FOR IMMEDIATE RELEASE 15 NOVEMBER 2018
This announcement contains inside information that qualified, or may have qualified, as inside information for the purposes of Article 17 of the Market Abuse Regulation (EU) 596/2014 (MAR). For the purposes of MAR and Article 2 of commission Implementing Regulation (EU) 2016/1055, this announcement is made by Sarah Ellard, Company Secretary, for Chemring Group PLC.
CHEMRING GROUP PLC
POST YEAR-END STATEMENT
Chemring Group PLC ("Chemring" or "the Group") today provides a post year-end statement in respect of the year ended 31 October 2018 ("FY18").
Key Points
· Underlying trading for FY18 was in line with expectations
· FY18 year-end net debt was £82m
· Significant progress in Sensors, with positions now secured on all targeted Programs of Record. Countermeasures market continues to recover, primarily driven by the US
· Strategic decision to exit from commoditised Energetics businesses and treat as discontinued activities
· FY18 year-end order book was £462m, of which £68m relate to discontinued activities
· Non-underlying items, primarily non-cash, of c.£130m to be included in FY18 results (FY17: £29m)
Michael Ord, Chief Executive, commented:
"We finished the year in line with our expectations for underlying trading and net debt with progress in all businesses and the recovery in the UK Countermeasures business well underway. We have taken two strategic decisions which are reflected in the full-year results. The decision to exit the commoditised Energetics businesses will simplify the Group and enable a greater focus on our growing and differentiated Sensors and Countermeasures positions, where we have recently made significant progress. We also took the decision to review a number of balance sheet items, which in light of the strategic review, are no longer considered fully recoverable. Together, these are necessary actions and part of us building a stronger business for the future. Further detail on my views of the Group and its future direction will be provided in January."
Strategic review of the Group's portfolio
The Group retains strong market positions in the global Sensors and Countermeasures segments. Recent successes on major US Programs of Record, together with Roke's innovation and engineering business growth, provide a strong underpin to the continuing Group.
Following a strategic review of the Group's Energetics portfolio the Board has concluded that the future focus within the Energetics segment should be on the niche specialist energetic materials businesses in Chicago, Ardeer and Norway. It has therefore made the decision to exit the commoditised Energetics businesses located in Derby and Florida. These businesses will be treated as discontinued in the 2018 financial statements.
The discontinued businesses contributed £139m (2017: £240m, 2016: £173m) to revenue, £8m (2017: £24m, 2016: £17m) to underlying operating profit, and £10m (2017: £26m, 2016: £20m) to EBITDA. The order book of the discontinued businesses at 31 October 2018 was £68m (2017: £153m, 2016: £285m).
The businesses will be classified as held for sale and the Group expects to record a non-cash impairment charge against these businesses of approximately £68m in the 2018 financial statements.
FY18 outturn
With the exception of the impact of the CCM UK incident, trading across the Group in the final quarter of FY18 remained in line with the Board's expectations and led to total full year revenue of £436m (2017: £547m), of which £139m (2017: £240m) related to discontinued businesses.
The Group's trading performance for the year to 31 October 2018 is expected to be in line with the revised guidance given in the trading update on 4 September 2018.
At 31 October 2018, net debt was £81.8m (2017: £80.0m).
Amortisation of acquired intangibles totalled £14m (2017: £15m), of which £2m (2017: £3m) related to discontinued operations.
In addition, the Group expects non-underlying items from continuing operations of a further £48m. These items comprise:
- the revaluation of deferred tax assets in the USA following the new tax legislation enacted in December 2017 (£17m - as previously announced)
- legal costs associated with on-going investigations (£13m)
- non-capital costs of the Tennessee transformation project, including the write-off of assets and demolition costs (£8m)
- following a strategic product portfolio review the Group has recognised an impairment charge in respect of certain products where capitalised development costs are no longer considered fully recoverable (£7m)
- deferred consideration on acquisitions (£4m)
- other (£3m)
- deferred tax credit on the above - £4m
Update on CCM UK Incident
The investigation into the incident is on-going and the Group continues to work closely with the regulatory bodies. The Group has taken the decision not to re-open the damaged production line; instead, it will over time transition all MTV mixing to the automated facility on site. A phased re-start of the CCM UK site started in September, with the shipping of finished goods and production of non-Energetic products.
Further guidance of the impact of the phased re-start on FY19 will be given as it becomes available.
Order book
The on-going Group order book at 31 October 2018 was £394m (2017: £325m). The discontinued businesses order book was £68m (2017: £153m). The on-going order book principally reflects a number of significant orders that were received in both the Countermeasures and Sensors segments.
A number of these awards were on long-term Programs of Record, reflecting the Group's move to focus on higher margin, niche market positions, and which give confidence in the Group's prospects.
The closing order book by segment shows: Countermeasures £183m (2017: £179m), Sensors £75m (2017: £53m), Energetics (continuing) £136m (2017: £93m) and Energetics (discontinued) £68m (2017: £153m).
FY18 Results and update on Chief Executive's Review
The Group's FY18 results are scheduled to be announced on 17 January 2019. At the time of these results Michael Ord, Chief Executive, will provide an update on his review of the Group's businesses and future strategy.
-ENDS-
For further information:
Rupert Pittman Group Director of Corporate Affairs, 01794 833901
Chemring Group PLC
Andrew Jaques MHP Communications 020 3128 8100
James White
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 2,600 people worldwide, and with production facilities in four countries, Chemring meets the needs of customers in more than fifty countries
· Chemring is organised under 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
Cautionary statements
This announcement contains unaudited information based on management accounts and 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.
No statement in this announcement is intended as a profit forecast for FY18 and no statement in this announcement should be interpreted to mean that underlying operating profit for the current or future financial years would necessarily be above a minimum level, or match or exceed the historical published underlying operating profit or set a minimum level of underlying operating profit.
