenue | - continuing | | 334.6 | 254.7 |
+-------------------------------------------+----------------------------------------+-------+------------+-------------+
| | - acquired | | 19.6 | |
| | | | | - |
+-------------------------------------------+----------------------------------------+-------+------------+-------------+
| Total revenue | | 354.2 | 254.7 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Operating profit | - continuing | | 65.2 | 57.8 |
+-------------------------------------------+----------------------------------------+-------+------------+-------------+
| | - acquired | | 3.2 | |
| | | | | - |
+-------------------------------------------+----------------------------------------+-------+------------+-------------+
| Total operating profit | 2 | 68.4 | 57.8 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Operating profit is analysed as: | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Underlying operating profit* | | 84.9 | 61.2 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Goodwill adjustment arising from recognition of tax losses | | (1.8) | - |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Intangible amortisation arising from business combinations | | (6.0) | (3.4) |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Loss on fair value movements on derivatives | | (8.7) | |
| | | | - |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | 68.4 | 57.8 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Share of post-tax results of associate | | 0.1 | 0.1 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Finance income | | 1.8 | 0.6 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Finance expense | | (12.6) | (8.7) |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Profit before tax for the year from continuing operations | 2 | 57.7 | 49.8 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Profit before tax is analysed as: | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Underlying profit before tax* | | 74.2 | 53.2 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Goodwill adjustment arising from recognition of tax losses | | (1.8) | - |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Intangible amortisation arising from business combinations | | (6.0) | (3.4) |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Loss on fair value movements on derivatives | | (8.7) | - |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | 57.7 | 49.8 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Tax | | (16.5) | (15.9) |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Profit after tax for the year from continuing operations | | 41.2 | 33.9 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Discontinued operations | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Loss after tax from discontinued operations | | | (1.9) |
| | | - | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Profit after tax for the year | | 41.2 | 32.0 |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Attributable to: | Equity holders of the parent | | 41.2 | 32.1 |
+-------------------------+----------------------------------------------------------+-------+------------+-------------+
| | Minority interests | | | (0.1) |
| | | | - | |
+-------------------------+----------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Earnings per ordinary share | 3 | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| From continuing operations: | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Underlying* | | 160p | 112p |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Basic | | 123p | 105p |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Diluted | | 123p | 104p |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| From continuing and discounted operations: | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Basic | | 123p | 99p |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| | | | |
+------------------------------------------------------------------------------------+-------+------------+-------------+
| Diluted | | 123p | 98p |
+-------------------------+-----------------+----------------------------------------+-------+------------+-------------+
* Before goodwill adjustment arising from recognition of tax losses, intangible
amortisation arising from business combinations and loss on fair value movements
on derivatives.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 31 October 2008
+--------------------------------------------------+----+---------+----------+
| | | 2008 | 2007 |
| | | GBPm | GBPm |
+--------------------------------------------------+----+---------+----------+
| | | | |
+--------------------------------------------------+----+---------+----------+
| Profit after tax for the year | | 41.2 | 32.0 |
+--------------------------------------------------+----+---------+----------+
| | | | |
+--------------------------------------------------+----+---------+----------+
| Other recognised income and expense | | | |
+--------------------------------------------------+----+---------+----------+
| (Losses)/gains on derivatives | | (3.8) | 0.2 |
+--------------------------------------------------+----+---------+----------+
| Movement on deferred tax relating to cash flow | | 0.8 | (0.1) |
| hedges | | | |
+--------------------------------------------------+----+---------+----------+
| Exchange differences on translation of foreign | | 24.8 | (7.0) |
| operations | | | |
+--------------------------------------------------+----+---------+----------+
| Actuarial (losses)/gains on defined benefit | | (0.1) | 4.4 |
| pension schemes | | | |
+--------------------------------------------------+----+---------+----------+
| Movement on deferred tax relating to pension | | - | (1.5) |
| schemes | | | |
+--------------------------------------------------+----+---------+----------+
| Current tax on items taken directly to equity | | (0.6) | 2.0 |
+--------------------------------------------------+----+---------+----------+
| Deferred tax on items taken directly to equity | | (4.2) | 1.1 |
+--------------------------------------------------+----+---------+----------+
| Total recognised income and expense for the year | | 58.1 | 31.1 |
+--------------------------------------------------+----+---------+----------+
| | | | |
+--------------------------------------------------+----+---------+----------+
| Attributable to: | | | |
+--------------------------------------------------+----+---------+----------+
| Equity holders of the parent | | 58.1 | 31.2 |
+--------------------------------------------------+----+---------+----------+
| Minority interest | | - | (0.1) |
+--------------------------------------------------+----+---------+----------+
CONSOLIDATED BALANCE SHEET
as at 31 October 2008
+--------------------------------------+---+---------+----------+---------+-----------+
| | | GBPm | 2008 | GBPm | 2007 |
| | | | GBPm | | GBPm |
+--------------------------------------+---+---------+----------+---------+-----------+
| Non-current assets | | | | | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Goodwill | | 128.8 | | 94.8 | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Other intangible assets | | 85.0 | | 37.1 | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Property, plant and equipment | | 110.4 | | 69.8 | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Interest in associate | | 1.0 | | 1.0 | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Deferred tax | | | | | |
| | | 9.7 | | 9.1 | |
+--------------------------------------+---+---------+----------+---------+-----------+
| | | | 334.9 | | 211.8 |
+--------------------------------------+---+---------+----------+---------+-----------+
| Current assets | | | | | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Inventories | | 89.1 | | 51.2 | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Trade and other receivables | | 87.8 | | 61.9 | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Cash and cash equivalents | | 69.6 | | 38.7 | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Derivative financial instruments | | - | | 0.9 | |
+--------------------------------------+---+---------+----------+---------+-----------+
| | | | 246.5 | | 152.7 |
+--------------------------------------+---+---------+----------+---------+-----------+
| Total assets | | | 581.4 | | 364.5 |
+--------------------------------------+---+---------+----------+---------+-----------+
| | | | | | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Current liabilities | | | | | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Bank loans and overdrafts | | (19.7) | | (22.5) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Obligations under finance leases | | (0.7) | | (0.7) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Trade and other payables | | (108.5) | | (71.4) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Provisions | | (1.5) | | (0.4) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Current tax liabilities | | (6.3) | | (3.3) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Derivative financial instruments | | (8.1) | | - | |
+--------------------------------------+---+---------+----------+---------+-----------+
| | | | (144.8) | | (98.3) |
+--------------------------------------+---+---------+----------+---------+-----------+
| Non-current liabilities | | | | | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Bank loans | | (163.6) | | (113.5) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Obligations under finance leases | | (2.2) | | (1.5) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Trade and other payables | | (1.8) | | (0.4) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Long term provisions | | (4.4) | | (1.3) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Deferred tax | | (17.3) | | (12.1) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Preference shares | | (0.1) | | (0.1) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Retirement benefit obligations | | (13.6) | | (13.3) | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Derivative financial instruments | | | | - | |
| | | (3.0) | | | |
+--------------------------------------+---+---------+----------+---------+-----------+
| | | | (206.0) | | (142.2) |
+--------------------------------------+---+---------+----------+---------+-----------+
| Total liabilities | | | (350.8) | | (240.5) |
+--------------------------------------+---+---------+----------+---------+-----------+
| Net assets | | | 230.6 | | 124.0 |
+--------------------------------------+---+---------+----------+---------+-----------+
| | | | | | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Equity | | | | | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Share capital | | | 1.8 | | 1.6 |
+--------------------------------------+---+---------+----------+---------+-----------+
| Share premium account | | | 119.8 | | 60.5 |
+--------------------------------------+---+---------+----------+---------+-----------+
| Special capital reserve | | | 12.9 | | 12.9 |
+--------------------------------------+---+---------+----------+---------+-----------+
| Hedging reserve | | | (2.6) | | 0.4 |
+--------------------------------------+---+---------+----------+---------+-----------+
| Revaluation reserve | | | 1.5 | | 1.6 |
+--------------------------------------+---+---------+----------+---------+-----------+
| Retained earnings | | | 102.9 | | 49.8 |
+--------------------------------------+---+---------+----------+---------+-----------+
| | | | 236.3 | | 126.8 |
+--------------------------------------+---+---------+----------+---------+-----------+
| Own shares | | | | | |
| | | | (5.7) | | (2.8) |
+--------------------------------------+---+---------+----------+---------+-----------+
| Equity attributable to equity | | | | | 124.0 |
| holders of the parent | | | 230.6 | | |
+--------------------------------------+---+---------+----------+---------+-----------+
| Total equity | | | | | 124.0 |
| | | | 230.6 | | |
+--------------------------------------+---+---------+----------+---------+-----------+
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 October 2008
+--------------------------------------------------+------+----------+----------+
| |Note | 2008 | 2007 |
| | | GBPm | GBPm |
+--------------------------------------------------+------+----------+----------+
| Cash flows from operating activities | | | |
+--------------------------------------------------+------+----------+----------+
| Cash generated from operations | A | 83.7 | 60.6 |
+--------------------------------------------------+------+----------+----------+
| Tax paid | | (13.4) | (12.0) |
+--------------------------------------------------+------+----------+----------+
| Net cash inflow from operating activities | | | 48.6 |
| | | 70.3 | |
+--------------------------------------------------+------+----------+----------+
| | | | |
+--------------------------------------------------+------+----------+----------+
| Cash flows from investing activities | | | |
+--------------------------------------------------+------+----------+----------+
| Dividends received from associate | | 0.1 | 0.1 |
+--------------------------------------------------+------+----------+----------+
| Purchases of property, plant and equipment | | (31.0) | (14.6) |
+--------------------------------------------------+------+----------+----------+
| Purchases of intangible assets | | (3.2) | (1.4) |
+--------------------------------------------------+------+----------+----------+
| Proceeds on disposal of subsidiary | | - | 3.2 |
| undertaking/division | | | |
+--------------------------------------------------+------+----------+----------+
| Proceeds on disposal of property, plant and | | - | 0.2 |
| equipment | | | |
+--------------------------------------------------+------+----------+----------+
| Acquisition of subsidiary undertakings (net of | | (68.2) | (46.9) |
| cash acquired) | | | |
+--------------------------------------------------+------+----------+----------+
| Net cash outflow from investing activities | | (102.3) | (59.4) |
+--------------------------------------------------+------+----------+----------+
| | | | |
+--------------------------------------------------+------+----------+----------+
| Cash flows from financing activities | | | |
+--------------------------------------------------+------+----------+----------+
| Dividends paid | | (9.3) | (6.0) |
+--------------------------------------------------+------+----------+----------+
| Interest paid | | (8.2) | (7.4) |
+--------------------------------------------------+------+----------+----------+
| Proceeds on issues of shares | | 58.6 | 0.1 |
+--------------------------------------------------+------+----------+----------+
| New borrowings | | 72.7 | 50.7 |
+--------------------------------------------------+------+----------+----------+
| Repayments of borrowings | | (36.4) | (6.4) |
+--------------------------------------------------+------+----------+----------+
| Proceeds from/(repayments of obligations under) | | 0.4 | (0.7) |
| finance leases | | | |
+--------------------------------------------------+------+----------+----------+
| Purchase of own shares | | (2.9) | (2.8) |
+--------------------------------------------------+------+----------+----------+
| Net cash inflow from financing activities | | 74.9 | 27.5 |
+--------------------------------------------------+------+----------+----------+
| | | | |
+--------------------------------------------------+------+----------+----------+
| Increase in cash and cash equivalents during the | | 42.9 | 16.7 |
| year | | | |
+--------------------------------------------------+------+----------+----------+
| Cash and cash equivalents at start of the year | | 25.4 | 9.0 |
+--------------------------------------------------+------+----------+----------+
| Effect of foreign exchange rate changes | | 1.3 | (0.3) |
+--------------------------------------------------+------+----------+----------+
| Cash and cash equivalents at end of the year | | 69.6 | 25.4 |
+--------------------------------------------------+------+----------+----------+
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 October 2008
+-----------------------------------------------------+----------+----------+
| | 2008 | 2007 |
| | GBPm | GBPm |
+-----------------------------------------------------+----------+----------+
| A. Cash generated from operations | | |
+-----------------------------------------------------+----------+----------+
| Operating profit from continuing operations | 65.2 | 57.8 |
+-----------------------------------------------------+----------+----------+
| Operating profit from acquired operations | 3.2 | - |
+-----------------------------------------------------+----------+----------+
| Loss on discontinued operations | - | (1.9) |
+-----------------------------------------------------+----------+----------+
| Adjustment for: | | |
+-----------------------------------------------------+----------+----------+
| Depreciation of property, plant and equipment | 9.7 | 6.8 |
+-----------------------------------------------------+----------+----------+
| Amortisation of intangible assets arising from | 6.0 | 3.4 |
| business combinations | | |
+-----------------------------------------------------+----------+----------+
| Amortisation of other intangibles | 0.7 | 0.6 |
+-----------------------------------------------------+----------+----------+
| Loss on fair value movements on derivatives | 8.7 | - |
+-----------------------------------------------------+----------+----------+
| Goodwill adjustment arising from recognition of tax | 1.8 | - |
| losses | | |
+-----------------------------------------------------+----------+----------+
| Share-based payment expense | 1.7 | 2.4 |
+-----------------------------------------------------+----------+----------+
| Negative goodwill included in operating profit | - | (0.4) |
+-----------------------------------------------------+----------+----------+
| Difference between pension contributions paid and | 0.1 | (0.6) |
| amount | | |
| recognised in Income Statement | | |
+-----------------------------------------------------+----------+----------+
| Decrease in provisions | (2.2) | (0.5) |
+-----------------------------------------------------+----------+----------+
| Operating cash flows before movements in working | 94.9 | 67.6 |
| capital | | |
+-----------------------------------------------------+----------+----------+
| | | |
+-----------------------------------------------------+----------+----------+
| Increase in inventories | (18.8) | (4.6) |
+-----------------------------------------------------+----------+----------+
| Increase in trade and other receivables | (14.1) | (9.0) |
+-----------------------------------------------------+----------+----------+
| Increase in trade and other payables | 21.7 | 6.6 |
+-----------------------------------------------------+----------+----------+
| | | |
+-----------------------------------------------------+----------+----------+
| Cash generated from operations | 83.7 | 60.6 |
+-----------------------------------------------------+----------+----------+
| | | |
+-----------------------------------------------------+----------+----------+
| Reconciliation of net cash flow to movement in net | | |
| debt | | |
+-----------------------------------------------------+----------+----------+
| Increase in cash and cash equivalents during the | 42.9 | 16.7 |
| year | | |
+-----------------------------------------------------+----------+----------+
| Cash inflow from increase in debt and lease | (36.7) | (43.6) |
| financing | | |
+-----------------------------------------------------+----------+----------+
| Change in net debt resulting from cash flows | 6.2 | (26.9) |
+-----------------------------------------------------+----------+----------+
| | | |
+-----------------------------------------------------+----------+----------+
| New finance leases | 0.8 | (2.1) |
+-----------------------------------------------------+----------+----------+
| Translation difference relating to loans | (23.6) | 0.4 |
+-----------------------------------------------------+----------+----------+
| Amortisation of debt finance costs | (0.5) | (0.4) |
+-----------------------------------------------------+----------+----------+
| Movement in net debt in the year | (17.1) | (29.0) |
+-----------------------------------------------------+----------+----------+
| | | |
+-----------------------------------------------------+----------+----------+
| Net debt at start of the year | (99.6) | (70.6) |
+-----------------------------------------------------+----------+----------+
| | | |
+-----------------------------------------------------+----------+----------+
| Net debt at end of the year | (116.7) | (99.6) |
+-----------------------------------------------------+----------+----------+
+----------------------------+-----------+---------+----------+----------+----------+
| Analysis of net debt |
+-----------------------------------------------------------------------------------+
| | As at | Cash | Non-cash | Exchange | As at |
| | 1 Nov | flow | changes | movement | 31 Oct |
| | 2007 | GBPm | GBPm | GBPm | 2008 |
| | GBPm | | | | GBPm |
+----------------------------+-----------+---------+----------+----------+----------+
| | | | | | |
+----------------------------+-----------+---------+----------+----------+----------+
| Cash at bank and in hand | 38.7 | 29.6 | - | 1.3 | 69.6 |
+----------------------------+-----------+---------+----------+----------+----------+
| Overdrafts | (13.3) | 13.3 | - | - | - |
+----------------------------+-----------+---------+----------+----------+----------+
| | 25.4 | 42.9 | - | 1.3 | 69.6 |
+----------------------------+-----------+---------+----------+----------+----------+
| Debt due within one year | (9.2) | 10.4 | (18.0) | (2.9) | (19.7) |
+----------------------------+-----------+---------+----------+----------+----------+
| Debt due after one year | (113.5) | (46.8) | 18.0 | (21.3) | (163.6) |
+----------------------------+-----------+---------+----------+----------+----------+
| Finance leases | (2.2) | (0.3) | 0.3 | (0.7) | (2.9) |
+----------------------------+-----------+---------+----------+----------+----------+
| Preference shares | | - | - | - | (0.1) |
| | (0.1) | | | | |
+----------------------------+-----------+---------+----------+----------+----------+
| | | | | | |
+----------------------------+-----------+---------+----------+----------+----------+
| | (99.6) | 6.2 | 0.3 | (23.6) | (116.7) |
+----------------------------+-----------+---------+----------+----------+----------+
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 2008 or 31 October 2007 but is
derived from those accounts. Statutory accounts for 2007 have been delivered to
the Registrar of Companies, and those for 2008 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 preliminary announcement has been prepared on the basis of the accounting
policies as stated in the financial statements for the year ended 31 October
2008.
Whilst the financial information included in this preliminary announcement has
been computed in accordance with International Financial Reporting Standards
(IFRSs), this announcement does not itself contain sufficient information to
comply with IFRSs. The Company expects to publish full financial statements that
comply with IFRSs on 20 February 2009 (see Note 5 below).
+-----+---------------------------------------------------------------------------------------------+
| 2. | RECONCILIATION OF STATUTORY OPERATING PROFIT TO UNDERLYING OPERATING PROFIT |
+-----+---------------------------------------------------------------------------------------------+
Underlying profit is used by the Board to measure and monitor the underlying
performance of the Group. Set out below is a reconciliation of statutory
operating profit and underlying operating profit.
+--------------------------------------------------+------------+------------+
| | 2008 | 2007 |
| | GBPm | GBPm |
+--------------------------------------------------+------------+------------+
| | | |
+--------------------------------------------------+------------+------------+
| Statutory operating profit | 68.4 | 57.8 |
+--------------------------------------------------+------------+------------+
| Add back: | | |
+--------------------------------------------------+------------+------------+
| Goodwill adjustment arising from recognition of | 1.8 | - |
| tax losses | | |
+--------------------------------------------------+------------+------------+
| Intangible amortisation arising from business | 6.0 | 3.4 |
| combinations | | |
+--------------------------------------------------+------------+------------+
| Loss on fair value movements on derivatives | 8.7 | - |
+--------------------------------------------------+------------+------------+
| Underlying operating profit | 84.9 | 61.2 |
+--------------------------------------------------+------------+------------+
Profit before tax and underlying profit before tax also vary by the above
amounts.
+-----+---------------------------------------------------------------------------------------------+
| 3. | EARNINGS PER ORDINARY SHARE |
+-----+---------------------------------------------------------------------------------------------+
Earnings per share are based on the average number of shares in issue of
33,339,754 (2007: 32,470,410) and profit on ordinary activities after tax and
minority interests of GBP41.2 million (2007: GBP33.9 million). Diluted earnings
per share has been calculated using a diluted average number of shares in issue
of 33,514,169 (2007: 32,678,486) and profit on ordinary activities after tax and
minority interests of GBP41.2 million (2007: GBP34.0 million).
The earnings and shares used in the calculations are as follows:
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| From continuing | 2008 | 2007 |
| operations | | |
+ +----------------------------------------------+-------------------------------+
| | Earnings | Ordinary | EPS | Earnings | Ordinary | EPS |
| | GBPm | shares | Pence | GBPm | shares | Pence |
| | | Number | | | Number | |
| | | 000s | | | 000s | |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| | | | | | | |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| Basic | 41.2 | 33,340 | 123 | 33.9 | 32,470 | 105 |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| Additional shares | - | 174 | - | 0.1 | 208 | (1) |
| issuable other than at | | | | | | |
| fair value in respect | | | | | | |
| of options outstanding | | | | | | |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| Diluted | 41.2 | 33,514 | 123 | 34.0 | 32,678 | 104 |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
Reconciliation from basic earnings per share to underlying earnings per share:
Underlying basic earnings has been defined as earnings before intangible
amortisation arising from business combinations, goodwill adjustment arising
from recognition of tax losses and loss on fair value movements on derivatives.
The directors consider this measure of earnings allows a more meaningful
comparison of earnings trends.
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| | 2008 | 2007 |
+ +----------------------------------------------+-------------------------------+
| | Earnings | Ordinary | EPS | Earnings | Ordinary | EPS |
| | GBPm | shares | Pence | GBPm | shares | Pence |
| | | Number | | | Number | |
| | | 000s | | | 000s | |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| | | | | | | |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| Basic | 41.2 | 33,340 | 123 | 33.9 | 32,470 | 105 |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| Intangible amortisation | 12.3 | - | 37 | 2.3 | | 7 |
| arising from business | | | | | - | |
| combinations, | | | | | | |
| goodwill adjustment and | | | | | | |
| loss on fair value | | | | | | |
| movements on | | | | | | |
| derivatives (after tax) | | | | | | |
| | | | | | | |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
| Underlying | 53.5 | 33,340 | 160 | 36.2 | 32,470 | |
| | | | | | | 112 |
+-------------------------+-------------------------+----------+---------+----------+----------+---------+
+-------------------------+----------+----------+--------+----------+----------+--------+
| From continuing and | 2008 | 2007 |
| discontinued operations | | |
+-------------------------+------------------------------+------------------------------+
| | Earnings | Ordinary | EPS | Earnings | Ordinary | EPS |
| | GBPm | shares | Pence | GBPm | shares | Pence |
| | | Number | | | Number | |
| | | 000s | | | 000s | |
+-------------------------+----------+----------+--------+----------+----------+--------+
| | | | | | | |
+-------------------------+----------+----------+--------+----------+----------+--------+
| Basic | 41.2 | 33,340 | 123 | 32.1 | 32,470 | 99 |
+-------------------------+----------+----------+--------+----------+----------+--------+
| Additional shares | - | 174 | - | - | 208 | (1) |
| issuable other than at | | | | | | |
| fair value in respect | | | | | | |
| of options outstanding | | | | | | |
+-------------------------+----------+----------+--------+----------+----------+--------+
| Diluted | 41.2 | 33,514 | 123 | 32.1 | 32,678 | 98 |
+-------------------------+----------+----------+--------+----------+----------+--------+
+-----+---------------------------------------------------------------------------------------------+
| 4. | DIVIDEND |
+-----+---------------------------------------------------------------------------------------------+
The final dividend of 25p per ordinary share will be paid on 17 April 2009 to
all shareholders registered at the close of business on 27 March 2009. The
ex-dividend date will be 25 March 2009. The total dividend for the year will be
35p (2007: 25p). The final dividend is subject to approval by the shareholders
at the Annual General Meeting, and accordingly, has not been included as a
liability in the financial statements for the year ended 31 October 2008.
+-----+---------------------------------------------------------------------------------------------+
| 5. | 2008 FINANCIAL STATEMENTS |
+-----+---------------------------------------------------------------------------------------------+
The financial statements for the year ended 31 October 2008 will be posted to
shareholders on 20 February 2009. They will also be available from that date at
the registered office, Chemring House, 1500 Parkway, Whiteley, Fareham,
Hampshire PO15 7AF and will be posted on the Company's website at
www.chemring.co.uk the following morning.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UKVURKARAAUR
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