28 February 2011
Chemring Group PLC (“Chemring” or “the Group”) today issues its Interim Management Statement covering the period from 1 November 2010 to date, as required by Rule 4.3 of the Disclosure and Transparency Rules of the UK Listing Authority.
Trading during the first three month period to the end of January 2011 was 38% higher than for the same period in 2010, when calculated on a constant currency basis. This was driven by continued strong growth in our Counter-IED and Munitions businesses that was partially offset by a reduction in revenues from our Pyrotechnics activities.
The Group’s order book has increased to a new record of £944 million, 64% higher than at this time last year. This strong order book and the continued growth in three of our four core business segments provide a solid foundation for 2011, and the Board remains confident that the outlook remains in line with its expectations.
Our Counter-IED business continued to perform well, with revenue increased by 150% compared with the same period in 2010. A major component of this growth was provided by our US subsidiary, Non-Intrusive Inspection Technology, Inc. (“NIITEK”), with further increased deliveries of systems, spares and sustainment for the Husky Mounted Detection Systems (“HMDS”) ground penetrating radar used by the US Army, US Marine Corps, and Canadian armed forces.
Our Countermeasures business showed steady growth, with revenue 15% higher than for the same period last year. Our UK countermeasures subsidiary achieved much higher levels of sales than last year as a result of increased development funding for the next generation of naval countermeasures and more benign winter weather conditions that have made lot acceptance testing easier for delivery of our conventional flare products. This was partially offset by reduced production at Alloy Surfaces, which has been adversely affected by the continuing delays in approval of the current US Department of Defense budget.
The restart of production at Kilgore, following the incident on the MJU-7 decoy assembly line last September, has now been completed, and revenue in the period grew by more than 10% compared to the previous year. All but one production line is back to full volume, although it will be at least four months before the replacement building for the MJU-7 flare is completed.
Our Munitions business increased its revenue by 78% compared with last year, although most of this growth was generated by our recent Belgian acquisition, Mecar. The majority of these sales were to Middle Eastern countries unaffected by the recent political unrest.
Revenue in our Pyrotechnics business reduced by 40% compared with last year, principally caused by deliveries scheduled for January slipping into the second quarter. In particular, our Italian subsidiary, Simmel, was unable to deliver any of its mortar illumination rounds to UK customers because of an unexpected delay in the delivery of a key sub-system from one of our suppliers as the result of transport paperwork problems. This shortfall is expected to be recovered by the half year.
Current Financial Position
On 14 January 2011, the Group completed a refinancing of unsecured working capital facilities, which provide funding to April 2015.
Cash flow in the first quarter of the financial year was in line with management expectations, and the Group’s net debt at the end of January stood at £339 million (January 2010: £241 million). The net debt is expected to reduce by the half year.