Financial Statements - Chemring Group PLC

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C H E M R I N GG R O U P P L CNotes to the Financial Statements- continued3. COST OF SALES, GROSS PROFIT AND OTHER OPERATING EXPENSESContinuingoperations£000Discontinuedoperations£0002003Totaloperations£000Continuingoperations£000Discontinuedoperations£0002002Totaloperations£000Cost of sales - normal- insurance claim(see Note 6)83,807-83,8076,870-6,87090,677-90,67769,205(5,559)63,6469,155-9,15578,360(5,559)72,801Gross profit28,5101,37029,88021,3662,16023,526Distribution costsAdministrative expensesOther operating expenses (net)3,11211,14214,254-1,5861,5863,11212,72815,8403,12611,23414,360511,4251,4763,17712,65915,8364. OPERATING PROFIT/(LOSS)Operating profit/(loss) is stated after charging:Depreciation - owned assets- leased assetsAmortisation - intangible assetsOperating lease rentals - land and buildings- plant and equipment2003£0002,6856101,2104401,1382002£0002,6582717026441,077During the year £4,742,000 (2002: £4,550,000) of research and development costs were incurred by the Group, of which£1,208,000 (2002: £990,000) was capitalised (see Note 14).2003Auditors’ remuneration£0002002£000Statutory audit services:Group auditSubsidiary company auditsFurther assurance services:Accounts preparation and adviceTax services:Tax complianceTax advisoryOther non-audit services:Corporate finance13029111068418378130291110779153509P 34
2 0 0 3 F I N A N C I A L S T A T E M E N T S5. PROFIT ON DISPOSALInsurance claimA profit on disposal of £565,000 arose from the allocation of material damage insurance proceeds in excess of historic netbook value of assets of £1,077,000, less legal and professional fees incurred of £512,000. As no tax arises in respect of thedisposal of the related asset, the tax effect is limited to a credit of £174,000 in respect of the costs incurred. For further detailssee Note 6.Sale of business divisionOn 11 July 2003 the Group sold the business and net assets of Alloy Surfaces Chemical Coatings, a division ofAlloy Surfaces Company, Inc.. A profit on disposal of £724,000 arose on the sale of the business, being the excess of the netconsideration over net assets disposed of. For further details see Note 27.6. INSURANCE CLAIMFollowing the manufacturing incident at Kilgore Flares Company LLC on 18 April 2001, resulting in material damage andsuspension of operations, the Group lodged a claim with its insurers for property damage and business interruption. Legalproceedings in respect of this claim were filed in a Tennessee Court in March 2002 for an additional £11,000,000 over andabove the £3,200,000 which had been received from insurers at that time. Alongside the legal process, negotiations with theGroup’s insurers have continued throughout the year ended 31 October 2003.At 31 October 2003, the Board has made a further estimate of the additional proceeds which it believes that Kilgore is entitledto receive under the insurance policy, after taking advice from its professional advisers, of which £1,077,000 (2002:£7,300,000)has been recognised in these financial statements. Of this, £nil (2002: £5,559,000) has been credited to cost of sales with thebalance, net of legal and professional costs of £512,000 (2002:£618,000), being allocated as material damage proceeds. As thematerial damage related to fixed assets, the surplus of £565,000 (2002:£1,123,000) has been accounted for as a profit ondisposal, in accordance with FRS15, and included separately in the profit and loss account. For further details see Note 5.At 31 October 2003, payments totalling £5,700,000 (2002:£3,200,000) had been received from the Group’s insurers.The balance of the claim that had not been recovered from the insurers at the year end was £7,486,000 (2002:£9,633,000)which has been included within other debtors. Foreign exchange movements of £724,000 have been recognised through thestatement of total recognised gains and losses in these financial statements, due to the claim being denominated in US dollars.7. EMPLOYEESThe average number employed by the Group within each category of persons was:2003Number2002NumberProductionSales and administrationThe costs incurred in respect of these employees were:Wages and salariesSocial Security costsOther pension costs1,4232181,641£00033,7073,9651,81539,4871,3342411,575£00030,0984,6921,44436,234P 35
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Financial Statements - Chemring Group PLC

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