Company Announcements

FOR IMMEDIATE RELEASE                                                                                            4 MARCH 2021

CHEMRING GROUP PLC ("Chemring", the "Group" or the "Company")

AGM Update Announcement

Chemring issues the following update announcement, to coincide with the Company's Annual General Meeting taking place later today.

Current trading and outlook

Trading since the start of the current financial year has been as expected for both sectors. With the exception of the potential impact of foreign currency translation, discussed below, the Board's expectations for the current year remain unchanged.

Despite the ongoing restrictions of Covid-19, all our sites remain open and our people continue to show great professionalism and resilience. We continue to monitor our businesses and their supply chains closely.

With a robust strategy, market-leading positions across different geographies and sectors, and products and services that are critical to our government and commercial customers, Chemring's long-term prospects remain strong.

Foreign exchange

Foreign exchange rates continued to be volatile in the period and the average US$ rate of $1.37 compares to $1.28 in the first half of 2020, giving a 7% headwind. With approximately half of Group revenues US$ denominated, the US$ rate for the rest of 2021 may positively, or negatively, impact the translation of revenue, profit and cash flows. 2020 sensitivity analysis showed a 10c weakening of the US$ would negatively impact annual revenue by £13m and underlying operating profit by £2m.

Net debt

Net debt at 28 February 2021 was £51.0m (29 February 2020: £85.9m) as strong operating cash conversion continues to fund investment in capital expenditure. We continue to expect to make further progress on net debt in the full year.

Orders

Order intake in the period to 28 February 2021 was £128m (2020: £132m), with a book to bill ratio of 127% (2020: 125%). Having started the financial year with order cover of 78% our expected FY21 revenue is now 89% (2020: 88%) covered by revenue in the period and the order book, split 94% (2020: 92%) in Countermeasures & Energetics and 79% (2020: 80%) in Sensors & Information.  The order book, which has been impacted by the weakening US dollar, stood at £481m at 28 February 2021 (2020: £478m).

In the Sensors & Information sector, our US sensors business received a further delivery order of $53m under the previously announced Husky Mounted Detection System $200m Indefinite Delivery / Indefinite Quantity ("IDIQ") contract. This provides excellent visibility on this Program of Record well into FY22.

In the Countermeasures & Energetics sector Chemring Countermeasures USA ("CCM USA") was awarded a 5-year IDIQ contract from the US Army for the manufacture of M206 and MJU-7A/B infrared decoy flares for the US Army and Air Force. We have received the first delivery order under this contract which is valued at $29m. Deliveries are expected to be made in FY21 and FY22 with all work being performed at CCM USA's facility in Toone, Tennessee. 

Our niche energetics devices and propellant business in Scotland has signed a new long-term partnering agreement with Martin Baker Aircraft Company Ltd, the world leader in the design and manufacture of ejection and crashworthy seats. This 15 year agreement will see Chemring supply propellant material and pyro-mechanical devices for use in a wide range of Martin-Baker's ejection seats including those on the F-35 Joint Strike Fighter, and is valued at up to £160m.

Update on Tennessee expansion project

Investment in the expansion and automation of our Tennessee facility to meet the expected demand for F-35 countermeasures continues. Construction work of buildings has completed and the supply of complex manufacturing equipment to site continues, although some has been delayed due to suppliers being impacted by Covid-19. We still expect to generate incremental revenue from the new facility during the second half of our 2022 financial year.

Interim results date

The Group will report its interim results for the six months ended 30 April 2021 on 3 June 2021.  

- ENDS -

For further information:

Cautionary statement

This announcement contains unaudited information based on management accounts and forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Chemring's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are; increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approvals for engineering or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects.

Chemring undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.

Notes to editors

·    Chemring is a global business that specialises in the manufacture of advanced technology and high reliability products and the provision of critical services to the aerospace, defence and security markets

·    Chemring is a business with an evolving purpose of innovating to protect and with that the Group is focused on protecting people, platforms, missions and information from constantly changing threats

·    Employing approximately 2,300 people worldwide, and with production facilities in four countries, Chemring meets the needs of customers in more than fifty countries

·    Chemring is organised under two strategic product segments:  Countermeasures & Energetics, and Sensors & Information

·    Operating in niche markets and with strong investment in research and development, Chemring has the agility to rapidly react to urgent customer needs

www.chemring.co.uk