TIDMCHG
RNS Number : 9515I
Chemring Group PLC
23 June 2011
FOR IMMEDIATE RELEASE 23 JUNE 2011
CHEMRING GROUP PLC
INTERIM RESULTS FOR THE HALF YEAR TO 30 APRIL 2011
KEY HIGHLIGHTS
-- Revenue up 29% to GBP329.8 million (2010: GBP255.9
million)
-- Organic(1) revenue growth of 18%
-- 25% of revenue to non-NATO customers (2010: 16%)
-- Current order book at record high of GBP988 million
-- Acquisition of General Dynamics Detection Systems business
announced
-- Underlying earnings per share(2) up 18% to 20.8p (2010:
17.7p(3) )
-- Interim dividend per ordinary share up 18% at 4.0p (2010:
3.4p(3) )
FINANCIAL HIGHLIGHTS
Results for the half year to 30 April 2011
2011 2010 Increase/
GBPm GBPm decrease
Revenue 329.8 255.9 29%
Underlying operating profit(2) 57.6 52.3 10%
Underlying profit before tax(2) 49.6 42.3 17%
Profit before tax 41.7 25.3 65%
Underlying earnings per share(2) 20.8p 17.7p(3) 18%
Basic earnings per share 17.5p 10.4p(3) 68%
Dividend per ordinary share 4.0p 3.4p(3) 18%
Underlying cash generated from operations 46.7 28.4 64%
Net debt 198.1 260.5 -24%
Divisional Highlights
Counter-IED
-- Excellent first half with revenue up 132% to GBP95.7 million
- now the largest division
-- Over 150 Husky Mounted Detection Systems (HMDS) now in
operation
-- Deliveries of upgraded radar on new 64 unit HMDS contract
commence July
Countermeasures
-- Strong growth in UK and Australian businesses
-- Good performance at Kilgore following restart
-- Consolidation of Alloy Surfaces on two sites following
reduced demand for helicopter flares
Munitions
-- Divisional revenue increased by 57% to GBP85.4 million
despite minimal production at Mecar
-- Strong growth in naval and land force ammunition
-- Substantial growth in Middle East order book
Pyrotechnics
-- Production of training grenades and battlefield simulation
products resumes after upgrade
-- Reduced demand from British Army for 81mm illumination rounds
compensated by growth in sales of smoke and signal grenades to
European customers
-- US 40mm production weighted to second half
Dr David Price, Chemring Group Chief Executive, commented:
"The Group performed strongly in the first six months of this
financial year, with revenue up 29% to GBP329.8 million and
underlying profit before tax(2) up 17% to GBP49.6 million.
Underlying earnings per share(2) increased 18% to 20.8p. This
performance was achieved in spite of the growing difficulties
facing the UK and US defence markets.
Delivery of 18% organic growth(1) in the first half of the year,
with strong performances from the Counter-IED and Munitions
businesses, an increase in non-NATO customers, and a current order
book that is 52% higher than at April 2010, means the Group remains
on course to meet the Board's full year expectations. As a
short-cycle business with rapid development timescales, Chemring
remains excellently placed to deliver continuing growth for the
future."
Notes:
1. Organic growth excludes growth from the contracts and
customers acquired with Roke and Mecar.
2. Excludes acquisition related costs, intangible amortisation
arising from business combinations and gain/(loss) on fair value
movements on derivatives totalling GBP7.9 million (2010: GBP17.0
million). Underlying earnings per share is reconciled to basic
earnings per share in Note 5 of the interim report.
3. Restated to reflect subdivision of 5p ordinary shares into 1p
ordinary shares
4. The interim dividend of 4.0p per ordinary share will be paid
on 5 August 2011 to shareholders on the register at 15 July 2011.
The ex-dividend date will be 13 July 2011.
5. All comparisons are for the half year to 30 April 2010.
For further information:
0207
David Chief Executive, Chemring Group PLC 930
Price 0777
Finance
Director, 0207
Paul Chemring 930
Rayner Group PLC 0777
0207
Rupert Cardew 930
Pittman Group 0777
INTERIM MANAGEMENT REPORT
Results for the half year to 30 April 2011
2011 2010
GBPm GBPm
Revenue 329.8 255.9
Underlying operating profit* 57.6 52.3
Underlying profit before tax* 49.6 42.3
Profit before tax 41.7 25.3
Underlying earnings per share* 20.8p 17.7p(#)
Basic earnings per share 17.5p 10.4p(#)
Dividend per ordinary share 4.0p 3.4p(#)
* Excludes acquisition related costs, intangible amortisation
arising from business combinations and gain/(loss) on fair value
movements on derivatives totalling GBP7.9 million (2010: GBP17.0
million)
(#) Restated to reflect subdivision of 5p ordinary shares into
1p ordinary shares
( ) Organic growth excludes growth from contracts and customers
acquired with Roke and Mecar
The Group performed strongly in the first six months of this
financial year, with revenue up 29% to GBP329.8 million (2010:
GBP255.9 million) and underlying profit before tax* up 17% to
GBP49.6 million (2010: GBP42.3 million). Underlying earnings per
share* increased 18% to 20.8p (2010:17.7p). This performance was
achieved in spite of the growing difficulties facing the UK market
as a result of severe defence budget constraints, as well as the
widespread delays in US defence contract placement resulting from
the extended timescales for approval of the US FY2011 defence
budget. These delays, together with increased uncertainty in Middle
East markets constrained the growth in the order book, which
nonetheless grew by a further 17% over the period to GBP937 million
(October 2010: GBP803 million). It is, however, 44% higher than at
the end of April 2010 and remains a good leading indicator of
future growth. Trading in the second half is, therefore, expected
to be strong and the Group remains on course to meet the Board's
full year expectations.
Organic growth( ) in the first half period was 18%, which was an
excellent performance. This strong growth was generated by the
rapid expansion of the Counter-IED and Munitions businesses. The
continued success of the Husky Mounted Detection System (HMDS)
ground penetrating radar in the US market has made a major
contribution. In addition, the strategic focus on developing the
Group's position in non-NATO markets continues to play a key role,
with sales from these regions now constituting around 25% of the
Group revenue (2010: 16%).
Underlying cash generated from operating activities was up 64%
to GBP46.7 million (2010: GBP28.4 million), reflecting a strong
management focus on improving working capital during the period.
This corresponds to an 81% conversion of underlying operating
profit (2010: 54% conversion).
The integration of the Group's two recent acquisitions, Roke in
the UK and Mecar in Belgium, progressed steadily over the period.
Roke made an encouraging contribution with revenue of GBP24 million
in the first half, and should deliver its expected profit levels
over the full financial year. A number of important new product
development programmes, linked to core parts of other Group
businesses, have now been launched. Production at Mecar in the
first half was badly affected by the explosion that took place
within the large calibre assembly plant in September 2010. The
rebuilding of this facility and the careful safety review that must
be implemented before any production line is allowed to restart has
delayed production by about four months. This will result in a
stronger second-half weighting to the contribution from Mecar this
year.
Counter-IED
The Counter-IED business had an excellent first half,
significantly increasing revenue by 132% to GBP95.7 million (2010:
GBP41.3 million) and more than doubling operating profit to GBP20.0
million (2010: GBP9.9 million). The operating margin did, however,
reduce to 21% (2010: 24%), principally due to the acquisition of
Roke, which has lower margins.
NIITEK made another impressive start to the year, completing all
of the HMDS ground penetrating radar (GPR) system deliveries on
this year's 76 system contract, and increasing the deliveries of
spares by 280% compared with last year. Over 150 of these GPR
systems are now in operation with the US Army and have proved
tremendously successful in saving the lives of hundreds of soldiers
during operations in Afghanistan. The delivery of a high volume of
spares, together with an extensive support network of NIITEK
personnel to maintain the equipment at Forward Operating Bases, has
ensured a high level of availability of the equipment. A contract
for 64 systems was awarded in January 2011, including an upgrade to
certain aspects of the technology. These modified systems will
start to be delivered later this financial year. Funding for
further development remains high, and good progress is being made
on the next generation system. The competition in the US for the
procurement of the next generation vehicle-mounted mine detection
system is still expected in 2012.
The excellent performance achieved by the HMDS system and the
deployment of "Eyes in the Skies" detection systems have reduced
the effectiveness of insurgent attacks on vehicles, and more
improvised explosive device (IED) attacks are now focussed towards
dismounted operations. The Overseas Contingent Operations (OCO)
part of the recently approved US FY2011 defence budget has
allocated $75 million for procurement of hand-held detection
systems, and a considerable amount of our research and development
funding has been directed towards this growing part of the market.
Both NIITEK and Roke have developed new hand-held products, which
are undergoing evaluation trials at US and European test ranges
respectively.
NIITEK won the recent competition to integrate a GPR system on
to the Talon robot for use in off-road, dismounted operations. The
product development will take place over the remainder of the
financial year, and an in-theatre operational evaluation of the
system is scheduled for 2012. Considerable interest has been shown
in this product by export customers.
Chemring Ordnance has also won the recent competition for the
manufacture of the Mk7 MOD 2 Anti-Personnel Obstacle Breaching
System (APOBS) for the US Army and Marine Corps. APOBS is a
self-contained, expendable linear demolition charge that is capable
of safely clearing a footpath through anti-personnel mines and
multi-strand wire obstacles. The contract, which has an initial
value of $21 million, is estimated to be worth over $150 million
over three years if all option quantities are exercised.
Countermeasures
The Countermeasures business was rather subdued, with revenue
down 3% to GBP89.6 million (2010: GBP91.9 million) and operating
profit down 15% to GBP20.8 million (2010: GBP24.4 million). The
organic component of the revenue decreased by 13% during the period
but this was offset by the contribution from the acquired
electronic countermeasures activities at Roke. The phasing of
revenue in the US has been unusual, with a production gap at
Kilgore, delays in annual contract placement, and the consolidation
of the Alloy Surfaces business all combining to create a second
half bias. The reduction in operating margin to 23% (2010: 27%)
reflects the lower margin contribution from the Roke
programmes.
The non-US businesses made an excellent start to the year, with
strong growth in both the UK and Australia. The UK countermeasures
business delivered 13% growth in sales, with increased demand for
advanced flares and chaff to support the Tornado and Typhoon
aircraft currently involved in UK operations. The development
programmes for several advanced naval rounds also made a good
contribution, and these new rounds are expected to transition into
initial production in the near future. The Australian
countermeasures business also grew strongly, with a 38% increase in
demand for chaff and flares in line with the requirements of the
long term supply contract with the Commonwealth of Australia.
The US market was not as buoyant, with Alloy Surfaces seeing a
substantial drop in demand for its transport and rotary decoys,
exacerbated by the three or four month delay in placement of annual
orders that was directly attributable to the extended US Government
budget approval process. The reduction in demand for certain decoys
appears to be in anticipation of the phased withdrawal from
Afghanistan over the next three years. To maintain operational
efficiency, Alloy Surfaces has consolidated production into two of
its three sites and will be closing the third plant in the very
near future.
Revenue at Kilgore was 8% lower than in the first half of 2010,
even though the business has a record order book and substantial
prospects for growth. Production output was affected by the
previously reported incident last September that destroyed the
MJU-7 flare assembly facility. The replacement building will only
become operational towards the end of this financial year, as a
consequence of which GBP14 million of Kilgore's usual production is
expected to be deferred into the 2012 financial year. Strong growth
in the rate of production of B-52 flares, which more than doubled
in the first half, together with a good start to M212 spectral
flare production is expected to compensate for the MJU-7 shortfall.
A careful review of the safety systems on all production lines was
also instigated after the September incident, and a careful restart
process implemented over the first three months of the year. Strong
growth is expected from Kilgore during the second half.
Munitions
The Munitions business had an excellent first half, increasing
revenue by 57% to GBP85.4 million (2010: GBP54.4 million) and
operating profit 24% to GBP13.5 million (2010: GBP10.9 million).
The operating margin was 16% (2010: 20%), reflecting the losses
made by Mecar in the four month period of lost production.
Excluding Mecar from the analysis, the operating margin for this
business segment would have been 19%, which more accurately
reflects the mix between prime contracting and component revenues
for the period.
In September 2010, after the Group had owned Mecar for only a
few days, an incident occurred during the packaging of 81mm mortars
that resulted in a fire which destroyed the large calibre assembly
facility in Belgium. A major safety process review was instigated
and a phased production restart introduced across all production
lines, to ensure safe operations within all of Mecar's facilities.
Minimal production occurred during the first four months of the
financial year but the business is now starting to accelerate all
of its production activities.
Components and sub-system revenues grew by 16%, with increased
demand from both US and European prime contractors and an increase
in delivery of fuzes to Indian customers. Demand for naval
ammunition at Simmel also continues to grow, as a result of the
recent pace of the frigate and destroyer ship building programmes.
However, Simmel had lower sales of tank ammunition during the
period, driven by the timing of follow-on orders from its NATO
customers. Deliveries in 2011 are scheduled for the second half of
the year. Strong growth was also achieved in the sales of a range
of medium and large calibre products to non-NATO customers.
Pyrotechnics
The Pyrotechnics business had a slow start to the year, with
revenue down 14% to GBP59.1 million (2010: GBP68.3 million) and
operating profit down 8% to GBP11.7 million (2010 GBP12.8 million).
The operating margin increased slightly to 20% (2010: 19%) in spite
of the decrease in revenue at Hi-Shear, which had technical
difficulties that have delayed a number of space programmes into
the second half of the year.
Production of both M228 training grenades and battlefield effect
simulation launchers restarted in the period, and generated a 45%
growth in training revenues. Production of the M228 has now reached
a consistent 20 parts per minute, and strong growth in production
is expected over the remainder of the year.
Demand for smoke and illumination products reduced by 10% over
the period, mainly reflecting reduced requirements from the British
Army and the timing of US contracts for 40mm pyrotechnic products.
However, there was a 140% increase in deliveries of signal grenades
and a 300% increase in deliveries of smoke grenades that offset a
reduction in demand for 81mm illumination rounds. Deliveries of
40mm pyrotechnic rounds will restart in the US, and a full recovery
is expected by the end of the financial year.
Dividend
The Board is today declaring an interim dividend of 4.0p per
ordinary share (2010: 3.4p(#) ). This represents an increase of 18%
over last year's interim dividend and builds on the increases
delivered in recent years. The interim dividend will be paid on 5
August 2011 to shareholders on the register at 15 July 2011.
Financial position
The Group's financial position remains particularly strong, with
net assets increasing by 58% in the past year to GBP449.2 million.
The growth in net assets reflects the increase in retained profits
and the equity issue that was completed in April 2011.
On 14 January 2011, the Group completed a refinancing of its
bank facilities with a syndicate of five banks. The Group's
unsecured working capital facilities now total GBP230 million, with
a renewal date of April 2015.
Net debt at the period end was GBP198.1 million (2010: GBP260.5
million) and gearing was 44% (2010: 92%). The Group held a healthy
cash balance of GBP180.2 million (2010: GBP72.1 million) at the
period end, with in excess of GBP200 million headroom on its core
working capital facilities.
Acquisition and share issue
On 20 April 2011, the Group announced the conditional
acquisition of the Detection Systems operations and certain related
assets ("Detection Systems") of General Dynamics Armament and
Technical Products, a subsidiary of General Dynamics Corporation,
for a cash consideration of $90 million (GBP55 million). Detection
Systems, based in Charlotte, North Carolina, is a US leader in
chemical and biological threat detection and has advanced
capability in the stand-off detection of improvised explosive
devices. The acquisition is expected to complete within the next
few weeks.
Also on 20 April 2011, the Group placed 17,405,183 new ordinary
shares at 645p per share, raising approximately GBP112 million
before costs. The placing represented in the region of 9.8% of the
Group's market capitalisation. Approximately GBP55 million of the
placing proceeds will be used to fund the acquisition of Detection
Systems, with the remainder of the proceeds being used to pay
related acquisition costs and to fund future potential acquisition
opportunities.
At the end of April, the net proceeds of the placing were held
in cash and hence contributed to a significant reduction in the
Group's net debt.
Share split
At the Annual General Meeting on 24 March 2011, the shareholders
approved the subdivision of the Company's ordinary shares of 5p
each into ordinary shares of 1p each.
Health and safety
The Group continues to invest substantial funds and effort to
improve the safety record of its operations and to protect its
employees who work, at times, with highly volatile and energetic
materials. Significant amounts of capital have been expended 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. Risk assessments are carried out by internal health
and safety teams supported, where advantageous, by outside experts.
Complacency, however, is the enemy of safe operations, and the
training of staff in safety procedures continues to be a focus
throughout the Group.
At the end of last year, explosive incidents occurred at Kilgore
in Tennessee and at Mecar in Belgium. In the Kilgore incident,
three employees were seriously injured and it is very pleasing to
report that they have all now been discharged from hospital. The
Board wishes them a complete recovery. Lessons from both incidents
have been extensively analysed, and improvements in processes and
facilities have been rolled-out to all sites. All of the production
lines at Kilgore and Mecar were reviewed and subjected to
improvement programmes before any of them were allowed to
restart.
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 2010 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
The global defence market has undergone a recent period of
instability. The extended timescales for approval of last year's US
defence budget, the current UK defence budget constraints, and the
shifting approval of export licence applications for various parts
of the Middle East have reduced the pace of growth over the last
twelve months. However, with organic growth of 18% in the first
half of the year, strong performances from the Counter-IED and
Munitions businesses, an increase in non-NATO customers, and a
current order book that is 52% higher than at April 2010, the Group
remains on course to meet the Board's full year expectations. As a
short-cycle business with rapid development timescales, Chemring
remains excellently placed to deliver continuing growth for the
future.
D J Price
Chief Executive
23 June 2011
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
23 June 2011 23 June 2011
CONDENSED CONSOLIDATED INCOME STATEMENT
for the half year to 30 April 2011
Unaudited Unaudited
Half year Half year
to to Audited
30 April 30 April Year to
2011 2010 31 Oct 2010
Note GBPm GBPm GBPm
Continuing operations
Revenue 329.8 255.9 597.1
Operating profit 2 49.7 35.3 107.9
----------- ----------- -------------
Operating profit is
analysed as:
Underlying operating
profit* 57.6 52.3 135.6
Acquisition related costs (1.6) (2.3) (6.7)
Intangible amortisation
arising from business
combinations (11.5) (7.9) (17.0)
Gain/(loss) on fair value
movements on derivatives 5.2 (6.8) (4.0)
----------- ----------- -------------
49.7 35.3 107.9
---------------------------- ----- ----------- ----------- -------------
Share of post-tax results
of associate - - 0.1
Finance income 0.2 0.1 0.5
Finance expense (8.2) (10.1) (19.4)
----------- ----------- -------------
Profit before tax for the
period/year: 41.7 25.3 89.1
Profit before tax for the
period/year is analysed
as:
Underlying profit before
tax* 49.6 42.3 116.8
Acquisition related costs (1.6) (2.3) (6.7)
Intangible amortisation
arising from business
combinations (11.5) (7.9) (17.0)
Gain/(loss) on fair value
movements on derivatives 5.2 (6.8) (4.0)
----------- ----------- -------------
41.7 25.3 89.1
---------------------------- ----- ----------- ----------- -------------
Tax 4 (10.8) (6.9) (22.4)
----------- ----------- -------------
Profit after tax for the
period/year: 2 30.9 18.4 66.7
----------- ----------- -------------
Earnings per ordinary
share** 5
From continuing operations:
Underlying* 20.8p 17.7p 49.2p
----------- ----------- -------------
Basic 17.5p 10.4p 37.8p
----------- ----------- -------------
Diluted 17.4p 10.3p 37.4p
----------- ----------- -------------
*Before acquisition related costs, intangible amortisation
arising from business combinations and gain/(loss) on fair value
movements on derivatives
**Restated figures for prior periods to reflect division of each
5p ordinary share into five 1p ordinary shares on 28 March 2011
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half year to 30 April 2011
Unaudited Unaudited
Half year Half year
to to Audited
30 April 30 April Year to
2011 2010 31 Oct 2010
GBPm GBPm GBPm
Profit after tax for the period/year 30.9 18.4 66.7
----------- ----------- -------------
Other comprehensive income:
(Losses)/gains on cash flow hedges (0.4) 0.2 1.0
Movement on deferred tax relating
to cash flow hedges 0.1 - (0.3)
Exchange differences on translation
of foreign operations (0.6) 6.2 0.4
Actuarial gains/(losses) on defined
benefit pension schemes 0.7 (1.8) 4.0
Movement on deferred tax relating
to pension schemes (0.2) 0.5 (1.4)
Current tax on items taken directly
to equity - - 0.2
Deferred tax on items taken directly
to equity - - (0.5)
----------- ----------- -------------
Total comprehensive income for the
period/year attributable to equity
holders of the parent 30.5 23.5 70.1
----------- ----------- -------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the half year to 30 April 2011
Share Special
Share premium capital Hedging Revaluation Translation Retained
capital account reserve reserve reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 November
2010 1.8 120.4 12.9 (2.7) 1.4 (12.4) 209.0 330.4
--------------- -------- -------- -------- -------- ------------ ------------ --------- -------
Profit after
tax for the
period - - - - - - 30.9 30.9
Other
comprehensive
income for
the period - - - (0.3) - (0.6) 0.5 (0.4)
--------------- -------- -------- -------- -------- ------------ ------------ --------- -------
Total
comprehensive
income for
the period - - - (0.3) - (0.6) 31.4 30.5
Ordinary
shares
issued 0.2 109.3 - - - - - 109.5
Dividends paid - - - - - - (14.9) (14.9)
Cost of
share-based
payments (net
of
settlement) - - - - - - (1.3) (1.3)
At 30 April
2011 2.0 229.7 12.9 (3.0) 1.4 (13.0) 224.2 454.2
-------- -------- -------- -------- ------------ ------------ --------- -------
Share Special
Share premium capital Hedging Revaluation Translation Retained
capital account reserve reserve reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 November
2009 1.8 120.3 12.9 (3.4) 1.4 (11.7) 157.5 278.8
--------------- -------- -------- -------- -------- ------------ ------------ --------- -------
Profit after
tax for the
period - - - - - - 18.4 18.4
Other
comprehensive
income for
the period - - - 0.2 - 6.2 (1.3) 5.1
--------------- -------- -------- -------- -------- ------------ ------------ --------- -------
Total
comprehensive
income for
the period - - - 0.2 - 6.2 17.1 23.5
Dividends paid - - - - - - (12.7) (12.7)
Cost of
share-based
payments (net
of
settlement) - - - - - - (0.5) (0.5)
Transfers
between
reserves - - - 0.1 - - (0.1) -
-------- -------- -------- -------- ------------ ------------ --------- -------
At 30 April
2010 1.8 120.3 12.9 (3.1) 1.4 (5.5) 161.3 289.1
-------- -------- -------- -------- ------------ ------------ --------- -------
Share Special
Share premium capital Hedging Revaluation Translation Retained
capital account reserve reserve reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 November
2009 1.8 120.3 12.9 (3.4) 1.4 (11.7) 157.5 278.8
--------------- -------- -------- -------- -------- ------------ ------------ --------- -------
Profit after
tax for the
year - - - - - - 66.7 66.7
Other
comprehensive
income for
the year - - - 0.7 - 0.4 2.3 3.4
--------------- -------- -------- -------- -------- ------------ ------------ --------- -------
Total
comprehensive
income for
the year - - - 0.7 - 0.4 69.0 70.1
Ordinary
shares
issued - 0.1 - - - - - 0.1
Dividends paid - - - - - - (18.7) (18.7)
Cost of
share-based
payments (net
of
settlement) - - - - - - 0.1 0.1
Transfers
between
reserves - - - - - (1.1) 1.1 -
At 31 October
2010 1.8 120.4 12.9 (2.7) 1.4 (12.4) 209.0 330.4
-------- -------- -------- -------- ------------ ------------ --------- -------
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 April 2011
Unaudited Unaudited Audited
As at As at As at
30 April 30 April 31 Oct 2010
Note 2011 2010 As restated(#)
GBPm GBPm GBPm
Non-current assets
Goodwill 227.1 207.9 229.9
Development costs 16.4 10.1 13.3
Other intangible assets 167.2 131.5 181.5
Property, plant and
equipment 208.2 154.0 197.5
Interest in associate 1.1 1.1 1.1
Deferred tax 15.5 17.9 16.8
---------- ---------- ----------------
2 635.5 522.5 640.1
Current assets
Inventories 153.5 121.8 141.3
Trade and other receivables 170.1 117.2 165.6
Cash and cash equivalents 8 180.2 72.1 58.4
Derivative financial
instruments 5.8 - 1.9
509.6 311.1 367.2
Total assets 1,145.1 833.6 1,007.3
---------- ---------- ----------------
Current liabilities
Borrowings (9.4) (13.3) (65.6)
Obligations under finance
leases (2.1) (0.5) (2.6)
Trade and other payables (216.1) (123.1) (220.2)
Short term provisions (2.2) (1.7) (1.9)
Current tax liabilities (15.9) (9.4) (7.7)
Derivative financial
instruments (1.3) (2.6) (1.6)
(247.0) (150.6) (299.6)
Non-current liabilities
Borrowings (364.0) (317.9) (294.6)
Obligations under finance
leases (2.7) (0.8) (3.0)
Trade and other payables (1.2) (1.3) (1.0)
Long term provisions (2.9) (6.2) (3.1)
Deferred tax (49.3) (34.1) (52.4)
Preference shares (0.1) (0.1) (0.1)
Retirement benefit
obligations (22.4) (30.1) (23.0)
Derivative financial
instruments (6.3) (8.7) (7.3)
---------- ---------- ----------------
(448.9) (399.2) (384.5)
---------- ---------- ----------------
Total liabilities (695.9) (549.8) (684.1)
---------- ---------- ----------------
Net assets 449.2 283.8 323.2
---------- ---------- ----------------
Equity
Share capital 2.0 1.8 1.8
Share premium account 229.7 120.3 120.4
Special capital reserve 12.9 12.9 12.9
Hedging reserve (3.0) (3.1) (2.7)
Revaluation reserve 1.4 1.4 1.4
Translation reserve (13.0) (5.5) (12.4)
Retained earnings 224.2 161.3 209.0
---------- ---------- ----------------
454.2 289.1 330.4
Own shares (5.0) (5.3) (7.2)
---------- ---------- ----------------
Equity attributable to
equity holders of the
parent 449.2 283.8 323.2
---------- ---------- ----------------
Total equity 449.2 283.8 323.2
---------- ---------- ----------------
( )
(#) The restatement above relates to the reassessment of fair
value of assets on prior year acquisitions - see Note 10
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the half year to 30 April 2011
Unaudited Unaudited
Half year Half year
to to Audited
30 April 30 April Year to
2011 2010 31 Oct 2010
Note GBPm GBPm GBPm
Cash flows from operating
activities
------------------------------ ----- ----------- ----------- -------------
Underlying cash generated
from operations A 46.7 28.4 126.1
Acquisition related costs 10 (2.5) (2.3) (6.7)
------------------------------ ----- ----------- ----------- -------------
Cash generated from
operations A 44.2 26.1 119.4
Tax paid (4.5) (12.2) (30.0)
----------- ----------- -------------
Net cash inflow from
operating activities 39.7 13.9 89.4
----------- ----------- -------------
Cash flows from investing
activities
Dividends received from
associate 0.1 0.1 0.1
Purchases of intangible
assets (4.7) (2.8) (7.8)
Purchases of property, plant
and equipment (19.7) (19.5) (40.9)
Acquisition of subsidiaries
(net of cash acquired) - (92.0) (176.8)
----------- ----------- -------------
Net cash outflow from
investing activities (24.3) (114.2) (225.4)
----------- ----------- -------------
Cash flows from financing
activities
Dividends paid (14.9) (12.7) (18.7)
Interest paid (9.1) (5.8) (14.0)
Proceeds on issue of shares 109.5 - 0.1
New borrowings 101.2 171.7 208.8
Repayments of borrowings (78.7) (41.2) (41.7)
Proceeds from sale and
finance leaseback - - 4.5
Repayments of finance leases (0.7) (0.5) (0.7)
Purchase of own shares - (2.0) (3.9)
----------- ----------- -------------
Net cash inflow from
financing activities 107.3 109.5 134.4
----------- ----------- -------------
Increase/(decrease) in cash
and cash equivalents during
the year 122.7 9.2 (1.6)
Cash and cash equivalents at
start of the period/year 58.4 61.3 61.3
Effect of foreign exchange
rate changes (0.9) 1.6 (1.3)
----------- ----------- -------------
Cash and cash equivalents at
end of the period/year 180.2 72.1 58.4
----------- ----------- -------------
NOTES TO THE CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 30 April 2011
Unaudited Unaudited
Half year Half year
to to Audited
30 April 30 April Year to
2011 2010 31 Oct 2010
A. Cash generated from operations GBPm GBPm GBPm
Operating profit from continuing
operations 49.7 35.3 107.9
Adjustment for:
Amortisation of development costs 1.2 1.2 2.1
Amortisation of intangible assets
arising from business combinations 11.5 7.9 17.0
Amortisation of other intangibles 0.2 0.2 0.3
Depreciation of property, plant and
equipment 8.2 7.7 11.6
Loss on disposal of tangible assets - - 0.2
(Gain)/loss on fair value movements
on derivatives (5.2) 6.8 4.0
Share-based payment expense 1.0 1.4 2.3
Difference between pension
contributions paid and amount
recognised in Income Statement 0.3 0.3 0.7
Increase/(decrease) in provisions 0.1 1.2 (1.4)
----------- ----------- -------------
Operating cash flows before
movements in working capital 67.0 62.0 144.7
Increase in inventories (12.1) (18.7) (19.2)
Increase in trade and other
receivables (4.6) (16.3) (44.0)
(Decrease)/increase in trade and
other payables (6.1) (0.9) 37.9
----------- ----------- -------------
Cash generated from operations 44.2 26.1 119.4
Acquisition related costs 2.5 2.3 6.7
----------- ----------- -------------
Underlying cash generated from
operations 46.7 28.4 126.1
----------- ----------- -------------
Reconciliation of net cash flow to
movement in net debt
Increase/(decrease) in cash and cash
equivalents during the period/year 122.7 9.2 (1.6)
Increase in debt and lease financing
due to cash flows (21.0) (130.6) (171.1)
----------- ----------- -------------
Change in net debt resulting from
cash flows 101.7 (121.4) (172.7)
Acquired debt - - (5.4)
New finance leases - 0.3 -
Foreign exchange gains/(losses) 8.3 (15.9) (5.4)
Amortisation of debt finance costs (0.6) (0.7) (1.2)
----------- ----------- -------------
Movement in net debt in the year 109.4 (137.7) (184.7)
Net debt at start of the period/year (307.5) (122.8) (122.8)
----------- ----------- -------------
Net debt at end of the period/year (198.1) (260.5) (307.5)
----------- ----------- -------------
Analysis of net
debt
As at 1 Non-cash Exchange As at 30
Nov 2010 Cash flow changes movement April 2011
GBPm GBPm GBPm GBPm GBPm
Cash at bank and
in hand 58.4 122.7 - (0.9) 180.2
Debt due within
one year (65.6) 54.4 (0.1) 1.9 (9.4)
Debt due after
one year (294.6) (76.1) (0.5) 7.2 (364.0)
Finance leases (5.6) 0.7 - 0.1 (4.8)
Preference
shares (0.1) - - - (0.1)
---------- ---------- --------- ---------- ------------
Net debt (307.5) 101.7 (0.6) 8.3 (198.1)
---------- ---------- --------- ---------- ------------
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 2011 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
13. 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 half-yearly 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 2011 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
London, United Kingdom
23 June 2011
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 2011 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 23 June 2011. The information
for the year ended 31 October 2010 does not constitute statutory
accounts as defined in section 435 of the Companies Act 2006. Full
accounts for the year ended 31 October 2010, 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 half-yearly 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.
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
2010.
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 April to 30 April 31 Oct
2011 2010 2010
Continuing operations: GBPm GBPm GBPm
Revenue
Counter-IED 95.7 41.3 114.9
Countermeasures 89.6 91.9 196.3
Munitions 85.4 54.4 115.9
Pyrotechnics 59.1 68.3 170.0
Total 329.8 255.9 597.1
------------- ------------- ---------
Underlying operating profit
Counter-IED 20.0 9.9 28.1
Countermeasures 20.8 24.4 58.8
Munitions 13.5 10.9 20.9
Pyrotechnics 11.7 12.8 40.1
Charge for share based payments (1.0) (1.4) (2.3)
Non-recurring restructuring and
restart costs (2.9) - (1.5)
Incident costs - - (2.8)
Provision release - - 2.4
Unallocated head office costs (4.5) (4.3) (8.1)
------------- ------------- ---------
Underlying operating profit 57.6 52.3 135.6
Acquisition related costs (1.6) (2.3) (6.7)
Intangible amortisation arising from
business combinations (11.5) (7.9) (17.0)
Gain/(loss) on fair value movements
on derivatives 5.2 (6.8) (4.0)
------------- ------------- ---------
Operating profit 49.7 35.3 107.9
Share of post-tax results of
associate - - 0.1
Finance income 0.2 0.1 0.5
Finance expense (8.2) (10.1) (19.4)
Profit before tax for the
period/year 41.7 25.3 89.1
Tax (10.8) (6.9) (22.4)
------------- ------------- ---------
Profit after tax for the period/year 30.9 18.4 66.7
------------- ------------- ---------
In 2011 the non-recurring restructuring and restart costs relate
to the closure of Plant 3 at Alloy Surfaces Company, Inc. (GBP1.1
million) and the start up of production at Mecar S.A. following the
incident that occurred in September 2010 (GBP1.8 million).
Within the figures for the year ended 31 October 2010
restructuring costs of GBP1.5 million relate to the Group's UK
Counter-IED business, and the incident costs of GBP2.8 million
relate to incidents at the Kilgore Flares and Mecar S.A. sites. The
provision release of GBP2.4 million relates to the environmental
liabilities associated with the Chemring Energetic Devices site.
Further details are disclosed in the Group's audited financial
statements for the year ended 31 October 2010.
Unaudited Unaudited
Half year Half year Audited
to to Year to
30 April 30 April 31 Oct
2011 2010 2010
GBPm GBPm GBPm
Continuing operations:
Revenue by destination
UK 64.6 42.6 111.6
USA 156.5 141.8 293.1
Europe 25.8 30.1 72.9
Australia and Far East 26.3 23.2 44.1
Middle East 46.8 15.4 51.6
Rest of the world 9.8 2.8 23.8
Total 329.8 255.9 597.1
----------- ----------- ---------
There were no inter-segment sales in any of the periods.
The directors consider the only countries that are 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, as the chief operational decision makers do not
use this as a key decision tool. However, a disclosure of
non-current assets by location is shown below:
Unaudited Unaudited Audited
Half year Half year Year to
to to 31 Oct
30 April 30 April 2010
2011 2010 As restated(#)
GBPm GBPm GBPm
Continuing operations:
Non-current assets by location
UK 206.8 133.1 199.6
USA 256.5 283.4 275.9
Europe 151.6 96.2 149.4
Australia and Far East 20.6 9.8 15.2
Total 635.5 522.5 640.1
----------- ----------- ----------------
(#) The restatement above relates to the reassessment of fair
value of assets on prior year acquisitions - see Note 10
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 the year ending 31
October 2011 is 26% (2010: 25%) and the underlying estimated
effective tax rate is 26% (2010: 26%). 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
On 28 March 2011 the 5p ordinary shares in the Company were
divided into five 1p ordinary shares. All figures relating to share
numbers (including shares in issue, dividends per share and
earnings per share) prior to 28 March 2011 have been restated as
though the share split had already occurred, in order to provide
comparable information for the current period. See Note 7 for
further detail on the share split.
Earnings per share are based on the average number of shares in
issue of 176,919,779 (2010: 176,671,165) and profit on ordinary
activities after tax and minority interests of GBP30.9 million
(2010: GBP18.4 million). Diluted earnings per share has been
calculated using a diluted average number of shares in issue of
178,176,690 (2010: 178,330,180) and profit on ordinary activities
after tax and minority interests of GBP30.9 million (2010: GBP18.4
million).
The earnings and shares used in the calculations are as
follows:
2011 2010
Ordinary Ordinary
From shares shares
continuing Earnings Number EPS Earnings Number EPS
operations GBPm 000s Pence GBPm 000s Pence
Basic** 30.9 176,920 17.5 18.4 176,671 10.4
Additional shares
issuable other than
at fair value in
respect of options
outstanding** - 1,257 (0.1) - 1,659 (0.1)
-------- -------- ------ -------- -------- ------
Diluted** 30.9 178,177 17.4 18.4 178,330 10.3
-------- -------- ------ -------- -------- ------
Reconciliation from basic earnings per share to underlying
earnings per share:
Underlying earnings has been defined as earnings before
acquisition related costs, intangible amortisation arising from
business combinations and gain/(loss) on fair value movements on
derivatives. The directors consider this measure of earnings allows
a more meaningful comparison of earnings trends.
2011 2010
Ordinary Ordinary
From shares shares
continuing Earnings Number EPS Earnings Number EPS
operations GBPm 000s Pence GBPm 000s Pence
Basic** 30.9 176,920 17.5 18.4 176,671 10.4
Acquisition related
costs, intangible
amortisation arising
from business
combinations and
gain/(loss) on fair
value movements on
derivatives (after
tax)** 5.8 - 3.3 12.9 - 7.3
-------- -------- ------ -------- -------- ------
Underlying** 36.7 176,920 20.8 31.3 176,671 17.7
-------- -------- ------ -------- -------- ------
For the year ended 31 October 2010, underlying earnings per
share from continuing operations was 49.2p, which was calculated on
GBP86.9 million of earnings and 176,602,225 average shares, based
on restated historic share numbers following the share split on 28
March 2011. Basic earnings per share was 37.8p from continuing
operations, calculated on GBP66.7 million of earnings and
176,602,225 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 2011 was 1,043,145 (2010: 1,175,000) with an
average cost of GBP4.83 (2010: GBP4.49) per share. This represents
0.5% of the total issued and fully paid ordinary share capital.
During the period the Group issued 456,855 of treasury shares
(on a restated basis) following the vesting of conditional awards
made on 23 January 2008 under the Chemring Group Performance Share
Plan.
Full details of earnings per share for the year ended 31 October
2010 are disclosed in the Group's audited financial statements for
the year ended 31 October 2010.
**Restated figures for prior periods to reflect division of each
5p ordinary share into five 1p ordinary shares on 28 March 2011
6. DIVIDENDS
2011 2010
GBPm GBPm
Dividends on ordinary shares of 1p each**
Interim dividend for the year ended 31 October
2010 3.4p** - 6.0
Final dividend for the year ended 31 October
2010 8.4p (2009: 7.2p)** 14.9 12.7
------ ------
Total dividends 14.9 18.7
------ ------
The proposed interim dividend in respect of the half year ended
30 April 2011 of 4.0p per share will, if approved, absorb
approximately GBP7.8 million of shareholders' funds. No liability
for the proposed interim dividend has been included in these
half-yearly financial statements.
**Restated figures for prior periods to reflect division of each
5p ordinary share into five 1p ordinary shares on 28 March 2011
7. SHARE SPLIT AND PLACING
At the Company's Annual General Meeting on 24 March 2011 a
resolution was passed to split the Company's ordinary shares of 5p
each (the "Existing Ordinary Shares") in issue or held in treasury
into ordinary shares of 1p each (the "Ordinary Shares"), resulting
in shareholders holding five Ordinary Shares for each Existing
Ordinary Share they held prior to the share split.
On 20 April 2011 the Companyplaced 17,405,183 new ordinary
shares to raise a total of GBP112.3 million before expenses. The
proceeds will be used to fund the total cash consideration for the
acquisition of the Detection Systems operations and certain related
assets of General Dynamics Armament and Technical Products, a
subsidiary of General Dynamics Corporation (see Note 10). The
remaining proceeds of approximately GBP57.1 million have been
raised to take advantage of future opportunities and to pay
transaction costs.
8. CASH AND CASH EQUIVALENTS
Included within cash is GBP15.6 million of restricted cash
(2010: GBP10.4 million), of which GBP15.2 million (2010: GBP10.1
million) is held in escrow in relation to the Chemring Group Staff
Pension Scheme.
9. REFINANCING
During the period, the Group completed a refinancing of its bank
facilities with a syndicate of five banks. The new Group
facilities, which are unsecured, total GBP230 million, which is a
GBP55 million increase on the previous secured facilities. In
addition, the term of the facilities has been extended from April
2012 to April 2015.
The increase in the level of the facility and the tenure,
together with the introduction of several new banks to the Group,
will provide greater capacity and capability to support the Group's
future requirements.
10. ACQUISITIONS
Prior period balance sheet restatement
There were no acquisitions made by the Group in the period, but
acquisitions were made in the year ended 31 October 2010. Their
initial measurement period was incomplete as at 31 October 2010 and
in accordance with IFRS 3 (revised 2008) the fair values of their
net assets and goodwill were still provisional at that date.
In the current period there were measurement adjustments to the
acquired balance sheets of Roke Manor Research Limited, Mecar and
Chemring Fuze Technology S.r.l..
Roke Manor Chemring
Research Fuze Technology
Limited Mecar S.r.l. Total
GBPm GBPm GBPm GBPm
Intangible non-current
assets (0.1) (0.5) - (0.6)
Property, plant and equipment - 8.8 - 8.8
Working capital (0.7) (0.9) (0.1) (1.7)
---------- ----- ---------------- -----
(Decrease)/increase to
net assets (0.8) 7.4 (0.1) 6.5
------------------------------- ---------- ----- ---------------- -----
Goodwill as at 31 October
2010 27.5 7.4 2.8 37.7
Increase/(decrease)
to goodwill 0.8 (7.4) 0.1 (6.5)
----- ------ ---- ------
Goodwill as at 30 April
2011 28.3 - 2.9 31.2
--------------------------- ----- ------ ---- ------
There was a decrease in the fair value of acquired working
capital at Roke Manor Research Limited of GBP0.7 million and a
decrease in intangible assets of GBP0.1 million, resulting in a
revised goodwill figure of GBP28.3 million.
At Mecar the fair value of working capital decreased by GBP0.9
million but there was a revaluation of property, plant and
equipment that increased the fair value by GBP8.8 million. Also
there was a reassessment of acquired intangible assets at Mecar and
the fair value decreased by GBP0.5 million. The net effect left no
goodwill remaining in relation to Mecar.
An additional GBP0.1 million of acquisition related costs were
identified in relation to Chemring Fuze Technology S.r.l, resulting
in revised goodwill of GBP2.9 million.
The balance sheet as at 31 October 2010 has been restated to
reflect the above changes.
Acquisition related costs
Acquisition related costs of GBP1.6 million (2010: GBP2.3
million) have been recognised through the Income Statement in
accordance with IFRS 3 (revised 2008). The cash flow movement of
GBP2.5 million (2010: GBP2.3 million) recognises an additional
GBP0.9 million of deferred consideration which has been paid in the
period in respect of previous acquisitions.
Conditional acquisition
On 20 April 2011 the Group announced the conditional acquisition
of the Detection Systems operations and certain related assets of
General Dynamics Armament and Technical Products, a subsidiary of
General Dynamics Corporation, for a cash consideration of $90
million. The consideration for this acquisition will be funded from
the share placement completed during the period (see Note 7). The
acquisition is expected to complete within the next few weeks.
11. PENSIONS
The defined benefit obligations are calculated using an
actuarial valuation as at 30 April 2011. The deficit on the
Chemring Group Staff Pension Scheme has decreased to GBP20.3
million (2010: GBP27.3 million) as a result of changes to the
scheme's asset values from rising 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 has been recognised as an actuarial gain in the
Condensed Consolidated Statement of Comprehensive Income in
accordance with the Group's accounting policy.
12. RELATED PARTY TRANSACTIONS
The Group had no related party transactions during the period
requiring disclosure.
13. 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 DGGDLLXDBGBD
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