Defence cuts hit Chemring profit

Military counter-measures specialist Chemring said global defence markets continue to be uncertain, with budget cuts in all NATO countries, but it remains confident of a strong second half and meeting full year expectations.

The group, which makes decoys for military aircraft and ejector seats, said delay in approval of the US defence budget for a second consecutive year and continued delays in the approvals of export licences for Middle East countries have made it difficult to deliver revenue growth over the period.

However, the 31% growth in revenues to non-NATO customers is in line with the board's strategic objectives, it added.

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Underlying pre-tax profit at the British defence equipment maker was down 21% to £39.2m for the half year ended 30 April, mainly due to delays in US defence orders, particularly the NIITEK contract. Revenue from continuing operations rose to £333.3m during the half year from £319.3m a year earlier.

Chief executive David Price commented: "As expected, results for the first six months of the year were affected by the Continuing Resolution in the US and the US Government's delay in awarding the NIITEK $579m multi-year support contract until the last day of the period."

"Significantly, our order book grew by 14% to a new record of £1bn, and remains the best leading indicator of our future growth. The order book at 30 April provides 94% cover for full year revenue," he added.

Price said the second half has started well, with trading in May up over 50% year-on-year.

"The Board is confident that the group will deliver a strong second half trading performance, with increased operating margins that will enable us to meet our full year expectations."

Chemring, which earlier this month sold its marine businesses to Drew Marine for £32m to help reduce its debt, buy back its shares and fund pension liabilities, said net debt rose £48.8m to £311.5m from £262.7m at the year end.

An interim dividend of 5.3p per ordinary share has been recommended, up from 4p.

CJ