Production delays hit Carlyle-target Chemring

Defence contractor Chemring has issued a profits warning, saying a computer glitch and production delays are likely to wipe 15m sterling off full year earnings as it consider a takeover offer from private equity giant Carlyle.

A so-called Enterprise Resource Planning (ERP) system is one of the culprits, with errors having recently been discovered during an installation at Chemring's Florida subsidiary.

The group has also been hit by "several months" of delays in the production of an anti-personnel obstacle breaching system.

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Chemring, which specialises in countermeasures against things like improvised explosive devices (IED), also reports its order book, at £910m, is 9% lower than at the same point of 2011. The company blames the length of time it has taken for European countries to sign on the dotted line and the early start to Ramadan in the Middle East.

In common with most other defence companies, Chemring is also suffering from a failure of American politicians to agree the defence budget for 2013.

Perhaps the brightest news from Chemring is that its counter-IED division has reported revenues up 119% between May 1st and the end of August. Munitions, on the other hand, has seen a fall over the period of 45% to £39m.

On August 17th Chemring said it had received a "highly preliminary expression of interest" from Carlyle leading to a 33% rise in the share price.

In the trading update the firm offered no further guidance on the status of the offer.

BS