Shares in defence group Chemring Group (LON:CHG) slipped by 3% this morning on news that interim pre-tax profits had dropped by 15% to £25.3m. The group insisted that its order books are at record levels across all divisions and that it expects to see a stronger trading performance during the second half. In addition, it said it remains on course to meet full year expectations. Despite the lower profits, Chemring declared an interim dividend of 17p per share, up 21% on last year.
Revenues were up 10% at £255.9m during the period and underlying operating profits, before amortisation, loss on derivatives movements and acquisition costs, were up 13% at £52.3m. At the end of April the order book was up 16% to £651m (October 2009: £559m) but has since risen to a record high of £751m, up 25% since June 2009.
Ken Scobie, Chemring's chairman says: "The first six months of this financial year demonstrated the growing strength and quality of the Group's earnings, with revenue up 10% to £255.9 million (2009: £233.5 million) and underlying profit before tax* up 7% to £42.3 million (2009: £39.5 million). Our order book grew over the period by a further 16% to £651 million (October 2009: £559 million). As a result, we expect to see a stronger trading performance during the second half of the year and the Group remains on course to meet our full year expectations."
Mr Scobie noted that in spite of many commentators' reservations about the immediate future for the defence industry, the Group's order book had reached record levels across all our divisions, and the Board believed that Chemring has the products, the services and the dynamism to secure continuing success both in the second six months of this year and in the future.
Chemring makes a wide range of products for the military including pyrotechnics, ordnance disposal systems, munitions and countermeasures. Earlier in June the company shelved plans to buy US ammunition manufacturer The Allied Defense Group (ADG) after the US Department of Justice said it was planning to look deeper into allegations of bribery within one of ADG’s business units. Chemring first announced the £36m acquisition on January 19, claiming the move would boost its presence in the global ammunition and ammunition-related service markets.
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