Chemring Interim 2006 - Chemring Group PLC

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C H E M R I N G G R O U P P L Cminefield clearance system.There isconsiderable interest in this systemfrom other nations involved inpeacekeeping operations for dealingwith either deployed mines orImprovised Explosive Devices.Two key development programmescompleted major milestones in the lastfew months. Nobel Energeticscompleted the final development ofthe rocket motors for the NLAWanti-armour missile. Kilgore alsocompleted the update of its marinelocation marker, with successfulqualification trials from both F/A-18and helicopter platforms, and full scaleproduction will get underway in thesecond half of the year.MARINE ELECTRONICSIn line with our stated strategy todivest the marine division, weannounced the conditional sale of theMcMurdo marine lights business for£2.85 million in May. I hope that,when I report to you next, I will beable to confirm that we have disposedof the residual marine electronicsbusiness at a satisfactory valuation.BOARD OF DIRECTORSIn May, the Board was delighted towelcome the Rt Hon Lord Freeman asa non-executive director, completing,for the moment, the restructuring ofthe Board. Lord Freeman has a wealthof experience in Government, thedefence industry, business and finance,and we consider ourselves fortunate tohave secured his services. He willassume the Chairmanship of the AuditCommittee in July.INTERNATIONAL FINANCIALREPORTING STANDARDSWe have adopted InternationalFinancial Reporting Standards(IFRS) in the first half of 2006 andhave consequently restated the priorperiod accounts. Full details of therestatements upon adoption of IFRSP 4
I N T E R I M R E P O R T 2 0 0 6have been published in notes 8 and 9with my statement today.PENSIONSIn earlier reports, I have referred to thework being done by the Group toprovide satisfactory, modern pensionarrangements for its UK employees,and to eliminate any actual ortheoretical gap which might existbetween the asset and liabilityvaluations of our defined benefitschemes. I repeat my previousassertions that any assessment of adeficit in the funding positions of theseschemes, taking into consideration theadditional contributions being made bythe Group every year, would beminimal and not material in thecontext of the Group.The strength ofthe Group’s covenant is recognised byvirtue of the fact that we have beenassessed at the lowest risk level by thePension Protections Fund in collectingits levy this year.The Board has however beenconsidering all aspects of the currentpensions debate, including possiblecorporate governance implications,where we have concerns at theapparent contradictions which nowexist between the various parties’responsibilities for pension schemes.The Board has a responsibility toensure that the defined benefitschemes are properly funded, andfollowing the adoption of IFRS, tomanage the liability representing thedeficit on the Group’s balance sheet.We are in discussions with allinterested parties to develop asatisfactory solution to this issue.PROSPECTSYour directors are very conscious ofthe current political-military scenario,not only in Iraq and Afghanistan butalso in other disturbed areas of theworld, and its potential impact on thegrowth of the Group.To the extentthat anyone can predict world events,the Board takes soundings in theappropriate quarters on its judgmentfor future strategy and the anticipatedrate of expansion of the Group. In ourpredominant niche ofcountermeasures, the Board isconfident that our expansion willcontinue for several years, both inconventional magnesium-based decoysand in Alloy Surfaces’ special materialdecoys.The commissioning of theextension to Alloy Surfaces’ secondfacility earlier this month, and theopening of the third facility inNovember 2006, will provide theadditional capacity to meet the currentstrong order book.In our Energetics activities, we areconvinced that there are significantopportunities for expansion,consolidation and rationalisation, withthe resultant improvements inefficiency and global marketingcapabilities.The second half willbenefit from a full six months’contribution from Comet,Technical Ordnance and Leafield.In recent reports I have predictedbuoyant prospects for the Group,which the executive management havesuccessfully delivered. I anticipate thatthe full year results will demonstratefurther the Group’s potential, ourgrowing presence in the defenceindustry worldwide, and our ability togenerate value for our shareholders.K C ScobieChairman27 June 2006*All comparisons are for the half year to 30 April 2005 restated for IFRS.** See note 5 of interim statement.P 5
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Page 27 and 28: Photographs:© Chemring Group PLC

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