Chemring Group PLC Trading Update (6402Z)

TIDMCHG

RNS Number : 6402Z

Chemring Group PLC

04 September 2018

FOR IMMEDIATE RELEASE 4 SEPTEMBER 2018

CHEMRING GROUP PLC

TRADING UPDATE

Chemring Group PLC ("Chemring" or "the Group") today issues an update on trading for the four month period from 1 May to 31 August 2018.

Update on CCM Incident

Following the incident on 10 August at our CCM facility in Salisbury, our injured colleague remains in hospital recovering from his injuries. The Group is committed to supporting him and his family throughout his recovery, along with the family of our colleague who tragically lost his life in the incident.

The investigation into the incident, which occurred in an MTV flare mixing building at the Group's Salisbury site in the UK, is ongoing and the Group is working closely with the regulatory bodies to determine the root cause.

We are also working with the regulatory bodies on the UK CCM site restart plan. The initial steps of this plan will be to complete the shipment of finished goods inventory and initiate a phased restart of non-MTV product lines. The impact on the Group's underlying operating profit in the current financial year is likely to be around the middle of the range of GBP10m - GBP20m indicated in the statement made on 13 August.

The Group is still assessing the impact on the 2019 financial year which will be dependent on the site restart plan, as agreed with the regulatory bodies, and expected production rates. The Group is accelerating the transition to more automated MTV production facilities, which will improve operational effectiveness.

The Group has engaged with its insurers, but at this stage it is too early to assess the amount of any claim or the likely timing of any payments. The Group's property damage and business interruption insurance policy has a deductible of GBP2.5m, an overall policy limit of GBP60m and a twelve-month indemnity period for business interruption claims.

Countermeasures

The period has seen positive customer demand, resulting in GBP78m of orders received. The majority of orders were from the US Government for a range of requirements including spectral, infrared and special material decoys, which are manufactured at the Group's US CCM facilities. This provides strong order book coverage for our 2019 financial year.

Sensors

In Sensors, the Group is pleased to announce that it has received a number of significant awards in the period.

In the counter-IED market, Chemring Sensors and Electronic Systems (CSES) has been awarded a $93m, three-year IDIQ to refurbish and refresh the US DOD's fleet of Husky Mounted Detection Systems (HMDS). The initial award under this IDIQ contract is for $20m for delivery in the first year of the contract. CSES has also been awarded a $14m incrementally funded Research and Development contract for the HMDS.

In the biological detection market, CSES has also been awarded an IDIQ contract for the Enhanced Maritime Biological Detection (EMBD) program. The scope of work under this Delivery Order includes Engineering, Manufacturing, and Development (EMD) with options for Low Rate Initial Production (LRIP). The total contract value, including options, is $24m with the initial award under this IDIQ contract being $13.6m, with an initial delivery order of $5m.

In the chemical detection market, CSES has been notified that it was not one of the selected bidders to move to the next stage of the third stream of the Next Generation Chemical Detector (NGCD3) now known as the Multi Phase Chemical Agent Detector (MPCAD). An award decision on the first, and largest, stream of the NGCD program, the Aerosol & Vapor Chemical Agent Detector (AVCAD), is expected shortly.

In the UK, Roke was part of the consortium awarded the contract to provide private sector support to the UK MOD's procurement team in the delivery of the Battlefield Tactical Communication and Information System (BATCIS), the next generation land tactical communications and information system.

Energetics

As expected, in the commoditised pyrotechnic and ammunition market, demand continues to soften. The Group continues to focus on its move away from short-term commodity products to longer-term contracting and partnering agreements in higher margin niche product areas, where the demand for specialist devices and high explosives continues to be robust.

Outlook

Recent contract awards in our Countermeasures and Sensors segments demonstrate both continued customer demand and the progress the Group is making on its roadmap to focus on higher margin, niche market positions where the Group is best placed to generate future value.

With the exception of the impact of the CCM incident, trading across the Group remains in line with the Board's expectations.

-ENDS-

For further information:

   Rupert Pittman            Group Director of Corporate Affairs,                       01794 833901 

Chemring Group PLC

Andrew Jaques MHP Communications 0203 128 8100

James White

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 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

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September 04, 2018 02:00 ET (06:00 GMT)