CHEMRING – KEEPING AHEAD OF THE THREAT
By Julian Nettlefold
BATTLESPACE met up with Dr. David Price Group Chief Executive of Chemring Group Plc.
It was particularly interesting to meet up with David Price to discuss the rapid growth of Chemring Group. From a mixture of pyrotechnics and countermeasure companies to a global group of companies supplying everything from small initiators for pyrotechnics thru advanced countermeasures to high-tech Electronic Warfare (EW) systems. In the 1990’s, and in a former existence, the Editor managed the Public Relations for Astra Holdings Plc. where, post-receivership, some of the former Astra Companies such as Kilgore and Haley and Weller, eventually became part of Chemring Plc. In 2011 the Company reported Revenue of £745.3 million with a pre-tax profit of £125.6 million up from £597.1 million and £118.7 million respectively in 2010 with a total headcount of over 4500 employees.
The 2011 results announced in January of this year gave a good snapshot to the growth of Chemring.
* NIITEK increased revenue by 24% to £126.9m, with 77 HMDS units delivered to the US Army
* Chemring Ordnance awarded multi-year contract, worth up to $150m, to supply the Mk7 Anti-Personnel Obstacle Breaching System (APOBS) to the US Army and US Marine Corps
* Chemring Detection Systems acquired in July and performed in line with expectations
* Full year contribution from Roke
* Expendable countermeasures revenues declined as expected
* Kilgore restarted production and revenue reached new record
* Reduced revenues for illuminating products in both UK and US markets
* M992 pyrotechnic 40mm round named by US Army as one of top ten inventions
* Margin maintained in line with last year
* Revenue more than doubled to £237m
* Demand for 90mm and 40mm grenade ammunition almost triples
* Revenue from naval ammunition grows by 122%
Peter Hickson, Chemring Group Chairman, commented, “Chemring produced another year of growth in profits and earnings, with revenue up 25% to £745.3m and underlying profit before tax* up 6% to £125.6m. The Board has considered its long term dividend policy as part of a balance sheet review. For many years, the Group has adopted a policy of maintaining dividend cover at around four times. With our strong annual cash generation, we believe it would be appropriate to bring the cover down to three times over the next year. As part of this move, the proposed total dividend of 14.8p for 2011 will be covered 3.5 times by underlying after tax earnings, compared with 4.2 times last year. We have also concluded that we should consider returning surplus capital to shareholders whilst maintaining the strength of the balance sheet. Accordingly, we will seek approval at the forthcoming Annual General Meeting to renew our authority to buy back shares, when it is considered appropriate, over the course of the next year. We would only expect to exercise this authority for a buyback of up to £50m of shares. During the last year, many governments have struggled with increasing deficits and lower economic growth. This has affected defence procurement, leading to volume reductions and delays. The continuing problems of the Eurozone and the impact of possible sequestration in the US indicate that our traditional markets will not be any easier this year. We continue to pursue our policy of reducing our dependence on these markets, and are actively seeking more business from elsewhere. Our order book has risen by 12% since the year end and currently stands at £980m. It is encouraging to note that 44% of today’s order book emanates from non-NATO markets, and this compares with 33% at the same time last year. We see further good growth prospects in these markets and will pursue the opportunities they offer. I am confident that we have the products, the management and technological skills to achieve our objectiv