18 Sep 2008
Chemring Group PLC ("Chemring" or "the Group") today issues its
Interim Management Statement covering the period from 1 May 2008 to
date, as required by Rule 4.3 of the Disclosure and Transparency
Rules of the UK Listing Authority.
Current Trading
Trading in both the Energetics and Countermeasures divisions for
the four month period to the end of August 2008 continues to be
encouraging, with year to date revenues 38% above and operating
cash flow 63% above the same period in 2007. This increase in
revenue includes 13% growth from acquisitions made in the last
twelve months and confirms the strong levels of organic growth
reported in the interim results statement. The Group's order book
has further increased to a record £448 million, which is 53%
higher than at this time last year. The Board is confident that the
outlook for 2008 remains in line with its expectations.
Energetics
The Energetics division continues to perform well with revenues
exceeding those of the Countermeasures division. In the interim
results statement, it was reported that the restart of production
at Simmel Difesa SpA ("Simmel") during the first four months of the
financial year had been successful but trading would be weighted
towards the second half period. Trading at Simmel has increased in
line with expectations and deliveries of 81mm illumination mortar
rounds to BAE Systems plc have met all of the UK Ministry of
Defence delivery requirements.
Production of rocket motors for the UK/Swedish NLAW anti-armour
missile programme at Chemring Energetics UK Ltd in Scotland has
also increased substantially in volume during the current trading
period and will meet all of the customer's delivery
requirements.
The installation of improved, automated manufacturing capability
at Titan Dynamics Systems, Inc. ("Titan"), which was acquired in
January, is proceeding to schedule and a 300% increase in
production of battlefield effects simulation cartridges has been
successfully achieved. The US Army and US Marine Corps continue to
install growing numbers of launchers at their digital training
ranges, and demand for a wide variety of realistic battlefield
simulation cartridges is increasing rapidly.
Countermeasures
The Countermeasures division has also continued to perform well.
Demand from NATO countries for conventional and spectral infra-red
(IR) decoys remains strong and our UK countermeasures business has
now reached record levels of production.
During the period, Alloy Surfaces Company, Inc. ("Alloy") was
awarded a five year IDIQ (Indefinite Delivery, Indefinite Quantity)
contract from the US Army for the M211 special material decoys that
are used for the protection of helicopters from the latest IR
guided missiles. Negotiations are nearing completion with the US
Air Force on a five year IDIQ for the MJU-51 special material
decoys that are used for the protection of large transport
aircraft. Similar long term contracts for combat aircraft with both
the US Air Force and the US Navy are still being negotiated and are
now expected to be completed in early 2009.
Kilgore Flares Company LLC ("Kilgore") continues to grow
strongly with revenues weighted to the second half period. The new
C-17 flare recently passed first article testing and is now in full
volume production. The F-22 flare suite production rate has also
increased and the new advanced material facility, with its highly
automated production, has completed commissioning and will be
operated in parallel with the existing line to further increase the
production volumes. These programmes will mitigate the delay in
start-up of production of the new B-52 flare suite; this has been
deferred by the US Air Force which has decided to undertake
additional tests on the product before proceeding to full volume
production.
The second part of the US FY08 supplemental funding is working
its way through the acquisition process following US Government
approval in July 2008. Consequently, in excess of $60 million of
flare orders are expected to be awarded to Kilgore or Alloy before
the end of October. This will be in addition to the $42 million of
firm orders placed by the US Air Force and US Navy since the
beginning of May, for special material decoys used in the
protection of combat aircraft.
Acquisitions
The Group successfully completed two acquisitions during the
period:
- Scot, Inc. ("Scot"), a leading manufacturer of
cartridge-actuated and propellant-actuated devices (CAD/PADs) used
in aircraft emergency systems, missiles and space launch vehicles,
based in Illinois, USA, was acquired for $40 million. The
acquisition of Scot provides an important US centre-of-excellence
for the design, development, qualification and manufacture of
pyrotechnic devices and sub-systems used in aircraft, missile and
space platforms. Scot's engineering capability also complements the
existing high volume manufacturing and automation skills within
Chemring North America, and significantly enhances the Group's
position in the US pyrotechnic market.
- Martin Electronics, Inc. ("Martin"), a specialist manufacturer
of ammunition, fuzes, signaling and other pyrotechnically activated
devices for use in the defence sector, based in Florida, USA, was
acquired for $70 million. Martin positions the Group strongly
within key niches in the US munitions component market, increasing
the Group's capabilities by providing a platform from which to
develop niche prime contract opportunities in the US.
The acquisitions were funded by a £60 million equity fund
raising which substantially strengthened the Group's balance sheet
and, at the end of August, reduced gearing to approximately 75%,
compared with 104% at the end of April 2008.
Both of the acquired businesses are performing well.
The Board remains confident that the prospects for 2008 continue to
be strong.
For further information:
| Ken Scobie |
Chairman, Chemring Group PLC |
01489 881880 |
| Dr David Price |
Chief Executive, Chemring Group PLC |
01489 881880 |
| Rupert Pittman |
Cardew Group |
0207 930 0777 |
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.