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Interim results for the six months to 30 April 2017

22 June 2017

INTERIM RESULTS FOR THE SIX MONTHS TO 30 APRIL 2017

  H1 2017 # H1 2016
     
Revenue (£m) 249.6 180.1
Underlying EBITDA*(£m) 30.0 16.3
Underlying operating profit* (£m) 17.2 3.8
Underlying profit/(loss) before tax* (£m) 11.3 (4.0)
Underlying earnings/(loss) per share* (pence) 3.2 (1.3)
Statutory loss before tax (£m) (6.8) (16.8)
Underlying diluted earnings/(loss) per share* (pence) 3.1 (1.3)
Dividend per share (pence) 1.0p -
Net debt at 30 April (£m) 111.7 114.4

Highlights

  • Operational and financial performance continues to progress in line with expectations, with improved first half weighting delivering underlying operating profit of £17.2m
  • Net debt increased since year end to £111.7m reflecting investment in working capital in Energetics segment and improvements to supplier payment practices
  • Safety performance continues to be strong
  • Operational Excellence Programme underway with initiatives launched in support of lean operations, supply chain management, integrated sales and marketing operations and safety maturity
  • Site consolidation restructuring programme on schedule
  • Key US programmes continue to develop, with significant achievements on F-35 and HMDS programmes
  • Return on sales improved to 6.9% (H1 2016: 2.1%), driven by greater operational consistency across the Group
  • Order intake in H1 of £217.9m (H1 2016: £173.8m). Order book at half year £556.2m (FY 2016: £592.9 m), of which approximately £260m is currently expected to be recognised as revenue in H2 2017, representing cover of approximately 85% of expected H2 revenues
  • Board declared interim dividend of 1.0p per share (H1 2016: nil)

Michael Flowers, Chemring Group Chief Executive, commented:

“In the first half of 2017 the Group has continued to build on its H2 2016 performance, with solid order intake and revenue delivery from its operations. The consistency of manufacturing operations across all sites continues to improve, delivering more predictable revenue flow and improved margins.  

The Operational Excellence Programme, designed to further enhance safety, improve gross margins and cash conversion, is underway with initiatives launched in support of lean operations, supply chain management, integrated sales and marketing operations and safety maturity. Combined with ongoing site consolidation and cost base management efforts, this is expected to improve both delivery and margin performance over time.

Major programmes underpinning current performance and medium term growth, continue to plan. The four major US Programs of Record continue to evolve, with solid progress made on both the F-35 and HMDS programmes. On the chemical and biological detection programmes, development work has continued, with major customer reviews and tendering activities being the focus of our efforts in the second half.

The Board’s expectations for FY 2017 are unchanged.”

Notes:

# IFRS 15 has been adopted as at 1 November 2016 and the figures stated for H1 2017 include the impact of this adoption. Further details can be found in Note 18.

*The Directors believe that underlying measures provide a more useful comparison of business trends and performance. Underlying results exclude discontinued operations, exceptional items and the amortisation of acquired intangibles. The term underlying is not defined under IFRS and may not be comparable with similarly titled measures used by other companies.

All profit and earnings per share figures in this news release relate to underlying business performance (as defined above) unless otherwise stated.

A reconciliation of underlying measures to statutory measures is provided below:

Group: Underlying Non-underlying Statutory
EBITDA (£m) 30.0 (9.4) 20.6
Operating profit/(loss) (£m) 17.2 (18.1) (0.9)
Profit/(loss) before taxation (£m) 11.3 (18.1) (6.8)
Tax (charge)/credit (£m) (2.4) 5.8 3.4
Profit/(loss) after tax (£m) 8.9 (12.3) (3.4)
Basic earnings/(loss) per share (pence) 3.2 (4.4) (1.2)
Diluted earnings/(loss) per share (pence) 3.1 (4.3) (1.2)
Segments:      
Countermeasures EBITDA (£m) 7.0 (0.5) 6.5
Countermeasures operating profit/(loss) (£m) 1.0 (2.0) (1.0)
Sensors EBITDA (£m) 7.5 (4.2) 3.3
Sensors operating profit/(loss) (£m) 4.5 (8.7) (4.2)
Energetics EBITDA (£m) 19.9 (2.7) 17.2
Energetics operating profit (£m) 16.8 (6.9) 9.9

The adjustments comprise:

  • amortisation of acquired intangibles of £7.7m (H1 2016: £6.7m, 2016: £14.8m)
  • exceptional items of £nil (H1 2016: £0.2m, 2016: £0.3m) relating to acquisition and disposal related costs
  • exceptional items of £11.1m (H1 2016: £0.6m, 2016: £5.4m) relating to business restructuring and incident costs
  • exceptional items of £0.2m (H1 2016: £0.2m credit, 2016: £0.6m credit) relating to claim related costs
  • gain on the movement in the fair value of derivative financial instruments of £0.9m (H1 2016: £0.3m loss, 2016: £1.0m loss)
  • tax credit on adjustments of £5.8m (H1 2016: £3.0m, 2016: £5.6m)
  • discontinued operations credits of £1.2m (H1 2016 £1.8m, 2016: £4.6m)

Further details are provided in note 2.

For further information:

Rupert Pittman Group Director of Corporate Affairs, Chemring Group PLC
+44 (0) 1794 833901
Andrew Jaques
James White
MHP Communications
+44 (0) 20 3128 8100

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.

Notes to editors

  • Chemring is a global business that specialises in the manufacture of high technology products and the provision of services to the aerospace, defence and security markets
  • Employing approximately 2,500 people worldwide, and with production facilities in four countries, Chemring meets the needs of customers in more than fifty countries
  • Chemring is organised under three strategic product segments: Countermeasures, Sensors, and Energetics
  • Chemring has a diverse portfolio of products that deliver high reliability solutions to protect people, platforms, missions and information against constantly changing threats
  • Operating in niche markets and with strong investment in research and development (“R&D”), Chemring has the agility to rapidly react to urgent customer needs

www.chemring.co.uk

Presentation
The presentation slides and a live audio webcast of the presentation to analysts will be available at the Chemring Group results centre www.chemring.co.uk/resultscentre at 09.30 (UK time) on Thursday 22 June 2017. The presentation can also be listened to at that time by dialling +44 (0)20 3059 8125 and using the participant password ‘Chemring’. A recording of the audio webcast will be available later that day.

Photography
Original high resolution photography is available to the media by contacting Nessyah Hart, MHP Communications: nessyah.hart@mhpc.com / tel: +44 (0) 20 3128 8100.

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