Tweet
http://www.bbc.co.uk/news/uk-34635206
Then the British don't want to sell them arms?!
Chemring shares plunge as export order delayed
Defence contractor warns on profits as sale of ammunition to Middle East buyer held up by delays getting export licences
Chemring makes ammunition and pyrotechnics such as flares for jet fighters
Get a free valuation of your home YOPA's online estate agents can tell you how much your property is worth - and for free
Sponsored by YOPA
By Alan Tovey, Industry Editor
9:48AM GMT 27 Oct 2015
Follow
1 Comment
Defence group Chemring’s shares plunged more than 40pc after it warned hold-ups securing export licences for ammunition sales to the Middle East are set to hit annual profits.
The company used an unscheduled trading update to reveal that a £100m order from a Middle East customer for 40mm ammunition which was announced last month would almost certainly be delayed.
Sources close to the Chemring attribute the hold-up to bureaucracy and red tape, rather than a governmental change of policy about selling the ammunition to the as-yet-unidentified buyer, with the company confident of gaining the required export licences.
As a result Chemring said that its full-year underlying operating profit would be reduced by £16m to £33m. The company had previously said that its performance was heavily weighted to the second half of the year.
The delay is likely to push Chemring, which also produces flares and chaff used by military aircraft, past its debt covenants and management is to start talks with its lenders about renegotiating its debt structure to avoid a default.
Chemring 40mm grenades To strengthen its balance sheet, Chemring is planning a £90m rights issue, expected to take place in the first quarter of next year. The rights issue is fully underwritten by Investec and JP Morgan Cazenove.
The news caused shares in the main market listed company to fall more than 40pc to a 10-year low as analysts downgraded Chemring, though the shares recovered some of the losses and were off 80p at 146.5p as management sought to reassure the market.
Chemring boss Michael Flowers expressed his "frustration" at the delays
Explaining the “frustrating” delays with the 40mm ammunition contract, Michael Flowers, chief executive, said: “Despite every effort, we are still awaiting the receipt of necessary permits and export approvals.
“Given the proximity of our year end, the board considers there is now a realistic prospect that the group does not receive these permits and approvals in time to recognise revenue… in the current financial year.”
• Profile: Michael Flowers, the ex-Army officer still at the forefront of defence
Former Australian Army officer Mr Flowers added that Chemring - which dropped out of the FTSE 250 in 2013 after defence budgets were trimmed and operations in the Gulf region wound down – had been “impeded by its high levels of debt and associated interest costs”.
Chemring's products have included smoke grenades to hide troops' movements
“Significant time has been spent managing this debt, at the expense of further operational improvement and fully capturing longer-term growth opportunities,” said Mr Flowers, adding that the rights issue would be used to ease Chemring’s debt burden.
Terms for the rights issue are due to be released along with the annual results on january 21.
Chemring said its order book at the end of September stood at £606.3m, with £344.6m expected to be booked as revenue in the 2016 financial year.
However, once again the company warned orders would be weighted towards the second half of the coming year and said it expected “wider market backdrop for global defence spending to be one of slow recovery from 2016”.
One industry analyst said: "If it is just a timing issue and Chemring thought it would get the export licences in time for this year's results then that is one thing, even though it has pushed them to a rights issue.
"However, if something has changed and the customer that was buying the 40mm ammunition is no longer seen as friendly by the Government and there has been a policy change, then that could be a much more serious matter."
The world's 25 largest defence budgets
Then the British don't want to sell them arms?!
Chemring shares plunge as export order delayed
Defence contractor warns on profits as sale of ammunition to Middle East buyer held up by delays getting export licences
|
|
|
|
|
|
Chemring makes ammunition and pyrotechnics such as flares for jet fighters Get a free valuation of your home YOPA's online estate agents can tell you how much your property is worth - and for freeSponsored by YOPA
By Alan Tovey, Industry Editor
9:48AM GMT 27 Oct 2015
Follow
1 Comment Defence group Chemring’s shares plunged more than 40pc after it warned hold-ups securing export licences for ammunition sales to the Middle East are set to hit annual profits.
The company used an unscheduled trading update to reveal that a £100m order from a Middle East customer for 40mm ammunition which was announced last month would almost certainly be delayed.
Sources close to the Chemring attribute the hold-up to bureaucracy and red tape, rather than a governmental change of policy about selling the ammunition to the as-yet-unidentified buyer, with the company confident of gaining the required export licences.
As a result Chemring said that its full-year underlying operating profit would be reduced by £16m to £33m. The company had previously said that its performance was heavily weighted to the second half of the year.
The delay is likely to push Chemring, which also produces flares and chaff used by military aircraft, past its debt covenants and management is to start talks with its lenders about renegotiating its debt structure to avoid a default.
Chemring 40mm grenades To strengthen its balance sheet, Chemring is planning a £90m rights issue, expected to take place in the first quarter of next year. The rights issue is fully underwritten by Investec and JP Morgan Cazenove. The news caused shares in the main market listed company to fall more than 40pc to a 10-year low as analysts downgraded Chemring, though the shares recovered some of the losses and were off 80p at 146.5p as management sought to reassure the market.
Chemring boss Michael Flowers expressed his "frustration" at the delaysExplaining the “frustrating” delays with the 40mm ammunition contract, Michael Flowers, chief executive, said: “Despite every effort, we are still awaiting the receipt of necessary permits and export approvals.
“Given the proximity of our year end, the board considers there is now a realistic prospect that the group does not receive these permits and approvals in time to recognise revenue… in the current financial year.”
• Profile: Michael Flowers, the ex-Army officer still at the forefront of defence
Former Australian Army officer Mr Flowers added that Chemring - which dropped out of the FTSE 250 in 2013 after defence budgets were trimmed and operations in the Gulf region wound down – had been “impeded by its high levels of debt and associated interest costs”.
Chemring's products have included smoke grenades to hide troops' movements“Significant time has been spent managing this debt, at the expense of further operational improvement and fully capturing longer-term growth opportunities,” said Mr Flowers, adding that the rights issue would be used to ease Chemring’s debt burden.
Terms for the rights issue are due to be released along with the annual results on january 21.
Chemring said its order book at the end of September stood at £606.3m, with £344.6m expected to be booked as revenue in the 2016 financial year.
However, once again the company warned orders would be weighted towards the second half of the coming year and said it expected “wider market backdrop for global defence spending to be one of slow recovery from 2016”.
One industry analyst said: "If it is just a timing issue and Chemring thought it would get the export licences in time for this year's results then that is one thing, even though it has pushed them to a rights issue.
"However, if something has changed and the customer that was buying the 40mm ammunition is no longer seen as friendly by the Government and there has been a policy change, then that could be a much more serious matter."
The world's 25 largest defence budgets
| United States | 569.3 |
| China | 190.9 |
| United Kingdom | 66.5 |
| Russia | 53.2 |
| France | 52.7 |
| India | 49.7 |
| Japan | 49.3 |
| Saudi Arabia | 46.3 |
| Germany | 43.8 |
| South Korea | 35.7 |
| Australia | 34.3 |
| Brazil | 30.7 |
| Italy | 29.0 |
| Canada | 17.2 |
| Turkey | 15.9 |
| Israel | 15.6 |
| United Arab Emirates | 14.7 |
| Taiwan | 14.5 |
| Spain | 13.9 |
| Algeria | 12.4 |
| Poland | 12.2 |
| Netherlands | 10.6 |
| Singapore | 10.4 |
| Pakistan | 10.3 |
| Iraq | 10.3 |