Acquisition

1st Sep 2005 06:00

FOR IMMEDIATE RELEASE 1 SEPTEMBER 2005 CHEMRING GROUP PLC ACQUIRES UK ENERGETIC MATERIALS BUSINESS Chemring Group PLC ("Chemring") announces that it has acquired the entireissued share capital of Troon Investments Limited ("Troon") for a cashconsideration of ‚£22 million. The vendors were Inabata UK Limited, Mr MichaelParker and Mr Charles Tuchel.Description of the business and reasons for the acquisitionTroon, based in Ardeer, Scotland, manufactures and supplies a range ofpyrotechnic and propellant devices, rocket motors and demolition stores underthe trading name "Nobel Energetics".In the year to 31 December 2004, the sales of the Troon business were ‚£11.4million and the profit before tax was ‚£3.2 million. At 31 December 2004, Troonhad net assets of ‚£2.6 million. At 31 August 2005, Troon had gross assets of ‚£3.3 million. Troon is on track to deliver a strong performance in its currentfinancial year, and will make a small contribution to Chemring's results forthe year ending 31 October 2005. The acquisition is expected to materiallyenhance Chemring's earnings in the first full financial year post-completion.*Troon's range of products is complementary to those currently produced byChemring's existing Energetics Materials division. This division now hasoperations in the UK (Derby and Ardeer), the US, Spain and Australia, and aspreviously announced, conditional agreement has also been reached to acquirethe Comet business in Germany.The existing management team will remain in place at Troon.Principal terms of the acquisitionThe consideration of ‚£22 million was paid in cash, utilising increased bankfacilities. The consideration is subject to adjustment depending on the netassets of Troon at completion. It is anticipated that, following fair valueadjustments by Chemring, the net assets of Troon will be valued in excess of ‚£10 million. Chemring will not assume any liability for the accrued pensionbenefits of the Troon employees under the final salary pension scheme in whichTroon participated prior to the acquisition.Commenting on the acquisition, David Price, Chief Executive of Chemring, said:"The acquisition of Troon substantially enhances our position in the militaryenergetic materials market. Troon has an excellent track record and its currentorder book exceeds ‚£26 million. It significantly extends our range of highexplosive, missile motor technology, and initiator products. The business hasseveral significant long-term contracts, which will underpin its performanceover the next few years, including the "NLAW" missile motor contract, whichwill reach full scale production in the near future.Troon's recent focus has been the UK military market. Expansion of the businessinto the global defence market, as an integral part of the Chemring Group'sinternational activities, will provide substantial growth opportunities. This acquisition represents a fundamental step in our energetic materialsstrategy. With the inclusion of Troon in our portfolio, the projected turnoverof Chemring's Energetic Materials division will now be in excess of ‚£50million."Paul Rayner, Finance Director of Chemring, said:"The acquisition price of ‚£22 million represents an historic post-tax priceearnings multiple of approximately ten times. We have funded the acquisitionutilising new term loan facilities with Bank of Scotland, and whilst theacquisition will increase gearing in the short term to approximately 85%, thecash generated by the enlarged group will reduce gearing levels during 2006."* This statement should not be taken to mean that the earnings per share ofChemring will necessarily match or exceed the historical reported earnings pershare of Chemring and no forecast is intended or implied.Note to editors: * Approximately 80% of Troon's sales are to the defence industry. Products used directly by the armed forces are sold to the UK Ministry of Defence which is the largest customer. Other customers include Thales, BAE Systems and Martin Baker for products which are sub-components of larger assemblies. For further information:Dr David Price Chief Executive, Chemring Group PLC 01489 881880Paul Rayner Finance Director, Chemring Group PLC 01489 881880Rupert Pittman Cardew Group 0207 930 0777 ENDCHEMRING GROUP PLC

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