Chemring's bomb finder uncovers big profits

22nd Jun 2010 14:12

British military decoy flares and mine detection outfit Chemring is doing its bit for the boys in Afghanistan by supplying US-led forces with hi-tech ground penetrating radar systems capable of finding deadly improvised explosion devices (IEDs).The company's Explosive Ordnance Disposal (EOD) division doubled revenue and operating profit in the six months to 30 April as the Americans kept snapping up its Husky Mounted Detection System (HMDS).It can find mines and home-made bombs used by the Taliban and insurgent groups to target soldiers in Helmand and danger zones across Afghanistan.Made by Chemring's Non-Intrusive Inspection Technology (NIITEK) unit, the US army has just ordered another 76 HMDS systems, worth $106m (£72m). Including spares and support, the contract is worth $217m (£147m).Ten of them were made each month during the first half, but a new production facility will soon get that above 20. They cost about $500,000 (£340,000) each, but maintenance deals are equally as lucrative. A multi-year contract from the US army for up to 600 more systems is expected to go out to competitive tender early next year.Chief executive David Price told ShareCast he thinks the entire contract will go out to just one contractor, meaning a potential payday of $300m (£203m), plus much more for maintenance.By the time the job is made public Chemring will have over 150 radar systems in service. Its main competitor Curtiss Wright hasn't deployed its version yet.A decision is expected by April/May next year.Price told me data on effectiveness is classified, but the US army are "very happy" and are actively encouraging the US marines and other government departments to buy the systems. A contract with the marines is expected shortly.Overall, underlying profit for the entire group rose 7% to £42.3m in the first half on revenue from continuing operations up 10% to £255.9m. The order book is 25% higher than in June 2009 at a record £751m.In a separate statement Tuesday, the firm said Peter Hickson will start as an independent non-executive director on 1 July with a view to taking over from chairmanKen Scobie who retires in October after 13 years. Hickson, 65, is currently chairman of Communisis and a non-executive director of Kazakhmys, and previously chaired Anglian Water and been finance director at Powergen.The interim dividend rises 21% to 17p a share.