21st Jan 2016 08:47
LONDON (Alliance News) - Chemring Group PLC on Thursday announced plans to raise GBP80.8 million through a rights issue of shares in order to strengthen its financial position and cut its debt pile, as it posted a wider pretax loss for the year to the end of October.
Chemring, which makes countermeasures such as flares and decoys that military aircraft use against missile attack, as well as sensors and electronics used in military vehicles, said it will raise GBP80.8 million through a fully-underwritten 4-for-9 rights issue at a price of 94.00 pence per share, a 38% discount to the theoretical ex-rights issue price of a share in the company.
Chemring shares were down 12% to 157.25 pence on Thursday morning, the worst performer in the FTSE All-Share.
The company said it will use the funds raised from the issue to cut its debt pile and give it more financial breathing room. It said this will allow it to invest in further operational improvements to ensure it is able to capitalise on the long-term opportunities it sees in its markets.
The rights issue announcement came as Chemring said its pretax loss for the year to the end of October widened to GBP9.1 million, from GBP5.2 million a year earlier. Revenue fell to GBP377.3 million from GBP403.1 million, hit by delays to an ammunition contract in the Middle East which Chemring had flagged in a profit warning issued in October.
Chemring said its operational performance across its countermeasures and energetic systems segments was solid and said it won key contracts in its sensors and electronics arm in the US, covering IED, chemical and biological detection work.
The group said its expectations for 2016 were unchanged but said, in addition to paying no final dividend for 2015 in light of the rights issue, it won't pay an interim dividend for the current financial year, though it does intend to reinstate its final dividend for the year to the end of October 2016.
"We expect the wider market backdrop for global defence expenditure to be one of slow recovery in 2016. The situation for US defence spending is more stable than it has been for some time, and ongoing geopolitical tensions in the Middle East and elsewhere emphasise the need for robust defence and security measures. The timing of Middle East order placement and contract activity remains difficult to predict, in part due to the impact that recent falls in the oil price are having on Government spending in the region," said Michael Flowers, Chemring's chief executive.
By Sam Unsted; [email protected]; @SamUAtAlliance
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