Pentagon spending boosts Chemring sales

CHEMRING, THE small UK defence contractor which specialises in countermeasures to protect aircraft from attack by ground-to-air missiles, yesterday demonstrated how far sales are benefiting from the surge in Pentagon spending.

Shares in the group rose 6 per cent after Chemring reported a 13 per cent rise in pre-tax profits to pounds 13.3m for the year to the end of October.

The improvement was due largely to a record performance from its countermeasures business in the US, where turnover grew by 43 per cent to $106m, meaning that the Pentagon now accounts for nearly half Chemring's total turnover of pounds 125m.

The company's decoy-based countermeasure equipment is in use in Iraq on fixed-wing aircraft and helicopters and was also deployed during the Afghanistan campaign.

Chemring bid unsuccessfully with United Airlines for a contract from the US Department of Homeland Security to protect commercial airliners from attack by terrorists using shoulder-launched missiles. The US opted instead for a laser-based system proposed by BAE Systems and Boeing but it has continued to fund development work at Chemring on a civilian version of its decoy-based countermeasure.

The one blot on the company's results was a poor performance from its marine division which suffered setbacks on a number of products. Chemring suffered delays in developing a naval transponder able to give the speed and position of a vessel and also with a personal location device being developed for the leisure market. Work on a VHF radio, was scrapped altogether after pounds 800,000 had been spent on development.

During the year, Chemring also settled a $17m insurance claim against Royal & Sun Alliance over an explosion in 2002 at a magnesium flare plant in Toone, Tennessee. The final payment was received last August. A separate claim is still outstanding against Chemring's former insurance brokers, Willis, over expenses involved in pursuing the claim against RSA.

Gearing fell from 74 to 47 per cent and a dividend of 9p was declared for the year - up 22 per cent on the previous year's payout.