PRE-CLOSE TRADING UPDATE


 

TIDMCHG 
 
RNS Number : 3084W 
Chemring Group PLC 
17 November 2010 
 

FOR IMMEDIATE RELEASE 
                            17 NOVEMBER 2010 
 
 
                               CHEMRING GROUP PLC 
 
                            PRE-CLOSE TRADING UPDATE 
 
 
Chemring Group PLC ("Chemring" or "the Group") today provides an update on 
trading before entering the close period in respect of its preliminary results 
for the year ended 31 October 2010, which are expected to be announced on 18 
January 2011. 
 
Trading 
The Group performed strongly in the last quarter of the financial year with 
revenue in the period increasing substantially to GBP218 million, up 42% from 
GBP154 million in the same period last year. As identified in our interim 
management statement in September, this growth reflects the high second half 
weighting, following the delays in order placement by many of our European 
customers. The total revenue generated in the full year, subject to final audit, 
was GBP597 million, 18% higher than the previous year, and represents a 
satisfactory rate of growth in spite of the difficult European market 
conditions. Our US, Middle East and Far East revenues all grew strongly during 
the year. 
 
Two separate incidents stopped production in September at our Kilgore Flares 
facility in Tennessee and our newly acquired subsidiary, Mecar, in Belgium. A 
number of safety improvements were identified to prevent similar occurrences and 
these have been implemented successively on each production line prior to 
re-start. At Mecar, each product re-start is being consecutively phased over the 
first half period and this is not expected to have any impact on the full year 
performance. At Kilgore, production re-start for all products not directly 
involved in the incident was approved at the beginning of October. A number of 
the safety improvement actions took longer to implement than originally 
expected, resulting in about GBP7 million of revenue and GBP3 million of 
operating margin being delayed into the first two months of the 2011 financial 
year. In addition, we have incurred non-recurring costs of GBP3 million 
associated with damaged product and inventory, as well as the safety 
improvements mentioned earlier. Apart from these two issues, the operating 
profit was in line with expectations. 
 
The Group's order book at the end of the year was GBP803 million, which is 44% 
higher than at the end of 2009. Since most of the Group's contracts are placed 
with six to twelve months' duration, the Board considers this an important 
indicator that the prospects for further growth in 2011 continue to be strong. 
 
 
Update on Market Conditions 
The market conditions have not changed significantly since we issued our last 
interim management statement in September 2010. However, in the last few weeks, 
the UK Government published its Strategic Defence and Security Review: Securing 
Britain in an Age of Uncertainty. The key implications for Chemring are broadly 
neutral, and the UK market will represent only 15% of Group revenue in 2011 and 
beyond. 
 
The removal of the RAF Harrier fleet in 2011 will reduce our countermeasures 
revenues by about GBP1 million per year. However, the additional twelve Chinook 
helicopters will increase the support helicopter fleet and potentially increase 
demand for expendable decoys, particularly in support of the Afghanistan 
campaign. In the longer term, the demand for flares to support the twenty two 
new A400m transport aircraft should outweigh the reduction associated with the 
withdrawal of C130 aircraft. The reduction in numbers of JSF aircraft or its 
delayed timing will have a negligible impact on the decoy production that 
continues to be dominated by US requirements. 
 
The UK Government also announced its "commitment to ensuring that the 
peacekeeping campaign in Afghanistan is properly resourced, funded and equipped, 
so that the armed forces can do their job as effectively and as safely as 
possible". This commitment to the Afghanistan mission and the emphasis on 
Special Forces will maintain demand for improved pyrotechnic and 
counter-improvised explosive device ("C-IED") products that better meet our 
customers' operational requirements. The emphasis on C-IED and man-portable 
electronic warfare technology should also underpin our target market for the 
next generation Roke products. 
 
Financial Position 
The operating cash inflow across the Group in the last quarter of the year was 
in line with expectations. After allowance for the funding of the two 
acquisitions made in September of Mecar in Nivelles, Belgium and Roke in Romsey, 
UK, the net debt for the Group was GBP310 million, in line with the guidance 
given in our third quarter interim management statement. 
 
 
 
For further information: 
 
+---------------+--------------------------------+---------------------+ 
| Dr David      | Chief Executive, Chemring      | 01489 881880        | 
| Price         | Group PLC                      |                     | 
+---------------+--------------------------------+---------------------+ 
| Paul Rayner   | Finance Director, Chemring     | 01489 881880        | 
|               | Group PLC                      |                     | 
+---------------+--------------------------------+---------------------+ 
| Rupert        | Cardew Group                   | 020 7930 0777       | 
| Pittman       |                                |                     | 
+---------------+--------------------------------+---------------------+ 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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