Skip to main content

Keyword:

Countermeasures

Our business units:

Chemring Countermeasures USA – Consists of Alloy Surfaces, based in Pennsylvania, and Kilgore Flares, based in Tennessee.

Alloy Surfaces is a leading developer of special material decoys for the US Navy, Marine Corps, Army and Air Force, with exports to the UK and Australia.

Kilgore Flares operates a high volume manufacturing facility making conventional and advanced flares, including flares for the F-22 and F-35.

Chemring Countermeasures UK – Manufactures advanced expendable countermeasures for air and sea platforms. Its aircraft products include conventional and advanced flares, chaff, and decoys specifically for civilian platforms. Its naval products include infra-red and radio frequency decoys and the CENTURION trainable naval decoy launcher.

Chemring Australia – Develops and manufactures aircraft countermeasures, pyrotechnics, and counter-IED and electronic warfare solutions.

Order book
£177.0m
(2015: £184.1m)
Revenue
£138.3m
(2015: £125.8m)
Underlying operating profit
£12.8m
(2015: £17.5m)
Underlying operating margin
9.3%
(2015: 13.9%)

Countermeasures revenue reflected the continued recovery in the segment, increasing by 9.9% on the prior year to £138.3 million (2015: £125.8 million). The impact of the production issues and energetic incidents that were experienced in the first half were partly offset by £2.8 million of insurance proceeds related to an earlier energetic incident. This resulted in a decline in margins from 13.9% to 9.3% and an underlying profit of £12.8 million, compared with £17.5 million in 2015. On a constant currency basis using 2015 rates, revenue was £127.8 million and underlying operating profit was £11.7 million.

The closing order book for Countermeasures was £177.0 million, down 3.9% on 2015. The decline, principally in the US, reflects the improved production consistency and the progressive working through of orders placed in earlier years, but also reflects the budget constraints that continue to be experienced with many customers. The transition from legacy aircraft to next generation platforms together with the continued depletion of customer inventory, built up during the Iraq and Afghanistan conflicts, is currently resulting in low order placement. Initial production contracts on the next-generation platforms including the F-35 are beginning to be placed more frequently.

 

The Group intends to maintain its leading position in the market for conventional and advanced countermeasures through continuous operational improvement and targeted investment in technology.

New automated manufacturing facilities in the UK and Australia are operational, and Chemring has a strong focus on improving the operational performance of all facilities. The Group also intends to maintain its technological lead in air countermeasures through targeted R&D investment to meet evolving needs and to sustain its sole source positions on the key US and NATO next-generation platforms – the Typhoon, F-22 and F-35. In May 2016, as part of its targeted investment in technology, the Group completed the purchase of Wallop Defence Systems Limited’s countermeasures products, patents and intellectual property.

In the naval countermeasures segment, the Group intends to complete the development of the CENTURION fully-trainable naval decoy launcher in close collaboration with a launch customer, and will continue to evolve naval decoy technology by working closely with lead users, particularly the UK MoD. Additionally, the Group plans to grow its market share through in-country relationships and technology transfer in emerging markets.

Over the past year new systems have been implemented to improve the management of safety and production, and further initiatives are underway to focus on the delivery of production efficiencies, waste reduction and more efficient working capital management.

 

The facility consolidation at Philadelphia continues to plan. All necessary approvals are in place and, depending on customer delivery requirements, will complete in the second quarter of 2017. The remaining site will temporarily close in the second quarter of 2017 to enable the relocation of assets and the modification of the plant’s layout and services. The cash costs of the project are expected to be approximately $3.0 million, with the project expected to deliver approximately $1.4 million in annualised savings from 2018.

The implementation of a long-term manufacturing plan in the US, incorporating productivity improvements, waste and waste removal cost reduction, personnel reduction and overhead reduction is underway. This initiative is expected to position the business well for the future.

The UK Countermeasures business had an improved second half, overcoming technical issues on one product line that occurred in the first half, although the resolution of these issues meant operating margins were lower than expected. The stronger second half performance was further aided through a shift in product mix utilising existing spare capacity. In particular, demand for chaff products was higher than in previous years and this increased demand was met through manufacturing efficiency improvements implemented during the previous twelve months.

2017 trading performance for Countermeasures, while underpinned by a good order book, is expected to be slightly down year-on-year, as production will be impacted by US site consolidation activities in the first half.

Back to Top
Link to Adobe website - opens in a new window

Most computers will open PDF documents automatically, but you may need to download Adobe Reader.