RNS No 8312k
CHEMRING GROUP PLC
29th January 1999
CHEMRING GROUP PLC
Preliminary Results for the 13 months ended
31 October 1998
SUCCESSFULLY RESTRUCTURED
* Profit on continuing operations after interest #4.1m (compared to
a loss in 1997 of #1.7m).
* Turnover for continuing operations increased by 35% to #59m from
#44m.
* Orders up 50% to #41m.
* Earnings per share 11.33 p, up from a loss of 4.37p (excluding
exceptional items and discontinued operations).
* Disposal of all non-core businesses complete.
* Dividend per ordinary share for the year increased to 5p from 3p.
Commenting on the results, Ken Scobie, Chairman said:
With the restructuring programme completed, Chemring s improving
performance provides a good platform for sustained future growth. The
right combination of people and businesses, operating in markets with
good opportunities for growth, provides a promising future for the
Group.
For further enquiries, please contact:
Ken Scobie, Chairman Chemring 0171 930 0777
David Evans, Chief Executive Chemring 0171 930 0777
Peter Gaze Cardew & Co. 0171 930 0777
STATEMENT BY THE CHAIRMAN
Introduction
I am delighted to report that the strategy to turn the Group around,
set out in last year s annual report, has been successfully
implemented.
Results
The results for the thirteen month period are stated separately for
continuing and discontinued operations, and the results for the
previous year have been restated to reflect this.
For continuing operations, the operating profit in the period was
#6,649,000, before exceptional costs, compared to a loss of #1,608,000
in 1997, on turnover up 35% to #59,388,000.
Across the Group, turnover for the thirteen months was up 16% at
#74,746,000 (last year - #64,653,000) and Group profit before tax for
the thirteen months, after exceptional costs, was #1,251,000. Last
year, the Group loss before tax credits was #24,022,000, after major
exceptional costs and writedown of goodwill.
The exceptional costs provided for during the period arise from the
disposal of non-core businesses. Group interest and finance costs
totalled #2,582,000 (last year - #1,572,000). The Group tax charge
for the thirteen months was #413,000 (last year - credit of
#2,250,000).
Structure
T h e G roup s principal activities are, firstly in defence,
Countermeasures, Military Pyrotechnics and Explosives; and, secondly
in non-defence, Marine Safety, Chemical and Plating Systems and Wiring
Harnesses.
During the period Kembrey Wiring Systems significantly strengthened
its position as a leading wiring harness supplier to the aerospace
industry with long-term prospects, and, as reported at the time of the
interim results, is now considered a continuing operation.
Over the period all of the non-core businesses have been divested,
apart from Vacuum Reflex which was sold on 7 December 1998, and
Ronstan, the disposal of which was approved by the shareholders on 27
January 1999, and will be completed by the end of January 1999. This
completes the divestment of the non-core businesses and will now
enable us to focus our undivided attention on how best to develop the
position and prospects of the continuing businesses.
Dividends
An interim dividend for the thirteen months ended 31 October 1998 of
2.00p per ordinary share was paid on 31 July 1998. The directors
recommend a final dividend of 3.00p per ordinary share, to be paid
on 7 April 1999, making a total for the period of 5.00p per ordinary
share (last year - 3.00p).
Earnings per share
Group earnings per share on a fully diluted basis, before exceptional
items and excluding discontinued operations, were 11.33p.
Research and development
The cost of funded research and development programs and our own
expenditure during the period increased to #3.2 million, from #1.9
million last year.
Indebtedness
All facilities in the UK are provided by National Westminster Bank
Plc, which has taken a full debenture on the Group s UK assets;
facilities and terms to December 1999 have been agreed.
Total indebtedness increased during the period. Proceeds from the
disposal programme were below original expectations. There was
substantial capital investment in both the UK and the US.
Board
From today, David Evans will be taking over the responsibilities of
Chief Executive of the Group. David s management skills are vital at
this time of transition from a concentrated period of divestment
towards a more stable one of carefully managed and sustained growth.
Peter Molony, who has held the position of Chief Executive since 15
July 1997, has successfully carried out the divestment strategy and
established a sound strategy for the continuing operations. This
phase is now complete and I am delighted to say that Peter will
continue to support the Group as a non-executive director on the
Board.
Employees
The last year has been a period of major restructuring, with the
pressures of the disposal programme and the refocusing of the
continuing operations to meet the challenges of the market place. I
would like to thank all our employees for their loyalty and hard work
during the period.
Prospects
With the restructuring programme completed, Chemring s improving
performance provides a good platform for sustained future growth. The
right combination of people and businesses, operating in markets with
good opportunities for growth, provides a promising future for the
Group.
K C Scobie
Chairman
29 January 1999
REVIEW BY THE CHIEF EXECUTIVE
In his statement to shareholders last year the Chairman advised that
the Group would refocus on its historical competencies with the
objective of returning the Group to profitability. The Group has
returned to profit supported by a 35% increase in turnover for the
continuing operations to #59.4 million.
During the period there has been #3.2 million expenditure in research
and development and #4.7 million in capital expenditure in support
of continuing growth prospects for each of the core businesses.
For continuing operations the turnover was split 53/47% between
defence / non-defence activities and for the Group as a whole, 61% of
our business was for export markets.
The Group s activities are covered under the following headings:
Defence
Countermeasures:
Chemring Countermeasures, Alloy Surfaces, Pains Wessex Australia
Military Pyrotechnics and Explosives:
Pains Wessex, Pains Wessex Australia, Haley & Weller, Schermuly
Non-Defence
Marine Safety:
Pains Wessex Safety Systems, McMurdo Marine, Nova Marine
Chemical and Plating Systems:
Alloy Surfaces, Chemring Plating Systems
Wiring Harnesses:
Kembrey Wiring Systems
Defence Businesses
Turnover in defence activities was #31.5 million during the period, up
#9.4 million (42%) on the previous year s performance. The period
ended with a healthy order book of #20 million that has been further
increased to #29 million since the commencement of the new financial
year.
Countermeasures
The Group is an international market leader in the development and
manufacture of expendable countermeasures to protect valuable military
platforms. A healthy opening order book supported a turnover increase
of 125% to #18.9 million for the period. Order book levels have been
maintained and there are several major opportunities in the pipeline.
For aircraft countermeasures the Group is prime contractor and design
authority for the current UK range of infra red flares for which
development was completed in 1998. Production deliveries are ongoing.
Development of a new proprietary lower cost 55mm flare for Tornado
aircraft will complete in 1999. Tornado aircraft users include UK,
Germany, Italy and Saudi Arabia. The Group is also the prime
contractor for the flare development for the European Fighter Aircraft
2000 (Typhoon) which is nearing completion, along with the BOL chaff
cartridge, which has completed development. The Group in now in an
excellent position to satisfy future production requirements for
expendable countermeasures on this aircraft.
Chaff orders for existing products increased in the period and we have
been notified of restocking requirements for several export customers
for delivery in 1999. The qualification of the BOL dispenser on USN
F18s and USAF F15s is expected to complete in 1999. Qualification of
Alloy Surfaces special material in the BOL expendable pack is nearing
completion and this will provide the BOL dispenser with both an RF and
IR capability, which is attracting substantial interest.
Alloy Surfaces new facility in New Chester, Pennsylvania commenced
operation in September 1998, demonstrating our commitment to the many
US Department of Defense programmes incorporating Alloy Surfaces
unique IR material. Alloy s special materials feature in several
important advanced countermeasure programmes for all three services.
Private venture R&D has been directed at continuing development of MEB
(Modular Expendable Blocks) for aircraft. The MEB incorporates both
flare and chaff materials and has successfully undergone several
flight tests on a variety of platforms. It is expected to be
specified for several UK and foreign aircraft with orders starting to
flow towards the end of 1999.
There are NATO navy requirements for a combined RF/IR round. In
December 1998 Chemring was awarded a production contract by the UK MoD
for MK36 naval IR rounds.
Investment will continue in both facilities and R&D to ensure Chemring
maintains its market position and capitalises on the increasing need
to protect valuable military platforms.
Military Pyrotechnics and Explosives
The Group is the leading supplier to the UK MoD and an international
market leader for its range of specialist pyrotechnic and explosive
products used in training and other non-offensive activities.
The downturn in the Asian economies and delays in the processing of
export licences impacted on orders during the period and turnover at
#12.6 million for the thirteen months was #1.1 million down on the
previous year.
Pains Wessex Australia achieved record military turnover, benefiting
from the Australian government strategy to encourage in-country
industrial capability and the decision last year for the company to
build a new licensed site.
The increased emphasis on international collaboration and the
relationship with Royal Ordnance is starting to yield new export
opportunities, of which some will transition into orders in 1999.
There is good visibility of UK MoD requirements over the next three
years and Chemring is well placed to maintain its market position.
Non-Defence Businesses
Marine Safety
The Group is a market leader in providing legislated marine safety
p r o ducts to aid location and rescue, including pyrotechnics,
electronic location beacons, location lights and VHF radio. Despite
the worldwide strengthening of sterling in 1998, turnover for the
thirteen months increased by 10% to #15.6 million.
The business is primarily driven by international legislation set by
the International Maritime Organisation (IMO) under its Safety of Life
at Sea (SOLAS) convention. This mandates the carrying of pyrotechnic
products and marine safety lights all manufactured by the Group.
More recently the Global Maritime Distress and Safety System (GMDSS)
has legislated for 406 Emergency Positioning Indicating Radio Beacons
(EPIRBs), Search and Rescue Transponders (SARTs) and portable VHF
radios, also supplied by the Group. By February 1999 all commercial
vessels under the SOLAS convention must be fully fitted with GMDSS
products.
The emphasis in the period has been on completing several important
new product developments to meet new legislation that will assist with
increasing turnover in 1999. New products which have recently
completed their necessary approvals are all round lights, VHF
radios, a pyrotechnic hydrostatic release unit (HRU) for electronic
beacons and life rafts, and a lower cost EPIRB.
The US recreational market is legislated and policed by the US
Coastguard. This market has provided growth for our pyrotechnic
products and will provide growth for our electronics products.
Forthcoming legislation, both internationally from the IMO and within
the European Union, will further expand our market opportunities.
This includes new fishing vessel safety requirements within the EU in
1999 and additional safety measures, such as voyage data recorders and
automatic identification systems.
Development in 406 EPIRB technology and the integration of Global
Positioning Systems (GPS) presents new market areas for our
technology, including Personal Locating Beacons (PLB) for land use and
Emergency Location Transmitters (ELT) for aviation use, as legislation
is introduced in these areas.
These new products are expected to contribute significantly to both
growth in turnover and improved margin commencing in 1999.
Chemical and Plating Systems
Turnover for the period was #4.5 million. Alloy Surfaces special
chemicals for use in diffusion coating of engine components continues
to benefit from the upturn in the aerospace sector and demand is
expected to continue at current levels for the next three years.
Chemring Plating Systems turnover, although ahead of last year, was
disappointing. There has been major restructuring of the printed
circuit board industry, particularly in Europe, delaying capital
expenditure. The downturn in the Tiger economies has had a similar
effect in the Far East.
An agreement has been signed with a leading international plating line
supplier, to supply pulse plating units with their new line
installations. An office has been opened in Hong Kong to service
sales to major PCB manufacturers in Taiwan, China and South Korea.
Wiring Harnesses
Kembrey Wiring Systems, based in Swindon, is one of the largest UK
manufacturers of high specification cable harnesses for the aerospace
industry. It has an excellent reputation for supplying quality wiring
systems to manufacturers of aircraft and aircraft engines. Major
customers include Rolls-Royce, BMW and British Aerospace.
Turnover in the period increased by 58% to #7.8 million against a
background of increased activity in the aerospace sector.
D R Evans
Chief Executive
29 January 1999
REVIEW BY THE FINANCE DIRECTOR
Operating results
A summary of the operating results for the thirteen month period
appears in the Chairman s Statement. For continuing operations,
turnover grew by #15.4 million, an increase of 35%. On an annualised
basis, the growth in sales was #10.5 million (25%).
Gross margins have improved to 27.3% for continuing operations, from
the poor 1997 position of 19.7%.
Distribution costs of continuing operations have been well controlled
and are under 5% of sales compared to almost 9% last year.
Administration costs have reduced as a percentage of volume from 15%
to 11% of sales.
Exceptional costs
The exceptional charge of #2.3 million arises from losses incurred
on the disposal of non-core businesses. The disposal of Vacuum Reflex
was completed on 7 December 1998 and the Ronstan disposal to
management was approved by shareholders at the Extraordinary General
Meeting on 27 January 1999.
Interest
The interest charge for the thirteen month period is #1.0 million
higher than last year.
The increase comprises principally:
Interest on debt financing for the new Alloy Surfaces factory
Increase in UK bank margin charged on loan and overdraft
facilities
Higher levels of overdraft funding in the period to accommodate
the growth of the continuing operations.
Interest cover on profit generated by continuing operations, excluding
exceptional costs, is 2.6 times (last year - negative).
Taxation
The tax charge of #0.4 million is an effective rate of 12% on profit
before exceptional costs, and represents tax arising on overseas
operations only. Ongoing rates are likely to remain low in the
forthcoming year, as UK tax losses are available to offset against
future profits.
Goodwill and impairment of fixed assets
The Board has considered the impact of capitalising goodwill on
continuing operations previously written-off to reserves and has
adopted FRS10 and FRS11 early. The goodwill amounts previously
written-off totalling #18.3 million have been capitalised without
future amortisation on the basis of an indefinite life. The goodwill
capitalised will be subject to an annual impairment test. The Group s
net asset value has increased to #26.8 million as a consequence, and
the balance sheet as at 30 September 1997 restated by way of a prior
year adjustment.
Investment in the US
The Group has invested US$6 million in the new Alloy Surfaces factory
in the US, fully funded by local low cost long term debt (average
interest rate is 5.2% per annum). In addition, future capital
equipment for Alloy Surfaces of US$2.3 million over two years is
planned and fully funded.
Funding and treasury management
Total facilities of #28.6 million for cash and bonding requirements
have been agreed with National Westminster Bank Plc for all UK
companies. In addition, Alloy Surfaces has facilities of US$8.3
million in tax exempt bonds and loans with Wilmington Trust and the
Pennsylvania Industrial Development Authority.
The Board is aware of the requirements of FRS13 and will implement the
standard in the next financial year.
Provisions
The Board is mindful of the requirements under FRS12 and at 31 October
1998 provisions and accrued costs of #1.6 million were carried
forward. Of this, #0.5 million relates to asset impairment for the
sale of Ronstan and Vacuum Reflex.
Cash flow and gearing
The consolidated cash flow statement shows a continuation of strong
cash generation from operating activities.
Over the period, stock and debtors have reduced by #3.7 million
(12.7%), with over #2.0 million of this relating to ongoing
operations.
With the inclusion of goodwill, the Group gearing position is now 84%
(last year restated - 73%). Group debt at the period end was #22.6
million (last year - #20.6 million).
Year 2000 and preparation for the introduction of EMU
New systems have been introduced in a number of Group companies during
the past two years, which comply with year 2000 requirements.
Software upgrades are being introduced at all remaining sites
within the next six months, making all Group systems year 2000
compliant. We do not expect compliance costs to add significantly to
overheads in the forthcoming year.
In addition, a working party has been set up to ensure action plans
are progressed for each subsidiary company to achieve Group-wide
accreditation of the British Standard PD2000-1. Internal audits of
embedded systems have commenced and the Group is systematically
responding to customers and suppliers.
The issue of EMU is being reviewed to assess its impact on the Group.
Early indications are that, for our defence business, the impact will
be minimal, while the transparency of pricing in Europe may benefit
the marine safety business.
R J Gibbs
Finance Director
29 January 1999
SUMMARY FINANCIAL INFORMATION
for the thirteen month period ended 31 October 1998
Audited Unaudited
13 month 6 month
period period Audited
ended 31 ended Year
Oct 1998 3 April ended
1998 30 Sept 1997
#000 #000 #000
Turnover: Continuing
operations
Defence
Countermeasures 18,929 6,710 8,411
Military pyrotechnics and
explosives 12,600 7,246 13,751
Non-defence
Marine safety 15,622 7,581 14,154
Chemical and plating systems 4,465 2,357 2,747
Wiring harnesses 7,772 3,542 4,916
59,388 27,436 43,979
Turnover: Discontinued
operations 15,358 9,222 20,674
74,746 36,658 64,653
Operating profit/(loss)
Continuing operations 6,649 2,806 (1,608)
Discontinued operations (625) 213 (2,422)
Profit/(loss) on continuing
operations after interest and
excluding all exceptional
items 4,137 1,799 (1,662)
Exceptional items
Charged after operating
profit 2,261 - 9,327
Goodwill written-off - - 9,191
2,261 - 18,518
Pre-tax profit/(loss) after
all exceptional items 1,251 2,012 (24,022)
Shareholders funds (restated
for capitalisation of
goodwill) 26,815 28,828 28,366
Dividend per ordinary share 5.00p 2.00p 3.00p
Earnings/(loss) per ordinary
share fully diluted before
all exceptional items and
excluding discontinued
operations 11.33p (4.37)p
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the thirteen month period ended 31 October 1998
13 month period ended
31 October 1998
Continuing Discontinued Total
operations operations operations
#000 #000 #000
Turnover 59,388 15,358 74,746
Cost of sales (43,169) (10,779) (53,948)
Gross profit 16,219 4,579 20,798
Distribution costs (2,953) (2,417) (5,370)
Administrative expenses (6,617) (2,787) (9,404)
Operating profit/(loss) 6,649 (625) 6,024
Associated undertaking 70
Exceptional items
Loss on disposal of
discontinued operations (2,261)
Fundamental
reorganisation of
operations -
Loss on disposal of
fixed assets in
continuing operations -
(2,261)
Profit/(loss) on
ordinary activities 3,833
before interest
Interest payable (2,582)
Profit/(loss) on
ordinary activities
before taxation 1,251
Tax on profit/(loss) on
ordinary activities (413)
Profit/(loss) on
ordinary activities
after taxation 838
Dividends (1,189)
Retained loss for the
period/year (351)
Earnings/(loss) per
ordinary share 3.52p
Earnings/(loss) per
ordinary share fully
diluted before all
exceptional items and
excluding discontinued
operations 11.33p
Year ended
30 September 1997
Continuing Discontinued Total
operations operations operations
#000 #000 #000
Turnover 43,979 20,674 64,653
Cost of sales (35,276) (14,687) (49,963)
Gross profit 8,703 5,987 14,690
Distribution costs (3,846) (2,746) (6,592)
Administrative expenses (6,465) (5,663) (12,128)
Operating profit/(loss) (1,608) (2,422) (4,030)
Associated undertaking 98
Exceptional items
Loss on disposal of
discontinued operations (4,608)
Fundamental
reorganisation of
operations (12,523)
Loss on disposal of
fixed assets in
continuing operations (1,387)
(18,518)
Profit/(loss) on
ordinary activities
before interest (22,450)
Interest payable (1,572)
Profit/(loss) on
ordinary activities
before taxation (24,022)
Tax on profit/(loss) on
ordinary activities 2,250
Profit/(loss) on
ordinary activities
after taxation (21,772)
Dividends (715)
Retained loss for the
period/year (22,487)
Earnings/(loss) per
ordinary share (92.05)p
Earnings/(loss) per
ordinary share fully
diluted before all
exceptional items and
excluding discontinued
operations (4.37)p
Included within the cost of sales for continuing operations for the
year ended 30 September 1997 are exceptional charges of #1,103,000 and
within administrative expenses, exceptional charges of #317,000.
ADDITIONAL FINANCIAL PERFORMANCE STATEMENTS
for the thirteen month period ended 31 October 1998
13 month Year
period ended ended
31 Oct 1998 30 Sept 1997
#000 #000 #000 #000
Statement of total
recognised gains and
losses
Profit/(loss) on ordinary
activities after taxation 838 (21,772)
Currency translation
difference on foreign
currency net investments (1,009) (1,182)
(Decrease)/Increase in
revaluation reserve (209) 1,295
Total recognised gains and
losses for the period/year (380) (21,659)
Reconciliation of
movements in shareholder s
funds
Profit/(loss) on ordinary
activities after taxation 838 (21,772)
Dividends (1,189) (715)
Retained loss for the
period/year (351) (22,487)
Other recognised
(losses)/gains for the
period/year (1,218) 113
Goodwill written back in 9,191
the period/year -
Ordinary shares issued in
the period/year - 3
Share premium arising in
the period/year 18 73
Net reduction in
shareholders funds (1,551) (13,107)
Shareholders funds at 1
October 1997 as previously
stated 10,120 23,227
Goodwill capitalised 18,246 18,246
Shareholders funds at 1
October 1997 as restated 28,366 41,473
Shareholders funds at 31
October 1998 26,815 28,366
CONSOLIDATED BALANCE SHEET
as at 31 October 1998
Restated
As at 31 October As at 30 September
1998 1997
#000 #000 #000 #000
Fixed assets
Intangible assets
Development costs 608 243
Goodwill 18,246 18,246
18,854 18,489
Tangible assets 18,549 18,499
Investments 863 843
38,266 37,831
Current assets
Stock 10,920 13,359
Debtors 14,487 15,804
Cash at bank and in hand 2,162 1,506
27,569 30,669
Creditors due within one
year (21,556) (27,133)
Net current assets 6,013 3,536
Total assets less current
liabilities 44,279 41,367
Creditors due after more
than one year (16,964) (13,001)
Provisions for liabilities -
and charges (500)
26,815 28,366
Capital and reserves
Called up share capital 1,246 1,246
Reserves
Share premium account 10,789 10,771
Special capital reserve 12,939 12,939
Revaluation reserve 2,626 2,866
Revenue reserves (785) 544
25,569 27,120
Shareholders funds 26,815 28,366
Attributable to equity
shareholders 26,753 28,304
Attributable to non-equity
shareholders 62 62
26,815 28,366
CONSOLIDATED CASH FLOW STATEMENT
for the thirteen month period ended 31 October 1998
13 month period Year ended
ended 30 September 1997
31 October 1998
#000 #000 #000 #000
Net cash inflow from
operating activities 7,297 10,238
Loss on discontinued
operations - (2,912)
Fundamental reorganisation
of operations (1,788) (4,453)
5,509 2,873
Returns on investments and
servicing of finance (2,312) (1,553)
Taxation (165) (241)
Capital expenditure (4,251) (2,274)
Acquisitions and disposals 401 -
Equity dividends paid (712) (2,290)
Cash outflow before use of
liquid resources and
financing (1,530) (3,485)
Financing - issue of
shares 18 76
- increase in
debt 2,846 427
2,864 503
Increase/(decrease) in
cash in the period/year 1,334 (2,982)
Reconciliation of net cash
flow to movement in net
debt
Increase/(decrease) in
cash in the period/year 1,334 (2,982)
Cash inflow from the
increase in debt and lease
financing (2,846) (427)
Change in net debt
resulting from cash flows (1,512) (3,409)
Translation difference (69) (670)
Disposals 8 -
Finance leases (378) -
(1,951) (4,079)
Notes
1. The financial information set out above does not constitute the
Company s statutory accounts for the thirteen month ended 31
October 1998 or the year ended 30 September 1997 but is derived
from those accounts. Statutory accounts for 1997 have been
delivered to the Registrar of Companies, and those for 1998 will
be delivered following the Company s Annual General Meeting. The
auditors have reported on those accounts; their reports were
unqualified and did not contain statements under section 237(2)
or (3) of the Companies Act 1985.
The financial information has been prepared in accordance with
the accounting policies adopted for the 1997 accounts with the
exception of goodwill, previously written off against reserves
which is now capitalised in accordance with the provisions of
FRS10 and FRS11.
2. The Financial Statements for the thirteen month period ended 31
October 1998 will be posted to shareholders on 16 February 1999
and will also be available from that date at the registered
office, 1645 Parkway, Whiteley, Fareham, Hampshire PO15 7AH.
3. Subject to shareholder approval, the final dividend of 3.00p per
ordinary share will be paid on 7 April 1999 to all shareholders
registered at the close of business on 19 March 1999.
END
FR AWAKKKUKAUAR
Chemring (LSE:CHG)
과거 데이터 주식 차트
부터 6월(6) 2024 으로 7월(7) 2024
Chemring (LSE:CHG)
과거 데이터 주식 차트
부터 7월(7) 2023 으로 7월(7) 2024
