Press releases

INTERIM RESULTS FOR THE SIX MONTHS TO 30 APRIL 2016

Continuing operations	H1 2016	H1 2015
Revenue	£180.1m	£161.7m
Underlying operating profit1	£3.8m	£5.5m
Underlying loss before tax1	£(4.0)m	£(1.3)m
Net debt at 30 April	£114.4m	£148.5m
Net debt at 31 October		£154.3m
Underlying loss per share1,2	(1.3)p	(0.5)p
Dividend per share	-	2.4p
Total operating loss	£(5.3)m	£(8.3)m
Loss before tax	£(16.8)m	£(15.1)m
Total loss per share2	(5.3)p	(4.9)p

¹ Underlying measures referred to in this announcement are stated before costs relating to acquisitions and disposals, business restructuring and incident costs, profit/(loss) on disposal of businesses, items deemed to be of an exceptional nature, impairment of goodwill and acquired intangibles, impairment of assets held for sale, amortisation of acquired intangibles and gains/losses on the movement in the fair value of derivative financial instruments, as stated in the 2015 Annual Report and Accounts. Further details of underlying and total measures are shown in notes 3 and 6.
² Earnings per share figures for periods prior to the rights issue have been restated to reflect the bonus element of the rights issue.

Highlights

• Revenue up 11.4% on comparative period, with increases in all three strategic segments. Underlying operating profit £1.7 million below prior year due principally to lower margin sales mix, phasing of revenue within FY16, and contract-specific issues resolved in the half
• Delayed 40mm ammunition contract now fully effective, with initial revenue recognised
• Order book increased to £591.3 million (31 October 2015: £569.6 million), with deliveries of over £240 million scheduled in H2 representing approximately 90% of expected H2 revenue
• Significant H2 weighting driven by substantial increase in 40mm contract revenues and greater consistency in production
• FY16 full year anticipated to be slightly below market expectations*
• Successful completion of rights issue and subsequent repayment of £48.8 million of US loan notes, reducing future finance costs
• Renewed focus on operational improvement centred on site rationalisation, process optimisation and working capital management
• Refreshed Board composition, with appointment of Chairman-designate and two further non-executive directors

^* As of 20 June 2016, Chemring’s compiled consensus of analysts’ forecasts was for FY16 underlying operating profit of £48.7 million

Michael Flowers, Chemring Group Chief Executive, commented:

“While revenues increased in every segment, the H1 result was impacted by the slightly later than expected commencement of the 40mm contract, together with a lower margin sales mix, phasing of revenue within FY16, and contract-specific issues resolved in the half. This performance contrasts with a growing sense of momentum across the business as operational improvement initiatives are accelerated following the deleveraging resulting from the rights issue.

We continue to expect our full year FY16 result to be heavily weighted to the second half, due to substantially higher 40mm contract revenues and greater consistency in production. Whilst it is encouraging that approximately 90% of expected H2 revenue is in the order book, the Board’s current assessment is that the FY16 out-turn is likely to be slightly below market expectations.

Having significantly strengthened the balance sheet through the rights issue, we are now able to focus fully on the operational priorities that will underpin our future growth. These priorities include site rationalisation and capacity investment projects, implementing significant cost saving initiatives, ensuring excellence in contract delivery and delivering improved working capital management. This work is being done while maintaining the highest standards of safety and progressing key strategic long-term US programmes.”

For further information:

Michael Flowers	Group Chief Executive, Chemring Group PLC	01794 833901
Steve Bowers	Group Finance Director, Chemring Group PLC	01794 833901
Rupert Pittman	Group Director of Corporate Affairs, Chemring Group PLC	01794 833901
Andrew Jaques James White	MHP Communications	020 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 2,700 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 & Electronics, and Energetic Systems
• 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/investors/results-centre at 09.30 (UK time) on Tuesday 21 June 2016. 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 Tom Horsman, MHP Communications: [email protected] / tel: +44 (0) 20 3128 8100.

View the full press release in PDF format.