Chemring Group PLC Full year results for the year to 31 October 2013 - PowerPoint PPT Presentation

Full Year Results FY13 Chemring Group PLC Full year results for the year to 31 October 2013 1 delivering global protection

Full Year Results FY13 Mark Papworth – Chief Executive Introduction 2 delivering global protection

Full Year Results FY13 Agenda Introduction Mark Papworth Performance Recovery Programme Financial & Operational Review Steve Bowers FY14 Guidance Strategic Planning Process Mark Papworth Performance Recovery Programme - H1 FY14 Priorities Summary Q & A 3 delivering global protection

Full Year Results FY13 Summary • Good progress with Performance Recovery Programme – underpins FY14 profitability – creates a more resilient business • Strategic Planning Process now complete – core businesses identified – priorities & segmental strategies agreed – strategic direction determined for next three years, reflecting market realities • Results in line with recent guidance – budgetary pressures in core defence markets – impact from internal operational issues • Market backdrop creating drag on performance – continued delays in US and Non-NATO order placement – UK and European markets remain flat – Middle East, Asia Pacific and South American markets still growing • Board’s expectations for the current year remain unchanged 4 delivering global protection

Full Year Results FY13 Performance Recovery Programme H2 FY13 Priorities H1 FY13 Priorities Right size and upgrade senior Focus management on operational Management leadership team performance improvement Focus organisation on costs and cash Deliver cash performance and Cash & Costs covenant renegotiation Complete integration of eight Identify operations for consolidation strategic business units to create Integration into centres of excellence four centres of excellence Understand application of current Focus business development in Business key countries and commercial product portfolio to new markets and Development evaluation of non-defence applicability of technology to non- opportunities defence opportunities Gain thorough understanding of the Complete Strategic Planning Process Strategy organisation and start to build a and implement key actions to deliver common Chemring identity growth 5 delivering global protection

Full Year Results FY13 Benefits from Performance Recovery Programme Costs - 46% reduction in Head Office & Divisional headcount - Delivering £10 million - Closure of three offices per annum in savings - Elimination of “excess” throughout the Group Operational integration / performance improvement - Group margins broadly -Eight operating units consolidated into four maintained despite revenue -Capacity adjustments at all operating units reduction - ‘Problem’ businesses recovering - Co-ordinated and cohesive Management / management process management team -Improved management capability - Forecast accuracy improved and -Removed senior poor performers variation reduced, but market itself -75% reduction in management reporting burden remains volatile - Clarity and responsiveness improved -Eliminated two organisational levels - Aligned incentivisation and -New forecasting and budget process implemented accountability 6 delivering global protection

Full Year Results FY13 Benefits from Performance Recovery Programme (cont’d) Cash/ debt position - Successfully negotiated covenant -Better focus on managing cash and debt alleviation in June 2013 -Managed cash performance to deliver below original - Successfully spread FY14 £20m pension quarterly net / gross debt to EBITDA position bullet payment over three years Business development -Secured significant export sales for Sensors & -New export sales into seven countries Electronics products -Co-production Agreements signed for Countermeasures into Middle East -Evaluating four co-production agreements -Munitions co-production opportunities -Secured strategic partners in Brazil, India, Saudi Arabia now being considered in Brazil and UAE Non-defence markets -Evaluating commercial opportunities for four core Chemring Technology Capabilities - Ground Penetrating Radar - Higher profile given to non-defence opportunities - GPS anti-jam - Focused management attention - Data protection – commercial cyber security - Secure cellular communications 7 delivering global protection

Full Year Results FY13 Steve Bowers – Group Finance Director Financial & Operational Review 8 delivering global protection

Full Year Results FY13 Headline results FY13 FY12 Change £624.9m £740.3m - 15.6% Revenue £72.1m £88.3m - 18.3% Operating profit 11.5% 11.9% Operating margin £52.4m £70.1m - 25.2% Profit before tax 21.6p 28.5p - 24.2% Earnings per share 7.2p 9.5p - 24.2% Dividend per share £248.7m £244.8m + 1.6% Net debt References to operating profit, profit before tax and earnings per share are to underlying measures • Revenue decline results from lower activity levels in all areas • Operating margins broadly constant through cost savings and efficiency actions • Order book £675.5m, of which over £450m deliverable in FY14 9 delivering global protection

Full Year Results FY13 Revenue bridge 740.3 £m 624.9 FY12 Countermeasures Sensors & Pyrotechnics & Energetic FY13 Electronics Munitions Sub-Systems 10 delivering global protection

Full Year Results FY13 Operating profit bridge (7.2) (0.2) 88.3 (8.2) £m 0.4 (1.0) 72.1 FY12 Countermeasures Sensors & Pyrotechnics & Energetic Unallocated FY13 Electronics Munitions Sub-Systems central costs 11 delivering global protection

Full Year Results FY13 Countermeasures 20% of Group revenue Countermeasures USA, Countermeasures UK, Chemring Australia FY13 FY12 Change Revenue £125.0m £163.2m -23.4% Operating profit £13.2m £20.4m -35.3% Operating margin 10.6% 12.5% Order book £160.8m £213.3m - 24.6% FY13 review FY14 guidance Business close to minimum sustaining order Reduced US volumes due to Afghanistan volumes drawdown and ongoing delays to orders Sole source qualified positions on Typhoon and October 2013 closure of Defence Contract Joint Strike Fighter but order timing remains Management Agency impacted deliveries, uncertain exacerbating production issues at Kilgore Progress continues to be made on Kilgore product Headcount and overheads resized to reflect quality issues current demand levels 12 delivering global protection

Full Year Results FY13 Sensors & Electronics 34% of Group revenue Chemring Sensors & Electronic Systems, Chemring Technology Solutions FY13 FY12 Change Revenue £211.3m £228.9m -7.7% Operating profit £44.7m £44.9m -0.4% Operating margin 21.2% 19.6% Order book £106.2m £100.7m +5.5% FY13 review FY14 guidance Performance driven by HMDS – further US orders Final HMDS IDIQ order expected in H2 FY14; of $141m under IDIQ contract chem/bio programme completes in FY14 Widespread demand outside US for Ground Sustained global interest in detection, jamming Penetrating Radar systems and defeat products Improved margins result from sales mix biased HMDS and other programmes transitioning from toward product sales urgent operation requirement to base budget – entering R&D phase for several key products 13 delivering global protection

Full Year Results FY13 Pyrotechnics & Munitions 32% of Group revenue Mecar, Simmel, Chemring Defence, Chemring Ordnance FY13 FY12 Change Revenue £200.6m £249.5m -19.6% Operating profit £13.0m £21.2m -38.7% Operating margin 6.5% 8.5% Order book £315.5m £350.1m -9.9% FY13 review FY14 guidance Delays in order placement, particularly in Outlook mixed due to lower demand from NATO non-NATO markets markets Significant non-NATO order pipeline evidences Impact of reduced volume and adverse mix leading positions in naval and land ammunition offsets benefit of operational improvements Mortar systems deliveries resumed in Q4 FY13 as $42.1m non-standard ammunition order to be export licence issues resolved fulfilled, albeit at lower margins 14 delivering global protection

Full Year Results FY13 Energetic Sub-Systems 14% of Group revenue Chemring Energetics UK, Chemring Nobel, Chemring Energetic Devices FY13 FY12 Change Revenue £88.0m £98.7m -10.8% Operating profit £11.3m £12.3m -8.1% Operating margin 12.8% 12.5% Order book £93.0m £96.8m -3.9% FY13 review FY14 guidance Revenue impacted by reduction in US and UK Outlook is flat – continued reduction in NATO defence spending requirements mitigated by emerging markets Early production synergies realised from Emphasis on resolution of production issues, integration of Hi-Shear into Chemring Energetic integration of manufacturing sites Devices Sale of US build-to-print business for $10.0m signed December 2013, completion imminent 15 delivering global protection