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Preliminary Results For the Year Ended 31 October 2011

24 January 2012

  • Revenue up 25% to £745.3 million (2010: £597.1 million)
  • Organic revenue growth~ of 9% in difficult market
  • Non-NATO revenues up 81% to 29% of total Group revenue (2010: 20%)
  • Year end order book up 9% at £878.3 million (2010: £803.3 million)
  • Order book today at £980 million, up 9% on January 2011
  • Underlying profit before tax* up 6% to £125.6 million (2010: £118.7 million#)
  • Underlying earnings per share* up 5% at 52.1p (2010: 49.8p#)
  • Profit before tax £90.8 million (2010: £89.1 million)
  • Basic earnings per share 39.8p (2010: 37.8p#)
  • Dividend per ordinary share up 25% at 14.8p (2010: 11.8p#)
  • Underlying operating cash flow* £124.6 million (2010: £128.0 million#)
  • Net debt of £262.7 million (2010: £307.5 million)

DIVISIONAL PERFORMANCE

Counter-IED

  • NIITEK increased revenue by 24% to £126.9 million, with 77 HMDS units delivered to the US Army
  • Chemring Ordnance awarded multi-year contract, worth up to $150 million, to supply the Mk7 Anti-Personnel Obstacle Breaching System (APOBS) to the US Army and US Marine Corps
  • Chemring Detection Systems acquired in July and performed in line with expectations

Countermeasures

  • Full year contribution from Roke
  • Expendable countermeasures revenues declined as expected
  • Kilgore restarted production and revenue reached new record

Pyrotechnics

  • Reduced revenues for illuminating products in both UK and US markets
  • M992 pyrotechnic 40mm round named by US Army as one of top ten inventions
  • Margin maintained in line with last year

Munitions

  • Revenue more than doubled to £237 million
  • Demand for 90mm and 40mm grenade ammunition almost triples
  • Revenue from naval ammunition grows by 122%

Peter Hickson, Chemring Group Chairman, commented:

“Chemring produced another year of growth in profits and earnings, with revenue up 25% to £745.3 million and underlying profit before tax* up 6% to £125.6 million.

The Board has considered its long term dividend policy as part of a balance sheet review. For many years, the Group has adopted a policy of maintaining dividend cover at around four times. With our strong annual cash generation, we believe it would be appropriate to bring the cover down to three times over the next year. As part of this move, the proposed total dividend of 14.8p for 2011 will be covered 3.5 times by underlying after tax earnings*, compared with 4.2 times last year. We have also concluded that we should consider returning surplus capital to shareholders whilst maintaining the strength of the balance sheet. Accordingly, we will seek approval at the forthcoming Annual General Meeting to renew our authority to buy back shares, when it is considered appropriate, over the course of the next year. We would only expect to exercise this authority for a buyback of up to £50 million of shares.

During the last year, many governments have struggled with increasing deficits and lower economic growth. This has affected defence procurement, leading to volume reductions and delays. The continuing problems of the Eurozone and the impact of possible sequestration in the US indicate that our traditional markets will not be any easier this year. We continue to pursue our policy of reducing our dependence on these markets, and are actively seeking more business from elsewhere. Our order book has risen by 12% since the year end and currently stands at £980 million. It is encouraging to note that 44% of today’s order book emanates from non-NATO markets, and this compares with 33% at the same time last year. We see further good growth prospects in these markets and will pursue the opportunities they offer. I am confident that we have the products, the management and technological skills to achieve our objectives and provide the foundation for steady growth.”

For further information:

Dr David Price Chief Executive, Chemring Group PLC 0207 930 0777
Paul Rayner Finance Director, Chemring Group PLC 0207 930 0777
Rupert Pittman Director of Communications and Investor Relations, Chemring Group PLC 0207 930 0777
     
Anthony Cardew/
Emma Crawshaw		 Cardew Group 0207 930 0777

* Before acquisition related costs, restructuring and incident costs, provision release, (gain)/loss on fair value movements on derivatives and intangible amortisation arising from business combinations (see Note 3)
# Restated figures for prior year to reflect the subdivision of shares (see Note 5), as well as the reclassification of certain items from underlying costs to non-underlying costs (see Note 3)
~ Organic growth at constant US dollar excludes growth from contracts and customers acquired with Roke, Mecar and Chemring Detection Systems

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