Chemring's (CHG) chief executive, Mark Papworth, has made big changes since parachuting in to save the flares and countermeasures company seven months ago. But the benefits will arrive too late to save this financial year and he's warned of profits at the bottom end of expectations. With first-half underlying earnings having plunged 36 per cent year on year to 10.3p, JPMorgan Cazenove has cut its full-year forecast by 7 per cent to 23.6p, while 2014's estimate has been slashed by 10 per cent to 25.9p.
Lower volumes, production delays and a shrinking order book did the damage. Sales fell sharply at both the countermeasures and pyrotechnics & munitions divisions which, when added to high fixed costs, meant underlying operating profit at the two units slumped 77 per cent and 68 per cent, respectively. Bringing the troops home from Afghanistan is clearly hurting and customers are putting off buying decisions - the order book has fallen 8 per cent since October to £701m. Still, the sensors and electronics division almost doubled profit to £25.2m and a big countermeasures order from the Middle East is expected soon. Mr Papworth's two-year recovery programme, first flagged in January, has found £10m of annual savings, too, mostly job cuts, although those will cost £15m and only chip in from next year. All businesses remain under scrutiny and a comprehensive business plan for the next three years should be ready in months.
CHEMRING (CHG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 261p | MARKET VALUE: | £504.5m | |
| TOUCH: | 260-262p | 12-MONTH HIGH: | 415p | Low: 214p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | na | |
| NET ASSET VALUE: | 229p* | NET DEBT: | 62% | |
| Half-year to 30 Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 333 | 19.7 | 8.3 | 5.3 |
| 2013 | 297 | -8.8 | -1.6 | 3.4 |
| % change | -11 | - | - | -36 |
Ex-div: 24 Jul Payment: 15 Aug *Includes intangible assets of £367m, or 190p a share | ||||
