Chemring Regulatory News (CHG)

FOR IMMEDIATE RELEASE 27 November 2012

CHEMRING GROUP PLC

 Trading Update

Chemring Group PLC ("Chemring" or "the Group") today provides an update on trading having entered the close period in respect of its preliminary results for the financial year ended 31 October 2012.

Trading

The Group's performance during 2012 was extremely disappointing. Chemring's operational performance has been weak, and management of investors' expectations over the past year has also been poor. In part, this resulted from a failure to anticipate the likely impact of the changing market dynamics on the Group's businesses, but also reflected failures in performance at several of our businesses.

Expectations for the Group's trading performance for the financial year ended 31 October 2012 remain in line with the trading update issued on 1 November 2012. The following further detail is subject to final audit.

Trading in the final quarter was impacted by the issues set out in the 1 November 2012 trading statement that principally affected the Countermeasures and Munitions business segments. As a result, turnover for the financial year ended 31 October 2012 is expected to be approximately £740 million (2011: £725 million).

The year end order book of approximately £760 million compares to £878.3 million at the prior year end.

Financial position

There was a significant operating cash inflow in the final quarter that resulted in net debt at the year end of approximately £250 million. (2011: £262.7 million).

Market conditions

Defence spending in the US, UK and Europe is expected to remain under significant pressure.

The US defence market remains vulnerable to ongoing budget uncertainties, particularly around sequestration and the impact of a six month continuing resolution from 1 October 2012. The threat of sequestration continues to have a negative impact on customer behaviour, and there is a lack of clarity about defence expenditure in the medium term. As a result, we are seeing delays in the procurement process whilst customers await greater visibility and certainty as to their future budgets.

The UK MoD's review of its procurement process continues to result in delays to the start of new programmes and reduced funding for existing ones whilst, in Europe, ongoing deficit reduction programmes are exerting downward pressure on defence spending, leading to uncertainty in the procurement process and delayed programme implementation.

Chemring's non-NATO markets continue to offer opportunities, although order intake remains subject to the granting of export licence approval, which is proving more difficult to achieve in some markets.

Outlook

The wider market backdrop is likely to remain challenging. Chemring needs to adapt and better equip itself in order to meet these challenges.

Mark Papworth joined Chemring as Chief Executive Officer on 5 November 2012, and brings significant experience of delivering performance improvement and implementation of strategic change in the manufacturing, technology and service sectors. He will present his initial views on Chemring and his operational priorities at the Group's preliminary results which are expected to be announced on 24 January 2013.

- Ends -

A conference call for analysts and investors will be held at 08.30 GMT today. Dial-in details are as follows:

Participant dial in: +44 (0)20 3140 0668 (toll) / 0800 368 1950 (toll free)

PIN: 475152#.

A playback facility will be available for 30 days. Dial-in details are 020 3140 0698/0800 368 1890

PIN: 388348#

For further information:

Chemring Group PLC:

Rupert Pittman Director of Communications 01489 881 880

& Investor Relations rupertp@chemring.co.uk

MHP Communications:

Andrew Jaques / John Olsen / James White 0203 128 8100

chemringplc@mhpc.com

Cautionary statement: 

This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Chemring's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are; increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approvals for engineering or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects.

Chemring undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.