Chemring pleases after showing signs of recovery

23rd Jan 2014 12:30

Manufacturing and defence group Chemring pleased the market with its full-year results on Thursday, prompting broker Investec to reiterate its 'buy' rating on the stock despite a drop in profit. On an underlying basis, pre-tax profit declined 25.2% from £70.1m to £52.4m year-on-year (YOY), pushing earnings per share from 28.5p to 21.6p. Revenue for the period slumped 15.6% from £740.3m to £624.9m, although the group stressed its performance recovery programme had driven an operational improvement and resulted in a more resilient business. Revenue slipped as the defence market remained challenging, while operational issues in some of its business had a further negative impact on its performance. It was also affected by the shutdown of the US government, which caused a delay to product acceptance and shipment in October. Since the initiation of the recovery programme in January last year, the group has undergone a reorganisation, implemented a plan of operational performance improvement, refocused the business on development activity, and improved its management of both cash and costs. Group Chairman Peter Hickson said: "At the end of a year of significant change, Chemring is now a more resilient business, with a clear strategic direction. Much has been achieved by the new management team during the year, with the positive impact of the performance recovery programme beginning to bear fruit. "In addition, the strategic planning process has provided a clear view of the market, competitive dynamics and prospects for each of the businesses, as well as identifying the core markets in which the group will focus investment." Looking forward the company intends to continue to improve its operational performance and pursue the growth opportunities that exist, particularly within non-NATO markets where defence spending is expected to increase. It will also reshape and strengthen its portfolio of businesses through the disposal of non-core activities and technology investment in those businesses that can achieve sustainable growth and margin improvement, it said.The board's expectations for the current financial year remained unchanged.NR