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09 Feb 05. The FT reported that Chemring, the niche defence manufacturer of countermeasures and flares, is set to open this month a second production facility in the US for a proprietary anti-missile decoy.

Such has been the demand from the US military and its closest allies, including the UK, Australia, Canada and Japan, for the new product that the company is set to open a second site in Pennsylvania to boost production.

The order backlog for the new decoy, which is designed to defeat heat- seeking missiles by throwing up a protective cloud of specially coated material around an aircraft rather than a traditional pyrotechnic flare, has jumped from $40m (£21m) last year to $60m.

“The deliverable backlog is due in 2005 and the challenge will be to get it all out,” said David Evans, chief executive. Mr Evans, who steps down in April after five years at the helm, said the Pentagon had agreed to help finance the ramp-up in production by covering the new facility’s overheads.

The strong demand for the new decoy along with the more traditional flares helped lift pre-tax profits by 12 per cent from £11.8m to £13.3m in the 12 months to the end of October. Turnover rose 6 per cent to £125.6m.

Mr Evans said he expected the strong financial performance to continue this year with underlying profits expected to approach the £17m mark.

Its maritime safety and security division, which supplies signal flares, safety lights and transponders, delivered disappointing growth last year as its break into the leisure market was hit by a poor review of the performance of its locator beacons. The beacons are designed to help the coastguard track down a person overboard. The company, which estimates it lost up to £4m in sales in 2004 as a result, has since made improvements to the product and is hoping to register 20 per cent growth in that part of the market this year.

Chemring declared a final dividend of 6.2p, a rise of 28 per cent after receiving final settlement from an outstanding insurance claim, giving a total pay-out of 9p (7.4p). Mr Evans said the dividend policy in future would likely track earnings growth. The shares responded with a sharp rise to 450p reflecting this settlement and the company becoming a bid target from the likes of Cobham or Smiths

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