TIDMCHG
RNS Number : 8653R
Chemring Group PLC
17 September 2014
FOR IMMEDIATE RELEASE 17 SEPTEMBER 2014
CHEMRING GROUP PLC
INTERIM MANAGEMENT STATEMENT
Chemring Group PLC ("Chemring" or "the Group") today issues its
Interim Management Statement covering the period from 1 May 2014 to
date, as required by Rule 4.3 of the Disclosure and Transparency
Rules of the UK Listing Authority.
Key points
-- Q3 revenue in line with the Group's expectations
-- Financial strength continues to improve through repayment of
GBP102.5 million ($167.5 million) of loan notes and signing of new
revolving credit facility
-- Key research and development contracts won for Sensors & Electronics Programs of Record
-- Based on current expectations of order intake and product
delivery and absent any material change in customer behaviour, full
year expectations broadly unchanged
Michael Flowers, Chief Executive of Chemring, commented:
"Our focus remains on creating a platform for growth, as
reflected in our strengthened financial position and the improving
quality of our operations. The Group has continued to make
progress, and whilst the trading environment remains challenging, I
am pleased that Chemring has gained a number of contracts that
position the Group for the longer term.
"Current world events and increasing NATO commitment indicate
the potential for the recent trend of declining defence spending to
moderate. Recent customer enquiries and improved order intake gives
us confidence that our markets are stabilising. Whilst the timing
of international order placement remains difficult to predict,
Chemring is well positioned to benefit from any sustained increase
in demand."
Current trading
Revenue from continuing operations for the three month period to
31 July 2014 was GBP77.5 million, compared with GBP110.5 million in
the same period last year.
The Group's order book at 31 July 2014 was GBP417.5 million,
3.9% higher than the continuing operations order book of GBP401.8
million at 30 April 2014. Of the order book at 31 July 2014, 25.8%
was for delivery in the current financial year.
Countermeasures
Countermeasures revenue was 2.3% below the same period last
year, reflecting its continued stabilisation. In the US, although
deferrals in customer order placement have continued, a $22.2
million order was received in August for infra-red decoys from the
Alloy Surfaces facility. Chemring Australia has been awarded an
AU$5.0 million contract to become a qualified supplier of flares
for the F-35 Joint Strike Fighter, strengthening Chemring's
position on this platform.
At Chemring Countermeasures UK, work continues to complete the
delivery of the advanced countermeasure that has been the subject
of long term development. Resolution of technical problems
associated with this product is anticipated to enable customer
acceptance in the current financial year.
Following the incident at the Kilgore site in February, the
appropriate regulatory approvals have been granted and the
re-commissioning of the impacted area of the facility will complete
by October 2014.
Sensors & Electronics
Revenue in the Sensors & Electronics segment was 54.5% lower
than the same period last year, as activity transitions from urgent
operational requirements to customer funded research and
development contracts in support of long term US Department of
Defense ("US DoD") Programs of Record. Reflecting this, Chemring
was awarded a $26.1 million contract for the Program of Record for
the next generation of the Husky Mounted Detection System ("HMDS").
Chemring has also secured participation in all three initial
research and development contracts for the Next Generation Chemical
Detector Program of Record, to an initial value of $3.9
million.
The Group continues to pursue opportunities for the sale of
ground penetrating radar into non-NATO and commercial markets.
Dialogue with a number of customers in the Middle East is ongoing
with orders and revenue targeted before the end of the current
financial year.
Energetic Systems
Revenue in our Energetic Systems segment was 4.4% lower than the
same period last year. Activity levels are stabilising and
operational performance continues to improve.
Order intake in the period to 31 July 2014 fell by 17.2%
compared to the same period last year. However, since the period
end, orders totalling GBP53.5 million have been received from US
and Middle East customers providing essential base load
manufacturing activity.
Financial position
The receipt of net proceeds of GBP134.5 million from the
disposal of the European Munitions business has resulted in an
improved financial position. At 31 July 2014, the Group's net debt
was GBP116.8 million (30 April 2014: GBP229.2 million).
Following receipt of these proceeds, GBP14.5 million ($24.7
million) of the Group's private placement loan notes were repaid at
par in June 2014. The Group is now applying a further GBP88.0
million ($142.8 million) of the disposal proceeds to repay loan
notes. This will lead to an accelerated interest payment of GBP13.0
million ($21.1 million) being incurred in the current financial
year, equivalent to 14.8% of the principal repaid. In view of the
non-recurring nature of this payment, it will be treated as a
non-underlying item in the Group's financial statements.
On 31 July 2014, Chemring successfully concluded the refinancing
of its revolving credit facility with the signing of a GBP70.0
million, four year facility. In addition, the Group entered into
ancillary UK facilities of GBP70.0 million in respect of bonding
and trade finance requirements, and a $15.0 million US facility to
fulfil trade finance and working capital requirements.
Outlook
The Group has continued to make progress, implementing
structural and financial change to position the Group for long term
growth. While the trading environment remains challenging and there
is potential for a Continuing Resolution in the US, Chemring has
gained a number of contracts that position the Group for long term
Programs of Record. Work continues to gain production orders for
Sensors & Electronics products to offset the pause in US DoD
manufacturing, however the timing of international order placement
remains difficult to predict.
Based on current expectations of order intake and product
delivery, and absent any material change in customer behaviour, the
Board's current outlook for this financial year is broadly
unchanged.
-ENDS-
The next scheduled announcement from Chemring will be a trading
update to be issued in November 2014.
For further information:
Michael Flowers Group Chief Executive, Chemring Group PLC 01794 833901
Steve Bowers Group Finance Director, Chemring Group PLC 01794 833901
Rupert Pittman Group Director of Communications and
Investor Relations, Chemring Group PLC 01794 833901
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 global business that specialises in the
manufacture of high technology products and services to the
aerospace, defence and security markets
-- Employing more than 3,500 people worldwide, and with
production facilities in four countries, Chemring meets the needs
of customers in more than fifty countries worldwide
-- Chemring is now organised under three strategic product
segments: Countermeasures, Sensors & Electronics, and Energetic
Systems
-- Chemring has a diverse portfolio of products that deliver
high reliability solutions to protect people, platforms, mission
and information against constantly changing threats
-- Operating in niche markets and with strong investment in
research and development, Chemring has the agility to rapidly react
to urgent customer needs
www.chemring.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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