TIDMCHG
RNS Number : 9900N
Chemring Group PLC
22 June 2010
+---------------------------------+---------------------------------+
| FOR IMMEDIATE RELEASE | 22 JUNE 2010 |
+---------------------------------+---------------------------------+
CHEMRING GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 APRIL 2010
Financial Highlights
· Revenue from continuing operations up 10% to GBP255.9 million (2009:
GBP233.5 million)
· Order book up 16% to GBP651 million (October 2009: GBP559 million)
· Order book today at new record high of GBP751 million, up 25% since June
2009
· Underlying operating profit* up 13% to GBP52.3 million (2009: GBP46.1
million)
· Underlying profit before tax* up 7% to GBP42.3 million (2009: GBP39.5
million)
· Underlying earnings per share* up 10% at 89p (2009: 81p)
· Profit before tax GBP25.3 million (2009: GBP29.9 million)
· Basic earnings per share 52p (2009: 61p)
· Interim dividend per ordinary share up 21% at 17p (2009: 14p)
Divisional Highlights
Countermeasures
· Steady growth in revenue, up 7% to GBP91.9 million (2009: GBP86.2 million)
· Strong performance from US businesses, revenue up 27% at Alloy Surfaces
and up 23% at Kilgore
· Order book up 20% to GBP279 million from GBP232 million at last year end
· Order book at Kilgore up 121% compared to last year
Pyrotechnics
· Revenue at similar level to 2009
· Increased sales of 40mm pyrotechnic rounds to US Army
· Some slippage of European orders into second half
· Encouraging contribution from new acquired Hi-Shear business
EOD
· Excellent first half performance from NIITEK
· Divisional revenues up 92% to GBP41.3 million (2009: GBP21.5 million)
· New $106 million US Army order for HMDS gives NIITEK record order book of
$134 million
Munitions
· Subdued first half revenue of GBP54.4 million (2009: GBP57.2 million)
· Operating profit up 27% to GBP10.9 million (2009: GBP8.6 million)
· Hi-Shear awarded $10 million contract for Patriot sub-system
· New US primary explosives facility completed and undergoing certification
Results for the Half Year to 30 April 2010
+-----------------------------------+---------+---------+
| | 2010 | 2009 |
+-----------------------------------+---------+---------+
| | GBPm | GBPm |
+-----------------------------------+---------+---------+
| | 255.9 | 233.5 |
| Revenue | | |
+-----------------------------------+---------+---------+
| | 52.3 | 46.1 |
| Underlying operating profit* | | |
+-----------------------------------+---------+---------+
| | (10.0) | (6.6) |
| Net finance expense | | |
+-----------------------------------+---------+---------+
| | 42.3 | 39.5 |
| Underlying profit before tax* | | |
+-----------------------------------+---------+---------+
| | 25.3 | 29.9 |
| Profit before tax | | |
+-----------------------------------+---------+---------+
| | | |
| Underlying earnings per share* | 89p | 81p |
+-----------------------------------+---------+---------+
| | | |
| Basic earnings per share | 52p | 61p |
+-----------------------------------+---------+---------+
| | | |
| Dividend per ordinary share | 17p | 14p |
+-----------------------------------+---------+---------+
* See Note 2 below
Ken Scobie, Chemring Group Chairman, commented:
"The first six months of this financial year demonstrated the growing strength
and quality of the Group's earnings, with revenue up 10% to GBP255.9 million
(2009: GBP233.5 million) and underlying profit before tax* up 7% to GBP42.3
million (2009: GBP39.5 million). Underlying earnings per share* increased by 10%
to 89p (2009: 81p). Our order book grew over the period by a further 16% to
GBP651 million (October 2009: GBP559 million). As a result, we expect to see a
stronger trading performance during the second half of the year and the Group
remains on course to meet our full year expectations.
In recent years, your Group has powered ahead through organic growth and a
focused acquisition policy, concentrating on its recognised areas of expertise,
many in niche markets. We have balanced this growth with a sound financial basis
of strong cash flow, conservative gearing and a long term debt profile. The
Group has also been highly responsive to the requirements of shareholders in
terms of earnings and dividend growth. This business strategy will continue to
serve us well in the future. In spite of many commentators' reservations about
the immediate future for the defence industry, the Group's order book has
reached record levels across all our divisions, and the Board believes that we
have the products, the services and the dynamism to secure continuing success
both in the second six months of this year and in the future."
Notes:
1. All comparisons are for the half year to 30 April 2009.
2. Excludes intangible amortisation arising from business combinations, loss
on fair value movements on derivatives and acquisition related costs totalling
GBP17.0 million (2009: GBP9.6 million). Underlying earnings per share* is
reconciled to basic earnings per share in note 5 of the interim statement.
3. The interim dividend of 17p per ordinary share will be paid on 6 August
2010 to shareholders on the register at 16 July 2010. The ex-dividend date will
be 14 July 2010.
For further information:
+--------------+----------------------------------+---------------+
| David Price | Chief Executive, Chemring Group | 0207 930 |
| | PLC | 0777 |
+--------------+----------------------------------+---------------+
| Paul Rayner | Finance Director, Chemring Group | 0207 930 0777 |
| | PLC | |
+--------------+----------------------------------+---------------+
| Rupert | Cardew Group | 0207 930 0777 |
| Pittman | | |
+--------------+----------------------------------+---------------+
INTERIM MANAGEMENT REPORT
RESULTS FOR THE HALF YEAR TO 30 APRIL 2010
+--------------------------------------+---------+---------+
| | 2010 | 2009 |
| | GBPm | GBPm |
+--------------------------------------+---------+---------+
| | | |
+--------------------------------------+---------+---------+
| Revenue | 255.9 | 233.5 |
+--------------------------------------+---------+---------+
| Underlying operating profit* | 52.3 | 46.1 |
+--------------------------------------+---------+---------+
| Net finance expense | (10.0) | (6.6) |
+--------------------------------------+---------+---------+
| Underlying profit before tax* | 42.3 | 39.5 |
+--------------------------------------+---------+---------+
| Profit before tax | 25.3 | 29.9 |
+--------------------------------------+---------+---------+
| | | |
+--------------------------------------+---------+---------+
| Underlying earnings per share* | 89p | 81p |
+--------------------------------------+---------+---------+
| Basic earnings per share | 52p | 61p |
+--------------------------------------+---------+---------+
| Dividend per ordinary share | 17p | 14p |
+--------------------------------------+---------+---------+
* Excludes intangible amortisation arising from business combinations, loss on
fair value movements on derivatives and acquisition related costs totalling
GBP17.0 million (2009: GBP9.6 million)
The first six months of this financial year demonstrated the growing strength
and quality of the Group's earnings, with revenue up 10% to GBP255.9 million
(2009: GBP233.5 million) and underlying profit before tax* up 7% to GBP42.3
million (2009: GBP39.5 million). Underlying earnings per share* increased by 10%
to 89p (2009: 81p). This performance was achieved in spite of the extreme
weather conditions experienced for part of the period in the UK and USA which
disrupted production at several of our sites, an explosive incident at our UK
countermeasures facility, and delays in the placement of contracts from a number
of our European customers. However, our order book grew over the period by a
further 16% to GBP651 million (October 2009: GBP559 million). As a result, we
expect to see a stronger trading performance during the second half of the year
and the Group remains on course to meet our full year expectations.
Sales to our US customers increased by 33% to GBP141.8 million (2009: GBP106.6
million), reflecting a strong performance from both our US countermeasures
businesses and the continued success at NIITEK in the delivery of counter-IED
ground penetrating radar systems to the US Army. Sales to our UK and European
customers, on the other hand, were down by 25% to GBP72.7 million (2009: GBP96.6
million), which reflects the second half bias caused by contract delays and the
production stoppage at Chemring Countermeasures in Salisbury.
Our acquisitions of Hi-Shear in California and Chemring Fuze Technology in Italy
made an encouraging contribution to earnings in the first half and should
deliver their expected profits in the second six months of the year.
COUNTERMEASURES
Our Countermeasures division performed well, increasing revenue by 7% to GBP91.9
million (2009: GBP86.2 million) and operating profit by 3% to GBP24.4 million
(2009: GBP23.7 million). The year-on-year revenue growth at constant exchange
rates was just under 11% and reflects a strong performance from both our US
businesses. The operating margin was 27%, slightly below the 2009 performance,
reflecting the impact of bad weather earlier in the year and a recent incident
at our UK countermeasures facility that stopped production for four weeks in
April.
Alloy Surfaces had an excellent first half, with sales 27% higher than 2009 and
production volumes reaching record levels. Manufacture of the MJU-50 decoys that
protect fixed wing and transport aircraft for the US Air Force increased
substantially by 75%, whilst production volumes of MJU-49 decoys, that protect
fixed wing and rotary aircraft for the US Navy, almost doubled. This growth was
partially offset by a reduction in demand for BOL/IR decoys for Tornado aircraft
from the Royal Air Force.
Kilgore also had a strong first half of the year with 23% growth, driven by a
54% increase in production volumes of flares for the F-22 Raptor. Production of
two new 36mm flares commenced in the period and will reach full output over the
next few months. The order book at Kilgore is now 121% higher than the previous
year and provides a very solid foundation for continued growth in the future.
Our UK countermeasures business had a slower start to the year with first half
revenue 24% lower than in the first half of 2009. The timing of contracts from
the UK Ministry of Defence for aircraft flares and naval countermeasures has
made revenue more weighted to the second half of this financial year but the bad
weather in January and February also contributed. At the beginning of April, an
explosive ignition occurred on the Salisbury site within a small oven used to
cure the priming materials that are used in our spectral flares. All production
was stopped whilst an in-depth investigation took place. The majority of flare
production re-started in May but production of our spectral products is unlikely
to resume until July.
In 2009, the UK business commenced the construction of new state-of-the-art
automated manufacturing facilities for the production of our full range of
flares at its UK site in Salisbury. These facilities will double our maximum
production capacity and meet the surge requirements of our UK Ministry of
Defence customer. They will also allow a rapid response to urgent export
opportunities. The fully automated, remote operation features incorporated into
the design will further improve the safety of working conditions for our
production employees. Construction of the buildings has now been completed and
installation of the automated equipment is scheduled over the next six months.
Commissioning will take place during the first half of 2011 and we expect
production to be underway during the second half.
The order book for countermeasures increased by 20% to GBP279 million (October
2009: GBP232 million), providing confidence in further growth during the
remainder of this financial year and during 2011.
PYROTECHNICS
Our Pyrotechnics division had a steady first half with revenue at a similar
level to last year at GBP68.3 million (2009: GBP68.6 million), whilst operating
profit was down to GBP12.8 million (2009: GBP15.1 million). The year-on-year
revenue growth at constant exchange rates was 1% but included a 12% contribution
from the acquisition of Hi-Shear. Delays in order intake from the UK, Europe and
the Middle East have been the principal issue that has made production more
second half weighted. The operating margin achieved in the first half was 19%,
nearly 3% below the 2009 performance, reflecting the changes in volumes and the
impact of differing margins within the USA versus Europe product mix.
Our US pyrotechnic businesses performed extremely well, with revenues up 70%
compared with the previous year. Production of 40mm pyrotechnic rounds for the
US prime contractors increased significantly, with production of the M585 white
star round 87% higher than in 2009. Factory acceptance of the M661 green star
parachute round and the M992 black light round were also achieved in the period,
and full production will start shortly. Upgrades to the M228 training grenade
and its automated production line also took place during the last six months.
Factory acceptance will commence shortly, and production volumes are expected to
ramp up quickly during the second half.
During the period, production of our battlefield effects simulation (BES)
cartridges was relocated to Chemring Ordnance in Florida, and the BES launchers
were relocated to Chemring Energetic Devices in Illinois. Production will
re-start in the second half of the year. The US Army placed a multi-year
contract, worth up to $74 million, for BES cartridges and a $4.9 million
contract for the installation of another 900 launchers at their training ranges.
A two year contract for another 1,600 launchers is expected shortly and will
double the installed base over the next three years.
Our European pyrotechnic businesses have seen a reduction in revenues. Simmel
has reduced its production volumes of 81mm mortar illumination rounds by 25% to
a level consistent with the long term demand of the British Army. Chemring
Defence had a slow start to the year, with many of its core orders delayed by
several months as governments reviewed the impact of current budgetary
pressures. Orders from the UK, Europe and the Middle East are now starting to
appear, and their order book is up 62% compared with last year. This includes a
GBP39.5 million multi-year order from the UK Ministry of Defence, which will
underpin production in the future.
The order book for pyrotechnics increased by 19% to GBP204 million (October
2009: GBP172 million) and provides confidence that delayed order intake will
deliver future growth.
EXPLOSIVE ORDNANCE DISPOSAL
Our Explosive Ordnance Disposal (EOD) division had an excellent first half,
significantly increasing its revenue by 92% to GBP41.3 million (2009: GBP21.5
million) and doubling its operating profit to GBP9.9 million (2009: GBP5.1
million). The operating margin was maintained at 24%, slightly ahead of 2009,
with production at NIITEK dominating the performance.
NIITEK had an impressive first half with production of its Husky Mounted
Detection System (HMDS) ground penetrating radar growing to 10 systems a month.
The US Army has just announced a further contract for another 76 HMDS systems
for delivery by May 2011. This contract is initially worth $106 million but,
when fully defined, will increase in value to $217 million, including spares,
training and support. A multi-year contract for up to 600 more systems is
expected to go out to competition in early 2011. We will have over 150 radar
systems in service by that time and are confident that we will retain our
incumbent position.
The new contract requires production to increase to in excess of 20 equivalent
HMDS systems per month. Consequently a second production facility will start
operation in July of this year. The US Marine Corps has also expressed strong
interest in HMDS and a contract is expected shortly. Twenty eight personnel are
currently deployed in support of the equipment, but this number will be
increased steadily over the next nine months to seventy people.
Chemring Energetics continues to make good progress with the development of our
range of demolition stores. Qualification programmes are underway with the UK
Ministry of Defence for new insensitive demolition stores, such as flexible
shaped charges, sheet explosives and obstacle removal. A new plastic explosives
assembly facility is under construction at our Ardeer site and will start
production of several of these new products in the second half of this year.
The order book for EOD fell by 30% to GBP26 million (October 2009: GBP37
million), as production of HMDS continued whilst the placement of follow-on
contracts was delayed by the protracted negotiations on final costs on the
previous production order. The new contract has now been awarded, and the order
book has increased to GBP98 million, an increase of 165% since October 2009.
This gives greater indication of the expected contribution from NIITEK for both
the remainder of this year and in the future.
MUNITIONS
Our Munitions division had a subdued first half, with a slight drop in revenues
to GBP54.4 million (2009: GBP57.2 million) but an increase in operating profit
of 27% to GBP10.9 million (2009: GBP8.6 million). The operating margin improved
to 20% with Simmel and Chemring Australia providing the most significant
contributions. This margin performance was well ahead of the 2009 level and more
representative of our long term expectations.
Our prime contracting activities continue to represent about 50% of our
munitions business. During the period, we experienced significant growth in our
sales to Middle East and Far East customers. Deliveries of 40mm naval ammunition
were made to Singapore and a new contract was recently received for 76mm
ammunition. Deliveries of 40mm HEDP grenades doubled in the period, principally
driven by the success of Chemring Australia. The first deliveries were achieved
of 125mm tank ammunition to a Middle East customer.
Deliveries of components and sub-systems to US prime contractors increased by
50% compared with last year, principally due to increased demand for fuze
components and the surge in detonator production following renewed availability
of lead azide, the key primary explosive. This change in availability was the
direct result of the completion of our new primary explosives facility in South
Dakota. The facility is currently being used to safely screen existing stocks,
whilst new material variants undergo age characterisation that is part of the
certification process.
Our Hi-Shear business has made a good start following acquisition. It received a
$10 million order for electronic safety and arming fuze (ESAF) units for the
Patriot missile and a further contract for additional special test equipment
that will be needed to support the increased production for the future.
The order book for munitions increased by 20% to GBP142 million (October 2009:
GBP118 million) with strong growth in Europe, driven principally by the success
of our Simmel business in Italy.
DIVIDEND AND FINANCIAL POSITION
The Board is today declaring an interim dividend of 17p per ordinary share
(2009: 14p). This represents an increase of 21% over last year's interim
dividend and builds on the substantial increases delivered in recent years. The
interim dividend will be paid on 6 August 2010 to shareholders on the register
at 16 July 2010.
The Group's financial position remains strong, with net assets increasing by 13%
to GBP284 million from GBP251 million at April 2009. Net debt at the period end
was GBP260 million (2009: GBP167 million) and gearing was 92% (2009: 66%). The
acquisition of Hi-Shear was debt funded and, with the anticipated cash flows in
the second half of this year, gearing is expected to fall by the year end.
The Group has a healthy cash balance of GBP72 million (2009: GBP42 million),
with in excess of GBP100 million headroom on its main working capital
facilities.
On 19 November 2009, the Group completed a private placement of $280 million of
fixed interest loan notes with a number of institutional investors. The funding
provided acquisition finance and additional working capital. GBP273 million of
the Group's gross debt does not fall due for repayment until 2016 and beyond
and, hence, secures finance over the next few years.
aCQUISITIONs
On 25 November 2009, the Group completed the acquisition of Hi-Shear for a cash
consideration of $132 million. Hi-Shear is a leading manufacturer of high
reliability energetic products for use in key space and defence programmes,
including satellites, missile defence and aircrew egress.
On 19 March 2010, the Group acquired the Italian-based Chemring Fuze Technology
S.r.l. ("CFT") for a cash consideration of EUR11.4 million. CFT provides fuzes for
Simmel Difesa and other European ammunition suppliers. The acquisition provides
Simmel with a significant increase in its electronic design capability and
underpins the future development of this key sub-system.
On 19 January 2010, the Group announced the conditional acquisition of The
Allied Defense Group, Inc. (ADG") for a cash consideration of $59 million. On
the same day as Chemring's announcement, ADG received a subpoena from the US
Department of Justice ("DOJ") requesting that ADG produce documents relating to
its dealings with foreign governments. ADG also became aware that day that an
employee of its US subsidiary, Mecar USA, Inc. ("Mecar US"), had been indicted
by the DOJ for allegedly engaging in schemes to bribe foreign government
officials to obtain and retain business. The unsealed indictment of this
employee and the DOJ's press release indicated that the alleged criminal conduct
was on behalf of another US company unrelated to ADG or Mecar US. Whilst the DOJ
initially agreed that ADG could limit its response to the subpoena to matters
related to the indicted former employee of Mecar US, the DOJ has recently
indicated that it will request additional documents from ADG and expand its
review. Against this background, we are currently reviewing our options with
regards to ADG, which may include a restructuring of the transactions
contemplated by the merger agreement.
The Board continues to review various potential acquisition opportunities as
part of the Group's ongoing corporate development.
Board succession
In the November 2009 Interim Management Statement the Group announced that, as I
am now in my seventy second year, we had commenced the process to find a
suitable candidate as my successor. I am delighted that we have separately
announced today that Peter Hickson will be the next Chairman of Chemring. Peter
will join the Board on 1 July 2010, and after a period of familiarisation will
assume the Chairmanship on 1 October 2010.
Peter is an extremely experienced individual with a strong track record, and the
Board believes that he is the right person to oversee the next stage of the
Group's development. I have been your Chairman now for thirteen years, during
which time we have seen the Group change beyond recognition and establish itself
as a prominent international business. Over this period, the share price has
increased from a low of 76p to a high of over GBP36, and the Group's market
capitalisation now stands at GBP1.2 billion. The Group is in excellent shape to
meet the challenges of the future, and I wish both Peter and Chemring's
employees good fortune as the Group continues to grow.
HEALTH AND SAFETY
In the last ten years the Group has invested substantial funds and effort to
improve the safety record of the industry and protect its employees who work, at
times, with highly volatile and energetic materials. Significant amounts of
capital expenditure have been spent on robotics and other automated processes to
isolate operators from the most sensitive processes. This is a continuing
process where no matter how diligent one is in assessing risk, incidents can
still happen. These assessments are carried out by our own health and safety
teams supported, where advantageous, by outside experts. Complacency, however,
is the enemy of safe operations, and we continue to train and strengthen our
staff in safety procedures throughout the Group.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties which could have a material impact on the
Group's performance over the remaining six months of the financial year and
could cause actual results to differ materially from expected and historical
results have not changed significantly from those set out in the "Principal
Risks and Uncertainties" section of the Group's 2009 Annual Report and Accounts.
These can be summarised as:
· Health and safety risks
· Risks associated with possible cuts in worldwide defence budgets
· Risks associated with the timing of receipt of orders
· Risks related to the strength and breadth of management resource
· Risks associated with the introduction of new manufacturing facilities
· Risks associated with the introduction of new products
· Political, economic and financial risks
· Competitive risks
· Compliance and corruption risks
Prospects
In recent years, your Group has powered ahead through organic growth and a
focused acquisition policy, concentrating on its recognised areas of expertise,
many in niche markets. We have balanced this growth with a sound financial basis
of strong cash flow, conservative gearing and a long term debt profile. The
Group has also been highly responsive to the requirements of shareholders in
terms of earnings and dividend growth. This business strategy will continue to
serve us well in the future. In spite of many commentators' reservations about
the immediate future for the defence industry, the Group's order book has
reached record levels across all our divisions, and the Board believes that we
have the products, the services and the dynamism to secure continuing success
both in the second six months of this year and in the future.
K C SCOBIE
CHAIRMAN
22 JUNE 2010
+-----------------------------------------------------------------------+
| Cautionary statement |
| |
| This Interim Management Report (IMR) has been prepared solely to |
| provide additional information to shareholders to assess the Group's |
| strategies and the potential for those strategies to succeed. The IMR |
| should not be relied on by any other party or for any purpose. |
| |
| The IMR contains certain-forward looking statements. These statements |
| are made by the directors in good faith based on information |
| available to them up to the time of their approval of this report but |
| such statements should be treated with caution due to the inherent |
| uncertainties, including both economic and business risk factors, |
| underlying any such forward-looking information. |
| |
+-----------------------------------------------------------------------+
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for the maintenance and integrity of the Company
website.
Legislation in the United Kingdom governing the preparation and dissemination of
financial information differs from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
+--+-----------------------------------------------------------------+
| a)| the Condensed Set of Financial Statements has been prepared in |
| | accordance with IAS 34 - Interim Financial Reporting; |
+--+-----------------------------------------------------------------+
| | |
+--+-----------------------------------------------------------------+
| b)| the Interim Management Report includes a fair review of the |
| | information required by DTR 4.2.7R (indication of important |
| | events during the first six months and description of principal |
| | risks and uncertainties for the remaining six months of the |
| | year); and |
+--+-----------------------------------------------------------------+
| | |
+--+-----------------------------------------------------------------+
| c)| the Interim Management Report includes a fair review of the |
| | information required by DTR 4.2.8R (disclosure of related |
| | parties' transactions and changes therein). |
+--+-----------------------------------------------------------------+
By order of the Board
+-----------------------------------+-----------------------------------+
| D J PRICE | P A RAYNER |
+-----------------------------------+-----------------------------------+
| CHIEF EXECUTIVE | FINANCE DIRECTOR |
+-----------------------------------+-----------------------------------+
| 22 JUNE 2010 | 22 JUNE 2010 |
+-----------------------------------+-----------------------------------+
CONDENSED CONSOLIDATED INCOME STATEMENT
for the half year to 30 April 2010
+--------------------+------------+------+-----------+-----------+----------+
| |Note | Unaudited | Unaudited | Audited |
+---------------------------------+------+-----------+-----------+----------+
| | | Half | Half | Year to |
| | | year to | year to | |
+---------------------------------+------+-----------+-----------+----------+
| | | 30 April | 30 April | 31 Oct |
| | | 2010 | 2009 | 2009 |
+---------------------------------+------+-----------+-----------+----------+
| | | GBPm | GBPm | GBPm |
+---------------------------------+------+-----------+-----------+----------+
| Continuing operations | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Revenue | - | | 247.8 | 233.5 | 503.9 |
| | continuing | | | | |
+--------------------+------------+------+-----------+-----------+----------+
| | - | | 8.1 | - | - |
| | acquired | | | | |
+--------------------+------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Total revenue | | 255.9 | 233.5 | 503.9 |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Operating profit | - | | 34.9 | 36.5 | 107.9 |
| | continuing | | | | |
+--------------------+------------+------+-----------+-----------+----------+
| | - | | 0.4 | - | - |
| | acquired | | | | |
+--------------------+------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Total operating profit | 2 | 35.3 | 36.5 | 107.9 |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Operating profit is analysed | | | | |
| as: | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Underlying | - | | 48.4 | 46.1 | 114.7 |
| operating profit | continuing | | | | |
+--------------------+------------+------+-----------+-----------+----------+
| | - | | 3.9 | - | - |
| | acquired | | | | |
+--------------------+------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Total underlying operating | 2 | 52.3 | 46.1 | 114.7 |
| profit | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Acquisition related costs | 9 | (2.3) | - | - |
+---------------------------------+------+-----------+-----------+----------+
| Intangible amortisation | | (7.9) | (8.1) | (13.8) |
| arising from business | | | | |
| combinations | | | | |
+---------------------------------+------+-----------+-----------+----------+
| (Loss)/gain on fair value | | (6.8) | (1.5) | 7.0 |
| movements on derivatives | | | | |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Total operating profit | | 35.3 | 36.5 | 107.9 |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Share of post-tax results of | | - | - | 0.1 |
| associate | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Finance income | | 0.1 | 0.8 | 0.7 |
+---------------------------------+------+-----------+-----------+----------+
| Finance expense | | (10.1) | (7.4) | (12.9) |
+---------------------------------+------+-----------+-----------+----------+
| Profit before tax for the | | 25.3 | 29.9 | 95.8 |
| period/year from continuing | | | | |
| operations | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Tax | 4 | (6.9) | (8.4) | (25.7) |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Profit after tax for the | 2 | 18.4 | 21.5 | 70.1 |
| period/year attributable to | | | | |
| equity shareholders of the | | | | |
| parent | | | | |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Earnings per ordinary share | 5 | | | |
+---------------------------------+------+-----------+-----------+----------+
| From continuing operations: | | | | |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Underlying | | 89p | 81p | 213p |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Basic | | 52p | 61p | 199p |
+---------------------------------+------+-----------+-----------+----------+
| | | | | |
+---------------------------------+------+-----------+-----------+----------+
| Diluted | | 52p | 61p | 197p |
+--------------------+------------+------+-----------+-----------+----------+
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half year to 30 April 2010
+--------------------------------------+-----------+-----------+---------+
| | Unaudited | Unaudited | Audited |
+--------------------------------------+-----------+-----------+---------+
| | Half | Half | Year to |
| | year to | year to | |
+--------------------------------------+-----------+-----------+---------+
| | 30 April | 30 | 31 Oct |
| | 2010 | April | 2009 |
| | | 2009 | |
+--------------------------------------+-----------+-----------+---------+
| | GBPm | GBPm | GBPm |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
| Profit after tax for the period/year | 18.4 | 21.5 | 70.1 |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
| Cash flow hedges: | | | |
+--------------------------------------+-----------+-----------+---------+
| Gains/(losses) on cash flow hedges | 0.2 | (4.3) | (1.0) |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
| Movement on deferred tax relating to | - | 1.4 | 0.2 |
| cash flow hedges | | | |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
| Exchange differences on translation | 6.2 | 14.7 | (3.1) |
| of foreign operations | | | |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
| Actuarial losses on defined benefit | (1.8) | (2.5) | (14.1) |
| pension schemes | | | |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
| Movement on deferred tax relating to | 0.5 | 0.7 | 4.0 |
| pension schemes | | | |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
| Other comprehensive income: | | | |
+--------------------------------------+-----------+-----------+---------+
| Current tax on items taken directly | - | (2.1) | (1.2) |
| to equity | | | |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
| Deferred tax on items taken directly | - | - | 0.3 |
| to equity | | | |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
| Total comprehensive income for the | 23.5 | 29.4 | 55.2 |
| period/year attributable to equity | | | |
| holders of the parent | | | |
+--------------------------------------+-----------+-----------+---------+
| | | | |
+--------------------------------------+-----------+-----------+---------+
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the half year to 30 April 2010
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | | Share | Special | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | Share | premium | capital | Hedging | Revaluation | Retained | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | capital | account | reserve | reserve | reserve | earnings | Total |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| At 1 November | 1.8 | 120.3 | 12.9 | (3.4) | 1.4 | 145.8 | 278.8 |
| 2009 | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Profit after tax | - | - | - | - | - | 18.4 | 18.4 |
| for the period | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Other | - | - | - | 0.2 | - | 4.9 | 5.1 |
| comprehensive | | | | | | | |
| income for the | | | | | | | |
| period | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Total | - | - | - | 0.2 | - | 23.3 | 23.5 |
| comprehensive | | | | | | | |
| income for the | | | | | | | |
| period | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Dividends paid | - | - | - | - | - | (12.7) | (12.7) |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Cost of | - | - | - | - | - | (0.5) | (0.5) |
| share-based | | | | | | | |
| payments (net of | | | | | | | |
| settlement) | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Transfers between | - | - | - | 0.1 | - | (0.1) | - |
| reserves | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| At 30 April 2010 | 1.8 | 120.3 | 12.9 | (3.1) | 1.4 | 155.8 | 289.1 |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| | | Share | Special | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| | Share | premium | capital | Hedging | Revaluation | Retained | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| | capital | account | reserve | reserve | reserve | earnings | Total |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| At 1 November | 1.8 | 119.8 | 12.9 | (2.6) | 1.5 | 102.9 | 236.3 |
| 2008 | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| Profit after tax | - | - | - | - | - | 21.5 | 21.5 |
| for the period | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| Other | - | - | - | (2.9) | - | 10.8 | 7.9 |
| comprehensive | | | | | | | |
| income for the | | | | | | | |
| period | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| Total | - | - | - | (2.9) | - | 32.3 | 29.4 |
| comprehensive | | | | | | | |
| income for the | | | | | | | |
| period | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| Dividends paid | - | - | - | - | - | (8.8) | (8.8) |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| Cost of | - | - | - | - | - | (0.5) | (0.5) |
| share-based | | | | | | | |
| payments (net of | | | | | | | |
| settlement) | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| Transfers between | - | - | - | 0.1 | (0.1) | - | - |
| reserves | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
| At 30 April 2009 | 1.8 | 119.8 | 12.9 | (5.4) | 1.4 | 125.9 | 256.4 |
+-------------------+---------+---------+---------+---------+-------------+----------+-------+
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | | Share | Special | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | Share | premium | capital | Hedging | Revaluation | Retained | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | capital | account | reserve | reserve | reserve | earnings | Total |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| At 1 November | 1.8 | 119.8 | 12.9 | (2.6) | 1.5 | 102.9 | 236.3 |
| 2008 | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Profit after tax | - | - | - | - | - | 70.1 | 70.1 |
| for the year | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Other | - | - | - | (0.8) | - | (14.1) | (14.9) |
| comprehensive | | | | | | | |
| income for the | | | | | | | |
| year | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Total | - | - | - | (0.8) | - | 56.0 | 55.2 |
| comprehensive | | | | | | | |
| income for the | | | | | | | |
| year | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Ordinary shares | - | 0.5 | - | - | - | - | 0.5 |
| issued | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Dividends paid | - | - | - | - | - | (13.8) | (13.8) |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Cost of | - | - | - | - | - | 0.9 | 0.9 |
| share-based | | | | | | | |
| payments (net of | | | | | | | |
| settlement) | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Deferred tax on | - | - | - | - | - | (0.3) | (0.3) |
| share-based | | | | | | | |
| payment | | | | | | | |
| transactions | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| Transfers between | - | - | - | - | (0.1) | 0.1 | - |
| reserves | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
| At 31 October | 1.8 | 120.3 | 12.9 | (3.4) | 1.4 | 145.8 | 278.8 |
| 2009 | | | | | | | |
+-------------------+---------+---------+---------+---------+-------------+----------+--------+
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 April 2010
+---------------------------------+------+-----------+-----------+---------+
| |Note | Unaudited | Unaudited | Audited |
+---------------------------------+------+-----------+-----------+---------+
| | | As at | As at | As at |
+---------------------------------+------+-----------+-----------+---------+
| | | 30 April | 30 April | 31 Oct |
| | | 2010 | 2009 | 2009 |
+---------------------------------+------+-----------+-----------+---------+
| | | GBPm | GBPm | GBPm |
+---------------------------------+------+-----------+-----------+---------+
| Non-current assets | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Goodwill | | 207.9 | 154.7 | 149.5 |
+---------------------------------+------+-----------+-----------+---------+
| Other intangible assets | | 131.5 | 95.7 | 81.9 |
+---------------------------------+------+-----------+-----------+---------+
| Development costs | | 10.1 | 6.1 | 8.5 |
+---------------------------------+------+-----------+-----------+---------+
| Property, plant and equipment | | 154.0 | 128.3 | 135.0 |
+---------------------------------+------+-----------+-----------+---------+
| Investments | | 1.1 | 1.1 | 1.1 |
+---------------------------------+------+-----------+-----------+---------+
| Deferred tax | | 17.9 | 13.7 | 17.7 |
+---------------------------------+------+-----------+-----------+---------+
| | | 522.5 | 399.6 | 393.7 |
+---------------------------------+------+-----------+-----------+---------+
| Current assets | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Inventories | | 121.8 | 107.7 | 96.9 |
+---------------------------------+------+-----------+-----------+---------+
| Trade and other receivables | | 117.2 | 93.9 | 98.8 |
+---------------------------------+------+-----------+-----------+---------+
| Cash and cash equivalents | 7 | 72.1 | 41.8 | 61.3 |
+---------------------------------+------+-----------+-----------+---------+
| Derivative financial | | - | - | 0.4 |
| instruments | | | | |
+---------------------------------+------+-----------+-----------+---------+
| | | 311.1 | 243.4 | 257.4 |
+---------------------------------+------+-----------+-----------+---------+
| | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Total assets | | 833.6 | 643.0 | 651.1 |
+---------------------------------+------+-----------+-----------+---------+
| | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Current liabilities | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Bank loans and overdrafts | | (13.3) | (32.3) | (34.3) |
+---------------------------------+------+-----------+-----------+---------+
| Obligations under finance | | (0.5) | (0.5) | (0.5) |
| leases | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Trade and other payables | | (123.1) | (106.7) | (115.1) |
+---------------------------------+------+-----------+-----------+---------+
| Current tax liabilities | | (9.4) | (12.6) | (14.6) |
+---------------------------------+------+-----------+-----------+---------+
| Derivative financial | | (2.6) | (5.2) | (1.1) |
| instruments | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Short term provisions | | (1.7) | (1.7) | (1.2) |
+---------------------------------+------+-----------+-----------+---------+
| | | (150.6) | (159.0) | (166.8) |
+---------------------------------+------+-----------+-----------+---------+
| Non-current liabilities | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Bank loans | | (43.9) | (76.7) | (61.1) |
+---------------------------------+------+-----------+-----------+---------+
| Loan notes | 8 | (274.0) | (96.9) | (87.2) |
+---------------------------------+------+-----------+-----------+---------+
| Obligations under finance | | (0.8) | (2.4) | (0.9) |
| leases | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Trade and other payables | | (1.3) | (2.6) | (1.8) |
+---------------------------------+------+-----------+-----------+---------+
| Deferred tax | | (34.1) | (21.0) | (22.6) |
+---------------------------------+------+-----------+-----------+---------+
| Long term provisions | | (6.2) | (4.7) | (5.2) |
+---------------------------------+------+-----------+-----------+---------+
| Preference shares | | (0.1) | (0.1) | (0.1) |
+---------------------------------+------+-----------+-----------+---------+
| Retirement benefit obligations | | (30.1) | (16.6) | (28.1) |
+---------------------------------+------+-----------+-----------+---------+
| Derivative financial | | (8.7) | (11.6) | (3.7) |
| instruments | | | | |
+---------------------------------+------+-----------+-----------+---------+
| | | (399.2) | (232.6) | (210.7) |
+---------------------------------+------+-----------+-----------+---------+
| | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Total liabilities | | (549.8) | (391.6) | (377.5) |
+---------------------------------+------+-----------+-----------+---------+
| | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Net assets | | 283.8 | 251.4 | 273.6 |
+---------------------------------+------+-----------+-----------+---------+
| | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Equity | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Share capital | | 1.8 | 1.8 | 1.8 |
+---------------------------------+------+-----------+-----------+---------+
| Share premium account | | 120.3 | 119.8 | 120.3 |
+---------------------------------+------+-----------+-----------+---------+
| Special capital reserve | | 12.9 | 12.9 | 12.9 |
+---------------------------------+------+-----------+-----------+---------+
| Hedging reserve | | (3.1) | (5.4) | (3.4) |
+---------------------------------+------+-----------+-----------+---------+
| Revaluation reserve | | 1.4 | 1.4 | 1.4 |
+---------------------------------+------+-----------+-----------+---------+
| Retained earnings | | 155.8 | 125.9 | 145.8 |
+---------------------------------+------+-----------+-----------+---------+
| | | 289.1 | 256.4 | 278.8 |
+---------------------------------+------+-----------+-----------+---------+
| Own shares | | (5.3) | (5.0) | (5.2) |
+---------------------------------+------+-----------+-----------+---------+
| Equity attributable to equity | | 283.8 | 251.4 | 273.6 |
| holders of the parent | | | | |
+---------------------------------+------+-----------+-----------+---------+
| | | | | |
+---------------------------------+------+-----------+-----------+---------+
| Total equity | | 283.8 | 251.4 | 273.6 |
+---------------------------------+------+-----------+-----------+---------+
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the half year to 30 April 2010
+-------------------------------------+------+-----------+-----------+---------+
| |Note | Unaudited | Unaudited | Audited |
+-------------------------------------+------+-----------+-----------+---------+
| | | Half | Half | Year to |
| | | year to | year to | |
+-------------------------------------+------+-----------+-----------+---------+
| | | 30 April | 30 | 31 Oct |
| | | 2010 | April | 2009 |
| | | | 2009 | |
+-------------------------------------+------+-----------+-----------+---------+
| | | GBPm | GBPm | GBPm |
+-------------------------------------+------+-----------+-----------+---------+
| | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Cash flows from operating | | | | |
| activities | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Underlying cash generated from | A | 28.4 | 30.8 | 106.7 |
| operations | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Acquisition related costs | 9 | (2.3) | - | - |
+-------------------------------------+------+-----------+-----------+---------+
| Cash generated from operations | A | 26.1 | 30.8 | 106.7 |
+-------------------------------------+------+-----------+-----------+---------+
| Tax paid | | (12.2) | (6.8) | (18.7) |
+-------------------------------------+------+-----------+-----------+---------+
| | | 13.9 | 24.0 | 88.0 |
| Net cash inflow from operating | | | | |
| activities | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Cash flows from investing | | | | |
| activities | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Dividends received from associate | | 0.1 | - | - |
+-------------------------------------+------+-----------+-----------+---------+
| Purchases of property, plant and | | (19.5) | (14.2) | (33.4) |
| equipment | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Purchases of intangible assets | | (2.8) | (2.0) | (4.8) |
+-------------------------------------+------+-----------+-----------+---------+
| Acquisition of subsidiaries | 9 | (92.0) | (27.5) | (27.6) |
| (including overdraft acquired) | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Net cash outflow from investing | | (114.2) | (43.7) | (65.8) |
| activities | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Cash flows from financing | | | | |
| activities | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Dividends paid | | (12.7) | (8.8) | (13.8) |
+-------------------------------------+------+-----------+-----------+---------+
| Interest paid | | (5.8) | (6.4) | (10.5) |
+-------------------------------------+------+-----------+-----------+---------+
| Proceeds on issue of shares | | - | - | 0.5 |
+-------------------------------------+------+-----------+-----------+---------+
| New borrowings | | 171.7 | 13.5 | 14.9 |
+-------------------------------------+------+-----------+-----------+---------+
| Repayment of borrowings | | (41.2) | (6.5) | (20.7) |
+-------------------------------------+------+-----------+-----------+---------+
| Decrease of obligations under | | (0.5) | (0.4) | (1.6) |
| finance leases | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Purchase of own shares | | (2.0) | (1.4) | (1.5) |
+-------------------------------------+------+-----------+-----------+---------+
| | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Net cash inflow/(outflow) from | | 109.5 | (10.0) | (32.7) |
| financing activities | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Increase/(decrease) in cash and | | 9.2 | (29.7) | (10.5) |
| cash equivalents during the | | | | |
| period/year | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Cash and cash equivalents at start | | 61.3 | 69.6 | 69.6 |
| of the period/year | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Effect of foreign exchange rate | | 1.6 | 1.9 | 2.2 |
| changes | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| Cash and cash equivalents at end of | | 72.1 | 41.8 | 61.3 |
| the period/year | | | | |
+-------------------------------------+------+-----------+-----------+---------+
| | | | | |
+-------------------------------------+------+-----------+-----------+---------+
NOTES TO THE CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 30 April 2010
+----------------------------------------+-----------+-----------+---------+
| A. Cash generated from operations | Unaudited | Unaudited | Audited |
| | | | |
+----------------------------------------+-----------+-----------+---------+
| | Half | Half | Year to |
| | year to | year to | |
+----------------------------------------+-----------+-----------+---------+
| | 30 April | 30 | 31 Oct |
| | 2010 | April | 2009 |
| | | 2009 | |
+----------------------------------------+-----------+-----------+---------+
| | GBPm | GBPm | GBPm |
+----------------------------------------+-----------+-----------+---------+
| | | | |
+----------------------------------------+-----------+-----------+---------+
| Operating profit from continuing | 34.9 | 36.5 | 107.9 |
| operations | | | |
+----------------------------------------+-----------+-----------+---------+
| Operating profit from acquired | 0.4 | - | - |
| operations | | | |
+----------------------------------------+-----------+-----------+---------+
| Total operating profit | 35.3 | 36.5 | 107.9 |
+----------------------------------------+-----------+-----------+---------+
| Adjustment for: | | | |
+----------------------------------------+-----------+-----------+---------+
| Depreciation of property, plant and | 7.7 | 6.6 | 13.3 |
| equipment | | | |
+----------------------------------------+-----------+-----------+---------+
| Impairment charge | - | - | 1.1 |
+----------------------------------------+-----------+-----------+---------+
| Amortisation of intangible assets | 7.9 | 8.1 | 13.8 |
| arising from business combinations | | | |
+----------------------------------------+-----------+-----------+---------+
| Amortisation of other intangible | 1.4 | 0.6 | 1.5 |
| assets | | | |
+----------------------------------------+-----------+-----------+---------+
| Loss/(gain) on fair value movements on | 6.8 | 1.5 | (7.0) |
| derivatives | | | |
+----------------------------------------+-----------+-----------+---------+
| Share-based payment expense | 1.4 | 1.1 | 2.1 |
+----------------------------------------+-----------+-----------+---------+
| Difference between pension | 0.3 | (0.1) | 0.1 |
| contributions paid and amount | | | |
| recognised in income statement | | | |
+----------------------------------------+-----------+-----------+---------+
| Increase/(decrease) in provisions | 1.2 | (0.5) | 0.5 |
+----------------------------------------+-----------+-----------+---------+
| | | | |
+----------------------------------------+-----------+-----------+---------+
| Operating cash flows before movements | 62.0 | 53.8 | 133.3 |
| in working capital | | | |
+----------------------------------------+-----------+-----------+---------+
| | | | |
+----------------------------------------+-----------+-----------+---------+
| Increase in inventories | (18.7) | (9.3) | (8.4) |
+----------------------------------------+-----------+-----------+---------+
| (Increase)/decrease in trade and other | (16.3) | 0.3 | (10.0) |
| receivables | | | |
+----------------------------------------+-----------+-----------+---------+
| Decrease in trade and other payables | (0.9) | (14.0) | (8.2) |
+----------------------------------------+-----------+-----------+---------+
| | | | |
+----------------------------------------+-----------+-----------+---------+
| Cash generated from operations | 26.1 | 30.8 | 106.7 |
+----------------------------------------+-----------+-----------+---------+
| Acquisition related costs | 2.3 | - | - |
+----------------------------------------+-----------+-----------+---------+
| | | | |
+----------------------------------------+-----------+-----------+---------+
| Underlying cash generated from | 28.4 | 30.8 | 106.7 |
| operations | | | |
+----------------------------------------+-----------+-----------+---------+
| | | | |
+----------------------------------------+-----------+-----------+---------+
| Reconciliation of net cash flow to | | | |
| movement in net debt | | | |
+----------------------------------------+-----------+-----------+---------+
| Increase/(decrease) in cash and cash | 9.2 | (29.7) | (10.5) |
| equivalents during the period/year | | | |
+----------------------------------------+-----------+-----------+---------+
| Cash (inflow)/outflow from increase in | (130.6) | (6.6) | 7.5 |
| debt and lease financing | | | |
+----------------------------------------+-----------+-----------+---------+
| Change in net debt resulting from cash | (121.4) | (36.3) | (3.0) |
| flows | | | |
+----------------------------------------+-----------+-----------+---------+
| | | | |
+----------------------------------------+-----------+-----------+---------+
| Decrease in debt and finance leasing | 0.3 | 0.2 | 0.5 |
+----------------------------------------+-----------+-----------+---------+
| Translation difference | (15.9) | (14.1) | (3.1) |
+----------------------------------------+-----------+-----------+---------+
| Amortisation of debt finance costs | (0.7) | (0.2) | (0.5) |
+----------------------------------------+-----------+-----------+---------+
| Movement in net debt in the | (137.7) | (50.4) | (6.1) |
| period/year | | | |
+----------------------------------------+-----------+-----------+---------+
| Net debt at start of the period/year | (122.8) | (116.7) | (116.7) |
+----------------------------------------+-----------+-----------+---------+
| | | | |
+----------------------------------------+-----------+-----------+---------+
| Net debt at end of the period/year | (260.5) | (167.1) | (122.8) |
+----------------------------------------+-----------+-----------+---------+
+------------------------+---------+---------+----------+----------+----------+
| Analysis of net debt | | | | | |
+------------------------+---------+---------+----------+----------+----------+
| | As at 1 | Cash | Non-cash | Exchange | As at 30 |
| | Nov | flow | changes | movement | April |
| | 2009 | | | | 2010 |
+------------------------+---------+---------+----------+----------+----------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+------------------------+---------+---------+----------+----------+----------+
| | | | | | |
+------------------------+---------+---------+----------+----------+----------+
| Cash at bank and in | 61.3 | 9.2 | - | 1.6 | 72.1 |
| hand | | | | | |
+------------------------+---------+---------+----------+----------+----------+
| | | | | | |
+------------------------+---------+---------+----------+----------+----------+
| Debt due within one | (34.3) | 32.2 | (10.5) | (0.7) | (13.3) |
| year | | | | | |
+------------------------+---------+---------+----------+----------+----------+
| Debt due between two | (61.1) | 12.0 | 6.0 | (0.8) | (43.9) |
| and five years | | | | | |
+------------------------+---------+---------+----------+----------+----------+
| Debt due after more | (87.2) | (175.3) | 4.5 | (16.0) | (274.0) |
| than five years | | | | | |
+------------------------+---------+---------+----------+----------+----------+
| Finance leases | (1.4) | 0.5 | (0.4) | - | (1.3) |
+------------------------+---------+---------+----------+----------+----------+
| Preference shares | (0.1) | - | - | - | (0.1) |
+------------------------+---------+---------+----------+----------+----------+
| | | | | | |
+------------------------+---------+---------+----------+----------+----------+
| | (122.8) | (121.4) | (0.4) | (15.9) | (260.5) |
+------------------------+---------+---------+----------+----------+----------+
INDEPENDENT REVIEW REPORT TO CHEMRING GROUP PLC
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 April
2010 which comprises the Condensed Consolidated Income Statement, the Condensed
Consolidated Statement of Comprehensive Income, the Condensed Consolidated
Statement of Changes in Equity, the Condensed Consolidated Balance Sheet, the
Condensed Consolidated Cash Flow Statement and related Notes 1 to 12. We have
read the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland): 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the Entity issued
by the Auditing Practices Board. Our work has been undertaken so that we might
state to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34: Interim Financial Reporting, as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410: Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 April 2010 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditors
Southampton, United Kingdom
22 June 2010
NOTES TO THE CONDENSED SET OF FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of preparation
The Condensed Consolidated Income Statement for each of the six month periods
and the Condensed Consolidated Balance Sheet as at 30 April 2010 do not
constitute statutory accounts as defined by section 435 of the Companies Act
2006 and have not been delivered to the Registrar of Companies. The half-yearly
financial report was approved by the Board of Directors on 22 June 2010. The
information for the year ended 31 October 2009 does not constitute statutory
accounts as defined in section 435 of the Companies Act 2006. Full accounts for
the year ended 31 October 2009, which include an unqualified audit report, did
not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not contain statements
under section 498(2) or (3) of the Companies Act 2006, have been delivered to
the Registrar of Companies.
These interim financial statements have been prepared in accordance with IFRSs
as adopted by the European Union. The condensed set of financial statements
included in the half-yearly financial report has been prepared in accordance
with International Accounting Standard 34 - Interim Financial Reporting as
adopted by the European Union.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
Going concern
The directors believe the Group is well placed to manage its business risks
successfully despite the current uncertain economic outlook. The Group's
forecasts and projections, taking account of reasonably possible changes in
trading performance, show that the Group should be able to operate within the
level of its current committed facilities.
The directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. Thus
they continue to adopt the going concern basis in preparing the half-yearly
condensed financial statements.
Changes in accounting policies
The accounting policies applied by the Group in this half-yearly financial
report are the same as those applied by the Group in its consolidated financial
statements for the year ended 31 October 2009, except as described below.
In the current financial year, the Group has adopted International Financial
Reporting Standard 8 - Operating Segments, International Accounting Standard 1 -
Presentation of Financial Statements (revised 2007), International Financial
Reporting Standard 3 - Business Combinations (revised 2008) and International
Accounting Standard 27 - Consolidated and Separate Financial Statements (revised
2008).
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the Chief
Executive and the Board of Directors to allocate resources to the segments and
to assess their performance. In contrast, the predecessor Standard (IAS 14 -
Segment Reporting) required the Group to identify two sets of segments (business
and geographical), using a risks and rewards approach, with the Group's system
of internal financial reporting to key management personnel serving only as the
starting point for the identification of such segments. As a result, the
segmental information required by IAS 34 which is included in note 2 below is
presented in accordance with IFRS 8. An additional balance sheet as at 31
October 2008 has not been provided as the adoption of the standard has not
changed any number on the balance sheet.
The most significant changes to the Group's previous accounting policies for
business combinations are as follows:
· Acquisition related costs which previously would have been included in the
cost of a business combination are included in administrative expenses as they
are incurred.
· Any changes to the cost of an acquisition, including contingent
consideration, resulting from events after the date of acquisition are
recognised in profit or loss. Previously, such changes resulted in an adjustment
to goodwill.
The revised standards have been applied to both acquisitions that were completed
during the period as described in note 9.
Any adjustments to contingent consideration for acquisitions made in the prior
year which would result in an adjustment to goodwill continue to be accounted
for under IFRS 3 (2004) and IAS 27 (2005), for which the accounting policies can
be found in the Group's latest annual audited financial statements.
2. SEGMENTAL ANALYSIS
A segmental analysis of revenue and results is set out below:
+---------------------------------------+-----------+-----------+---------+
| | Unaudited | Unaudited | Audited |
| | Half year | Half year | Year to |
| | to 30 | to 30 | 31 Oct |
| | April | April | 2009 |
| | 2010 | 2009 | |
+---------------------------------------+-----------+-----------+---------+
| Continuing operations: | GBPm | GBPm | GBPm |
+---------------------------------------+-----------+-----------+---------+
| Revenue | | | |
+---------------------------------------+-----------+-----------+---------+
| Countermeasures | 91.9 | 86.2 | 183.5 |
+---------------------------------------+-----------+-----------+---------+
| Pyrotechnics | 68.3 | 68.6 | 173.2 |
+---------------------------------------+-----------+-----------+---------+
| EOD | 41.3 | 21.5 | 61.2 |
+---------------------------------------+-----------+-----------+---------+
| Munitions | 54.4 | 57.2 | 86.0 |
+---------------------------------------+-----------+-----------+---------+
| | | | |
+---------------------------------------+-----------+-----------+---------+
| Total | 255.9 | 233.5 | 503.9 |
+---------------------------------------+-----------+-----------+---------+
| | | | |
+---------------------------------------+-----------+-----------+---------+
| Underlying operating profit | | | |
+---------------------------------------+-----------+-----------+---------+
| Countermeasures | 24.4 | 23.7 | 53.5 |
+---------------------------------------+-----------+-----------+---------+
| Pyrotechnics | 12.8 | 15.1 | 43.8 |
+---------------------------------------+-----------+-----------+---------+
| EOD | 9.9 | 5.1 | 15.6 |
+---------------------------------------+-----------+-----------+---------+
| Munitions | 10.9 | 8.6 | 13.4 |
+---------------------------------------+-----------+-----------+---------+
| Charge for share-based payments | (1.4) | (1.1) | (2.1) |
+---------------------------------------+-----------+-----------+---------+
| Restructuring costs | - | (1.7) | (2.9) |
+---------------------------------------+-----------+-----------+---------+
| Unallocated head office costs | (4.3) | (3.6) | (6.6) |
+---------------------------------------+-----------+-----------+---------+
| | | | |
+---------------------------------------+-----------+-----------+---------+
| Underlying operating profit | 52.3 | 46.1 | 114.7 |
+---------------------------------------+-----------+-----------+---------+
| Acquisition related costs | (2.3) | - | - |
+---------------------------------------+-----------+-----------+---------+
| Intangible amortisation arising from | (7.9) | (8.1) | (13.8) |
| business combinations | | | |
+---------------------------------------+-----------+-----------+---------+
| (Loss)/gain on fair value movements | (6.8) | (1.5) | 7.0 |
| on derivatives | | | |
+---------------------------------------+-----------+-----------+---------+
| | | | |
+---------------------------------------+-----------+-----------+---------+
| Operating profit | 35.3 | 36.5 | 107.9 |
+---------------------------------------+-----------+-----------+---------+
| Share of post-tax results of | - | - | 0.1 |
| associate | | | |
+---------------------------------------+-----------+-----------+---------+
| Finance income | 0.1 | 0.8 | 0.7 |
+---------------------------------------+-----------+-----------+---------+
| Finance expense | (10.1) | (7.4) | (12.9) |
+---------------------------------------+-----------+-----------+---------+
| | | | |
+---------------------------------------+-----------+-----------+---------+
| Profit before tax for the period/year | 25.3 | 29.9 | 95.8 |
+---------------------------------------+-----------+-----------+---------+
| Tax | (6.9) | (8.4) | (25.7) |
+---------------------------------------+-----------+-----------+---------+
| | | | |
+---------------------------------------+-----------+-----------+---------+
| Profit after tax for the period/year | 18.4 | 21.5 | 70.1 |
+---------------------------------------+-----------+-----------+---------+
+---------------------------------------+-----------+-----------+---------+
| | Unaudited | Unaudited | Audited |
| | Half year | Half year | Year to |
| | to | to | 31 Oct |
| | 30 April | 30 April | 2009 |
| | 2010 | 2009 | |
+---------------------------------------+-----------+-----------+---------+
| | GBPm | GBPm | GBPm |
+---------------------------------------+-----------+-----------+---------+
| Continuing operations: | | | |
+---------------------------------------+-----------+-----------+---------+
| Revenue | | | |
+---------------------------------------+-----------+-----------+---------+
| UK | 42.6 | 55.2 | 125.2 |
+---------------------------------------+-----------+-----------+---------+
| USA | 141.8 | 106.6 | 235.4 |
+---------------------------------------+-----------+-----------+---------+
| Europe | 30.1 | 41.4 | 75.0 |
+---------------------------------------+-----------+-----------+---------+
| Australia and Far East | 23.2 | 19.1 | 39.1 |
+---------------------------------------+-----------+-----------+---------+
| Middle East | 15.4 | 5.6 | 20.4 |
+---------------------------------------+-----------+-----------+---------+
| Rest of the world | 2.8 | 5.6 | 8.8 |
+---------------------------------------+-----------+-----------+---------+
| | | | |
+---------------------------------------+-----------+-----------+---------+
| Total | 255.9 | 233.5 | 503.9 |
+---------------------------------------+-----------+-----------+---------+
There were no inter-segment sales in any of the periods.
The directors consider the only countries that are considered significant in
accordance with IFRS 8 are the UK and USA as disclosed above.
The Group does not disclose assets by segment in the monthly management accounts
provided to the Executive Committee or the Board of Directors. Therefore, in
accordance with Improvements to IFRSs issued in April 2009, the Group has
adopted this amendment early in order to clarify that the chief operational
decision makers do not use this as a key decision tool.
There were no material changes to the numbers disclosed for the year ended 31
October 2009 in arriving at the IFRS 8 - Operating Segments disclosure.
3. SEASONALITY OF REVENUE
Revenue for all four of the business segments is more weighted towards the
second half of the financial year in line with defence spending. Margins in the
second half of the financial year are anticipated to improve as increased
revenue should lead to higher gross profit, whilst fixed costs should remain at
similar levels to the first half of the financial year.
4. TAX
The estimated tax rate for the Group for continuing operations for the year
ending 31 October 2010 is 27% (2009: 28%) and the underlying estimated effective
tax rate is 26% (2009: 28%). This represents the best estimate of the average
effective income tax rate expected for the full year, applied to the pre-tax
income for the six month period.
5. EARNINGS PER SHARE
Earnings per share are based on the average number of shares in issue of
35,334,233 (2009: 35,232,169) and profit on ordinary activities after tax and
minority interests of GBP18.4 million (2009: GBP21.5 million). Diluted earnings
per share has been calculated using a diluted average number of shares in issue
of 35,666,036 (2009: 35,516,735) and profit on ordinary activities after tax and
minority interests of GBP18.4 million (2009: GBP21.5 million).
The earnings and shares used in the calculations are as follows:
+------------------------------+----------+----------+-------+----------+----------+-------+
| | | | 2010 | | | 2009 |
+------------------------------+----------+----------+-------+----------+----------+-------+
| From continuing operations | | Ordinary | | | Ordinary | |
+------------------------------+----------+----------+-------+----------+----------+-------+
| | | shares | | | shares | |
+------------------------------+----------+----------+-------+----------+----------+-------+
| | Earnings | Number | EPS | Earnings | Number | EPS |
+------------------------------+----------+----------+-------+----------+----------+-------+
| | GBPm | 000s | Pence | GBPm | 000s | Pence |
+------------------------------+----------+----------+-------+----------+----------+-------+
| Basic | 18.4 | 35,334 | 52 | 21.5 | 35,232 | 61 |
+------------------------------+----------+----------+-------+----------+----------+-------+
| Additional shares issuable | - | 332 | - | - | 285 | - |
| other than at fair value in | | | | | | |
| respect of options | | | | | | |
| outstanding | | | | | | |
+------------------------------+----------+----------+-------+----------+----------+-------+
| | | | | | | |
+------------------------------+----------+----------+-------+----------+----------+-------+
| Diluted | 18.4 | 35,666 | 52 | 21.5 | 35,517 | 61 |
+------------------------------+----------+----------+-------+----------+----------+-------+
Reconciliation from basic earnings per share to underlying earnings per share:
Underlying earnings has been defined as earnings before intangible amortisation
arising from business combinations, acquisition related costs and loss on fair
value movements on derivatives. The directors consider this measure of earnings
allows a more meaningful comparison of earnings trends.
+------------------------------+----------+----------+-------+----------+----------+-------+
| | | | 2010 | | | 2009 |
+------------------------------+----------+----------+-------+----------+----------+-------+
| From continuing operations | | Ordinary | | | Ordinary | |
+------------------------------+----------+----------+-------+----------+----------+-------+
| | | shares | | | shares | |
+------------------------------+----------+----------+-------+----------+----------+-------+
| | Earnings | Number | EPS | Earnings | Number | EPS |
+------------------------------+----------+----------+-------+----------+----------+-------+
| | GBPm | 000s | Pence | GBPm | 000s | Pence |
+------------------------------+----------+----------+-------+----------+----------+-------+
| Basic | 18.4 | 35,334 | 52 | 21.5 | 35,232 | 61 |
+------------------------------+----------+----------+-------+----------+----------+-------+
| Intangible amortisation | 12.9 | - | 37 | 7.0 | - | 20 |
| arising from business | | | | | | |
| combinations, acquisition | | | | | | |
| related costs and loss on | | | | | | |
| fair value movements on | | | | | | |
| derivatives (after tax) | | | | | | |
+------------------------------+----------+----------+-------+----------+----------+-------+
| | | | | | | |
+------------------------------+----------+----------+-------+----------+----------+-------+
| Underlying | 31.3 | 35,334 | 89 | 28.5 | 35,232 | 81 |
+------------------------------+----------+----------+-------+----------+----------+-------+
Full details of earnings per share for the year ended 31 October 2009 are
disclosed in the Group's audited 2009 Financial Statements.
Underlying earnings per share from continuing operations was 213p from
continuing operations, which was calculated on GBP75.0 million of earnings and
35,266,616 average shares. Basic earnings per share was 199p from continuing
operations, calculated on GBP70.1 million of earnings and 35,266,616 average
shares.
The number of shares in issue differs from the number held by third parties due
to the fact that the Group holds Chemring Group PLC shares in treasury. The
total number of ordinary shares held in treasury at 30 April 2010 was 235,000
(2009: 263,131) with an average cost of GBP22.44 (2009: GBP18.86) per share.
This represents 0.7% of the total issued and fully paid ordinary share capital.
During the period the Group issued 100,011 of treasury shares following the
vesting of conditional awards made on 27 September 2006 and 24 January 2007
under the Chemring Group Performance Share Plan. The Group also purchased 71,880
shares for treasury in the period.
6. DIVIDENDS
+------------------------------------------------+---------+--------+
| | 2010 | 2009 |
+------------------------------------------------+---------+--------+
| | GBPm | GBPm |
+------------------------------------------------+---------+--------+
| Dividends on ordinary shares of 5p each | | |
+------------------------------------------------+---------+--------+
| Interim dividend for the half year ended 30 | - | 5.0 |
| April 2009 14.0p | | |
+------------------------------------------------+---------+--------+
| Final dividend for the year ended 31 October | 12.7 | 8.8 |
| 2009 36.0p (2008: 25.0p) | | |
+------------------------------------------------+---------+--------+
| | | |
+------------------------------------------------+---------+--------+
| Total dividends | 12.7 | 13.8 |
+------------------------------------------------+---------+--------+
The proposed interim dividend in respect of the half year ended 30 April 2010 of
17p per share will, if approved, absorb approximately GBP6.0 million of
shareholders' funds. No liability for the proposed interim dividend has been
included in these interim financial statements.
7. CASH AND CASH EQUIVALENTS
Included within cash is GBP10.4 million of restricted cash (2009: GBP5.4
million), of which GBP10.1 million (2009: GBP5.1 million) is held in escrow in
relation to the Chemring Group Staff Pension Scheme.
8. LOAN NOTES
During the period, the Group issued $280 million of fixed interest loan notes to
a number of institutional investors. $80 million of the loan notes will mature
in November 2016, and $200 million will mature in November 2019. The total issue
carries an interest rate of approximately 5.5%, a more favourable rate than the
Group previously enjoyed. The proceeds were used to fund the acquisition of
Hi-Shear Technology Corporation, repay existing short and medium term debt, and
provide additional working capital facilities for the Group.
9. ACQUISITIONS
The following acquisitions were completed during the period:
+----------------------+--------------+-------------+------------+---------------+
| Name of business | Activity | Date of | Proportion | Acquisition |
| acquired | | acquisition | of shares | consideration |
| | | | acquired | GBPm |
| | | | % | |
+----------------------+--------------+-------------+------------+---------------+
| Hi-Shear Technology | Pyrotechnics | 25 | | |
| Corporation | | November | 100% | 78.7 |
| | | 2009 | | |
+----------------------+--------------+-------------+------------+---------------+
| Chemring Fuze | Munitions | 19 March | 100% | 10.2 |
| Technology S.r.l | | 2010 | | |
+----------------------+--------------+-------------+------------+---------------+
| | |
| Cash paid for acquisitions in the period | 88.9 |
+----------------------------------------------------------------+---------------+
| Bank overdraft acquired | 3.1 |
+----------------------------------------------------------------+---------------+
| | |
+----------------------------------------------------------------+---------------+
| Cash outflow from investing activities | 92.0 |
+----------------------------------------------------------------+---------------+
| Acquisition related costs included within cash | 2.3 |
| generated from operations | |
+----------------------------------------------------------------+---------------+
| | |
+----------------------------------------------------------------+---------------+
| Net cash outflow | 94.3 |
+----------------------+--------------+-------------+------------+---------------+
Hi-Shear was acquired, by way of a cash purchase, to enhance the Group's
pyrotechnic offerings.
An analysis of the net assets acquired and consideration paid in respect of the
acquisition of Hi-Shear is set out below:
+-------------------------------------+----------+-------------+--------+
| | | Provisional | |
| | | | |
+-------------------------------------+----------+-------------+--------+
| | Book | fair | Fair |
| | | value | |
+-------------------------------------+----------+-------------+--------+
| | value | adjustments | value |
+-------------------------------------+----------+-------------+--------+
| | GBPm | GBPm | GBPm |
+-------------------------------------+----------+-------------+--------+
| | | | |
+-------------------------------------+----------+-------------+--------+
| Intangible assets | - | 42.3 | 42.3 |
+-------------------------------------+----------+-------------+--------+
| Property, plant and equipment | 1.6 | - | 1.6 |
+-------------------------------------+----------+-------------+--------+
| Bank overdraft | (3.1) | - | (3.1) |
+-------------------------------------+----------+-------------+--------+
| Working capital | 7.5 | (4.0) | 3.5 |
+-------------------------------------+----------+-------------+--------+
| Deferred tax | 0.2 | (11.8) | (11.6) |
+-------------------------------------+----------+-------------+--------+
| Net assets acquired | 6.2 | 26.5 | 32.7 |
+-------------------------------------+----------+-------------+--------+
| Goodwill | - | 46.0 | 46.0 |
+-------------------------------------+----------+-------------+--------+
| Total | 6.2 | 72.5 | 78.7 |
+-------------------------------------+----------+-------------+--------+
| Total cash consideration | | | 78.7 |
+-------------------------------------+----------+-------------+--------+
Chemring Fuze Technology S.r.l. was acquired through a cash purchase on 19 March
2010 and provides fuzes to Simmel Difesa, a fellow Group company. The
acquisition is designed to provide synergies from vertical integration and
security in the continued supply of fuzes. The company was acquired for GBP10.2
million, which resulted in goodwill of GBP4.9 million and acquired intangibles
of GBP7.2 million. The only significant provisional fair value adjustment was to
remove pre-existing goodwill resulting from a previous transaction.
Adjustments from book value to provisional fair value arise principally from the
application of Group accounting policies and the recognition of intangible
assets under IFRS3 (Revised) - Business Combinations and Fair Value Adjustments
to Inventories, Receivables, Property, Plant and Equipment. Intangible assets
relate principally to customer relationships and technology.
All intangible assets were recognised at their respective provisional fair
values. The residual excess of total cost over the fair value of net assets
acquired is recognised as goodwill in the financial statements. Goodwill
represents the value of synergies and assembled workforces acquired.
The acquisitions during the period contributed GBP8.1 million of revenue, GBP3.9
million to the Group's underlying operating profit and GBP0.4 million to the
Group's statutory operating profit for the period between the date of
acquisition and the balance sheet date.
If the acquisitions had been completed on the first day of the current period,
Group revenues, underlying operating profit and statutory operating profit for
continuing operations for the period would have been approximately GBP257.5
million, GBP53.1 million and GBP35.4 million respectively. This information is
not necessarily indicative of the results of operations that would have occurred
had the operations been acquired at the start of the current period, nor of the
future results of the combined operations.
10. PENSIONS
The defined benefit obligations are calculated using an actuarial valuation as
at 30 April 2010. The deficit has increased as a result of changes to the
schemes' asset values from falling equity markets and from the adjustment in
assumptions to reflect current market conditions. The difference between the
expected return on assets and the actual return on assets have been recognised
as an actuarial loss in the Condensed Consolidated Statement of Comprehensive
Income in accordance with the Group's accounting policy.
The Chemring Group Staff Pension Scheme 2009 triennial valuation has now been
completed and full details will be disclosed in the Group's 2010 Annual Report.
11. RELATED PARTY TRANSACTIONS
The Group had no related party transactions during the period requiring
disclosure.
12. CORPORATE WEBSITE
Further information on the Group and its activities can be found on the
corporate website at www.chemring.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BLGDLGUDBGGB
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