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| Date | 12 Sept 2023 |
| Time | 07:00:02 |
| Category | Trading updates |
| ID | 0711M |
FOR IMMEDIATE RELEASE 12 SEPTEMBER 2023
CHEMRING GROUP PLC
FY23 TRADING UPDATE AND CONTRACT WINS
Chemring Group PLC ("Chemring" or "the Group") today issues a scheduled trading update for the period to 31 August 2023.
Current trading and outlook
Trading in the period has progressed as planned, with continued strong order intake a notable highlight. This provides excellent visibility out to FY25. Expected FY23 revenue is now fully covered by the order book and the outturn for the year ending 31 October 2023 remains in line with the Board's and current analyst expectations*. Achieving full year expectations is subject to US Department of Defense ("US DoD") approval of certain countermeasure deliveries, representing c.£25m of revenue, that have already been manufactured and will be recognised once approval is received. The US DoD is expected to grant approval subject to determination of the quality of raw material provided by a third-party supplier that is outside of the control of the Group. The Group is supporting all parties in resolving this matter.
The Group has received a number of significant orders during the period, detailed below. As at 31 August 2023, order intake for the year to date was £536m (31 August 2022: £365m) and the order book was £829m (31 August 2022: £575m). Encouragingly, order cover for FY24 is building, with Countermeasures & Energetics having 81% order cover of expected revenue and the shorter cycle Sensors & Information sector having 54% cover.
Contract awards - Sensors & Information
Roke
In the Sensors & Information sector our specialist consulting and technology business, Roke, has received a significant award valued at £40m to deliver the next two years of Project ZODIAC for the UK Ministry of Defence ("UK MOD"). ZODIAC is the backbone of the British Army's Land ISTAR Programme, and will deliver an integrated intelligence, surveillance, target acquisition, and reconnaissance ("ISTAR") system, which will transform how the Army undertakes data-led decision making in the Land environment to gain operational advantage.
ZODIAC will provide an integrated and distributed system of applications and underlying system architecture that will enable the Army to understand, decide and act with greater precision and speed and digitally integrate with key allied partners. Roke will act as the Prime Systems Integrator on this advanced technology programme supported by a supply chain of some of the world's leading technology companies. The Group expects to see deliveries under this contract commence late in FY23 with the majority delivered in FY24 and early FY25.
Activity at Roke has remained extremely buoyant with order intake in the year to date at £165m (31 August 2022: £124m) up 33%. As a result of this strong order intake we expect Roke to achieve another record year in FY23, with revenue exceeding £160m.
US Sensors
Having successfully completed a Low Rate Initial Production ("LRIP") Production Readiness Review and a supporting Manufacturing Readiness Review in May, our US Sensors business has been informed that the Milestone C procurement decision in respect of the Joint Biological Tactical Detection System ("JBTDS") program has been approved.
A LRIP contract, valued at $15m, was received in September 2023. Hardware deliveries under this contract will be made over the next 10 to 14 months, with a Full Rate Production contract expected to be awarded thereafter.
Contract awards - Countermeasures & Energetics
Energetics
In Energetics we continue to see increased levels of activity and demand in the propellants and energetic materials markets as customers re‐evaluate their operational usage and stockpile requirements associated with traditional defence capabilities.
Our Norwegian business, Chemring Nobel, continues to work with a number of its customers, including Northrop Grumman, Diehl Defence, Rheinmetall, and Nammo, on establishing long-term supply agreements. Chemring Nobel now has a record order book, providing significant visibility over the medium term.
In the US, our Chicago business has received multiple orders in the period including two contracts totalling $23m to supply critical components to Lockheed Martin, and a $11m order to supply key parts on the United Launch Alliance ("ULA") Vulcan launch system including flight-critical initiators, thrusters and cartridges. Our Chicago business now has a record order book which is in excess of $100m.
Our three niche Energetics businesses, which design and manufacture high precision engineered devices and specialist materials, continue to see strong customer demand with order intake up 122% to £211m (31 August 2022: £95m). This strong performance demonstrates the value that our customers place on Chemring's niche products and reinforces our decision to invest in expanding capacity at our Energetics sites.
Countermeasures
In Countermeasures we have continued to see sustained customer demand from across our portfolio, maintaining our position as the world leader in the design, development and manufacture of advanced expendable countermeasures. In the year to date the Group's Countermeasures businesses received orders totalling £141m (31 August 2022: £121m) and in the period since 30 April 2023 we received the following notable awards: $17m for the delivery of MJU-75 flares from our fully automated manufacturing facility in Tennessee in support of the US DoD, and £24m for the delivery of a range of countermeasure products in support of the UK MOD from our facility near Salisbury.
Full year results date
As previously announced, the results for the year ending 31 October 2023 will be released on 12 December 2023.
Michael Ord, Chemring Group Chief Executive, commented:
"These significant order wins are illustrative of our leading technological offering and the heightened customer demand that we are seeing in response to increased global uncertainty. The growth in order intake across both sectors demonstrates customer confidence in Chemring to develop and supply highly effective solutions, builds our order cover for FY24, and positions the Group well for the future."
-ENDS-
* The Group believes analyst forecasts for adjusted operating profit for the year ended 31 October 2023 are in the range of £65.2m to £68.2m, with a consensus of £66.9m.
For further information:
Rupert Pittman Group Director of Corporate Affairs, 01794 463401
Chemring Group PLC
James McFarlane MHP Communications 020 3128 8100
Ollie Hoare
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 FTSE-250 listed 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 2,600 people worldwide, and with production facilities in four countries, Chemring meets the needs of customers in more than fifty countries
· Chemring is organised under two strategic product segments: Sensors & Information and Countermeasures & 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