Preliminary Results for the Year Ended 31 October 2006

23 Jan 2007

Results

• Revenue from continuing operations £187.7 million (2005: £121.0 million), up 55%
• Profit before tax from continuing operations £31.8 million (2005: £19.2 million), up 66%
• Basic earnings per ordinary share from continuing operations 70.33p (2005: 46.63p), up 51%
• Dividend per ordinary share 16.00p (2005: 10.50p), up 52%
• Basic earnings per ordinary share 44.33p (2005: 30.16p), up 47%

Highlights

• Excellent performance from all three Countermeasures businesses - total profits up 37% and record levels of production achieved
• Strong performance by acquired Energetics companies - revenue more than doubled to £69.3 million
• Increase in total Group operating margins to 20% - second half Energetics margin also up to 20%
• Year end order book up 75% - current order book at record high of £246.0 million
• Strong operational cash flow of £45.6 million (2005: £21.1 million)
• Divestment of Marine division substantially complete

Commenting on the results, Ken Scobie, Chemring Group Chairman, said: "2006 has been a year of dynamic progress and outstanding performance, as anticipated in my closing comments in last year’s annual report. Operating profit and profit before tax both increased by over 65% to £37.8 million (2005: £22.9 million) and £31.8 million (2005: £19.2 million) respectively, with basic earnings per share (on continuing operations) on the enlarged share capital following the vendor placing in March 2006 rising by 51% to 70.33p (2005: 46.63p). In view of the excellent performance of the Group this year, the Board is recommending a final dividend of 11.20p per ordinary share, a 53% increase on the final dividend for 2005.

Both the Countermeasures and Energetics divisions contributed strongly in the year, and there was a welcome improvement in Energetics’ margins which increased to 15% (2005: 8%).

Our acquisitions completed in the latter part of 2005 and during 2006 - Nobel Energetics in Scotland, Comet in Germany, Technical Ordnance in the US and Leafield Engineering in England - all contributed as anticipated. In 2007 we will enjoy a full year’s profits from the businesses acquired in 2006.

In last year's annual report I outlined the Board’s strategy of concentrating on our two divisions of Countermeasures and Energetics. This strategy remains unchanged. In Countermeasures we are capitalising on our industry strengths, developing new decoys and new military uses for our specialised pyrophoric material, and investing in plant, equipment and new production processes to reduce manufacturing costs and improve quality. In Energetics we continue our search for suitable acquisitions to make us a consolidating force in a fragmented industry.

In the year under review basic earnings per share from the continuing operations increased by 51% to 70.33p, the share price reached over £16 from £6.60, and the Group was admitted to the FTSE 250 Index. Whilst it would be unrealistic to believe that such outstanding performance could be repeated continuously in the longer term, the Board believes that with the current record order book, a full twelve months’ earnings from each of the companies now in the Group, and the opportunities for our product range at a time of political and military uncertainty, not just in the Middle East, further significant growth is achievable in 2007."

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