23rd Jun 2015 07:36
LONDON (Alliance News) - Chemring Group PLC on Tuesday reiterated its expectations for its full year despite swinging to a pretax loss for its first half due to contract delays and exceptional costs, as it expects a heavily weighted, stronger second half performance.
Chemring provides technology products and services to the aerospace, defence and security markets.
For the half year to end-April, the company posted a pretax loss of GBP15.1 million, swung from a pretax profit of GBP5.1 million a year before, as revenue fell to GBP161.7 million from GBP208.8 million, and it posted exceptional costs of GBP13.8 million.
These exceptional cost included GBP4.7 million related to proceedings by the US Department of Justice, GBP1.8 million in business restructuring costs, and GBP7.1 million amortisation arising from business combinations.
The Department of Justice proceedings relate to historic supplies of product by Chemring's Kilgore business, it said. A settlement with the Department of Justice is expected to be reached in the second half, Chemring said.
Chemring attributed its reduction in profitability to ongoing contract delays primarily related to Middle East customers.
However, since the half year end the company has received orders worth over GBP50.0 million. As a result of these orders and a number of "material" opportunities it expects to finalise in the coming months and the resolution of some operational issues, it expects a very heavily weighted second half performance.
Chemring said its order book stood at GBP502.8 million on April 30, up from GBP401.8 million at the same point a year ago. Of this, its said GBP208.8 million is for delivery in the current year.
A lack of available shipping capacity prevented certain deliveries of product to Middle East customers, Chemring said, though these issues have now been resolved. Additionally, the company expects to see the benefit of increased production volumes and efficiency levels at its Alloy Surfaces business, and further production gains at its Kilgore, Chemring Defence and Chemring Energetic Devices businesses.
"Having carefully scrutinised the status of the order pipeline and subject to receipt of key orders in the coming months, the group's expectations for the full year remain unchanged," Chief Executive Michael Flowers said in a statement.
"Overall, we are making good strategic and operational progress, and look forward with increasing optimism to the longer-term potential of the group being delivered," Flowers added.
Chemring proposed an interim dividend of 2.4 pence, unchanged from the previous year.
Shares in Chemring are trading up 0.2% at 206.00 pence Tuesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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