21st Jun 2018 08:48
LONDON (Alliance News) - Chemring Group PLC on Thursday swung to a pretax profit for the first half of its financial year on the back of lower finance costs, increased customer demand and continued consistency in operational performance.
For the six months to April-end, the aerospace and defence company recorded pretax profit of GBP4.3 million, compared with a pretax loss of GBP6.8 million a year ago, on a revenue of GBP229.3 million and GBP249.6 million, respectively.
The dip in revenue was attributed to lower deliveries of 40mm ammunition to customers in the Middle East and negative movements in exchange rates.
Underlying operating profit - the company's preferred profit measure - grew 5% to GBP18.1 million in the period. Profit, before tax and exceptional items, was up 31% at GBP14.8 million.
Total finance costs fell to GBP2.8 million in the interim period from GBP4.3 million a year ago. The drop in finance costs was attributed to working capital reductions and repayment of loan notes.
"Market conditions and business performance in the first half of 2018 have continued to strengthen, with margins and earnings improving across the group. We expect this trend to continue as the impact of significant increases to the US Defense budget start to flow through, with the group maximising the impact of these improvements through improved delivery performance resulting from the operational excellence programme," Chief Executive Michael Flowers said.
"In light of strong order book cover and improved performance, the board's outlook for FY 2018 remains positive, with expectations unchanged. As previously highlighted, we expect a stronger contribution from Countermeasures and scheduled reductions in Energetics," Flowers added.
The company's order book at end of the first half stood at GBP442 million, of which GBP212 million is currently expected to be delivered in the second half, representing around 80% of second half revenue.
The company's Countermeasures division, which manufactures decoy flares and chaff to counter missile threats, recorded underlying operating profit of GBP7.3 million, up from GBP1.0 million. Revenue increased by 4.7% to GBP55.9 million.
The Sensors division recorded underlying operating profit of GBP6.8 million for the first half, versus GBP4.5 million a year ago, on a 10% revenue rise to GBP44.5 million. The division manufactures IED detectors and surveillance systems.
The Energetics division posted a 51% drop in underlying operating profit to GBP8.3 million and 17% fall in revenue to GBP128.9 million. The drop in the division's earnings was attributed to completion of a large 40mm ammunition contract to a Middle East customer and lower margin sales mix biase. The division manufactures thrusters and actuators for satellite launches.
Chemring has raised its dividend payment by 10% to 1.1 pence per share for the first half.
Shares in the company were trading 0.8% higher at 218.63p each on Thursday morning.
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