PRE-CLOSE TRADING UPDATE (3373S)
18 11월 2011 - 4:00PM
UK Regulatory
TIDMCHG
RNS Number : 3373S
Chemring Group PLC
18 November 2011
FOR IMMEDIATE RELEASE 18 NOVEMBER 2011
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 2011, which
are expected to be announced on 24 January 2012.
Trading
The Group performed strongly in the last quarter of the
financial year with revenue in the period increasing substantially
to GBP252 million, up 16% from GBP218 million in the same period
last year. Organic growth from our continuing businesses was 11% in
the period, which remains encouraging in the current uncertain
market conditions. Trading in the period for our Counter-IED and
Munitions business segments continues to be very strong, with
revenues up by 37% and 61% respectively compared with last year. In
line with our strategy to diversify our geographic customer
profile, over half of the Munitions revenue is now generated from
non-NATO markets. Operating margins in the period have remained
firm although pricing pressures continue in our Counter-IED
markets.
However, as a result of unexpected delays in customer approval
of product lot acceptance, GBP37 million of revenue, associated
with finished product manufactured in September and October,
slipped out of the last week of October into November. This revenue
shortfall was principally in the Counter-IED and Countermeasures
business segments, with about one third associated with a delay in
the agreement with the US Army procurement organisation on the
final terms for delivery of Husky Mounted Detection System (HMDS)
ground penetrating radars under the US contract "definitization"
process. This has now been resolved.
The total revenue generated in the full year, subject to final
audit, was GBP745 million, 25% higher than the previous year, but
5% lower than the Board's expectations. The gross margin associated
with this delayed revenue is approximately GBP14 million and will
take the Group operating profit below market expectations, albeit
there will still be positive growth on last year's figure.
The Board's expectations for the 2012 financial year remain
unchanged.
The Group's order book at the end of the year was GBP878
million, which is 9% higher than at the end of 2010, but 12% lower
than reported in our third quarter interim management statement.
This reflects widespread delays in the placement of contracts
because of the continued uncertainty in the US and European defence
markets, as well as the impact of the timing of religious festivals
with our Middle East customers.
Financial Position
As anticipated, there was a significant operating cash inflow of
GBP86 million in the quarter. As a result, net debt fell by 15% to
approximately GBP260 million at the year end, compared with GBP307
million at the end of 2010.
During the summer, we were in discussions with a third party
regarding a significant acquisition which we are no longer
pursuing. There are no other material acquisitions under
consideration at this time.
Update on Market Conditions
The US has seen a repeat of the continuing resolution process
which adversely affected order placement last year. Furthermore,
the Budget Control Act was enacted in August 2011, as a measure to
cap overall public sector spending over the next ten years. These
events have significantly disrupted the usual procurement process
and are likely to result in the delay in the placement of orders,
driving a second half bias in 2012 comparable to that in the 2011
financial year.
The European market continues to be dominated by government
deficit reduction programmes, which are expected to generate
further short-term uncertainty in European defence budgets and
disrupt current procurement plans. Over the next twelve months, we
expect this uncertainty to translate into weaker defence spending
and delays to the traditional timing of the placement of
orders.
Our non-NATO markets have remained buoyant with strong GDP
growth and sustained high oil prices. In line with our strategy, we
continue to grow our presence within the Middle East and Asia as we
move towards our medium term target of 40% of revenues coming from
non-NATO markets.
Outlook
Whilst the first quarter of 2012 will benefit from the revenues
that have slipped out of October, this is balanced by a backdrop of
greater market uncertainty and potential order delays.
Consequently, the Board's expectations for the 2012 financial year
remain unchanged. Looking further forward, the Board believes that
our strong market positions, diverse product portfolio and strategy
for expansion in non-NATO markets will continue to generate growth
into the medium term.
For further information
Chemring Group PLC:
Dr David Price Chief Executive 01489 881880
Paul Rayner Finance Director 01489 881880
Director of Communications and
Rupert Pittman Investor Relations 01489 881880
Cardew Group:
Anthony Cardew 020 7930 0777
Emma Crawshaw 020 7930 0777
This information is provided by RNS
The company news service from the London Stock Exchange
END
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