Chemring Share Discussion Threads

[ards] 18/12/2012 08:11

sapara
agree with points but debt coming down and very cash generative. still dominant in important sectors. question is what is already factored in price.

[salpara111] 15/12/2012 13:08

Just ran the slide rule over this one again but I am not convinced.
A market cap of circa 450M and net debt of 250m gives an enterprise value of around £700M. To have a pe of circa 10 they would need to bring in pretax profit of around £95M and this year it looks like it will be less than half that amount.
I would imagine that one of the main issues that will keep it from being taken over is the relatively large net debt at circa £250M
There will doubtless be a bounce when the USA "Fiscal Cliff" is resolved but don't forget that the order book here shrunk by over £100M last year.

[targatarga] 13/12/2012 15:53

northern rock, polly peck etc. Wouldn't be surprised to see these bid for tomorrow!

[targatarga] 13/12/2012 15:27

Sneaky people. I was shaken out at 226p earlier. Hindsight is a wonderful thing!

[targatarga] 13/12/2012 10:25

Feels like another profit warning coming! imho

[targatarga] 13/12/2012 09:51

support seems to have disappeared...

[targatarga] 28/11/2012 11:29

loads of nt trades today... A good sign?

[kiwihope] 28/11/2012 09:04

Lots of negativity on this board. Good, makes me more comfortable with my recent purchases...

[broadwood] 27/11/2012 16:11

My take would be that the market is relieved nothing else has come to light since the beginning of Nov and there's a sigh of relief being breathed today.

News on defence cuts couldn't get much worse so that should be priced in.

[simon gordon] 27/11/2012 12:20

Liberium:

Following the profit warning on 1st Nov, the company has announced an 'in line' year end statement. However, having spoken to the company, it appears consensus will settle around 29p from a range of 31p- 34p from those who published post the last warning. The order book is down 13% to £760m. Our FY'13 eps estimate will decline by c 25% to 27p. FY net debt is £250m (10% worse than we estimated). Next year requires a focus on strengthening the balance sheet. Admission of weak operational performance and poor expectation management is the first step to recovery. The Chairman and new CEO recently bought 50,000 shares each. The investment case now hinges on what can be done by the new CEO to limit the effects of cyclical decline and improve cash generation. Valuation looks attractive but we can't rule out further downgrades.

Bull scenario – The new CEO deploys his experience to turn the business around with a focus on cash generation. The Chairman did so with Anglian Water. A trade buyer may emerge once there is certainty on US defence budget cuts in Q1.

 Bear scenario – New management may find more skeletons. US sequestration (or resulting required defence cuts), combined with ongoing withdrawal from Afghanistan, will further impact this short cycle business.

 Valuation reflects ongoing uncertainty – The investment case now hinges on what can be done by the new CEO to limit the effects of cyclical decline and improve cash generation. The shares now trade on a CY13 P/E of 8x but cannot rule out the possibility of further downgrades. We remain at Hold while we await details of the improvement strategy.

====

27p next year makes it look like there ain't much more juice in the share price until late January, with a high risk of rubbish to emerge from the half a billion of companies acquired.

I've taken my profits.

Good fortune.

[ards] 27/11/2012 11:36

pretty miserable kitchen sink statement clearing the decks for new CE to easily hit expectations. probably fairly priced given dire statement. the mention of failure to export licences a bit disappointing and for me kills my enthusiasm as I had thought that emerging markets would still want to kill each other even if we dont.

[salpara111] 27/11/2012 11:20

Hmm, not sure what to do.
I never cease to be amazed by the relief rallys that happen to bombed out stocks even when there is little substantial new positive information. I guess the biggest positive to come out of this was the reduction in net debt.
The US spending cliff will get resolved and when it does orders will be unfrozen and that will undoubtedly give a push to defence stocks.
I guess a return to the 270-280 line would not be unreasonable in the short term, difficult to determine what might happen after that.

[bigbertie] 27/11/2012 10:35

I'm not buying but only because I still hold some and don't want to get over-exposed. I will hold because I think there is upside. This is because there is a new CEO, a clear and concise statement of position, a product range which defence departments really need to keep buying (imagine outcry if lots of copters shot down because they stopped putting the countermeasures on) immediate upside from progress on the US budget (probably by end of December). Importantly they are already qualified to supply various programmes so can resume sales quickly. I am also reassured that they did (as forecast) have strong cash inflow and net debt reduction in 4Q. This all IMHO - the world is very uncertain. Good luck all.

Edit - of course there may be some write-offs in the imminent results, but I think this is probably in the price.

[bsharman3] 27/11/2012 10:15

AVOID this one. I was looking for clarity with today's statement - now there is some clarity - but it is not great reading.. The market is getting smaller, margins under pressure and not a great future ahead. However why wouldn't a big defence player such as BAE systems not want to buy a business such as Chemring - cost savings etc??

[cestnous] 27/11/2012 09:16

Neither can I, I'm afraid.

[tom111] 27/11/2012 09:15

i cannot see any compelling reason to buy here after todays statement.

[fozzie] 27/11/2012 09:01

A degree of clarity is true, its clear this company is performing poorly. I cannot see why they are a buy in fact they almost state all the reasons it isnt a buy in the note, poor trading in the final qtr, lower comparable order book, cuts to defense spending in its major areas of operation and difficulty in gaining export licences elsewhere. Avoid imo.

[kiwihope] 27/11/2012 08:51

Company needs to adjust to the new reality of difficult defence environment. Looks like it may be getting to grips at last. I'm sure there is a good business here, worth substantially more than current value...

[simon gordon] 27/11/2012 07:52

0730 GMT [Dow Jones] Investec resumes coverage of Chemring Group (CHG.LN) at buy and introduces a new price target of 280p, from 500p previously. Says Tuesday's trading update provides a degree of clarity and comfort on revenue and net debt after a difficult year. The update follows the profit warning earlier this month - the fourth this year - and after private equity firm Carlyle Group walked away from takeover plans. Investec maintains the view that Chemring is a sustainable business capable of operating at least at current levels of profitability. Says upside exists from improving operational delivery. Shares closed Monday at 230p.

[bulltradept] 27/11/2012 07:45

Chemring Group PLC Trading Update
Print
Alert
TIDMCHG

RNS Number : 0473S

Chemring Group PLC

27 November 2012

FOR IMMEDIATE RELEASE 27 November 2012

CHEMRING GROUP PLC

Trading Update

Chemring Group PLC ("Chemring" or "the Group") today provides an update on trading having entered the close period in respect of its preliminary results for the financial year ended 31 October 2012.

Trading

The Group's performance during 2012 was extremely disappointing. Chemring's operational performance has been weak, and management of investors' expectations over the past year has also been poor. In part, this resulted from a failure to anticipate the likely impact of the changing market dynamics on the Group's businesses, but also reflected failures in performance at several of our businesses.

Expectations for the Group's trading performance for the financial year ended 31 October 2012 remain in line with the trading update issued on 1 November 2012. The following further detail is subject to final audit.

Trading in the final quarter was impacted by the issues set out in the 1 November 2012 trading statement that principally affected the Countermeasures and Munitions business segments. As a result, turnover for the financial year ended 31 October 2012 is expected to be approximately GBP740 million (2011: GBP725 million).

The year end order book of approximately GBP760 million compares to GBP878.3 million at the prior year end.

Financial position

There was a significant operating cash inflow in the final quarter that resulted in net debt at the year end of approximately GBP250 million. (2011: GBP262.7 million).

Market conditions

Defence spending in the US, UK and Europe is expected to remain under significant pressure.

The US defence market remains vulnerable to ongoing budget uncertainties, particularly around sequestration and the impact of a six month continuing resolution from 1 October 2012. The threat of sequestration continues to have a negative impact on customer behaviour, and there is a lack of clarity about defence expenditure in the medium term. As a result, we are seeing delays in the procurement process whilst customers await greater visibility and certainty as to their future budgets.

The UK MoD's review of its procurement process continues to result in delays to the start of new programmes and reduced funding for existing ones whilst, in Europe, ongoing deficit reduction programmes are exerting downward pressure on defence spending, leading to uncertainty in the procurement process and delayed programme implementation.

Chemring's non-NATO markets continue to offer opportunities, although order intake remains subject to the granting of export licence approval, which is proving more difficult to achieve in some markets.

Outlook

The wider market backdrop is likely to remain challenging. Chemring needs to adapt and better equip itself in order to meet these challenges.

Mark Papworth joined Chemring as Chief Executive Officer on 5 November 2012, and brings significant experience of delivering performance improvement and implementation of strategic change in the manufacturing, technology and service sectors. He will present his initial views on Chemring and his operational priorities at the Group's preliminary results which are expected to be announced on 24 January 2013.

[sat69] 26/11/2012 17:10

Cest - It does appear that way but it could be a bit of profit-taking after the rise off the recent lows. I've held on tight. We'll know at 0700 tomorrow, though my suspicion is there will not be that much movement either way.

[cestnous] 26/11/2012 16:09

I hope someone didn't have a sneak peep at tomorrows statement at 11 o'clock today.

[cestnous] 24/11/2012 09:46

From today's Telegraph.

Defence equipment group Chemring, which has been under pressure following two profit warnings and an aborted private equity takeover approach, was buoyed by the news that UBS Global Asset Management held more than 5pc of the company. Greater Manchester Pension Fund also revealed it had a 3.4pc stake through a holding managed by UBS. Chemring shares climbed 12.2 to 229.2p

[randolph and mortimer] 23/11/2012 15:50

Statement this coming Tuesday.