TIDMCHG
RNS Number : 2405H
Chemring Group PLC
18 June 2013
FOR IMMEDIATE RELEASE 18 JUNE 2013
CHEMRING GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 APRIL 2013
2013 2012
GBPm GBPm
Revenue 297.4 333.3
Underlying operating profit(2) 35.1 48.5
Underlying profit before tax(2) 25.6 39.2
(Loss)/profit before tax (8.8) 19.7
Pence Pence
Underlying earnings per share(2) 10.3 16.0
Basic (loss)/earnings per share (1.6) 8.3
Dividend per share(3) 3.4 5.3
(1) All results are for continuing operations and comparisons
are for the half year to 30 April 2012.
(2) Underlying measures are stated before acquisition and
disposal related costs, restructuring and incident costs, profit on
disposal of business, impairment of goodwill and acquired
intangible assets, amortisation of intangibles arising from
business combinations and gains/losses on fair value movements on
derivatives, adjusted for tax as appropriate for earnings per
share, as stated in the 2012 Annual Report and Accounts.
(3) The interim dividend of 3.4p per ordinary share will be paid
on 15 August 2013 to shareholders on the register at 26 July 2013.
The ex-dividend date will be 24 July 2013.
-- New senior management team appointed during the period
-- Important progress made in Performance Recovery Programme
-- Restructuring costs of approximately GBP15 million expected, delivering annual savings of approximately GBP10 million predominantly arising from FY2014, underpinning FY2014 profitability and providing greater resilience in the medium term
-- Our markets are likely to remain challenging into 2014, particularly in the US
-- Order book of GBP701.1 million (October 2012: GBP760.9
million), of which GBP287.6 million is deliverable in FY2013
Mark Papworth, Chemring Group Chief Executive, commented:
"The Group has made good progress in the first half. The quality
of our operations is improving, and while there is still much to
do, we are confident that the Group's performance is heading in the
right direction. However, visibility generally, and the limited
level of detail on the extent and nature of cuts to US defence
spending in particular, makes forecasting increasingly difficult.
For the current financial year, the Board's outlook is towards the
lower end of expectations.
Looking ahead, significant progress has been made in our
Performance Recovery Programme announced in January 2013. These
actions are expected to underpin 2014 profitability, drive
improvements in operational performance, and provide greater
resilience in current challenging markets."
For further information:
Mark Papworth Group Chief Executive, Chemring Group PLC 01489
881880
Steve Bowers Group Finance Director, Chemring Group PLC 01489
881880
Rupert Pittman Group Director of Communications and
Investor Relations, Chemring Group PLC 01489 881880
Andrew Jaques MHP Communications 0203 128 8100
John Olsen
James White
Cautionary statement
This announcement contains forward-looking statements that are
based on current expectations or beliefs, as well as assumptions
about future events. These forward-looking statements can be
identified by the fact that they do not relate only to historical
or current facts. Forward-looking statements often use words such
as anticipate, target, expect, estimate, intend, plan, goal,
believe, will, may, should, would, could, is confident, or other
words of similar meaning. Undue reliance should not be placed on
any such statements because they speak only as at the date of this
document and, by their very nature, they are subject to known and
unknown risks and uncertainties and can be affected by other
factors that could cause actual results, and Chemring's plans and
objectives, to differ materially from those expressed or implied in
the forward-looking statements.
There are a number of factors which could cause actual results
to differ materially from those expressed or implied in
forward-looking statements. Among the factors that could cause
actual results to differ materially from those described in the
forward-looking statements are; increased competition, the loss of
or damage to one or more key customer relationships, changes to
customer ordering patterns, delays in obtaining customer approvals
for engineering or price level changes, the failure of one or more
key suppliers, the outcome of business or industry restructuring,
the outcome of any litigation, changes in economic conditions,
currency fluctuations, changes in interest and tax rates, changes
in raw material or energy market prices, changes in laws,
regulations or regulatory policies, developments in legal or public
policy doctrines, technological developments, the failure to retain
key management, or the key timing and success of future acquisition
opportunities or major investment projects.
Chemring undertakes no obligation to revise or update any
forward-looking statement contained within this announcement,
regardless of whether those statements are affected as a result of
new information, future events or otherwise, save as required by
law and regulations.
Notes to Editors
-- Chemring is a manufacturing business with facilities in eight
countries, selling to over sixty countries worldwide
-- Chemring is now organised under four strategic product
segments: Countermeasures, Sensors & Electronics, Pyrotechnics
& Munitions, and Energetic Sub-Systems
-- Chemring has a diverse portfolio of products, protecting
military people and platforms against a constantly changing
threat
-- Operating in niche markets with short product development
timescales, Chemring has the agility to rapidly react to urgent
customer needs
-- Strong R&D investment for new products and improvements
in technology continually allows Chemring to expand its addressable
markets
Presentation
The presentation slides and a live audio webcast of the
presentation to analysts will be available at the Chemring Group
results centre www.chemring.co.uk/resultscentre at 09.30 (UK time)
on Tuesday 18 June 2013. The results presentation can also be
listened to at that time by dialling +44 (0) 20 8817 9301
(freephone number 0800 634 5205 from within the UK) and using the
confirmation number 11016776. A recording of the audio webcast will
be available later that day.
Photography
Original high resolution photography is available to the media
by contacting James White, MHP Communications: James.white@mhpc.com
/ Tel: 0203 128 8100
INTERIM MANAGEMENT REPORT
Group overview
As anticipated, the first six months of the year saw revenue
from continuing operations down 10.8% to GBP297.4 million (2012:
GBP333.3 million), underlying profit before tax reduce by 34.7% to
GBP25.6 million (2012: GBP39.2 million), and underlying earnings
per share down 35.6% to 10.3p (2012: 16.0p). In particular, these
results reflect lower revenues and profits from our Countermeasures
and Pyrotechnics & Munitions operations, which were affected by
reduced volumes, continuing production delays due to issues arising
last year, and slow order intake.
The order book reduced by 7.9% over the period to GBP701.1
million (October 2012: GBP760.9 million). Of this order book,
GBP287.6 million is scheduled for delivery during the current
financial year.
Markets
Defence spending in NATO markets remains constrained, and our
analysis indicates that the global market will continue to contract
for the next two years, albeit at a slower rate than being seen at
present. Declines in US and NATO defence spending, driven primarily
by reduced budgets and the withdrawal from Afghanistan, will
significantly outweigh the growth that is expected in other regions
of the world.
The US market dominates the global defence industry, and the
ongoing lack of clarity caused by sequestration makes forecasting
increasingly difficult. The current FY14 US President's request for
defence spending of $527 billion, 6.9% more than the current $493
billion of funding requested for FY13, ignored sequestration budget
cuts which would reduce the budget by $52 billion. The budget
request backs the military's shift to the Asia-Pacific region, and
increases funding in areas including cyber security and
intelligence, surveillance and reconnaissance. Importantly for
Chemring, the budget request supports current plans for the F-35
Joint Strike Fighter, HMDS transitions to a programme of record,
and the PAC-3 Missile Segment Enhancement is maintained. In May
2013, the FY14 budget request was amended to include the Overseas
Contingency Operations ("OCO") budget. At $79 billion, the OCO
budget request is $8 billion lower than the FY13 OCO budget.
Our expectation is that, given the identified depth of
disagreements on Capitol Hill, sequestration and a Continuing
Resolution for FY14 is the likely outcome. We therefore expect
there will be a decline of approximately 10% in the US defence
budget between 2012 and 2017, with the budget stabilising by 2016
at the earliest.
Elsewhere in the world, we expect to see moderate declines in
defence spending in the UK and Europe as a result of ongoing
austerity measures, with these declines being offset by growth in
Asia-Pacific, the Middle East and South America. Spending in the
Asia-Pacific region will be primarily driven by India's planned
doubling of its defence budget by 2017 but the risk of delays and
underspend remains. The Middle East and Maghreb are expected to
grow at about 4% annually, dominated by Saudi Arabia, as increasing
security spend is driven by internal and international unrest.
Finally, spending in South America is focused in Brazil, where
economic growth, global aspirations and major homeland security
programmes are driving significant equipment investment.
Update on Performance Recovery Programme
The Group's performance in recent times has suffered as a result
of numerous, well-documented operational issues. Many of these
should have been identified earlier, and resource mobilised to
mitigate the impact of the issues sooner.
A new executive management team has been appointed during the
period, and good progress has been made on its two year Performance
Recovery Programme set out in January 2013. This will drive
improvements in operational performance and provide greater
resilience to the challenges presented by our markets, whilst at
the same time reorganising the Group to ensure that it can
effectively respond to attractive market opportunities in the
immediate and longer term.
Five immediate priorities were identified as the initial areas
of focus for the Programme:
-- strengthen and simplify the organisational structure;
-- integrate business units and exploit the untapped synergies that exist;
-- implement a systematic programme of operational performance improvement;
-- re-focus business development activity; and
-- prioritise cash and cost management.
The complex structure under which Chemring previously operated
comprised of four geographic divisions, four reporting segments and
fifteen subsidiary businesses. This overly complicated operating
and reporting structure has been abolished. In its place is a new
structure that clusters similar businesses together within four
Strategic Product Segments:
-- Countermeasures;
-- Sensors & Electronics;
-- Pyrotechnics & Munitions; and
-- Energetic Sub-Systems.
This new structure, and the constituent parts of each Strategic
Product Segment, are reflected in the operational review that
follows.
Chemring's head office and divisional functions have been
integrated into a single organisation that provides the functional
support needed to facilitate the effective performance of the
operating businesses, whilst maintaining appropriate oversight and
control. The closure of the Group's administrative offices at Pall
Mall and Derby in the UK, and at Washington and Philadelphia in the
US, will be complete by the end of the current financial year. The
result of these changes will be an anticipated reduction in
corporate and divisional headcount of 40%.
Within the Strategic Product Segments, a number of the operating
businesses are being integrated to exploit operating synergies and
reduce costs. The combined businesses, or Strategic Business Units
("SBUs"), are, as a direct result, now better positioned to
leverage volume, and integrate product and technology development
plans. The elimination of policies and procedures that have
historically created significant inertia within the Group, coupled
with clearer reporting lines and more rapid communication with the
Group's senior management, is delivering improved focus,
accountability and responsiveness. It has also contributed
significantly to the elimination of duplication and waste, and led
to a reduction in management overhead and infrastructure.
The cost of this restructuring will be around GBP15 million,
predominantly arising in FY2013, and will deliver annual savings of
approximately GBP10 million from FY2014. While the operational
benefits of the Performance Recovery Programme are beginning to
come through, these are not expected to have a significant impact
on the FY2013 results.
Our focus to date has been on creating the structure and working
environment needed to improve the operational performance of the
business. This will be an ongoing process. During the remainder of
the current financial year, we will complete the process of
integrating four SBUs:
-- Chemring Countermeasures USA ("CCM USA") - Alloy Surfaces and Kilgore
-- Chemring Sensors & Electronic Systems ("CSES") - NIITEK and Chemring Detection Systems
-- Chemring Technology Solutions ("CTS") - Roke and Chemring EOD
-- Chemring Energetic Devices ("CED") - CED and Hi-Shear
Simultaneously, we will complete operational performance
assessments at Chemring Countermeasures UK, Chemring Energetics UK,
Simmel and Mecar. The operational improvements that will result
from this activity will enable us to benefit from improved on-time
deliveries and improved quality, thereby delivering a sustained
enhancement in profitability.
Finally, we will complete a comprehensive planning process that
will detail our business strategy for the next three years. This
review will be comprehensive and cover all aspects of the business.
It will assist us in crystallising a set of strategic objectives
that will set out the future direction of the business.
Countermeasures
Comprising: CCM USA (Alloy Surfaces and Kilgore), Chemring
Countermeasures UK, Chemring Australia
The Countermeasures businesses had a disappointing first half,
with revenue down 25.3% to GBP57.0 million (2012: GBP76.3 million)
and operating profit down 77.1% to GBP4.9 million (2012: GBP21.4
million). The operating margin reduced to 8.6% (2012: 28.0%),
mainly due to reduced volumes and margins at CCM USA.
As explained above, our two US-based countermeasures businesses,
Alloy Surfaces and Kilgore Flares, are being integrated and the
combined business renamed Chemring Countermeasures USA. The project
has progressed well, and we are already seeing the benefits of
integration in terms of cost savings but more importantly, in
improved product quality performance for our customers. Activity
levels at CCM USA reduced significantly year-on-year, reflecting
the contraction of demand resulting from the drawdown in
Afghanistan, and resulting in a marked reduction in profit due to
the fixed operating cost base of the business. During the period,
CCM USA was awarded contracts by the US Department of Defense for
$26.4 million for the manufacture of M211, M206, MJU-7A/B and
MJU-10/B decoy devices for the US Army and the US Air Force.
Deliveries under these contracts are scheduled to begin in June
2013 and will continue into 2015.
At Chemring Countermeasures UK, pressure from defence budget
cuts is continuing to have a significant influence on order
placement by European customers, resulting in delay or cancellation
of normal annual requirements. This reflects an ongoing contraction
in demand from the UK Ministry of Defence and other NATO customers,
as stocks are run down in anticipation of withdrawing troops and
assets from Afghanistan. Progress has been made in resolving
technical problems associated with the development of the new
countermeasure referred to in the 2012 Annual Report and Accounts.
We anticipate resuming customer acceptance testing of this
countermeasure in the second half of the current financial
year.
Chemring Australia has also seen activity levels reduce as a
consequence of lower expenditure by the Australian Defence Force,
following cuts to their operating budget as a result of the
decision to withdraw from Afghanistan.
The order book for Countermeasures reduced by 6.6% in the period
to GBP199.0 million (October 2012: GBP213.0 million), reflecting
the flattening of demand. We anticipate receiving a significant
order from a Middle East customer for delivery in the second half
of the current financial year.
Sensors & Electronics
Comprising: Chemring Sensors & Electronic Systems (NIITEK
and Chemring Detection Systems), Chemring Technology Solutions
(Roke and Chemring EOD)
Revenue for the Sensors & Electronics segment increased by
20.6% to GBP108.3 million (2012: GBP89.8 million) during the
period, and operating profit rose by 93.8% to GBP25.2 million
(2012: GBP13.0 million). The operating margin increased to 23.3%
(2012: 14.5%), due to inventory cost savings and a favourable sales
mix.
In the US, we are integrating NIITEK and Chemring Detection
Systems to create Chemring Sensors & Electronic Systems. This
integration allows us to realise cost benefits across both
businesses and, more importantly, allows us to better leverage our
technology capabilities, co--ordinate our customer interaction and
maximise efficiencies within the supply chain. Trading in the
period was strong, and included completion of the initial $161.3
million delivery order placed under the $579 million multi-year
Husky Mounted Detection System ("HMDS") Ground Penetrating Radar
Indefinite-Delivery/Indefinite-Quantity ("IDIQ") contract awarded
in April 2012.
On 3 June 2013, we announced a further delivery order worth
$76.7 million, to provide spares for the HMDS for the US Army, for
delivery in the period to May 2014. This announcement followed a
similar order valued at $24.1 million that was received in April
2013 and a $9.1 million order received in February 2013.
The detection systems business continues to perform well and,
since the period end, has been awarded a $25.2 million contract for
the supply of Joint Biological Point Detection Systems ("JBPDS") to
the US Army.
Roke and Chemring EOD are being integrated to create Chemring
Technology Solutions. Trading in the period was encouraging, with
sales of the Resolve electronic warfare manpack system being made
to Australia, Spain and Sweden. The period also saw a favourable
sales mix, biased towards product sales and away from
contract-based R&D activity.
The order book for Sensors & Electronics at 30 April 2013
was GBP99.8 million, 0.9% down over the period (October 2012:
GBP100.7 million). This reduction is principally a reflection of
changes in order placement patterns, with a larger number of
smaller value orders being placed for programmes such as HMDS.
Pyrotechnics & Munitions
Comprising: Mecar, Simmel, Chemring Defence, Chemring
Ordnance
The Pyrotechnics & Munitions segment had a tough start to
the financial year, with revenue down 27.5% to GBP89.2 million
(2012: GBP123.0 million) and operating profit reducing 67.9% to
GBP5.0 million (2012: 15.6 million). Operating margins therefore
reduced to 5.6% (2012: 12.7%), reflecting the relatively high fixed
operating costs of these businesses.
This result reflects a general reduction in demand levels,
driven by defence spending cuts, the drawdown from Afghanistan, and
the timing of activity under certain major orders, including the
mortar systems contract.
Following the production issues that occurred in the previous
financial year, the Anti-Personnel Obstacle Breaching System
("APOBS") has recently passed quality tests and full scale
production has resumed.
The order book for Pyrotechnics & Munitions reduced by 9.6%
to GBP316.7 million (October 2012: GBP350.3 million). We are
continuing to see customers in all regions served by our businesses
deferring order placement decisions, particularly in the Munitions
area, in a continuation of the trend highlighted in our Interim
Management Statement issued in February 2013.
Energetic Sub-Systems
Comprising: Chemring Energetics UK, Chemring Nobel, Chemring
Energetic Devices (Hi-Shear and Chemring Energetic Devices)
Revenues for the Energetic Sub-Systems segment fell in the
period by 2.9% to GBP42.9 million (2012: GBP44.2 million); however,
operating profit increased by 18.2% to GBP5.2 million (2012: GBP4.4
million). The operating margin rose to 12.1% (2012: 10.0%), mainly
due to a recovery in profitability in the US businesses.
Overall activity at Chemring Energetics UK was similar to last
year, but with significant differences in product mix. The
principal change was a reduction in Next Generation Light Anti-tank
Weapon ("NLAW") rocket motor sales, with this being offset by an
increase in the purchases of explosives by the UK Ministry of
Defence. Order intake was down, primarily as a result of delays in
the placement of demolition stores contracts, and the comparative
period having benefited from significant orders for ejector seat
propulsion systems.
In the US, we are expanding Chemring Energetic Devices with the
addition of Hi-Shear, to create a new SBU that will be able to
better leverage volume through the supply chain, integrate product
and technology development, and streamline management overhead. The
combined customer portfolio of defence, space launch and satellite
prime contractors provides a strong opportunity for further growth
across this segment.
The order book for Energetic Sub-Systems at 30 April 2013 was
GBP85.6 million, a reduction of 11.7% in the period (October 2012:
GBP96.9 million). This is largely a reflection of lower forward
demand indications at Chemring Energetic Devices.
Dividend
The Board has declared an interim dividend of 3.4p per ordinary
share (2012: 5.3p). The dividend is three times covered by
underlying earnings per share, in line with the policy detailed in
the 2012 Annual Report and Accounts. The interim dividend will be
paid on 15 August 2013 to shareholders on the register at 26 July
2013.
Balance sheet
The Group's net debt rose by GBP30.3 million during the period
to GBP275.1 million (October 2012: GBP244.8 million; April 2012:
GBP311.5 million). This increase included GBP10.1 million of
exchange rate effects, primarily attributable to the higher
translated value of US dollar denominated debt as a result of the
weakening of sterling during the period.
Working capital increased during the period by GBP51.4 million,
including a GBP25.5 million increase in inventories. Part of this
additional inventory reflects opportunities taken to procure, at
improved pricing, materials for orders that are scheduled for
delivery in the second half of the current financial year. In
addition, inventory continues to be held whilst production delays
are fully resolved. Capital expenditure in the period, including
capitalised development costs, was GBP7.6 million (2012: GBP21.8
million), principally comprising spend on health and safety related
improvements.
During the period, a charge of GBP15.7 million was made in
relation to acquired intangible assets in respect of Chemring
Energetic Devices, part of the Energetic Sub-Systems segment, as a
result of lower expected cash inflows at this business. This
reflects the continuing challenging economic conditions facing the
defence industry within the US, and Chemring Energetic Devices'
markets in particular.
Debt facilities
We have successfully concluded a revision of financial covenants
with our debt providers. In respect of our revolving credit
facility, the maximum permitted ratio of net debt to underlying
EBITDA has been increased to 3.50x at the April and July 2013
testing dates, and to 3.25x at the October 2013 and January 2014
testing dates, before reverting to 3.00x thereafter. The basis of
calculation of this ratio has also been amended so as to translate
non-sterling denominated debt using average, rather than closing,
rates of exchange. In respect of our loan notes, the permitted
ratio of debt to underlying EBITDA has been increased to 3.50x for
the four quarters mentioned above, with this covenant continuing to
be based upon total gross debt. This covenant will also adopt the
use of average exchange rates. Taken together, these changes
provide Chemring with considerable additional headroom.
The results of the covenant tests at the period end, with
comparatives as at 31 October 2012, are as follows:
2013 2012
Covenant ratio - revolving credit facility
Actual ratio of net debt to underlying EBITDA 2.79x 2.14x
Maximum allowed ratio of net debt to underlying
EBITDA 3.50x 3.00x
Actual ratio of underlying EBITDA to finance costs 4.95x 6.71x
Minimum allowed ratio of underlying EBITDA to
finance costs 4.00x 4.00x
Covenant ratio - loan note agreements
Actual ratio of total debt to underlying EBITDA 2.83x 2.79x
Maximum allowed ratio of total debt to underlying
EBITDA 3.50x 3.00x
Actual ratio of underlying EBITDA to finance costs 6.23x 6.86x
Minimum allowed ratio of underlying EBITDA to
finance costs 3.50x 3.50x
Board changes
A number of changes have been made to the Board of Directors
during the period. Mark Papworth was appointed Group Chief
Executive on 5 November 2012, replacing Dr David Price. Steve
Bowers was appointed as Group Finance Director with effect from 7
January 2013. He took over from Nigel Young, who had been appointed
Interim Chief Financial Officer on 31 July 2012. Sir Peter Norriss,
who had been a non-executive director since May 2004, stood down at
the Group's Annual General Meeting on 20 March 2013.
Since the period end, the Company has appointed Nigel Young as a
non-executive director and Chair of the Audit Committee on 1 May
2013, and announced the appointment of Andy Hamment, who joins the
Board as a non-executive director on 1 July 2013.
Health and safety
The Group continues to place health and safety as its first
priority in all actions and decision making. We have invested
substantial funds and effort in improving the safety record of our
operations, and in protecting our employees, especially those who
work with highly volatile and energetic materials. Significant
amounts of capital have been expended on robotics and similar
automated processes to isolate operators from the most sensitive
operations. This is a continual process of improvement for
Chemring.
Risk assessments are carried out by our health and safety teams,
supported, where appropriate, by external consultants. Complacency
is the enemy of safe operations, and the training of staff in
safety procedures continues to be an ongoing focus 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, are those
set out in the "Principal Risks and Uncertainties" section of the
Group's 2012 Annual Report and Accounts. These can be summarised
as:
-- Health and safety risks
-- Political and economic risks, including possible defence budget cuts
-- Risks associated with the timing of receipt and value of orders
-- Risks associated with the introduction of new manufacturing facilities
-- Risks associated with the introduction of new products
-- Competitive risks
-- Product failure risks
-- Risks related to management resource
-- Compliance and corruption risks; and
-- Financial risks, including credit, interest rate and foreign exchange risks
The Board does not anticipate any significant change in the
likely impact of these risks overall.
Outlook
The Group has made good progress in the first half. The quality
of our operations is improving, and while there is still much to
do, we are confident that the Group's performance is heading in the
right direction. However, visibility generally, and the limited
level of detail on the extent and nature of cuts to US defence
spending in particular, makes forecasting increasingly difficult.
For the current financial year, the Board's outlook is towards the
lower end of expectations.
Looking ahead, significant progress has been made in our
Performance Recovery Programme. These actions are expected to
underpin 2014 profitability, drive improvements in operational
performance, and provide greater resilience in current challenging
markets.
Mark Papworth
Group Chief Executive
18 June 2013
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
Mark Papworth Steve Bowers
Group Chief Executive Group Finance Director
18 June 2013 18 June 2013
CONDENSED CONSOLIDATED INCOME STATEMENT
for the half year to 30 April 2013
Unaudited Unaudited
Half year to Half year to
30 April 2013 30 April 2012
Note Underlying Non-underlying Underlying Non-underlying
business items* business items*
performance Total performance Total
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue 297.4 - 297.4 333.3 - 333.3
Continuing operations
Operating profit 35.1 (34.4) 0.7 48.5 (19.5) 29.0
Share of post-tax
results of associate - - - - - -
Finance income - - - 0.1 - 0.1
Finance expense (9.5) - (9.5) (9.4) - (9.4)
------------- --------------- --------- ------------- --------------- --------
Profit/(loss) before
tax from continuing
operations 25.6 (34.4) (8.8) 39.2 (19.5) 19.7
Tax 4 (5.7) 11.5 5.8 (8.4) 4.7 (3.7)
------------- --------------- --------- ------------- --------------- --------
Profit/(loss) after
tax from continuing
operations 19.9 (22.9) (3.0) 30.8 (14.8) 16.0
Discontinued operations
Profit after tax from
discontinued operations 11 - - - 1.6 - 1.6
Profit/(loss) after
tax for the period 2 19.9 (22.9) (3.0) 32.4 (14.8) 17.6
------------- --------------- --------- ------------- --------------- --------
Earnings per ordinary
share 5
From continuing operations
Basic 10.3p (1.6p) 16.0p 8.3p
Diluted 10.0p (1.5p) 15.7p 8.2p
From continuing and discontinued
operations
Basic 10.3p (1.6p) 16.8p 9.1p
Diluted 10.0p (1.5p) 16.5p 9.0p
* Further information about non-underlying items can be found in
note 2
CONDENSED CONSOLIDATED INCOME STATEMENT (continued)
for the half year to 30 April 2013
Audited
Year to
31 Oct 2012
Note Underlying Non-underlying
business items*
performance Total
GBPm GBPm GBPm
Continuing operations
Revenue 740.3 - 740.3
Continuing operations
Operating profit 88.3 (51.3) 37.0
Share of post-tax results of associate 0.1 - 0.1
Finance income 0.1 - 0.1
Finance expense (18.4) - (18.4)
------------- --------------- --------
Profit before tax from continuing operations 70.1 (51.3) 18.8
Tax 4 (15.1) 9.5 (5.6)
------------- --------------- --------
Profit after tax from continuing operations 55.0 (41.8) 13.2
Discontinued operations
Profit after tax from discontinued operations 11 2.1 - 2.1
------------- --------------- --------
Profit after tax for the year 2 57.1 (41.8) 15.3
------------- --------------- --------
Earnings per ordinary share 5
From continuing operations
Basic 28.5p 6.8p
Diluted 28.1p 6.7p
From continuing and discontinued operations
Basic 29.6p 7.9p
Diluted 29.2p 7.8p
* Further information about non-underlying items can be found in
note 2
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the half year to 30 April 2013
Unaudited Unaudited Audited
Half year Half year Year to
to to
30 April 30 April 31 Oct 2012
2013 2012
GBPm GBPm GBPm
(Loss)/profit after tax for the period/year
attributable to equity holders of the
parent (3.0) 17.6 15.3
Items that will not be reclassified subsequently
to profit or loss:
Actuarial losses on defined benefit pension
schemes (5.2) (4.4) (2.7)
Movement on deferred tax relating to
pension schemes 1.4 0.7 0.7
---------- ----------- ------------
(3.8) (3.7) (2.0)
---------- ----------- ------------
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of
foreign operations 14.5 (9.3) (20.1)
Deferred tax on items taken directly
to equity - - 0.7
---------- ----------- ------------
14.5 (9.3) (19.4)
---------- ----------- ------------
Total comprehensive income/(expense)
for the period/year attributable to equity
holders of the parent 7.7 4.6 (6.1)
---------- ----------- ------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the half year to 30 April 2013
Share Special
Share premium capital Revaluation Translation Retained Own
capital account reserve reserve reserve earnings shares Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 November 2012 2.0 230.7 12.9 1.3 (39.6) 235.8 (9.6) 433.5
---------------------------- -------- -------- -------- ------------ ------------ --------- ------- ------
Loss after tax for the
period - - - - - (3.0) - (3.0)
Other comprehensive income
for the period - - - - 14.5 (3.8) - 10.7
---------------------------- -------- -------- -------- ------------ ------------ --------- ------- ------
Total comprehensive income
for the period - - - - 14.5 (6.8) - 7.7
Share-based payments (net
of settlement) - - - - - 0.6 - 0.6
Transfers between reserves - - - - - - - -
At 30 April 2013 2.0 230.7 12.9 1.3 (25.1) 229.6 (9.6) 441.8
-------- -------- -------- ------------ ------------ --------- ------- ------
Share Special
Share premium capital Revaluation Translation Retained Own
capital account reserve reserve reserve earnings shares Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 November 2011 2.0 230.6 12.9 1.4 (19.5) 254.6 (6.6) 475.4
---------------------------- -------- -------- -------- ------------ ------------ --------- ------- -------
Profit after tax for the
period - - - - - 17.6 17.6
Other comprehensive income
for the period - - - - (9.3) (3.7) - (13.0)
---------------------------- -------- -------- -------- ------------ ------------ --------- ------- -------
Total comprehensive income
for the period - - - - (9.3) 13.9 - 4.6
Ordinary shares issued - 0.1 - - - - - 0.1
Dividends paid - - - - - (20.8) - (20.8)
Share-based payments (net
of settlement) - - - - - 0.4 - 0.4
Transactions in own shares - - - - - - (4.5) (4.5)
Transfers between reserves - - - (0.1) - 0.1 - -
At 30 April 2012 2.0 230.7 12.9 1.3 (28.8) 248.2 (11.1) 455.2
-------- -------- -------- ------------ ------------ --------- ------- -------
Share Special
Share premium capital Revaluation Translation Retained Own
capital account reserve reserve reserve earnings shares Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 November 2011 2.0 230.6 12.9 1.4 (19.5) 254.6 (6.6) 475.4
---------------------------- -------- -------- -------- ------------ ------------ --------- ------- -------
Profit after tax for the
year - - - - - 15.3 - 15.3
Other comprehensive income
for the year - - - - (20.1) (1.3) - (21.4)
---------------------------- -------- -------- -------- ------------ ------------ --------- ------- -------
Total comprehensive income
for the year - - - - (20.1) 14.0 - (6.1)
Ordinary shares issued - 0.1 - - - - - 0.1
Dividends paid - - - - - (31.1) - (31.1)
Share-based payments (net
of settlement) - - - - - (1.8) - (1.8)
Transactions in own shares - - - - - - (3.0) (3.0)
Transfers between reserves - - - (0.1) - 0.1 - -
At 31 October 2012 2.0 230.7 12.9 1.3 (39.6) 235.8 (9.6) 433.5
-------- -------- -------- ------------ ------------ --------- ------- -------
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 April 2013
Note Unaudited Unaudited Audited
As at As at As at
30 April 30 April
2013 2012 31 Oct 2012
GBPm GBPm GBPm
Non-current assets
Goodwill 220.5 236.9 214.8
Development costs 31.7 27.6 31.0
Other intangible assets 146.8 178.6 167.4
Property, plant and equipment 242.2 235.2 240.0
Interest in associate 1.4 1.5 1.4
Deferred tax 24.2 21.5 16.9
---------- ---------- ------------
2 666.8 701.3 671.5
Current assets
Inventories 139.3 113.4 113.8
Trade and other receivables 197.2 219.4 193.0
Cash and cash equivalents 7 25.9 36.3 96.0
Derivative financial instruments 0.5 1.9 1.0
---------- ---------- ------------
362.9 371.0 403.8
Assets held for sale - 19.9 -
---------- ---------- ------------
Total assets 1,029.7 1,092.2 1,075.3
---------- ---------- ------------
Current liabilities
Borrowings (26.3) (85.5) (74.0)
Obligations under finance leases (0.9) (1.1) (1.7)
Trade and other payables (180.3) (176.4) (201.5)
Short term provisions (3.3) (1.4) (2.8)
Current tax liabilities (7.1) (9.9) (5.2)
Derivative financial instruments (0.8) (3.0) (0.1)
Liabilities held for sale - (2.6) -
(218.7) (279.9) (285.3)
Non-current liabilities
Borrowings (270.8) (259.9) (262.1)
Obligations under finance leases (2.9) (4.5) (2.9)
Trade and other payables (1.4) (3.5) (4.3)
Long term provisions (6.8) (2.8) (4.9)
Deferred tax (53.6) (54.5) (52.7)
Preference shares (0.1) (0.1) (0.1)
Retirement benefit obligations (31.7) (27.2) (27.0)
Derivative financial instruments (1.9) (4.6) (2.5)
---------- ---------- ------------
(369.2) (357.1) (356.5)
---------- ---------- ------------
Total liabilities (587.9) (637.0) (641.8)
---------- ---------- ------------
Net assets 441.8 455.2 433.5
---------- ---------- ------------
Equity
Share capital 2.0 2.0 2.0
Share premium account 230.7 230.7 230.7
Special capital reserve 12.9 12.9 12.9
Revaluation reserve 1.3 1.3 1.3
Translation reserve (25.1) (28.8) (39.6)
Retained earnings 229.6 248.2 235.8
---------- ---------- ------------
451.4 466.3 443.1
Own shares (9.6) (11.1) (9.6)
---------- ---------- ------------
Equity attributable to equity
holders of the parent 441.8 455.2 433.5
---------- ---------- ------------
Total equity 441.8 455.2 433.5
---------- ---------- ------------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the half year to 30 April 2013
Note Unaudited Unaudited Audited
Half year Half year
to to Year to
30 April 30 April
2013 2012 31 Oct 2012
GBPm GBPm GBPm
Cash flows from operating activities
--------------------------------------------- ------ ---------- ---------- ------------
Cash generated from continuing underlying
operations 5.0 15.3 114.9
Cash generated from discontinued underlying
operations - 2.7 3.3
----------------------------------------------------- ---------- ---------- ------------
Cash generated from underlying operations A 5.0 18.0 118.2
Acquisition and disposal related costs (3.3) (2.7) (5.5)
Restructuring and incident costs (3.3) (4.8) (10.1)
---------- ---------- ------------
Cash (absorbed)/generated from operations (1.6) 10.5 102.6
Tax received/(paid) 1.3 (4.0) (6.1)
---------- ---------- ------------
Net cash (outflow)/inflow from operating
activities (0.3) 6.5 96.5
---------- ---------- ------------
Cash flows from investing activities
Dividends received from associate - - 0.1
Purchases of intangible assets (1.9) (5.1) (11.0)
Purchases of property, plant and equipment (5.7) (16.7) (30.1)
Receipts from sales of trades or businesses
(net of cash transferred) - - 21.8
---------- ---------- ------------
Net cash outflow from investing activities (7.6) (21.8) (19.2)
---------- ---------- ------------
Cash flows from financing activities
Dividends paid - (20.8) (31.1)
Interest paid (11.4) (9.0) (23.8)
Proceeds on issue of shares - 0.1 -
New borrowings 27.0 2.5 12.5
Repayments of borrowings (77.6) (3.2) (23.0)
Capital payments on finance leases (0.9) (0.8) (1.8)
Purchase of own shares - (4.5) (4.8)
---------- ---------- ------------
Net cash outflow from financing activities (62.9) (35.7) (72.0)
---------- ---------- ------------
(Decrease)/increase in cash and cash
equivalents during the period/year (70.8) (51.0) 5.3
Cash and cash equivalents at start
of the period/year 96.0 91.9 91.9
Effect of foreign exchange rate changes 0.7 (1.3) (1.2)
---------- ---------- ------------
Cash and cash equivalents at end of
the period/year 25.9 39.6 96.0
---------- ---------- ------------
Analysis of continuing and discontinued cash and cash equivalents
Unaudited Unaudited Audited
Half year Half year Year to
to to
30 April 30 April 31 Oct 2012
2013 2012
GBPm GBPm GBPm
Cash and cash equivalents at the end of
the period/year
- continuing operations 25.9 36.3 96.0
- discontinued operations - 3.3 -
---------- ---------- ------------
Cash and cash equivalents at the end of
the period/year 25.9 39.6 96.0
---------- ---------- ------------
NOTES TO THE CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 30 April 2013
A. Cash generated from operations Unaudited Unaudited Audited
Half year Half year
to to Year to
30 April 30 April
2013 2012 31 Oct 2012
GBPm GBPm GBPm
Operating profit from continuing operations 0.7 29.0 37.0
Operating profit from discontinued operations - 2.6 3.1
Adjustment for:
Impairment of acquired intangibles/goodwill 15.7 - 22.5
Amortisation of development costs 2.2 1.9 4.3
Amortisation of intangible assets arising
from business combinations 10.4 10.2 20.9
Amortisation of patents and licenses 0.2 0.2 0.3
Loss on disposal of property, plant
and equipment 0.6 - 3.4
Depreciation of property, plant and
equipment 9.8 9.5 15.9
Loss/(gain) on fair value movements
on derivatives 0.4 1.7 (1.9)
Share-based payment expense 0.6 0.9 (0.1)
Difference between pension contributions
paid and amount recognised in income
statement (0.8) 1.9 0.6
---------- ---------- ------------
Operating cash flows before movements
in working capital 39.8 57.9 106.0
(Increase)/decrease in inventories (25.5) 27.9 28.0
Increase in trade and other receivables (4.1) (34.8) (8.2)
Decrease in trade and other payables (14.2) (39.8) (20.2)
Increase/(decrease) in provisions 1.1 (0.7) 2.8
---------- ---------- ------------
Cash (absorbed)/generated from operations (2.9) 10.5 108.4
Acquisition and disposal related costs 2.3 2.7 8.2
Restructuring and incident costs 5.6 4.8 11.9
Profit on disposal of business - - (10.3)
---------- ---------- ------------
Cash generated from operations 5.0 18.0 118.2
---------- ---------- ------------
Reconciliation of net cash flow to movement
in net debt
(Decrease)/increase in cash and cash
equivalents during the period/year (70.8) (51.0) 5.3
Decrease in debt and lease financing
due to cash flows 51.5 0.8 12.3
---------- ---------- ------------
Change in net debt resulting from cash
flows (19.3) (50.2) 17.6
Foreign exchange (losses)/gains (10.1) 2.2 1.9
Amortisation of debt finance costs (0.9) (0.8) (1.6)
---------- ---------- ------------
Movement in net debt in the period/year (30.3) (48.8) 17.9
Net debt at start of the period/year (244.8) (262.7) (262.7)
---------- ---------- ------------
Net debt at end of the period/year (275.1) (311.5) (244.8)
---------- ---------- ------------
Analysis of net debt
As at
1 Nov Cash Non-cash Exchange As at 30
2012 flow changes movement April 2013
GBPm GBPm GBPm GBPm GBPm
Cash at bank and in hand 96.0 (70.8) - 0.7 25.9
Debt due within one year (74.0) 50.6 (1.1) (1.8) (26.3)
Debt due after one year (262.1) - 0.2 (8.9) (270.8)
Finance leases (4.6) 0.9 - (0.1) (3.8)
Preference shares (0.1) - - - (0.1)
-------- ------- --------- ---------- ------------
Net debt (244.8) (19.3) (0.9) (10.1) (275.1)
-------- ------- --------- ---------- ------------
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 2013, 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, the notes to 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 it 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 2013 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
18 June 2013
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 2013 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 18 June 2013. The information
for the year ended 31 October 2012 does not constitute statutory
accounts as defined in section 435 of the Companies Act 2006. Full
accounts for the year ended 31 October 2012, 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
2012.
Restatement of prior period figures
The segmental analysis of revenue and profit has been restated
for the prior periods, in order to reflect the new operating
segments within the Group. These new segments have arisen from the
restructuring process announced in 2012, and are deemed to better
reflect the core operating activities of the Group going forward.
See note 2 for further detail.
2. SEGMENTAL ANALYSIS
A segmental analysis of revenue and results is set out
below:
Unaudited
Unaudited Half year Audited
Half year to Year to
to 30 April 30 April 31 Oct
2013 2012 2012
GBPm GBPm GBPm
Revenue
Countermeasures 57.0 76.3 163.2
Sensors & Electronics 108.3 89.8 228.9
Pyrotechnics & Munitions 89.2 123.0 249.5
Energetic Sub-Systems 42.9 44.2 98.7
------------- ----------- ---------
Revenue from continuing operations 297.4 333.3 740.3
Revenue from discontinued operations
Pyrotechnics & Munitions - 10.8 15.1
------------- ----------- ---------
Total revenue 297.4 344.1 755.4
------------- ----------- ---------
Underlying operating profit
Countermeasures 4.9 21.4 20.4
Sensors & Electronics 25.2 13.0 44.9
Pyrotechnics & Munitions 5.0 15.6 21.2
Energetic Sub-Systems 5.2 4.4 12.3
Unallocated corporate costs (5.2) (5.9) (10.5)
Underlying operating profit from continuing
operations 35.1 48.5 88.3
Underlying operating profit from discontinued
operations
Pyrotechnics & Munitions - 2.6 3.1
------------- ----------- ---------
Total underlying operating profit 35.1 51.1 91.4
------------- ----------- ---------
Acquisition and disposal related costs (2.3) (2.7) (8.2)
Restructuring and incident costs (5.6) (4.9) (11.9)
Profit on disposal of business - - 10.3
Impairment of acquired intangibles/goodwill (15.7) - (22.5)
Amortisation of intangibles arising from
business combinations (10.4) (10.2) (20.9)
(Loss)/gain on fair value movements on
derivatives (0.4) (1.7) 1.9
------------- ----------- ---------
Non-underlying items (34.4) (19.5) (51.3)
------------- ----------- ---------
Operating profit from continuing operations 0.7 29.0 37.0
Share of post-tax results of associate - - 0.1
Finance income - 0.1 0.1
Finance expense (9.5) (9.4) (18.4)
(Loss)/profit before tax for the period/year
from continuing operations (8.8) 19.7 18.8
Tax 5.8 (3.7) (5.6)
------------- ----------- ---------
(Loss)/profit after tax for the period/year
from continuing operations (3.0) 16.0 13.2
Profit after tax for the period/year
from discontinued operations - 1.6 2.1
------------- ----------- ---------
(Loss)/profit after tax for the period/year (3.0) 17.6 15.3
------------- ----------- ---------
There were no material inter-segment sales in any of the
periods.
In 2013, there were acquisition and disposal related costs of
GBP2.3 million (H1 2012: GBP2.7 million, 2012: GBP8.2 million). The
costs in the period related to acquisitions and disposals made in
previous periods, as well as ongoing merger and acquisition
activity. See note 8 for further details.
In 2013, the restructuring costs relate to the restructuring of
the divisional management structure - GBP3.1 million, the
integration of Alloy Surfaces and Kilgore Flares in the US - GBP1.2
million, and to a non-recurring incentive scheme designed to ensure
the continued service of key personnel during the restructuring
process - GBP0.2 million. In addition, in 2013 there were costs of
GBP0.9 million relating to several smaller restructuring projects
and incident-related costs of GBP0.2 million.
In H1 2012, the GBP4.9 million of restructuring costs related to
the restructuring at Alloy Surfaces and NIITEK in the US, and
Chemring Energetics in the UK. In 2012, the restructuring costs
related to the closure of a facility in Texas - GBP3.3 million,
restructuring of the Group's USA countermeasures business - GBP2.5
million, restructuring of UK operations - GBP2.6 million, an
additional GBP1.5 million relating to smaller restructuring
projects, and GBP2.0 million relating to the Board changes during
the year.
In 2013, the GBP15.7 million (H1 2012: GBPnil, 2012: GBPnil)
charge in respect of acquired intangible assets was recognised in
relation to Chemring Energetic Devices, Inc.; these assets are
therefore fully amortised. This was primarily driven by the lower
cash flows within the business plans, reflecting the continuing
challenging economic conditions facing the defence industry within
the US, and Chemring Energetic Devices, Inc.'s markets in
particular. The business operates in the Energetic Sub-Systems
segment. The impairment loss has been recognised in the income
statement as part of non-underlying items within continuing
operating profit and is based on value-in-use calculations.
In 2012, the impairment to goodwill of GBP22.5 million related
to Chemring Ordnance, Inc. (GBP6.8 million) and Chemring Energetic
Devices, Inc. (GBP15.7 million).
An update of the annual impairment assessment performed for the
preparation of the Group's financial statement for the year ended
31 October 2012 has been undertaken, with indicators of potential
impairment having been considered. Indicators were identified for
Chemring Energetic Devices, Inc., Hi-Shear Technology Corporation
and Simmel Difesa SpA, and a charge in respect of acquired
intangible assets was made in relation to Chemring Energetic
Devices, Inc. as described above. In respect of Hi-Shear Technology
Corporation and Simmel Difesa SpA, a reasonably possible change in
the key assumptions used would result in a significant impairment
charge being recorded in the financial statements. A 25% fall in
the forecast cash flows at Hi-Shear Technology Corporation and
Simmel Difesa SpA would require an impairment charge of up to GBP20
million in each of the afore-mentioned CGUs. During the second half
of the year, a comprehensive planning process will be undertaken
for all Group businesses, and this will be used to provide
financial projections and value-in-use calculations for the 2013
annual impairment assessment.
Unaudited Unaudited
Half year Half year Audited
to to Year to
30 April 30 April 31 Oct
2013 2012 2012
GBPm GBPm GBPm
Revenue by destination
Continuing operations:
UK 60.2 52.3 112.0
USA 132.0 138.6 348.5
Europe 27.8 40.8 84.8
Australia and Far East 19.6 24.6 60.4
Middle East 54.5 67.9 120.5
Rest of the world 3.3 9.1 14.1
297.4 333.3 740.3
----------- ----------- ---------
Discontinued operations:
UK - 0.6 1.0
USA - 1.0 2.5
Europe - 4.3 6.7
Australia and Far East - 3.2 3.4
Middle East - 0.5 -
Rest of the world - 1.2 1.5
----------- ----------- ---------
- 10.8 15.1
----------- ----------- ---------
Total 297.4 344.1 755.4
----------- ----------- ---------
The directors consider the only countries that are significant
in accordance with IFRS 8 are the UK and USA, as disclosed above,
and Saudi Arabia, which is included within the Middle East category
and which had revenue of GBP48.0 million (H1 2012: GBP51.5 million,
2012: GBP92.8 million).
The Group does not disclose assets by segment in the monthly
management accounts provided to the Executive Committee or the
Board of Directors. The Improvements to IFRSs issued in April 2009
only requires information provided to the chief operating decision
maker as a key decision making tool to be disclosed. The Group has
adopted this amendment in order to clarify that the chief
operational decision makers do not use this as a key decision tool.
IFRS 8 Operating Segments requires a geographic analysis of
non-current assets and so a disclosure of non-current assets by
location is shown below:
Unaudited Unaudited
Half year Half year Audited
to to Year to
30 April 30 April 31 Oct
2013 2012 2012
GBPm GBPm GBPm
Continuing operations:
Non-current assets by location
UK 225.7 222.4 219.7
USA 269.7 309.6 283.6
Europe 141.2 140.3 138.7
Australia and Far East 30.2 29.0 29.5
Total 666.8 701.3 671.5
----------- ----------- ---------
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.
4. TAX
The effective tax rate on underlying profits is 22.2% (H1 2012:
21.5%, 2012: 21.5%) and is based on the estimated effective tax
rate on underlying profits for the full year. The tax credit on
non-underlying items has been calculated based on the actual costs
incurred in the six month period and is an effective tax rate of
33.3% (H1 2012: 26.8%, 2012: 18.6%). This results in a statutory
effective tax rate of 65.9% (H1 2012: 19.9%, 2012: 28.4%) for the
half year. The full year statutory effective tax rate will be
dependent on the precise mix of profits between underlying and
non-underlying items but is currently forecast to be 23.6% (H1
2012: 19.9%, 2012: 28.4%).
5. EARNINGS PER SHARE
Earnings per share are based on the average number of shares in
issue of 193,292,527 (H1 2012: 193,337,430) and a loss on ordinary
activities after tax and minority interests of GBP3.0 million (H1
2012: GBP17.6 million profit). Diluted earnings per share has been
calculated using a diluted average number of shares in issue of
198,377,126 (H1 2012: 195,631,729) and a loss on ordinary
activities after tax and minority interests of GBP3.0 million (H1
2012: GBP17.6 million profit).
The earnings and shares used in the calculations are as
follows:
Continuing operations
2013 2012
Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm
Total (loss)/profit after tax (3.0) (3.0) 16.0 16.0
Non-underlying items (see reconciliation
below) 22.9 22.9 14.8 14.8
------- --------- ------- ---------
Underlying profit after tax 19.9 19.9 30.8 30.8
------- --------- ------- ---------
2013 2012
Ordinary Ordinary
shares shares
Number Number
000s 000s 000s 000s
Weighted average number of shares 193,293 193,293 193,337 193,337
Additional shares issuable other
than at fair value in respect of
options outstanding - 5,084 - 2,295
------- --------- ------- ---------
Weighted average number of shares
used for earnings per share 193,293 198,377 193,337 195,632
------- --------- ------- ---------
2013 2012
Basic Diluted Basic Diluted
Pence Pence Pence Pence
Earnings per share (1.6) (1.5) 8.3 8.2
------- --------- ------- ---------
Underlying earnings per share 10.3 10.0 16.0 15.7
------- --------- ------- ---------
Continuing and discontinuing operations
2013 2012
Basic Diluted Basic Diluted
GBPm GBPm GBPm GBPm
Total (loss)/profit after tax (3.0) (3.0) 17.6 17.6
Non-underlying items (see reconciliation
below) 22.9 22.9 14.8 14.8
------- --------- ------- ---------
Underlying profit after tax 19.9 19.9 32.4 32.4
------- --------- ------- ---------
2013 2012
Ordinary Ordinary
shares shares
Number Number
000s 000s 000s 000s
Weighted average number of shares 193,293 193,293 193,337 193,337
Additional shares issuable other
than at fair value in respect of
options outstanding - 5,084 - 2,295
------- --------- ------- ---------
Weighted average number of shares
used for earnings per share 193,293 198,377 193,337 195,632
------- --------- ------- ---------
2013 2012
Basic Diluted Basic Diluted
Pence Pence Pence Pence
Earnings per share (1.6) (1.5) 9.1 9.0
------- --------- ------- ---------
Underlying earnings per share 10.3 10.0 16.8 16.5
------- --------- ------- ---------
Reconciliation from basic earnings per share to underlying
earnings per share:
Underlying earnings has been defined as earnings before
acquisition and disposal related costs, restructuring and incident
costs, impairment of acquired intangibles/goodwill, amortisation of
intangibles arising from business combinations and (loss)/gain on
fair value movements on derivatives, adjusted for tax as
appropriate. The directors consider this measure of earnings allows
a more meaningful comparison of earnings trends. These are set out
below.
2013 2012
GBPm GBPm
(Loss)/profit after tax (3.0) 17.6
Acquisition and disposal related costs 2.3 2.7
Restructuring and incident costs 5.6 4.9
Impairment of acquired intangibles/goodwill 15.7 -
Amortisation of intangibles arising from business
combinations 10.4 10.2
Loss on fair value movements on derivatives 0.4 1.7
Tax on non-underlying items (11.5) (4.7)
-------- -------
Underlying profit after tax 19.9 32.4
-------- -------
6. DIVIDENDS
2013 2012
GBPm GBPm
Dividends on ordinary shares of 1p each
Interim dividend for the year ended 31 October
2012 5.3p - 10.3
Final dividend for the year ended 31 October 2012
4.2p (2011: 10.8p) 8.1 20.8
----- -----
Total dividends 8.1 31.1
----- -----
The proposed interim dividend in respect of the half year ended
30 April 2013 of 3.4p per share will, if approved, absorb
approximately GBP6.6 million of shareholders' funds. No liability
for the proposed interim dividend has been included in these
half-yearly financial statements.
7. CASH AND CASH EQUIVALENTS
Included within cash is GBPnil of restricted cash (H1 2012:
GBP0.4 million, 2012: GBP4.5 million).
8. ACQUISITIONS AND DISPOSALS
No acquisitions were made in the period but, as a result of
ongoing merger and acquisition activity and acquisitions and
disposals in prior periods, acquisition and disposal related costs
of GBP2.3 million (H1 2012: GBP2.7 million) have been recognised
through the income statement in accordance with IFRS3 (revised
2008). This cost predominantly relates to an onerous lease cost
relating to a previous acquisition, along with costs incurred on
proposed joint ventures in India, Brazil and Saudi Arabia.
9. PENSIONS
The defined benefit obligations are calculated using an
actuarial valuation as at 30 April 2013. The deficit on the
Chemring Group Staff Pension Scheme has increased to GBP30.6
million (H1 2012: GBP26.5 million), as a result of changes to the
scheme's asset values from rising equity markets and from
adjustments 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 loss in the
condensed consolidated statement of comprehensive income in
accordance with the Group's accounting policy.
10. RELATED PARTY TRANSACTIONS
The Group had no related party transactions during the period
requiring disclosure.
11. DISCONTINUED OPERATIONS
The results of the discontinued marine business for the period,
which have been included within the condensed consolidated income
statement, were as follows:
Unaudited Unaudited Audited
Half year Half year
to to Year to
30 April 30 April 31 Oct
2013 2012 2012
GBPm GBPm GBPm
Revenue - 10.8 15.1
Operating profit - 2.6 3.1
Finance expense - (0.3) (0.5)
Tax - (0.7) (0.5)
----------- ---------- --------
Profit after tax - 1.6 2.1
----------- ---------- --------
During the period, the discontinued operations contributed a
GBPnil inflow (H1 2012: GBP2.4 million, 2012: GBP3.3 million) to
the Group's net operating cash flows and paid GBPnil (H1 2012:
GBP0.3 million, 2012: GBP0.5 million) in respect of financing
activities.
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 BRGDLRXBBGXR
Chemring (LSE:CHG)
과거 데이터 주식 차트
부터 6월(6) 2024 으로 7월(7) 2024
Chemring (LSE:CHG)
과거 데이터 주식 차트
부터 7월(7) 2023 으로 7월(7) 2024
