Defence cuts hit Chemring

18th Jun 2013 07:34

Defence technology firm Chemring said first half revenue was hurt by reduced demand from it Countermeasures and Pyrotechnics & Munitions operations as it warned its markets are likely to remain challenging into 2014, particularly in the US.Revenue declined to £297.4m in the first six months of the year from £333.3m the same time a year earlier. Underlying operating profit reduced to £35.1m from £48.5m previously. The group reported a loss before tax of £8.8m compared to a pre-tax profit of £9.7m a year earlier. "In particular, these results reflect lower revenues and profits from our Countermeasures and Pyrotechnics & Munitions operations, which were affected by reduced volumes, continuing production delays due to issues arising last year, and slow order intake," Chemring explained in a company statement. Underlying earnings per share fell to 10.3p during the six-month period from 16.0p before. The order book reduced by 7.9% over the period to £701.1m. Of this order, £287.6m is scheduled for delivery during the current financial year, the group explained.Chief Executive Mark Papworth commented: "While there is still much to do, we are confident that the group's performance is heading in the right direction. However, visibility generally, and the limited level of detail on the extent and nature of cuts to US defence spending in particular, makes forecasting increasingly difficult.""Looking ahead, significant progress has been made in our Performance Recovery Programme announced in January 2013. These actions are expected to underpin 2014 profitability, drive improvements in operational performance, and provide greater resilience in current challenging markets.""For the current financial year, the Board's outlook is towards the lower end of expectations." Chemring's interim dividend has been slashed to 3.4p from 5.3p per share a year earlier.The group's shares tumbled 7.38% to 246.10p in London after the trading update.CJ