REG - Chemring Group PLC - Trading Update

ChemringAnnouncement

10/11/2023 07:00

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RNS Number : 9963S  Chemring Group PLC  10 November 2023

FOR IMMEDIATE RELEASE
 
                  10 NOVEMBER 2023

 

CHEMRING GROUP PLC ("Chemring", the "Group" or the "Company")

 

FINANCIAL YEAR-END, ENERGETICS AND US SENSORS UPDATE

 

FY23 Year-End Update

 

Chemring is pleased to announce that trading in the period to 31 October 2023
progressed as planned with the outturn for the year ending 31 October 2023
expected to be in-line with Board and analyst expectations*.

 

Net debt at year end is expected to be approximately £14.4m (2022: £7.2m).
Strong operating cash conversion of 90% of EBITDA (three year average: 101%),
has been used to fund growth opportunities, both organic and bolt-on, increase
dividends by 20%, and deploy £9m into the £50m share buyback programme
announced on 1 August 2023.

 

The Group continues to see robust market conditions, with increasing customer
demand for its technology-driven solutions and a resurgent demand for
traditional defence capabilities. This robust growth outlook is expected to be
maintained over the long term.

 

Energetics Contract Awards and Further Capacity Expansion

 

The Group continues to experience significant increases in demand for
energetic materials and devices, with its Norwegian-based subsidiary Chemring
Nobel winning over £40m of orders in the final month of the year, and its
US-based subsidiary Chemring Energetic Devices winning a $46m order from
United Launch Alliance ("ULA") in support of their Vulcan Launch Vehicle.

 

Considering the increased levels of demand for energetic materials and the
strong organic growth opportunity this presents, the Group has decided to
invest a further c£30m in increasing the capacity of Chemring Nobel. This
investment, which is in addition to the c£90m capacity expansion plan across
the Group's three Energetics businesses that was announced in June 2023, is
expected to deliver c£25m of incremental annual revenue. The total investment
in increased capacity in the Group's three Energetics businesses over the next
three years is expected to be c£120m, which will generate increased revenue
of c£85m and increased operating profit of c£21m.

 

Strategic Review of US Sensors

 

With both of the Group's US DoD sole-source biological detection
Programs-of-Record now in production phases**, and following the US Army's
decision to curtail production of the Husky Mounted Detection System ("HMDS")
and accelerate the transition of the program into a sustainment phase, and our
assessment that it is no longer probable the Group will proceed to the next
phase of the competitive Aerosol and Vapor Chemical Agent Detector ("AVCAD")
program, the Group has conducted a strategic review of its US Sensors business
and concluded that a focus on biological detection and security markets
presents the best opportunity to maintain strong margins and deliver growth.

 

As a result, the Explosive Hazard Detection ("EHD") business will be treated
as a discontinued operation in 2023 with a non-cash impairment of the goodwill
associated with its acquisition in 2009, and other assets, totalling £31m
being recorded.  Also, a non-cash (pre-tax) impairment of the previously
capitalised AVCAD development costs and other assets associated with the
program totalling £18m has been recorded as a non-underlying item; given its
competitive nature the Group had not included any AVCAD program revenues in
its forecasts.

 

The Group has moved quickly and decisively to reposition and reshape its US
Sensors business to ensure sustainable competitive advantage in its targeted
biological detection and security markets.

 

FY23 Results

 

Chemring's FY23 results are scheduled to be announced on 12 December 2023.

 

-ENDS-

 

* The Group believes the consensus of analyst forecasts for adjusted operating
profit for the year ended 31 October 2023 is £67.0m.

 

** The Enhanced Maritime Biological Detector ("EMBD") is now in full rate
production and the Joint Biological Tactical Detection System ("JBTDS") is in
low rate initial production.

 

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 FTSE250 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

 

www.chemring.com. (http://www.chemring.com.)

 

 

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