TIDMCHG
RNS Number : 9504W
Chemring Group PLC
16 December 2019
16 DECEMBER 2019
CHEMRING GROUP PLC
RESULTS FOR THE YEARED 31 OCTOBER 2019
As reported At 2018 exchange
rates
2019 Change 2019 Change 2018
Continuing operations
Revenue (GBPm) 335.2 + 13% 326.2 + 10% 297.4
Underlying EBITDA(*) (GBPm) 61.2 + 22% 59.7 + 19% 50.0
Underlying operating profit(*)
(GBPm) 44.0 + 42% 42.6 + 37% 31.0
Underlying profit before
tax(*) (GBPm) 39.4 + 58% 38.2 + 53% 24.9
Underlying earnings per
share(*) (pence) 11.2 + 62% 10.9 + 58% 6.9
Statutory operating profit/(loss)
(GBPm) 31.3 (15.9)
Dividend per share (pence) 3.6 + 9% 3.3
Net debt at 31 October
2019 (GBPm) 75.7 - 7% 81.8
Key points
-- Overall performance slightly ahead of our initial expectations,
reflecting strong Sensors & Information sector performance.
-- Safety remains our key priority and, together with enhancing
operational stability and efficiency, is driving investment
in the Group's manufacturing infrastructure.
-- Completed sale of Chemring Military Products and Chemring Defence
and closure of Chemring Prime Contracts. Announced sale of
Chemring Ordnance on 21 November 2019.
-- Australian subsidiary, offline for the majority of the year
to enable changeover to F-35 countermeasure manufacturing,
received two significant contracts, as previously announced.
-- Continued progress on various US Programs of Record. Further
delivery orders received under the HMDS IDIQ; successful critical
design review on AVCAD led to a further 75 unit order.
-- Strong order intake in Countermeasures & Energetics resulted
in a Group order book for the continuing business at year end
of GBP449m (2018: GBP394m), GBP287m currently due as revenue
in FY20, approximately 76% coverage of FY20 targeted revenue.
-- Net debt decreased year on year, reflecting strong operating
cash generation offset by the start of investment in the Tennessee
facility. Net debt: EBITDA fell to 1.24x (2018: 1.64x).
-- Board recommending a final dividend of 2.4p per ordinary share,
giving a total dividend of 3.6p per ordinary share (2018: 3.3p).
-- Board's expectations for FY20 trading performance remain unchanged,
with the usual seasonal H2 weighting.
Michael Ord, Group Chief Executive, commented:
"It has been an exceptionally busy year in which we continued to
deliver our current mission of building a stronger business. We
have implemented significant changes to improve safety, strengthen
leadership and corporate governance, and embed continuous
improvement across the Group. We have also changed the structure of
the business and the way in which we operate. In doing so we are
improving the quality of the business and redefining our purpose.
Collectively we are changing the culture of Chemring to one of
close collaboration, responsible behaviour and belief in our core
values of Safety, Excellence and Innovation.
With a number of significant operational and strategic
milestones achieved this year we have made real progress; moving
away from commoditised product lines to focus on higher quality,
sustainable business areas where we have a competitive
advantage.
As we continue to develop, over time our focus will move to
strategic opportunities that further enhance the Group's growth
potential and the delivery of positive returns for all our
stakeholders."
Notes:
* All profit and earnings per share figures in this news release
relate to underlying business performance (as defined below) unless
otherwise stated.
The principal Alternative Performance Measures ("APMs")
presented are the underlying measures of earnings which exclude
discontinued operations, exceptional items, gain or loss on the
movement on the fair value of derivative financial instruments, the
amortisation of acquired intangibles and the associated tax impact
on these items. The Directors believe that these APMs improve the
comparability of information between reporting periods as well as
reflect the key performance indicators used within the business to
measure performance. The term underlying is not defined under IFRS
and may not be comparable with similarly titled measures used by
other companies.
A reconciliation of underlying measures to statutory measures is
provided below:
Group - continuing operations: Underlying Non-underlying Statutory
EBITDA (GBPm) 61.2 (0.6) 60.6
----------- --------------- ----------
Operating profit (GBPm) 44.0 (12.7) 31.3
----------- --------------- ----------
Profit before tax (GBPm) 39.4 (12.7) 26.7
----------- --------------- ----------
Tax charge (GBPm) (7.9) 4.3 (3.6)
----------- --------------- ----------
Profit after tax (GBPm) 31.5 (8.4) 23.1
----------- --------------- ----------
Basic earnings per share (pence) 11.2 8.2
----------- --------------- ----------
Diluted earnings per share (pence) 11.0 8.1
----------- --------------- ----------
Group - discontinued operations:
----------- --------------- ----------
Profit/(loss) after tax (GBPm) 2.7 (3.9) (1.2)
----------- --------------- ----------
Segments - continuing operations:
----------- --------------- ----------
Sensors & Information EBITDA (GBPm) 29.3 - 29.3
----------- --------------- ----------
Sensors & Information operating
profit (GBPm) 26.3 (6.6) 19.7
----------- --------------- ----------
Countermeasures & Energetics EBITDA
(GBPm) 41.7 - 41.7
----------- --------------- ----------
Countermeasures & Energetics operating
profit (GBPm) 27.5 (5.5) 22.0
----------- --------------- ----------
The adjustments to continuing operations comprise:
-- amortisation of acquired intangibles of GBP12.1m (2018: GBP11.6m)
-- loss on the movement in the fair value of derivative financial
instruments of GBP0.6m (2018: GBP0.4m)
-- tax impact on adjustments of GBP4.3m credit (2018: GBP13.1m
charge)
The discontinued operations loss after tax comprises:
-- operating loss of GBP3.5m (2018: GBP8.0m profit)
-- exceptional items of GBP1.0m (2018: GBP72.0m)
-- loss on disposal of a subsidiary of GBP2.8m (2018: GBPnil)
-- tax credit on the above of GBP6.1m (2018: GBP1.0m charge)
Further details are provided in notes 3 and 4.
EBITDA is defined as profit before interest, tax, depreciation
and amortisation. Reference to constant currency relates to the
re-translation of FY19 financial information at the FY18 exchange
rates to reflect the movement excluding the impact of foreign
exchange. The exchange rates applied are disclosed in note 11.
For further information:
Group Director of Corporate Affairs, Chemring
Rupert Pittman Group PLC 01794 833901
Andrew Jaques MHP Communications 020 3128 8100
Oliver Hughes
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 the provision of services to
the aerospace, defence and security markets
-- Employing approximately 2,500 people worldwide, and with production
facilities in four countries, Chemring meets the needs of customers
in more than fifty countries
-- Chemring is now organised under two strategic product segments:
Sensors & Information and Countermeasures & Energetics
-- Chemring has a diverse portfolio of products that deliver high
reliability solutions to protect people, platforms, missions
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
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/investors/results-centre at 09.30
(UK time) on Monday 16(th) December 2019. The presentation can also
be listened to at that time by dialling +44 (0)20 3936 2999 and
using the participant access code: 41 49 27. A recording of the
audio webcast will be available later that day.
Photography
Original high resolution photography is available to the media
by contacting Isabella Grace, MHP Communications:
isabella.grace@mhpc.com / tel: +44 (0) 20 3128 8100.
Group overview
The Group has performed slightly ahead of the Board's initial
expectations, as announced on 1 November 2019. The Group's revenue
was up 13% to GBP335.2m (2018: GBP297.4m). Underlying operating
profit was up 42% to GBP44.0m (2018: GBP31.0m). Underlying earnings
per share was up 62% to 11.2p (2018: 6.9p).
Meaningful progress was made during 2019 to improve the quality
of Chemring. It has been a busy year for the Group in which
significant changes have been implemented in addition to ongoing
operational management. These include the introduction of a new
safety strategic framework, a Group-wide safety review and
strategic plan, and the introduction of new frameworks to
strengthen risk management and corporate governance. In addition to
a capability review and strengthening of the senior management
team, a number of key operational and strategic milestones were
achieved.
Following the closure of our UK countermeasures site after the
incident in August 2018, the site progressed through a phased
restart with chaff and naval decoy lines operational in the first
half of the year. Spectral and MTV lines began operations in the
third quarter and the overall site reached steady state
manufacturing by the end of the financial year, as planned.
The Group made excellent progress on its strategy to move away
from commoditised product lines to focus on higher margin and more
predictable revenue streams. On 15 November 2018 the Board
announced that it had decided to exit the commoditised energetics
businesses located in Florida and Derby. These businesses were
treated as discontinued operations and shown as held for sale in
the 2018 annual report and accounts.
The sale of Chemring Military Products, Inc. and Chemring
Defence UK Limited and the closure of Chemring Prime Contracts were
all completed during the year, and the sale of Chemring Ordnance,
Inc. was announced on 21 November 2019. This concludes our
programme of disposals which has reduced the Group's exposure to a
significant amount of operational and reputational risk, and
enables greater focus on the niche specialist energetic devices and
materials businesses in Chicago and Scotland, where the Group has
strong intellectual property and high barriers to entry. These
businesses enjoyed a stronger year driven by favourable market
conditions and the consolidation of our California site into
Chicago.
Net debt was GBP75.7m at the end of the year (2018: GBP81.8m),
the decrease since 31 October 2018 being largely attributable to
strong operating cash generation offset by the investment in
capital projects in the year, in particular the capacity expansion
programme in Tennessee. Continuing underlying operating cash inflow
of GBP63.9m (2018: GBP44.7m) represented 104% (2018: 89%) of
EBITDA.
The Group's order book at 31 October 2019 was GBP449m (2018:
GBP394m), of which approximately GBP287m is scheduled for delivery
during 2020, representing cover of approximately 76% of expected
FY20 revenue (2018: 70%). The increase since 31 October 2018 is
primarily attributable to the F-35 countermeasures order received
by our Australian subsidiary and the continued growth in our niche
businesses.
Health and safety
Our goal remains zero harm which will be achieved through
establishing and embedding a proactive safety culture which focuses
on the control and interaction of people, plant and process. In the
past year we have invested significant effort on the journey to
achieve this imperative, and this effort is resulting in the
continued improvement in safety performance globally.
We have introduced a new three-year safety strategy and plan
across the Group. This has progressed well, with all key milestones
of the plan having been met. Revised health, safety and
environmental standards and guidelines have been implemented, as
have our Fundamental Safety Rules.
The Group KPI of Total Recordable Injury Frequency ("TRIF") has
tracked reduction in injuries over the past fourteen months with
the rate dropping from 2.77 to 0.79. This KPI monitors the number
of recordable injuries per 200,000 man-hours worked over a rolling
twelve-month period. In addition, our process safety indicators are
driving improvement actions that reduce the potential for an
energetic event that could cause harm to our people and
facilities.
As part of the plan, we continue to introduce stronger HSE
assurance processes that ensure compliance to our standards and
benchmarks the business against best practice. This, in addition to
our facility surveys and our increased focus on process hazard
reviews for both new and legacy assets, will ensure that we design,
maintain and operate our processes with the highest levels of
integrity.
Governance and ethics
We have taken significant steps to strengthen our governance
during the year with the introduction of the Operational Framework
and the issue of an updated Code of Conduct. These both underpin
our drive to ensure that our employees always do the right thing
and that Chemring conducts its business in a responsible and
ethical manner.
Group Chief Executive's review
2019 was my first full year as Chief Executive of Chemring and I
have been heartened by the positive manner in which our people have
embraced the challenge of building a stronger and improved
business.
Whilst much has changed since I joined the Group, my initial
impressions of our significant capabilities and strengths remain
unchanged. The depth and spread of our technology and know-how, the
robustness of our market positions across our home markets of the
US, the UK, Europe and Australia, and the quality of our people,
combine to provide a significant opportunity for future growth.
To remain competitive and successful we must relentlessly
deliver on our commitments to all of our stakeholders, be they
customers, industry partners, shareholders or employees; it is
through this that we will continue to forge greater credibility,
trust and belief in the future of Chemring. It was therefore
pleasing to report that, despite some operational challenges in the
first half of the year, overall performance for the year was in
line with our expectations.
Strategy:
The Group's strategy is to deliver profitable growth by
operating in markets where we have differentiators such as
intellectual property, niche technology and high barriers to
entry.
In a number of our markets we are already market leader, or one
of the market leaders. This is particularly so in Countermeasures
& Energetics and to a growing extent in Sensors &
Information as a result of our recent long-term contract wins.
We will maintain and grow our positions in Countermeasures &
Energetics, investing in modernisation and automation to improve
operational effectiveness and reliability, and to increase
capacity. In Sensors & Information our focus is on expanding
the Group's product, service and capability offerings in the areas
of tactical electronic warfare and cyber-security, and in building
a technology-based strategy for growth beyond current US DoD
Programs of Record.
We will continually review the portfolio, to ensure that we
maintain sustainable niche positions where technical and
qualification barriers to entry enable high margins.
In recent years, significant focus has been placed on building a
safe and resilient business that is able to deliver margin
progression through continuous improvement in operational
performance and execution. We shall continue to invest in both our
infrastructure and people in order to deliver this strategy.
Structure:
Following a review of the business portfolio the Board concluded
that our future focus should be on those niche areas of the market
where we have sustainable competitive advantage through incumbent
supplier status and high barriers to entry, and where our products
and services are underpinned by our rich intellectual property and
know-how.
We therefore announced that we would exit the commoditised
energetics businesses, located in Derby and Florida, and that we
would be reorganised under two high-quality business sectors,
Sensors & Information and Countermeasures & Energetics. We
also concluded that we would protect and grow our positions across
defence, security and commercial sectors and focus on our home
markets of the US, the UK, Europe and Australia.
Exiting the commoditised energetics sector was an area of
attention during the year and it is therefore very pleasing to
report that the sales of Chemring Military Products and Chemring
Defence UK and the closure of Chemring Prime Contracts were all
completed in year. The sale of the remaining business, Chemring
Ordnance, was announced on 21 November 2019 and is expected to
complete by the end of Q2 FY20. These disposals will enable a
greater focus on our niche specialist energetic devices and
materials businesses in Chicago, Scotland and Norway.
We have already seen the benefits of this reorganisation in our
Sensors & Information sector, where we have world-leading
technologies and development capabilities. The integration of
Chemring Technology Solutions ("CTS") capabilities into Roke's
existing defence business has created a business with extended
reach and one that is able to support defence customers, whether
government or other defence contractors, at all stages of technical
readiness, from pre-concept research and innovation, through to
design, manufacture and in-service support. It has also provided
the platform to transition our electronic warfare technology
created in the UK into the US market. To facilitate this Roke
established a US footprint with the incorporation of Roke USA,
Inc..
There is growing collaboration between our US and UK businesses
and for the first time Roke and Chemring Sensors & Electronic
Systems ("CSES") have a single aligned strategy capturing shared
technology development and shared business winning campaigns. This
provides a strong foundation for our Sensors & Information
sector.
We also have significant opportunities in the Countermeasures
& Energetics sector where we are investing in safety,
automation, modernisation and capacity expansion in order to meet
expected market demand. We are taking steps to consolidate our
three geographical countermeasures businesses into a single, global
structure that is aligned to our key customers and market
opportunities. This move will enable us to more effectively
leverage our countermeasures businesses to improve our strategic
growth opportunities and market competitiveness. The creation of a
single integrated multinational business will be a significant step
forward for the Group.
Culture:
The realignment of the sectors has created the opportunity for
greater levels of interaction and collaboration across the Group
which is both delivering positive results in terms of financial and
operational performance, and is assisting the work being done to
embed our values based Chemring culture.
The new structure is enabling greater focus on our strategic
investments and a more robust implementation of our Operational
Framework, which was introduced in January 2019 and is now embedded
across the business. This is the reference source to all mandated
policies across the Group and is the backbone for our values,
behaviours and ways of working, and provides the necessary
governance to enable us to operate in a safe, consistent and
accountable way.
The longer-term potential
With a number of significant operational and strategic
milestones achieved this year, our near-term imperative is to
continue on the journey to build a stronger business; however we
will balance our focus and actions on both short-term performance
and long-term value creation.
Markets
The market outlook is positive with solid demand across our home
markets - the US, the UK, Europe, and Australia.
The US
The US is the world's largest defence market and our US
businesses are well positioned to benefit from this growing defence
budget.
The FY20 National Defense Authorization Act was passed in July
2019 with a base budget for FY20 of $545bn. The President's Budget
Request also projects the DoD five-year program to settle at $747bn
in FY24, providing growth to sustain personnel increases in all
four services, major equipment programmes such as the F-35 and
investments in technology innovation in electronic warfare, the
increased use of unmanned systems and cyber capabilities, as well
as renewed emphasis on space-based surveillance systems.
The UK
The UK is Europe's largest defence market. Chemring sells
directly to the MOD and security agencies, as well as to prime
contractors.
Expenditure levelled in 2015 but recovery has been slow, with
budgets squeezed by major programme commitments in armoured
vehicles and ships, but also the continued acquisition of new
platforms including the F-35 and the P-8 maritime patrol
aircraft.
This pressure on defence spending is likely to remain for the
foreseeable future, despite planned increases of over 2% to 2021.
For Chemring, the UK MOD accounts for less than 5% of Group
revenues, however it is an important partner for developing and
qualifying new products.
In the security domain, Chemring is a key provider of capability
to our clients, and with a growing concern about many national and
international threats, our customers are continuing to increase
demand for our services.
Europe
Europe combines modern, well--equipped forces with
budget--constrained new NATO members on its Eastern borders.
European defence spending is returning to growth, with most Western
European and Nordic members increasing 2019 and 2020 budgets and
projecting additional equipment procurement. The UK, France and
Germany remain key contributors to spend and actively contribute to
growth in NATO Europe defence spending, with all three investing in
aircraft and wider sensors and electronic warfare.
European defence spending currently falls well short of NATO's
2% GDP target, with only five countries in Europe meeting this
target in 2018. Major contributors to spend, such as Germany, have
committed to reaching 1.5% of GDP by 2024.
The outlook for the market is potentially more positive, and
there are some niche opportunities as new NATO members seek to
upgrade their capabilities and begin positioning for
next-generation development programmes.
Australia
Australia is Chemring's fourth home market, and it aims to grow
its defence spend to 2% of GDP by 2021. Australia has a
well-equipped military, which draws on both US and UK products as
well as highly capable local suppliers. Australia is in the midst
of a large-scale equipment and capability refresh. Its 2019-2020
budget of AUD 38.7bn is an uplift on the previous year, and this is
likely to continue as the Commonwealth aims to meet its 2% of GDP
target by 2021.
Group financial performance
Order intake for continuing operations for 2019 was up 14.1% to
GBP410.6m (2018: GBP360.0m), driven by the release of further
delivery orders on the HMDS IDIQ contract, orders in Australia for
F-35 countermeasures and growth in our niche energetics
businesses.
Revenue from continuing operations for the year was up 12.7% to
GBP335.2m (2018: GBP297.4m), driven by strong performance in the
Sensors & Information segment, as deliveries commenced on the
HMDS IDIQ contract and Roke enjoyed a strong year.
The underlying operating profit from continuing operations of
GBP44.0m (2018: GBP31.0m) resulted in an underlying operating
margin of 13.1% (2018: 10.4%). The increase in margin primarily
reflects the positive impact of the phased restart of our Salisbury
site and growth in our niche energetics businesses, combined with a
stronger year in Sensors & Information due to increased
revenues on the HMDS IDIQ contract and in Roke's information
security business.
Insurance recoveries of GBP15m are included within the result
for the year in relation to the incident in 2018 at the Salisbury
site. This income offsets site operating costs and the costs of
remediation, leaving the UK countermeasures business approximately
break-even for the year. The site is expected to operate at a more
normal level of activity in 2020.
Foreign exchange translation has provided a minor tailwind on
revenue and profit. While exchange rates have been volatile in the
year, there has been a strengthening of the US dollar against
sterling compared to 2018 with the average rate moving from $1.34
to $1.26. On a continuing constant currency basis, restating the
current year at the FY18 average exchange rate, revenue would have
been GBP326.2m and underlying operating profit would have been
GBP42.6m, being a tailwind of GBP1.4m on 2019's underlying
operating profit.
Total finance expense fell significantly to GBP4.6m (2018:
GBP6.1m). This was driven by the continued focus on reducing
intra-period working capital volatility, thus maintaining net debt
stability.
This left an underlying profit before tax from continuing
operations of GBP39.4m (2018: GBP24.9m). The effective tax rate on
the underlying profit before tax from continuing operations was
20.1% (2018: 22.9%). The underlying earnings from continuing
operations per share was 11.2p (2018: 6.9p).
Statutory operating profit from continuing operations was
GBP31.3m (2018: GBP15.9m loss) and after statutory finance expenses
of GBP4.6m (2018: GBP6.1m), statutory profit before tax from
continuing operations was GBP26.7m (2018: GBP22.0m loss), giving
statutory earnings per share from continuing operations of 8.2p
(2018: 14.6p loss). The statutory loss from discontinued operations
was GBP1.2m (2018: GBP65.0m loss), including a loss on disposal of
GBP2.8m relating to the sale of Chemring Military Products, Inc.
and Chemring Defence UK Limited, giving a statutory profit of
GBP21.9m (2018: GBP105.8m loss) from continuing and discontinued
operations.
A reconciliation of underlying to statutory profit measures is
provided in note 3. The non-underlying costs relate to the
amortisation of acquired intangibles and the tax credit associated
with this.
Revenue from discontinued operations fell to GBP43.4m (2018:
GBP138.6m) and underlying operating loss fell to GBP3.5m (2018:
GBP8.0m profit) primarily as a result of the disposals made in the
year.
Tax
The continuing underlying tax charge totalled GBP7.9m (2018:
GBP5.7m) on a continuing underlying profit before tax of GBP39.4m
(2018: GBP24.9m). The effective tax rate on underlying profit
before tax for the year was a charge of 20.1% (2018: 22.9%). We
expect the effective tax rate to remain in the low twenties,
notwithstanding any changes to the UK rate which the new government
may make.
The continuing statutory tax charge totalled GBP3.6m (2018:
GBP18.8m) on a continuing statutory profit before tax of GBP26.7m
(2018: GBP22.0m loss). The decrease in the continuing effective
rate of tax on the results of the Group is primarily due to
utilisation of tax losses where a deferred tax asset had not been
previously recognised.
The discontinued underlying tax credit was GBP6.2m (2018:
GBP1.8m charge) on an underlying loss before tax of GBP3.5m (2018:
GBP8.0m profit).
Segmental review - Sensors & Information
Performance
Revenue for Sensors & Information increased significantly by
51% to GBP131.9m (2018: GBP87.3m) and underlying operating profit
increased by 71.9% to GBP26.3m (2018: GBP15.3m), as underlying
operating margin improved to 19.9% (2018: 17.5%). The Sensors &
Information business in the US has moved into the delivery phase of
the HMDS Program of Record and continues to focus on the
engineering, manufacturing and development ("EMD") and testing
phases of the biological and chemical detection Programs of Record.
Roke's information security business continues to grow.
On a constant currency basis revenue would have risen 47% to
GBP128.3m and underlying operating profit would have been up 67% to
GBP25.6m.
The statutory operating profit for the year was GBP19.7m (2018:
GBP5.2m).
Key developments in the year on the major US Programs of Record
are summarised below:
The US DoD's Explosive Hazard Detection ("EHD") program, through
the Husky Mounted Detection System ("HMDS") program, which is a
spiral development program, with concurrent development, trialling,
and manufacturing to be undertaken, continues to progress as
expected. Under the previously awarded IDIQ sole-source contract
vehicles, further delivery orders of $30m were received in the
year. The ramp-up to production progressed as planned and customer
deliveries were made on schedule in the year.
We expect this program to run for the next decade providing a
recurring level of business as the US Army moves to its objective
of producing and fielding a fleet of 369 HMDS by mid-2021. The new
fleet will be comprised of both refurbished and new HMDS and this
activity will run alongside technology upgrade programs.
The Joint Biological Tactical Detection System ("JBTDS") program
moved into the Biological Point System Assessment phase in March
2018. The DoD is undertaking testing of our product, after which we
expect a production decision in early 2020.
In 2018, we bid and won a second biological program, the
Enhanced Maritime Biological Detection System ("EMBD"), where the
customer is the US Navy. Our initial contract award for Engineering
Manufacturing Development ("EMD") and LRIP was in the form of a
$24m IDIQ, against which we received delivery orders of $5m in 2018
and a further delivery order in this year of $9m. The program is
expected to be worth up to $100m over five to ten years once in
full rate production.
The Aerosol and Vapor Chemical Agent Detector ("AVCAD") is
progressing through the EMD phase as expected. The EMD and LRIP
phases are expected to be worth approximately $18m in the period to
2022. Following this the customer is expected to have a requirement
of up to $800m. Chemring is one of two contractors currently
selected for this competitive program. In October 2019, following a
successful critical design review, we received an order for a
further 75 units under the EMD phase of the program. The next
customer procurement decision point is expected to be at the
conclusion of the EMD phase in early 2021.
The markets for electronic warfare, cyber-security and data
science capabilities, in which Roke is a leading participant, have
been buoyant in the year. Roke has expanded its offerings resulting
in recent wins with the National Crime Agency to tackle child abuse
and sexual exploitation, the National Cyber Security Centre to
increase resilience of critical national infrastructure and Defence
Science and Technology Laboratory ("DSTL") to research and develop
new capabilities through the SERAPIS framework. This has driven
double digit growth in both revenue and underlying operating
profit.
Opportunities and outlook
The focus for Sensors & Information continues to be on
expanding the Group's product, service and capability offerings in
the areas of electronic warfare, cyber-security and data science,
and securing positions on the US DoD Programs of Record.
In the US, focus has turned to the execution phase on contracts.
Mobilisation has started, with strong initial deliveries in 2019 on
the HMDS program and the focus continues to be ensuring the
Virginia and North Carolina facilities are mobilised and resourced
to deliver the AVCAD, EMBD, JBTDS and HMDS contracts.
Supporting the UK Government across national security and
defence, and non-governmental industries in high-value
manufacturing and infrastructure, Roke will continue to focus on
their customers' missions: to enable them to deliver competitive
advantage, defend their people, assets and secrets, and defeat
their adversaries. With a focus on emerging technologies in
communications, cyber, automation and data science, Roke will
deliver research, engineering and advisory services using its
expert people and capabilities. Concurrently, Roke is seeking to
expand its capabilities into commercial and international markets
over the medium term.
The order book for Sensors & Information at 31 October 2019
was GBP80.0m (2018: GBP75.4m), of which GBP68m is expected to be
delivered in 2020, providing 52% cover of expected 2020
revenue.
2020 trading performance for Sensors & Information is
expected to show a continuation of the levels of business seen in
2019. No new US Programs are expected to commence in the year.
Segmental review - Countermeasures & Energetics
Performance
Order intake in the year of GBP276.5m (2018: GBP250.8m) has
continued to be strong, particularly in the significant US
market.
Revenue decreased 3% to GBP203.3m (2018: GBP210.1m) and the
segment reported a 15.1% increase in underlying operating profit to
GBP27.5m (2018: GBP23.9m). On a constant currency basis revenue
would have decreased by 6% to GBP197.9m and operating profit would
have been GBP26.7m.
The statutory operating profit for the year was GBP22.0m (2018:
GBP2.8m), the year being impacted by the phased restart of the
Salisbury site and the completion of the Australia F-35 production
refit.
The phased restart of our UK countermeasures site has progressed
as planned with chaff and naval decoy lines operational in the
first half of the year. Spectral and MTV lines began to operate in
the third quarter as planned, with the overall site at steady state
manufacturing at the end of the financial year. The site
contributed GBP21m of revenue and approximately broke even after
accounting for insurance recoveries of
GBP15m and remediation costs in 2019, in line with our previous
expectations.
Our Australian facility was closed for the majority of the year
to be fitted and qualified for F-35 production. The facility
upgrade was completed on schedule and to budget. We were pleased to
announce that our Australian subsidiary had been awarded two
significant contracts: an Undefinitised Contract Action with a Not
To Exceed value of US$60.4m and a further (Directed Sole Source)
award for US$6.5m. The contracts are from the US DoD to supply
countermeasures to the Royal Australian Air Force, US Navy and
Foreign Military Sales in support of the F-35 Joint Strike Fighter
and other platforms. This award follows a multi-year effort to
establish Chemring Australia as a qualified supplier for F-35
countermeasures. The first deliveries against these contracts
occurred at the end of our 2019 financial year.
Our niche energetics devices businesses enjoyed a strong year
driven by favourable market conditions and the consolidation of our
California site into Chicago.
Significant investment is planned over the next two years in our
Countermeasures & Energetics businesses to both recapitalise
and modernise facilities and invest in capacity to address expected
market demand, the most significant investment being the Tennessee
capacity expansion programme. The cost of this is currently
expected to be approximately GBP50m and is focused on delivering
capacity to meet expected F-35 demand from the US Government.
Opportunities and outlook
After a number of years of weakness in the countermeasures
markets that followed the end of the Iraq and Afghanistan
conflicts, the outlook for the segment is positive. The segment
focus remains on maintaining and growing the Group's market-leading
position, in particular on key platforms such as the F-35 as it
begins to enter service in increasing numbers, and in the important
special material decoy market.
The Group's niche propellant and devices businesses in Scotland
and Chicago are increasingly securing long-term contracts with
customers supporting greater short and medium-term visibility and
providing a framework for long-term planning and investment
decisions. Similarly, demand for high quality-high explosives has
enabled Chemring Nobel in Norway to work proactively with its
customer base on long-term contracting models, providing much
improved visibility.
The completed phased restart of our UK countermeasures site and
completion of the Australia F-35 production refit is expected to
increase revenue and operational performance of the segment in
2020.
Countermeasures & Energetics' order book at 31 October 2019
was GBP368.7m (2018: GBP318.3m). Of the 31 October 2019 order book,
approximately GBP219m is currently expected to be delivered in
2020, providing 89% cover of expected 2020 revenue.
With a strong order book in place, 2020 trading performance for
Countermeasures & Energetics is expected to be positive, albeit
with a significant bias towards the second half consistent with
historical revenue trends.
Performance - discontinued operations
Revenue for the discontinued commodity Energetics business
decreased by 68.7% to GBP43.4m (2018: GBP138.6m), generating an
underlying operating loss of GBP3.5m (2018: GBP8.0m profit),
reflecting the disposals during the year.
Net debt and cash flow
The Group's net debt at 31 October 2019 was GBP75.7m (2018:
GBP81.8m), representing a net debt to underlying EBITDA
(continuing) ratio of 1.24x (2018: 1.64x).
The financial health of the Group has improved in a number of
aspects during the year. Working capital practices were improved to
reduce intra-period volatility and following the defined benefit
pension scheme valuation, it was agreed that no further
contributions are required until April 2021 when the position will
be reassessed. The Group is working to achieve further improvements
over the medium term.
Underlying operating activities generated cash of GBP77.6m
(2018: GBP56.9m), split between continuing GBP63.9m (2018:
GBP44.7m) and discontinued GBP13.7m (2018: GBP12.2m). Continuing
cash conversion was 104% (2018: 89%) of continuing underlying
EBITDA.
Subsequent to the year end, the Group repaid the remaining
$83.6m of private placement loan notes via the use of the GBP136.7m
revolving credit facility which runs to October 2022. This is
expected to reduce interest costs in 2020 and beyond.
Working capital
Working capital relating to the continuing businesses was
GBP90.5m (2018: GBP83.7m), an increase of GBP6.8m. The increase is
mainly as a result of the timing of activity in the final quarter
of the year, driving a GBP6.7m increase in inventory, as
preparation was made for Q1 deliveries with all sites expected to
be operational in H1 FY20.
Trade receivables decreased by GBP15.1m and trade payables
decreased by GBP5.4m as a result of the timing of activity in the
final quarter of the year. Advance receipts from customers
increased by GBP9.6m reflecting improved commercial contracting
focus.
Retirement benefit obligations
The surplus on the Group's defined benefit pension schemes was
GBP9.6m (2018: GBP7.5m), measured in accordance with IAS 19
(Revised) Employee Benefits.
The surplus relates to the Chemring Group Staff Pension Scheme
(the "Scheme"), a UK defined benefit scheme whose assets are held
in a separately administered fund. The Scheme was closed to future
accrual in April 2012. A full actuarial valuation for the Scheme as
at 6 April 2018 has been prepared and updated to 31 October 2019,
using the projected unit credit method. This valuation showed a
surplus of GBP9.6m (2018: GBP7.5m). The improvement reflects the
effect of changes in actuarial assumptions.
The 6 April 2018 triennial valuation shows a technical
provisions deficit of GBP5.8m, which represents a funding level of
94% of liabilities. Deficit recovery payments totalling GBP6.25m,
which were the contributions due to be made in the period to 30
June 2019 under the previous deficit recovery plan, were made prior
to 31 December 2018. Of this, GBP0.4m was paid in 2019. After this,
the Group agreed with the trustees that no further deficit recovery
payments are required and the Group was released from the bank
guarantee of GBP7.2m given to the scheme in respect of future
contributions. The next actuarial valuation is due as at 6 April
2021 after which the future funding requirements will be
reassessed.
Contingent liabilities
The Group is, from time to time, party to legal proceedings and
claims, and is involved in correspondence relating to potential
claims, which arise in the ordinary course of business.
In addition the following matters, as previously disclosed in
last year's annual report, remained open at year-end:
-- A dispute between Alloy Surfaces Company, Inc. and the US Army
-- UK's Controlled Foreign Company ("CFC") Finance Company exemption
-- The Serious Fraud Office (the "SFO") investigation
-- The incident that occurred at the Group's countermeasures site
in Salisbury on 10 August 2018.
Full details of these are included in note 12.
Dividends
The Board is recommending a final dividend in respect of the
year ended 31 October 2019 of 2.4p (2018: 2.2p) per ordinary share.
With the interim dividend of 1.2p per share (2018: 1.1p), this
results in a total dividend of 3.6p (2018: 3.3p) per share.
If approved, the final dividend will be paid on 24 April 2020 to
shareholders on the register on 3 April 2020. In accordance with
accounting standards, this final dividend has not been recorded as
a liability as at 31 October 2019.
Board of Directors
On 8 August 2018, Daniel Dayan gave notice of his intention to
step down as a non-executive director of the Board and Chairman of
the Group's Remuneration Committee. He formally stepped down from
the Board on 30 November 2018.
Andrew Davies assumed the role of Chairman of the Remuneration
Committee on 8 August 2018. He will be stepping down as Chairman
following the Annual General Meeting in March 2020 but will remain
on the Remuneration Committee.
Stephen King was appointed as a non-executive director on 1
December 2018 and was appointed as Chairman of the Audit Committee
on 1 August 2019.
Laurie Bowen was appointed as a non-executive director on 1
August 2019. She will assume the role of Chairman of the
Remuneration Committee following the Annual General Meeting in
March 2020.
Nigel Young, who has now served as a non-executive director for
nearly seven years, has indicated his intention to retire on 30
April 2020, when his current appointment comes to an end.
Current trading and outlook
The Board's expectations for the Group's 2020 performance from
continuing operations remain unchanged.
Trading since the start of the current financial year has been
in line with expectations across all businesses.
While we continue to work towards a more balanced delivery of
revenue and profit, the expected profile of orders, revenue and
margins in 2020, combined with routine seasonality within the
business, means that the Group expects its trading performance to
be weighted towards the second half of the financial year.
The order book of continuing businesses as at 31 October 2019
was GBP449m, of which GBP287m is currently expected to be
recognised as revenue in 2020.
The Board is focused on continuing to restructure, simplify and
build a stronger business with a renewed purpose. With
high-technology products and market-leading positions Chemring has
the platforms for long-term future growth.
Going concern
The Group's business activities, key performance indicators, and
principal risks and uncertainties are described within the 2019
annual report and accounts. As part of a regular assessment of the
Group's working capital and financing position, the directors have
prepared a detailed bottom-up two year trading budget and cash flow
forecast for the period through to October 2021, being at least
twelve months after the date of approval of the financial
statements. This is in addition to the Group's longer-term
strategic planning process. In assessing the forecast, the
directors have considered:
-- trading risks presented by current economic conditions in the
defence market, particularly in relation to government budgets
and expenditure;
-- the timing of delivering key contracts;
-- the impact of macro-economic factors, particularly interest
rates and foreign exchange rates;
-- the status of the Group's existing financial arrangements and
associated covenant requirements;
-- progress made in developing and implementing cost reduction
programmes and operational improvements;
-- the availability of mitigating actions should business activities
fall behind current expectations, including the deferral of
discretionary overheads and restricting cash flows; and
-- the long-term nature of the Group's business which, taken together
with the Group's order book, provides a satisfactory level
of confidence to the Board in respect of trading.
Additional detailed sensitivity analysis has been performed on
the forecasts to consider the impact of severe, but plausible,
reasonable worse case scenarios on the covenant requirements. These
scenarios, which sensitised the forecasts for specific identified
risks, modelled the reduction in anticipated levels of underlying
EBITDA and the associated increase in net debt. These scenarios
included significant delays to major contracts. These sensitised
scenarios show headroom on all covenant test dates for the
foreseeable future.
The directors have acknowledged the latest guidance on going
concern. They have made appropriate enquiries and taken into
account factors which are detailed in the strategic report within
the 2019 annual report and accounts. As a consequence, the
directors believe that the Company is well placed to manage its
risks.
The directors having considered the forecasts, the risks, and
associated mitigating actions, have a reasonable expectation that
adequate financial resources will continue to be available for the
foreseeable future.
Thus, they continue to support the going concern basis in
preparing the financial statements.
Long-term viability statement
The directors have assessed the Group's viability over a
three-year period to October 2022 based on the above assessment,
combined with the Group's strategic planning process, which gives
greater certainty over the forecasting assumptions used. Based on
this assessment, the directors have a reasonable expectation that
the Group will be able to continue in operation and meet all its
liabilities as they fall due up to October 2022.
The directors have chosen a three-year period to assess
viability to reflect the characteristics of the Group's end
markets. These range from multi-year contracts such as the US
Programs of Record to shorter-term orders such as those awarded to
Roke.
In considering our viability statements we have considered the
principal risks and uncertainties discussed below and assessed the
impact.
Sensitivity analyses were run to model the financial and
operational impact of plausible downside scenarios of these risk
events occurring individually or in combination. These included the
impacts of a further deterioration in the macroeconomic
environment, underperformance in executing the Group's strategy,
failure to improve operational performance, material movements in
foreign exchange rates and a change in regulations impacting the
Group's internal financing structure. Consideration was also given
to the plausibility of the occurrence of other individual events
that in their own right could have a material impact on the Group's
viability.
Based on the consolidated financial impact of the sensitivity
analyses and associated mitigating internal controls and risk
management actions that are either now in place or could be
implemented, the Board has been able to conclude that the Group
will be able to maintain sufficient bank facilities to meet its
funding needs over the three year period.
Principal risks and uncertainties
The principal risks and uncertainties which could have a
material impact on the Group's performance and could cause actual
results to differ materially from expected and historical results
have not changed significantly from those set out in the Group's
2018 annual report and accounts and the 2019 interim report. A
detailed description of the Group's principal risks and
uncertainties and the ways they are mitigated can be found on pages
30 to 36 of the Group's 2019 annual report and accounts. In
summary, the principal risks relate to:
-- Health, safety, security and environmental risks
-- Strategic risks
-- Financial risks
-- Operational risks
-- People risks
-- Legal and compliance risks
-- Reputational risks
Management have detailed mitigation plans and assurance
processes to manage and monitor these risks.
RESPONSIBILITY STATEMENT OF THE DIRECTORS ON THE ANNUAL REPORT
AND ACCOUNTS
The responsibility statement below has been prepared in
connection with the Company's full annual report and accounts for
the year ended 31 October 2019. Certain parts thereof are not
included within this announcement.
We confirm to the best of our knowledge:
1. the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
2. the strategic report and directors' report includes a fair
review of the development and performance of the business
and the position of the issuer and the undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable, and provides the information
necessary for shareholders to assess the Group's performance,
business model and strategy.
This responsibility statement was approved by the Board of
directors on 16 December 2019, and has been signed on its behalf by
Michael Ord and Andrew Lewis.
CONSOLIDATED INCOME STATEMENT
for the year ended 31 October 2019
2019 2018
Underlying Non-underlying Underlying Non-underlying
performance* items* Total performance* items* Total
GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
Revenue 335.2 - 335.2 297.4 - 297.4
------------- --------------- ------ ------------- --------------- --------
Operating profit/(loss) 44.0 (12.7) 31.3 31.0 (46.9) (15.9)
Finance expense (4.6) - (4.6) (6.1) - (6.1)
------------- --------------- ------ ------------- --------------- --------
Profit/(loss) before
tax 39.4 (12.7) 26.7 24.9 (46.9) (22.0)
Taxation (7.9) 4.3 (3.6) (5.7) (13.1) (18.8)
------------- --------------- ------ ------------- --------------- --------
Profit/(loss) after
tax 31.5 (8.4) 23.1 19.2 (60.0) (40.8)
Discontinued operations
Profit/(loss) after
tax from discontinued
operations (note 4) 2.7 (3.9) (1.2) 6.2 (71.2) (65.0)
------------- --------------- ------ ------------- --------------- --------
Profit/(loss) after
tax 34.2 (12.3) 21.9 25.4 (131.2) (105.8)
------------- --------------- ------ ------------- --------------- --------
Earnings/(loss) per ordinary
share
Continuing operations
Basic 11.2p 8.2p 6.9p (14.6)p
Diluted 11.0p 8.1p 6.7p (14.6)p
------------- --------------- ------ ------------- --------------- --------
Continuing operations and discontinued
operations
Basic 12.2p 7.8p 9.1p (37.8)p
Diluted 12.0p 7.7p 8.9p (37.8)p
------------- --------------- ------ ------------- --------------- --------
* Further information about continuing non-underlying items is
set out in note 3.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 October 2019
2019 2018
GBPm GBPm
Profit/(loss) after tax attributable to equity
holders of the parent as reported 21.9 (105.8)
Items that will not be reclassified subsequently
to profit or loss
Actuarial gains on defined benefit pension
schemes 1.6 0.9
Movement on deferred tax relating to pension
schemes (0.7) (0.1)
------ --------
0.9 0.8
------ --------
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translation of foreign
operations (5.2) 5.2
Deferred tax on exchange differences on translation
of foreign operations 0.2 (0.5)
------ --------
(5.0) 4.7
------ --------
Total comprehensive income/(loss) attributable
to equity holders of the parent 17.8 (100.3)
------ --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 October 2019
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 2018 2.8 305.4 12.9 1.0 (27.2) 7.1 (7.8) 294.2
Profit after tax - - - - - 21.9 - 21.9
Other comprehensive
income/(loss) - - - - 1.4 (5.0) - (3.6)
Tax relating to
components of other
comprehensive income/(loss) - - - - - (0.5) - (0.5)
------------------------------ -------- --------- --------- ------------ ------------ --------- ------- ------
Total comprehensive
income - - - - 1.4 16.4 - 17.8
Ordinary shares
issued - 0.8 - - - - - 0.8
Share-based payments
(net of settlement) - - - - - 2.5 - 2.5
Dividends paid - - - - - (9.5) - (9.5)
Transfers between
reserves* - - - - 8.0 (8.0) - -
At 31 October 2019 2.8 306.2 12.9 1.0 (17.8) 8.5 (7.8) 305.8
-------- --------- --------- ------------ ------------ --------- ------- ------
*Transfer to reclassify exchange differences on translation of
foreign subsidiaries included in retained earnings to the
translation reserve.
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 2017 2.8 305.3 12.9 1.1 (24.8) 113.5 (9.6) 401.2
----------------------- -------- -------- -------- ------------ ------------ --------- ------- --------
Loss after tax - - - - - (105.8) - (105.8)
Other comprehensive
(loss)/income - - - - (2.4) 8.5 - 6.1
Tax relating to
components of other
comprehensive income - - - - - (0.6) - (0.6)
----------------------- -------- -------- -------- ------------ ------------ --------- ------- --------
Total comprehensive
loss - - - - (2.4) (97.9) - (100.3)
Ordinary shares
issued - 0.1 - - - - - 0.1
Share-based payments
(net of settlement) - - - - - 0.1 - 0.1
Dividends paid - - - - - (8.7) - (8.7)
Transactions in
own shares - - - - - - 1.8 1.8
Transfers between
reserves - - - (0.1) - 0.1 - -
-------- -------- -------- ------------ ------------ --------- ------- --------
At 31 October 2018 2.8 305.4 12.9 1.0 (27.2) 7.1 (7.8) 294.2
-------- -------- -------- ------------ ------------ --------- ------- --------
CONSOLIDATED BALANCE SHEET
as at 31 October 2019
2019 2018
GBPm GBPm GBPm GBPm
Non-current assets
Goodwill 108.5 109.2
Development costs 26.1 24.0
Other intangible assets 25.3 37.6
Property, plant and equipment 170.0 148.1
Retirement benefit surplus 9.6 7.5
Deferred tax 18.5 36.8
------- -------- ------- ---------
358.0 363.2
------- -------- ------- ---------
Current assets
Inventories 78.1 71.4
Trade and other receivables 53.7 62.2
Cash and cash equivalents 1.3 9.6
Derivative financial instruments 0.2 0.1
------- -------- ------- ---------
133.3 143.3
------- -------- ------- ---------
Assets classified as held
for sale 7.0 43.7
------- -------- ------- ---------
Total assets 498.3 550.2
------- -------- ------- ---------
Current liabilities
Borrowings (69.2) -
Trade and other payables (68.3) (68.6)
Provisions (4.8) (6.7)
Current tax (4.0) (0.8)
Derivative financial instruments (0.9) (0.3)
------- -------- ------- ---------
(147.2) (76.4)
------- -------- ------- ---------
Liabilities directly associated
with assets classified as
held for sale (1.8) (26.9)
Non-current liabilities
Borrowings (7.7) (91.3)
Provisions (12.4) (14.0)
Deferred tax (23.0) (47.1)
Preference shares (0.1) (0.1)
Derivative financial instruments (0.3) (0.2)
------- -------- ------- ---------
(43.5) (152.7)
------- -------- ------- ---------
Total liabilities (192.5) (256.0)
------- -------- ------- ---------
Net assets 305.8 294.2
------- -------- ------- ---------
Equity
Share capital 2.8 2.8
Share premium account 306.2 305.4
Special capital reserve 12.9 12.9
Revaluation reserve 1.0 1.0
Translation reserve (17.8) (27.2)
Retained earnings 8.5 7.1
------- -------- ------- ---------
313.6 302.0
Own shares (7.8) (7.8)
------- -------- ------- ---------
Total equity 305.8 294.2
------- -------- ------- ---------
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 October 2019
2019 2018
GBPm GBPm
Cash flows from operating activities
--------------------------------------------------------- ------- -------
Cash generated from continuing underlying operations 63.9 44.7
Cash impact of continuing non-underlying items (5.3) (7.5)
Cash generated from discontinued underlying operations 13.7 12.2
Cash impact of discontinued non-underlying items (7.1) (0.1)
--------------------------------------------------------- ------- -------
Cash flows from operating activities 65.2 49.3
Retirement benefit deficit recovery contributions (0.4) (7.9)
Tax paid (2.9) (5.5)
------- -------
Net cash inflow from operating activities 61.9 35.9
------- -------
Cash flows from investing activities
Purchases of intangible assets (3.8) (3.2)
Purchases of property, plant and equipment (41.0) (18.8)
Acquisition - deferred consideration - (0.7)
Customer funding for capital programmes 2.4 2.6
Proceeds on disposal of property, plant and equipment - 0.4
Proceeds on disposal of subsidiary 0.7 -
------- -------
Net cash outflow from investing activities (41.7) (19.7)
------- -------
Cash flows from financing activities
Dividends paid (9.5) (8.7)
Finance expense paid (4.9) (6.0)
Capitalised facility fees paid (0.3) (0.6)
Drawdown of borrowings - 26.5
Repayments of borrowings (18.1) (51.9)
Net cash outflow from financing activities (32.8) (40.7)
------- -------
Decrease in cash and cash equivalents (12.6) (24.5)
Cash and cash equivalents at beginning of the
year 9.6 33.6
Effect of foreign exchange rate changes (0.3) 0.5
------- -------
Cash and cash equivalents at end of the year (including
bank overdraft) (3.3) 9.6
------- -------
Notes
1. ACCOUNTS AND AUDITOR'S REPORT
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 October 2019 or
31 October 2018 but is derived from those accounts. Statutory
accounts for 2018 have been delivered to the Registrar of
Companies, and those for 2019 will be delivered following the
Company's Annual General Meeting. The auditor has reported on these
accounts; their reports were unqualified, did not draw attention to
any matters by way of emphasis without qualifying their report, and
did not contain any statements required under either section 498(2)
or section 498(3) of the Companies Act 2006.
This announcement has been prepared on the basis of the
accounting policies set out in the Company's financial statements
for the year ended 31 October 2019.
Whilst the financial information included in this announcement
has been computed in accordance with International Financial
Reporting Standards ("IFRSs"), this announcement does not itself
contain sufficient information to comply with IFRSs. The Company
expects to post full financial statements that comply with IFRSs on
its website on 16 December 2019 (see note 15 below).
Recent accounting developments
The following standards, amendments and interpretations have
been issued by the International Accounting Standards Board (IASB)
or by the IFRS IC. The Group's approach to these is as follows:
i) The following International Financial Reporting Committee
("IFRIC") interpretations, amendments to existing standards and new
standards were adopted in the year ended 31 October 2019 but have
not materially impacted the reported results or the financial
position:
-- Amendments to IFRS 2 Classifications and Measurement of Share-based
Payment Transactions;
-- IFRS 9 Financial Instruments Recognition and Measurement;
-- Annual Improvements to IFRSs 2014 and 2016 Cycle; and
-- IFRIC 22 Foreign Currency Transactions and Advance Consideration.
ii) At the date of authorisation of this announcement, the
following standards and interpretations that are potentially
relevant to the Group and which have not yet been applied in these
reported results were in issue but not yet effective (and in some
cases had not yet been adopted by the European Union):
Effective for periods beginning on or after 1 January 2019
-- IFRS 16 Leases;
-- Amendments to IAS 19 Employee Benefits;
-- Annual Improvements to IFRSs 2015-2017 Cycle; and
-- IFRIC 23 Uncertainty over Income Tax Treatments.
Effective for periods beginning on or after 1 January 2021
-- IFRS 17 Insurance Contracts.
The directors do not expect the adoption of these standards and
interpretations will have a material impact on the results of the
Group in future periods except as follows:
-- IFRS 16 Leases will impact the measurement, recognition,
presentation and disclosure of leases, particularly operating
leases where the term is longer than 12 months.
Under IFRS 16 Leases, lessees will be required to apply a single
model to recognise a lease liability and asset for all leases,
including those classified as operating leases under current
accounting standards, unless the underlying asset has a low value
or the lease term is 12 months or less. The adoption of IFRS 16
will have an impact on the results as each lease will give rise to
a right of use asset which will be depreciated on a straight line
basis, and a lease liability with a related interest charge. The
depreciation and interest will replace the operating lease payments
currently recognised as an expense.
The Group intends to apply the modified retrospective approach
and measure the right of use assets based on the lease liability
value calculated at 1 November 2019, with no restatement of prior
periods.
The Group expects to recognise a lease liability and
right-of-use asset of GBP6.9m at 1 November 2019 as a result of
applying IFRS 16, with no impact on retained earnings or total cash
flows. The impact on the income statement of reclassifying
operating costs to finance costs is expected to be immaterial.
2. SEGMENTAL ANALYSIS - CONTINUING OPERATIONS
Year ended 31 October 2019
Sensors Countermeasures Unallocated Group
& Information & Energetics
GBPm GBPm GBPm GBPm
Revenue 131.9 203.3 - 335.2
Segment result before depreciation,
amortisation, non-underlying
items and discontinued operations 29.3 41.7 (9.8) 61.2
Depreciation (2.3) (13.5) - (15.8)
Amortisation (0.7) (0.7) - (1.4)
-------------------------------------- --------------- ---------------- ------------ -------
Segmental underlying operating
profit 26.3 27.5 (9.8) 44.0
Amortisation of acquired intangibles (6.6) (5.5) - (12.1)
Non-underlying items - - (0.6) (0.6)
-------------------------------------- --------------- ---------------- ------------ -------
Segmental operating profit/(loss) 19.7 22.0 (10.4) 31.3
-------------------------------------- --------------- ---------------- ------------ -------
Year ended 31 October 2018
Sensors Countermeasures Unallocated Group
& Information & Energetics
Restated Restated
GBPm GBPm GBPm GBPm
Revenue 87.3 210.1 - 297.4
Segment result before depreciation,
amortisation, non-underlying
items and discontinued operations 18.5 39.6 (8.1) 50.0
Depreciation (1.7) (13.5) (0.1) (15.3)
Amortisation (1.5) (2.2) - (3.7)
-------------------------------------- --------------- ---------------- ------------ -------
Segmental underlying operating
profit 15.3 23.9 (8.2) 31.0
Amortisation of acquired intangibles (6.4) (5.2) - (11.6)
Non-underlying items (3.7) (15.9) (15.7) (35.3)
-------------------------------------- --------------- ---------------- ------------ -------
Segmental operating profit/(loss) 5.2 2.8 (23.9) (15.9)
-------------------------------------- --------------- ---------------- ------------ -------
3. ALTERNATIVE PERFORMANCE MEASURES
The principal Alternative Performance Measures ("APMs")
presented are the underlying measures of earnings which exclude
discontinued operations, exceptional items, gain or loss on the
movement on the fair value of derivative financial instruments, and
the amortisation of acquired intangibles. The directors believe
that these APMs improve the comparability of information between
reporting periods. The term underlying is not defined under IFRS
and may not be comparable with similarly titled measures used by
other companies.
2019 2018
GBPm GBPm
Acquisition and disposal related costs - (4.1)
Business restructuring costs - (8.1)
Less non-underlying depreciation in business - 0.7
restructuring costs
Legal costs - (12.8)
Change of Chief Executive - (1.7)
------- --------
Pension scheme charge in respect of GMP equalisation
court ruling - (0.8)
------- --------
Loss on the movement in the fair value of derivative
financial instruments (0.6) (0.4)
------- --------
Impact of non-underlying items on EBITDA (0.6) (27.2)
Non-underlying depreciation in business restructuring
costs - (0.7)
Impairment of capitalised development costs - (7.4)
Intangible amortisation arising from business
combinations (12.1) (11.6)
------- --------
Impact of non-underlying items on profit before
tax (12.7) (46.9)
Tax impact of non-underlying items 4.3 (13.1)
------- --------
Impact of non-underlying items on continuing
profit after tax (8.4) (60.0)
Non-underlying discontinued operations after
tax (3.9) (71.2)
------- --------
Impact of non-underlying items on profit after
tax (12.3) (131.2)
Underlying profit after tax 34.2 25.4
------- --------
Statutory profit/(loss) after tax 21.9 (105.8)
------- --------
Amortisation of acquired intangibles
Included is the amortisation charge arising from business
combinations of GBP12.1m (2018: GBP11.6m). Amortisation of acquired
intangibles arising from business combinations is associated with
acquisition costs under IFRS 3 Business Combinations. IFRS requires
intangibles to be recognised on acquisition that would not have
been capitalised had the business grown organically under
Chemring's ownership. As such, these costs are not reflective of
the underlying costs of the Group and therefore, in order to
provide an explanation of results that is not distorted by the
history of business units being acquired rather than organically
developed, have been excluded from the underlying measures.
Derivative financial instruments
Included in non-underlying items is a GBP0.6m loss (2018:
GBP0.4m loss) on the movement in fair value of derivative financial
instruments. This is excluded from underlying earnings to ensure
the recognition of the gain or loss on the derivative matches the
timing of the underlying transaction.
Acquisition and disposal-related costs
In 2018, acquisition and disposal-related costs of GBP4.1m
related to transaction costs and an earnout payment on the
acquisition of Wallop Defence Systems' assets for which no
provision was made at the time of acquisition.
Business restructuring costs
In 2018, business restructuring costs of GBP8.1m related to the
non-capital costs/asset write offs and demolition element of the
Tennessee capacity expansion programme.
Legal costs
In 2018, legal costs of GBP12.8m were in relation to ongoing
investigations.
Change of Chief Executive
In the year ended 31 October 2018, the costs associated with the
change of Chief Executive were GBP1.7m. As disclosed in the
directors' report contained in the 2018 annual report and accounts,
Michael Flowers stepped down as Group Chief Executive on 30 June
2018 and Michael Ord was appointed as Group Chief Executive on 1
July 2018.
Pension scheme charge in respect of GMP equalisation court
ruling
On 26 October 2018, the High Court handed down a judgement
involving the Lloyds Banking Group's defined benefit pension
schemes. The judgement concluded that pension schemes should be
amended to equalise pension benefits for men and women in relation
to guaranteed minimum pension benefits. An additional liability of
GBP0.8m was recognised in the 2018 results.
Impairment of capitalised development costs
In 2018, an impairment of capitalised product development costs
of GBP7.4m was recognised following the appointment of the new
Chief Executive who conducted a strategic review of the Group's
product portfolio to rationalise future resources on areas where
the Group had a niche position and competitive advantage. The
carrying value of the products for which an impairment charge was
recognised exceeded the expected future value, hence an impairment
charge was recognised in the year.
Tax
In the year ended 31 October 2019, the tax impact of continuing
non-underlying items comprises a GBP4.3m credit (2018: GBP13.1m
charge) on the above non-underlying items.
In the year to 31 October 2018, the tax impact of non-underlying
items included a GBP17.4m charge in respect of the enactment of the
US Tax Cuts and Jobs Act on 22 December 2017, and a GBP4.3m tax
credit on the above non-underlying items. These significant one-off
tax charges/credits have arisen from a change in legislation, and
as such have been removed from underlying results to aid
comparability and understanding of the Group's performance.
Discontinued operations
Further details on the results of discontinued operations is
presented in note 4.
4. DISCONTINUED OPERATIONS
A strategic review of the Group's energetics portfolio was
conducted during the year ended 31 October 2018 resulting in a
decision to exit the commoditised energetics businesses.
Accordingly, during the year the sale of Chemring Military
Products, Inc. and Chemring Defence UK Limited were completed and
Chemring Prime Contracts Limited was closed. The sale of the
remaining business in discontinued operations, Chemring Ordnance,
Inc., was announced on 21 November 2019.
2019 2018
GBPm GBPm
Revenue 43.4 138.6
Underlying operating (loss)/profit from discontinued
operations (3.5) 8.0
Tax on underlying operating (loss)/profit from
discontinued operations 6.2 (1.8)
------ -------
Profit after tax from underlying discontinued
operations 2.7 6.2
Profit after tax is analysed as:
Before exceptional items 2.7 6.2
------------------------------------------------------ ------ -------
Exceptional items (3.8) (72.0)
Tax on exceptional items (0.1) 0.8
------------------------------------------------------ ------ -------
(3.9) (71.2)
------ -------
Loss for the year from discontinued operations (1.2) (65.0)
------ -------
In 2019 the exceptional items include a loss on disposal of
GBP2.8m relating to the sale of Chemring Military Products, Inc.
and Chemring Defence UK Limited, an increase to the disposal
provision in respect of the disposal of the European Munitions
businesses in 2014 of GBP1.1m, business restructuring costs of
GBP0.8m and a GBP0.9m exceptional credit relating to the
realisation of working capital that was previously impaired in
respect of Chemring Ordnance, Inc..
In 2018 the exceptional items include the amortisation of
acquired intangibles of GBP2.7m and an impairment loss of GBP69.3m
in respect of the carrying values of Chemring Defence UK Limited,
Chemring Ordnance, Inc., B.D.L. Systems Limited and Richmond
Electronics and Engineering Limited was recorded.
Amortisation of acquired intangibles arising from business
combinations is associated with acquisition costs under IFRS 3
Business Combinations. IFRS requires intangibles to be recognised
on acquisition that would not have been capitalised had the
business grown organically under Chemring's ownership. As such,
these costs are not reflective of the underlying costs of the Group
and therefore, in order to provide an explanation of results that
is not distorted by the history of business units being acquired
rather than organically developed, have been excluded from the
underlying measures.
A GBP6.2m tax credit in 2019 is comprised of a GBP1.3m current
year tax credit and a GBP4.9m credit relating to prior year tax
adjustments.
Details of the sale of the subsidiaries
The Group completed the sale of the entire issued stock capital
of Chemring Military Products, Inc. to Global Ordnance LLC on 5
April 2019. Under the terms of the agreement, the Group received
GBP1.7m upon completion of the transaction. Deferred consideration
of GBP0.7m is payable on the first anniversary of the transaction.
A further deferred consideration amount of GBP0.4m is payable on
the second anniversary of the transaction. All deferred
consideration is considered recoverable.
The Group is entitled to further contingent consideration
following the sale of up to GBP0.8m if certain performance-related
and event-driven milestones are achieved by Chemring Military
Products, Inc. No value has been assigned to this consideration
based on the probability assessment of the associated milestones
being reached.
The Group completed the sale of the entire issued share capital
of Chemring Defence UK Limited to PWD Group Limited on 24 June
2019. Under the terms of the agreement, the Group received GBP0.0m
upon completion of the transaction. Contingent consideration is
payable if certain performance-related and event-driven milestones
are achieved by Chemring Defence UK Limited. No value has been
assigned to this consideration based on the probability assessment
of the associated milestones being reached.
2019 2019 2019
GBPm GBPm GBPm
Chemring Chemring Total
Military Defence
Products, UK Limited
Inc.
Consideration received or receivable:
Cash 1.7 - 1.7
Fair value of deferred consideration 1.1 - 1.1
----------- ------------ ------
Total disposal consideration 2.8 - 2.8
Net assets and liabilities disposed
of (3.6) (0.4) (4.0)
Disposal costs (1.1) (0.5) (1.6)
----------- ------------ ------
Loss on disposal before tax (1.9) (0.9) (2.8)
Income tax on loss on disposal - - -
----------- ------------ ------
Loss on disposal after tax (1.9) (0.9) (2.8)
----------- ------------ ------
The carrying amounts of assets and liabilities as at the date of
sale were:
Chemring Chemring Total
Military Defence
Products, UK Limited
Inc.
5 April 24 June
2019 2019
GBPm GBPm GBPm
Trade and other receivables 14.3 3.6 17.9
----------- ------------ -------
Total assets 14.3 3.6 17.9
----------- ------------ -------
Trade and other payables (10.7) (3.2) (13.9)
----------- ------------ -------
Total liabilities (10.7) (3.2) (13.9)
----------- ------------ -------
Net assets 3.6 0.4 4.0
----------- ------------ -------
5. HELD FOR SALE
The assets held for sale relate to the commoditised energetics
business Chemring Ordnance, Inc. On 21 November 2019 Chemring
announced that a conditional agreement had been entered into for
the sale of Chemring Ordnance, Inc. to Nammo Defense Systems Inc.
The sale, which is subject to regulatory approval by the US
authorities, is expected to complete no later than the end of Q2
FY20.
6. EARNINGS PER SHARE
Earnings per share is based on the average number of shares in
issue, excluding own shares held, of 280,061,053 (2018:
279,768,360). Diluted earnings per share has been calculated using
a diluted average number of shares in issue, excluding own shares
held, of 286,092,818 (2018: 285,993,316).
The earnings used in the calculations of the various measures of
earnings per share are as follows:
2019 2018
Basic Diluted Basic Diluted
GBPm EPS (pence) EPS (pence) GBPm EPS (pence) EPS (pence)
Underlying profit after
tax 31.5 11.2 11.0 19.2 6.9 6.7
Non-underlying items (8.4) (60.0)
------ ------------- ------------- -------- -------------- -------------
Profit/(loss) from continuing
operations 23.1 8.2 8.1 (40.8) (14.6) (14.6)
Loss from discontinued
operations (1.2) (0.4) (0.4) (65.0) (23.2) (23.2)
------ ------------- ------------- -------- -------------- -------------
Total profit/(loss) after
tax 21.9 7.8 7.7 (105.8) (37.8) (37.8)
------ ------------- ------------- -------- -------------- -------------
7. CASH GENERATED FROM OPERATING ACTIVITIES
2019 2018
GBPm GBPm
Operating profit/(loss) from continuing operations 31.3 (15.9)
Amortisation of development costs 1.3 3.6
Amortisation of intangible assets arising from
business combinations 12.1 11.6
Amortisation of patents and licenses 0.1 0.1
Loss on disposal of non-current assets 0.7 0.2
Depreciation of property, plant and equipment 15.8 15.3
Non-cash movement of non-underlying items 0.6 35.3
Share-based payment expense 2.5 1.1
------ -------
Operating cash flows before movements in working
capital 64.4 51.3
(Increase)/decrease in inventories (7.9) 1.6
Decrease in trade and other receivables 10.4 0.2
(Decrease) in trade and other payables (2.7) (8.3)
(Decrease) in provisions (0.3) (0.1)
Operating cash flow from continuing operations 63.9 44.7
Discontinued operations:
Operating cash flow from discontinued underlying
operations 13.7 12.2
Cash impact of non-underlying items from discontinued
operations (7.1) (0.1)
Tax paid (0.7) -
------ -------
Net cash inflow from discontinued operating activities 5.9 12.1
Net cash inflow/(outflow) from discontinued investing
activities 0.5 (1.2)
------ -------
Net cash inflow from discontinued operations 6.4 10.9
------ -------
8. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2019 2018
GBPm GBPm
Decrease in cash and cash equivalents during
the year (12.6) (24.5)
------- -------
Decrease in debt and lease financing due to cash
flows 18.4 26.0
------- -------
Decrease in net debt resulting from cash flows 5.8 1.5
Effect of foreign exchange rate changes 0.5 (2.0)
Amortisation of debt finance costs (0.2) (1.3)
------- -------
Movement in net debt 6.1 (1.8)
Net debt at beginning of the year (81.8) (80.0)
------- -------
Net debt at end of the year (75.7) (81.8)
------- -------
9. ANALYSIS OF NET DEBT
As at Exchange As at
1 Nov Cash Non-cash rate 31 Oct
2018 flows changes effects 2019
GBPm GBPm GBPm GBPm GBPm
Cash and cash equivalents (including
bank overdraft) 9.6 (12.6) - (0.3) (3.3)
Debt due within one year (excluding
bank overdraft) - - (64.6) - (64.6)
Debt due after one year (91.3) 18.4 64.4 0.8 (7.7)
Preference shares (0.1) - - - (0.1)
------- ------- --------- --------- --------
(81.8) 5.8 (0.2) 0.5 (75.7)
------- ------- --------- --------- --------
The Group's principal debt facilities comprised $83.6m of
private placement loan notes, a GBP136.7m revolving credit facility
and a $10.0m overdraft. In November 2019 the $83.6m of private
placement loan notes were repaid in line with the term of the
loans. The revolving credit facility was established in October
2018, is with a syndicate of five banks and runs until October
2022. The Group had GBP130.2m (2018: GBP68.1m) of undrawn borrowing
facilities at the year-end.
The Group is subject to two key financial covenants, which are
tested quarterly. These covenants relate to the leverage ratio
between underlying EBITDA and net debt' and the interest cover
ratio between underlying EBITDA and finance costs. The calculation
of these ratios involves the translation of non-Sterling
denominated debt using average, rather than closing, rates of
exchange. The Group was in compliance with the covenants throughout
the year.
10. DIVIDEND
At the Annual General Meeting on 21 March 2019 the shareholders
approved a final dividend in respect of the year ended 31 October
2018 of 2.2p per ordinary share. This was paid on 18 April 2019 to
shareholders on the register on 5 April 2019.
An interim dividend in respect of 2019 of 1.2p per ordinary
share was paid on 13 September 2019 to shareholders on the register
on 30 August 2019.
The Board is recommending a final dividend in respect of the
year to 31 October 2019 of 2.4p (2018: 2.2p) per ordinary share.
With the interim dividend of 1.2p (2018: 1.1p), this results in a
total dividend of 3.6p (2018: 3.3p) per ordinary share. If
approved, the final dividend will be paid on 24 April 2020 to
shareholders on the register on 3 April 2020. In accordance with
accounting standards, this final dividend has not been recorded as
a liability as at 31 October 2019.
11. EXCHANGE RATES
The following exchange rates applied during the year:
Average Closing Average Closing
rate rate rate rate
2019 2019 2018 2018
US Dollar 1.26 1.29 1.34 1.28
AU Dollar 1.82 1.88 1.74 1.80
-------- -------- -------- --------
For the year ended 31 October 2019 a 10 cent strengthening in
the US dollar exchange rate would have increased reported net debt
by approximately GBP5.7m (2018: GBP5.6m).
12. CONTINGENT LIABILITIES
The Group is, from time to time, party to legal proceedings and
claims, and is involved in correspondence relating to potential
claims, which arise in the ordinary course of business. In
addition, the following matters remain open at year end:
A dispute between Alloy Surfaces Company, Inc. and the US Army,
in relation to disputed pricing of a certain historic contract
fulfilled by Alloy Surfaces Company, Inc., proceeded to a hearing
in front of the US Armed Services Board of Contract Appeals
("ASBCA") in April 2017. ASBCA have not issued its decision in
relation to this matter, and therefore it is too early to predict
the outcome of the hearing. The range of possible outcomes is
between GBPnil to GBP12.0m. A provision of GBP1.0m (2018: GBP1.0m)
exists to cover estimated legal costs for the Group with regards to
this issue.
Since 2013, the Group has benefited from the UK's Controlled
Foreign Company ("CFC") Finance Company exemption. On 2 April 2019
the European Commission delivered a judgement which concluded in
some circumstances the UK's CFC exemption may breach state aid
rules. The UK government disagrees with the conclusion that the
UK's CFC rules were partially in breach of EU law, and has
therefore applied to the EU courts for annulment of the
Commission's decision. Given the early stage of this process, it is
too early to determine whether a tax liability is probable. The
range of possible outcomes is between GBPnil and GBP15m, plus
interest.
In accordance with the Serious Fraud Office ("SFO") News Release
dated 18 January 2018, an investigation was opened by the SFO into
Chemring Group PLC ("CHG") and its subsidiary, Chemring Technology
Solutions Limited ("CTSL"), following a self-report made by CTSL.
The investigation relates to bribery, corruption and money
laundering arising from the conduct of business by CHG and CTSL
including any officers, employees, agents and persons associated
with them. It is too early to predict the outcome of the SFO's
investigation, in which the Group continues to co-operate
fully.
On 10 August 2018 an incident occurred at the Group's
countermeasures facility in Salisbury. The Group responded
immediately to support those who were injured, and maintains
appropriate employers' liability insurance that we expect will
provide full compensation in due course. We continue to fully
support the Health and Safety Executive ("HSE") as it undertakes
its investigation. Whilst provisions have been recorded for costs
that have been identified, it is possible that additional uninsured
costs and, depending on the outcome of the HSE investigation,
financial penalties may be incurred. At this stage, these costs are
not anticipated to be material in the context of the Group's
financial statements.
13. EVENTS AFTER THE BALANCE SHEET DATE
On 21 November 2019, the Group announced that a conditional
agreement had been entered into for the sale of Chemring Ordnance,
Inc. to Nammo Defense Systems Inc. The sale, which is subject to
regulatory approval by the US authorities, is expected to complete
no later than the end of Q2 FY20. The consideration of $17m is
payable in cash on completion, subject to normal working capital
and other closing adjustments. Chemring Ordnance, Inc. was treated
as discontinued and held for sale in the annual report and
accounts.
On 19 November 2019 the Group repaid $83.6m of private placement
loan notes. This was funded from existing bank facilities and
cash.
14. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed. The directors of the Company had no material
transactions with the Company during the year, other than in
connection with their service agreements.
15. 2019 ANNUAL REPORT AND ACCOUNTS
The annual report and accounts for the year ended 31 October
2019 will be posted on the Company's website, www.chemring.co.uk,
on 16 December 2019 and a copy will be posted to shareholders, as
required, in advance of the Company's Annual General Meeting on 4
March 2020.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR TFBATMBIBMPL
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December 16, 2019 02:00 ET (07:00 GMT)
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