RNS No 6950m
CHEMRING GROUP PLC
1 July 1999
Interim Results for the
Twenty-Six Weeks ended
1 May 1999
For continuing operations and excluding operations under review and
exceptional costs:
- Record orders of #42 million
- Turnover increased to #29.3 million (1998: #26.6 million)
- Operating profit rose to #3.2 million (1998: #2.8 million)
- Recommended interim dividend of 2p per ordinary share
- Gearing down to 77%
- Initial #5 million requirement for BOL infra-red decoy awarded
by UK MoD
- Kembrey Wiring Systems won BAe preferred supplier contract to
supply wiring harnesses to all military aircraft
Ken Scobie, Chairman commented on the results:
The future is exciting against a background of customers long-
term commitments, increasing orders, investment in innovative
products and leading positions in key markets, creating excellent
growth prospects.
Enquiries:
David Evans Chief Executive today 0171 930 0777
after 1 July 01489 881880
Peter Gaze Cardew&Co. 0171 930 0777
STATEMENT BY THE CHAIRMAN
Record orders received in the first half of #42 million increased
the order book by 36% to #44 million and exceeded first half sales
of continuing operations by over 40%.
There is clear evidence that our marketing strategy and increased
R&D spend is translating into orders and will support growth across
the Group, particularly in our Countermeasures business, where
turnover this year will be more than double that of two years ago.
Against this background, I am confident of exciting, continued
growth for the future.
RESULTS FOR THE 26 WEEKS ENDED 1 MAY 1999
Turnover of continuing operations, excluding operations under
review and exceptional costs, was #29,297,000, up 10.1% (1998 -
#26,609,000) and operating profit was #3,153,000, up 11.9% (1998 -
#2,817,000).
Group turnover, including discontinued activities and operations
under review, was #32,059,000 (1998 - #36,658,000) providing profit
before interest of #2,089,000 (1998 - #3,019,000).
Inflow of cash from operating activities was #2,059,000 (1998 -
#632,000).
After interest and an estimated taxation charge at 19%, Group
profit on ordinary activities for the half year was #885,000
3.74p per ordinary share.
DIVIDEND
The directors have declared an interim dividend at the same rate as
last year, at 2p per ordinary share. This will be paid on 27 August
1999 to holders on the register at 6 August 1999.
BUSINESS PERFORMANCE
DEFENCE BUSINESSES
Orders received of #29 million exceeded sales by 75% in the first
half, increasing the defence order book by 55% to a record level of
#32 million, which further increased in May to #35 million with 50%
deliverable in the second half of the financial year.
The Countermeasures business is performing exceptionally well, with
turnover up 68% on the comparable period last year, and strong
demand for our products continues against a background of
protecting valuable military platforms engaged in active combat.
We have established ourselves as an international market leader in
introducing innovative self-protection decoy solutions for both air
and sea applications. We have several new naval projects under
development, which will lead to sales next year.
The extensive use of military aircraft in the Balkans campaign has
e m p hasised the need for increased self-protection and our
Countermeasures business will benefit, particularly our US based
Countermeasures business, Alloy Surfaces, which received its first
significant production requirement (#5 million) in June for its
innovative BOL infra-red (IR) decoy from the UK Ministry of
Defence. The BOL IR capability is expected to be available for all
UK aircraft capable of carrying the BOL dispenser and will be
fitted on the Eurofighter aircraft. In the USA, the US Navy s
Tomcat is equipped with the BOL dispenser and the IR decoy will
complete operational evaluation in the autumn which is expected to
lead to production orders later this year. The BOL dispenser is
under evaluation on the US Navy s F18 aircraft and the US Air
Force s F15 and other aircraft types.
Since the acquisition of Alloy Surfaces in 1993, its
Countermeasures turnover has grown dramatically and is expected to
increase by over 95% this year.
Military Pyrotechnic sales have been slow in the first half due to
the order book phasing, although orders received of over #10
million were almost double turnover in the period, and increased
the order book at the end of April to #11 million. We are
increasing our international collaboration initiatives,
particularly in Europe, to position us for possible future
European-led defence procurement programmes.
NON-DEFENCE BUSINESSES
Our Marine business provides a comprehensive SOLAS approved range
of pyrotechnic, electronic and light marine safety products and is
recognised as an international leader in marine safety products.
Turnover in the first half was up 9% on last year and sales of the
new higher margin products, particularly the low cost Emergency
Position Indicating Radio Beacon (EPIRB) and the Hydrostatic
Release Unit (HRU), will benefit the second half. Further R&D
expenditure will be directed at new electronic products to meet
known future legislation.
We are pleased that British Aerospace has awarded a contract to
Kembrey Wiring Systems to supply wiring harnesses for all its
military aircraft. The contract is for an initial 5-year period.
Kembrey's computer aided design and engineering expertise, together
with investment in the latest laser-marking technology, were
significant factors in BAe's decision. The BAe contract adds to
Kembrey's already strong presence in the aerospace sector, with
existing long term agreements with Rolls Royce and BMW/RR. It also
complements a healthy order book at the Swindon facility and
provides further strong growth where the arrangement is expected to
provide up to #6 million increase in annual turnover. In the
current financial year the infrastructure and organisation has been
strengthened in support of the second half turnover growth. This
necessary investment has increased the overheads and constrained
profits in the first half.
OPERATIONS UNDER REVIEW
The 1998 disposal programme is now complete, with Vacuum Reflex
sold on 7 December 1998 and Ronstan on 31 January 1999. The
results of both are shown under discontinued operations.
Chemring Plating Systems order intake is being affected by over-
capacity in the printed circuit board industry, brought about by
restructuring within the industry and the downturn in the South
East Asian economies. This over-capacity has resulted in lower
printed circuit board prices from South East Asia affecting
European suppliers and, as a result, delaying of capital
expenditure. Losses in the first half were #776,000 because of
lack of orders. The cost base has been significantly reduced and
orders are now being received which should reduce second half
losses significantly. I believe that the business would benefit
from being part of a specialist group supplying a range of
equipment into the printed circuit board industry and we are
reviewing the future alternatives for this business.
EXCEPTIONAL COSTS
Costs in relation to the aborted bid by a financial institution
amounting to #295,000 have been treated as exceptional but charged
against operating profit of the continuing operations.
BANK
The Group s banking facilities are adequate, and the continuing
operations will generate cash to service debt and future
investment. The net debt reduced in the period by #1 million to
#21.25 million at the half year and gearing was 77% (1998 - 84%).
YEAR 2000
The Group has fully reviewed the possible impact of Year 2000 and
all necessary actions are in hand to ensure compliance. The costs
are expected to be immaterial in the context of the Group.
PROSPECTS
Having been through an extended phase of restructuring, the quality
of our continuing businesses, particularly in Countermeasures and
Marine Safety products, and their capacity to support a buoyant
future for the Group, is now clear. We have also secured an
attractive future for Kembrey Wiring Systems and we will continue
to look to optimise our performance in Military Pyrotechnics.
Current difficulties at Chemring Plating Systems should not obscure
these successes, nor will they distract us from concentrating on
the development of our core businesses.
The future is exciting against a background of customers long-term
commitments, increasing orders, investment in innovative products
and leading positions in key markets, creating excellent growth
prospects.
The Group is well positioned for strong growth in the future and we
have the necessary management skills and worldwide marketing
network to realise the potential.
UNAUDITED CONSOLIDATED PROFIT & LOSS ACCOUNT
FOR THE 26 WEEKS TO 1 MAY 1999
Audited Unaudited Unaudited
13 months 26 weeks to 26 weeks to
to 31 Oct 1 May 3 April
1998 1999 1998
#000 #000 #000
Turnover
Continuing operations
57,664 - ongoing 29,297 26,609
1,724 - under review 557 827
59,388 29,854 27,436
15,358 Discontinued operations 2,205 9,222
74,746 32,059 36,658
Operating profit/(loss)
6,814 Continuing operations
- ongoing 3,153 2,817
- - exceptional
(165) costs (295) -
- under review (776) (11)
6,649 2,082 2,806
Discontinued operations 7 213
6,024 2,089 3,019
70 Associated undertaking - -
Exceptional items
Loss on disposal of
(2,261) discontinued operations - -
Profit on ordinary
activities before
3,833 interest 2,089 3,019
(2,582) Interest payable (994) (1,007)
Profit on ordinary
activities before
1,251 taxation 1,095 2,012
Tax on profit on
(413) ordinary activities (210) (508)
Profit on ordinary
activities after
838 taxation 885 1,504
(1,189) Dividends (473) (473)
(351) Retained profit/(loss) 412 1,031
Earnings per ordinary
3.52p share 3.74p 6.35p
Diluted earnings per
3.37p ordinary share 3.74p 6.24p
Net dividend per
5.00p ordinary share 2.00p 2.00p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Audited Unaudited Unaudited
13 months 26 weeks 26 weeks
to 31 Oct to 1 May to 3 April
1998 1999 1998
#000 #000 #000
Profit on ordinary
838 activities after
taxation 885 1,504
Currency translation
differences on foreign
(1,009) currency net
investments 361 (568)
(209) Decrease in revaluation
reserve - -
(380) 1,246 936
UNAUDITED CONSOLIDATED BALANCE SHEET
AS AT 1 MAY 1999
Audited Unaudited Unaudited
Restated
as at as at as at
31 Oct 1 May 3 April
1998 1999 1998
#000 #000 #000
Fixed assets
18,854 Intangible assets 18,892 18,430
18,549 Tangible assets 16,960 17,483
863 Investments 863 843
38,266 36,715 36,756
Current assets
10,920 Stock 10,971 14,086
14,487 Debtors 15,383 18,669
Cash at bank and in
2,162 hand 1,616 1,506
27,569 27,970 34,261
Creditors due within
one year
Bank loans and
7,369 overdraft 5,831 8,457
44 Loan stock 44 643
14,143 Other 13,953 18,567
21,556 19,828 27,667
6,013 Net current assets 8,142 6,594
Total assets less
current liabilities 44,857 43,350
44,279
Creditors due after
(16,964) more than one year (16,769) (14,022)
Provisions for
(500) liabilities and charges (500) (500)
26,815 27,588 28,828
1,246 Capital and reserves
25,569 Called up share capital 1,246 1,246
Reserves 26,342 27,582
26,815 Shareholders funds 27,588 28,828
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
FOR THE 26 WEEKS TO 1 MAY 1999
Audited Unaudited Unaudited
13 months 26 weeks 26 weeks
to 31 Oct to 1 May to 3 April
1998 1999 1998
#000 #000 #000
Net cash inflow from
7,297 operating activities 2,059 632
Fundamental
reorganisation of
(1,788) operations (494) -
5,509 1,565 632
Returns on investments
and servicing of
(2,312) finance (1,027) (1,007)
(165) Taxation (346) (3)
(4,251) Capital expenditure (1,179) (500)
Acquisitions and
401 disposals 2,843 -
(712) Equity dividends paid (710) (237)
Cash inflow/(outflow)
before use of liquid
(1,530) resources and financing 1,146 (1,115)
Financing
18 - issue of shares - -
- (decrease)/
2,846 increase in debt (55) 636
Increase/(decrease) in
1,334 cash 1,091 (479)
REVIEW REPORT BY THE AUDITORS
TO CHEMRING GROUP PLC
We have reviewed the interim financial information for the 26 weeks
ended 1 May 1999, which is the responsibility of, and has been
approved by the directors. Our responsibility is to report on the
results of our review.
Our review was carried out having regard to the Bulletins 1993/1
Review of interim financial information and 1998/6 Review of
interim financial information - supplementary guidance for
auditors issued by the Auditing Practices Board. This review
consisted of applying analytical procedures to the underlying
financial data, assessing whether accounting policies have been
consistently applied, and making enquiries of Group management
responsible for financial and accounting matters. The review
excluded audit procedures such as tests of controls and
verification of assets and liabilities, and was therefore
substantially less in scope than an audit performed in accordance
with Auditing Standards. Accordingly we do not express an audit
opinion on the interim financial information.
On the basis of our review:
- in our opinion the interim financial information has been
prepared using accounting policies consistent with those
adopted by Chemring Group PLC in its Financial Statements for
the thirteen month period ended 31 October 1998, and
- we are not aware of any material modifications that should be
made to the interim financial information as presented.
DELOITTE & TOUCHE, Chartered Accountants, 1 July 1999
Mountbatten House, 1 Grosvenor Square, Southampton, Hampshire SO15
2BZ
NOTES TO THE INTERIM REPORT
1. SEGMENTAL ANALYSIS OF TURNOVER
Audited Unaudited Unaudited
13 months 26 weeks 26 weeks
to 31 Oct to 1 May to 3 April
1998 1999 1998
#000 #000 #000
Ongoing operations
18,929 Countermeasures 11,248 6,710
Military pyrotechnics and
12,600 explosives 5,341 7,246
15,622 Marine safety 8,264 7,581
7,772 Wiring harnesses 3,153 3,542
2,741 Chemicals 1,291 1,530
57,664 29,297 26,609
Operations under review
1,724 Plating systems 557 827
15,358 Discontinued operations 2,205 9,222
74,746 32,059 36,658
2. OPERATING PROFIT/(LOSS)
Audited Unaudited Unaudited
13 months 26 weeks 26 weeks
to 31 Oct to 1 May to 3 April
1998 1999 1998
#000 #000 #000
Turnover
Continuing operations
57,664 - ongoing 29,297 26,609
1,724 - under review 557 827
59,388 29,854 27,436
15,358 Discontinued operations 2,205 9,222
74,746 32,059 36,658
Gross profit/(loss)
Continuing operations
15,351 - ongoing 8,098 7,907
868 - under review (114) 156
16,219 7,984 8,063
4,579 Discontinued operations 899 3,107
20,798 8,883 11,170
Net operating expenses
Continuing operations
(8,537) - ongoing (4,945) (5,090)
- - exceptional costs (295) -
(1,033) - under review (662) (167)
(9,570) (5,902) (5,257)
(5,204) Discontinued operations (892) (2,894)
(14,774) (6,794) (8,151)
Operating profit/(loss)
Continuing operations
6,814 - ongoing 3,153 2,817
- - exceptional costs (295) -
(165) - under review (776) (11)
6,649 2,082 2,806
(625) Discontinued operations 7 213
6,024 2,089 3,019
The unaudited results for the 26 weeks to 3 April 1998 have been
restated to include all businesses that were disposed of subsequent
to that date as discontinued operations.
3. TAXATION
The effective rate of taxation is reduced primarily due to the
utilisation of losses incurred in 1997. The benefit of this
loss utilisation is offset in part by the profitability of
operations in countries subject to higher rates of tax.
4. 1998 RESULTS
The figures for the thirteen months to 31 October 1998 are
abridged from the Group s full Financial Statements for that
period which carry an unqualified Auditors Report and have
been filed with the Registrar of Companies. The unaudited
balance sheet at 3 April 1998 has been restated to reflect the
capitalisation of goodwill amounting to #18,246,000 following
the adoption of FRS10 in the 1998 Financial Statements.
END
IR SDWESSUUUFEM
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