Chemring Group reiterates full year guidance

Defence contractor Chemring Group said trading expectations for the full year remain in line with guidance it provided in October.

Revenue in the final quarter of 2015 was approximately £124m, resulting in revenue for the year to 31 October of approximately £377m compared with £403.1m in 2014, the group said.

Late last month, Chemring warned there was a "realistic prospect" that its underlying operating profit for 12 months to the end of October could fall by approximately £16m - £33m on the back of a revenue delay related to a contract it signed in the Middle East.

In a trading update on Wednesday, it confirmed that no revenue or cash advance payment in respect of the 40mm ammunition contract to the Middle East, referred to in the October profit warning was recognised in the 2015 full year results. However, the London-listed company said the export approvals associated with this contract have now been granted and revenues are expected to commence once the cash advance payment has been received.

Meanwhile, the group said its order book at 31 October 2015 was approximately £570m compared with £486.8m 12 months ago, while net debt stood at approximately £154m from £135.6m in 2014, just below the lower end of the range of £155-£165m set out in the October trading update.

Separately, Chemring said it has reached an agreement with Esterline Corporation to buy patents, equipment, stock and selected contracts relating to its UK-based subsidiary, Wallop Defence Systems, for an initial cash consideration of £2.5m.

Additional payments of up to £9m, conditional on the future receipt of specific orders, may be made over the next three years, the company added, indicating the assets to be purchased relate to air countermeasures and pyrotechnic products that will be manufactured at Chemring's existing UK operations.

The transaction, which is subject to approval by the UK Ministry of Defence, and the UK Competition and Markets Authority, is expected to be finalised in early 2016.

Chemring shares were up 4.60% to 193.25p at 0907 GMT on Wednesday.