TIDMCHG
RNS Number : 7833T
Chemring Group PLC
25 November 2013
FOR IMMEDIATE RELEASE 25 NOVEMBER 2013
CHEMRING GROUP PLC
POST-CLOSE STATEMENT
Chemring Group PLC ("Chemring" or "the Group") today provides a
post-close statement, having entered the close period in respect of
its results for the year ended 31 October 2013, which are scheduled
to be announced on 23 January 2014.
Trading
The Board's expectations for the Group's trading performance for
the financial year ended 31 October 2013 remain in line with the
guidance given at the trading update issued on 11 October 2013.
The issues regarding the US Government shut down have largely
been resolved. The Group continues to work through specific
production issues, particularly those at Kilgore, and has taken
further steps to strengthen the management team at that
business.
Revenue in the final quarter was approximately GBP185 million,
down 24% from GBP242 million in the comparative period. For the
year to 31 October 2013, revenue was approximately GBP625 million
(2012: GBP740 million). The Group's order book at 31 October 2013
was approximately GBP702 million, 8% lower than at the end of the
previous financial year. These reductions reflect the significant
budgetary pressures in Chemring's core defence markets and order
deferrals among the Group's non-NATO customer base.
Financial position
As reported on 11 October 2013, delays in deliveries to
customers in the Middle East have had a short-term impact on cash
receipts, reducing the operating cash inflow for the final quarter
of the financial year.
However, despite these effects, net debt reduced by over GBP45
million in the quarter to approximately GBP249 million at 31
October 2013 (2012: GBP245 million). Furthermore, since 31 October
2013, the impact of the delays in deliveries has partially unwound
with the receipt of GBP14 million of cash from the relevant
customers.
The Group continues to have a positive relationship with its
debt holders and is maintaining a strong focus on managing cash and
working capital.
Strategic planning process
Despite the adverse market backdrop, Chemring is making good
progress with its strategic planning process.
The majority of this process is now complete, providing a
clearer view for each of Chemring's business units of their market
environment, competitive dynamics and future prospects.
The planning process has confirmed the Group's market-leading
positions and the strength of its technology in a number of areas,
and has highlighted new defence and adjacent non-defence
opportunities that the Group has yet fully to exploit. In addition,
the process has identified a number of further operational
initiatives which will allow the Group to reduce the impact of the
challenges that external market conditions provide. Chemring has
both reshaped its management team better to handle these
challenges, and set robust targets for which management throughout
the organisation is fully accountable.
Chemring has also concluded that there are a number of business
units within the Group which do not form part of its longer term
strategy. The Board has therefore started a process to divest of
certain of these businesses which is expected to result in an
improved financial position for the Group.
Segmental review
Countermeasures
Chemring has a leading share of the Countermeasures market and
unsurpassed technological capability. However, following the
drawdown from Afghanistan, the addressable market has contracted
dramatically and will not grow significantly until new platforms,
such as the F-35 and Typhoon, achieve full fleet operational
capability. The Group therefore considers that current volumes are
close to our customer's minimum sustaining levels.
The Group has concluded that it will invest in maintaining its
technical leadership and supporting customer-funded research
projects, while also delivering operational efficiencies,
principally through resolving production quality issues at its US
businesses.
Sensors & Electronics
Chemring's Sensors & Electronics businesses continue to
perform well, often as a result of urgent operational
requirements.
However, certain programmes in the US, such as the Husky Mounted
Detection System Ground Penetrating Radar, are beginning the
transition into long-term capabilities, while others, such as the
Stryker Nuclear Biological Chemical Reconnaissance Vehicle
programme, will complete during 2014.
Nonetheless, the Sensors & Electronics segment presents the
greatest opportunity for the Group to diversify into adjacent and
new markets.
The Group's focus will therefore be on business development
activity across NATO markets to exploit our current product range,
on technology investment to fill gaps in the product portfolio and
to ensure a strong position on new programmes as they arise.
Pyrotechnics & Munitions
While demand from NATO customers for Chemring's Pyrotechnics
& Munitions products has reduced, the Group continues to hold
strong positions in the markets for naval, light armoured vehicle
and tank munitions. The Group's businesses continue to develop
their position in non-NATO markets, where significant growth
opportunities exist.
Cash flow generation in this segment is improving, with
significant focus being placed on securing improved contractual
terms with customers and progressively reducing working
capital.
Energetic Sub-Systems
The Energetic Sub-Systems segment comprises a number of separate
businesses, each with differentiated products and capabilities.
There has been a number of operational issues within this segment
which have impacted recent performance, and addressing these issues
should enable margins to recover over time and order backlog to be
reduced.
Mark Papworth, Chief Executive, commented:
"Although the defence environment remains undeniably
challenging, we continue to take the necessary steps to give
Chemring a stable platform and rebuild shareholder value. These
steps will be driven by the results of our strategic planning
process that has crystallised our long-term objectives for the
business, determined our strategy for the next three years and
enabled a re-alignment of our portfolio."
-ENDS-
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 unaudited information based on
management accounts and 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 high technology electronics and energetic
products to over sixty countries worldwide.
-- The Company 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.
www.chemring.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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