Financial Statements - Chemring Group PLC

C H E M R I N G G R O U P P L CStatement by the Chairman- continuedRecently attention has turned to theprotection of commercial aircraft, andyour Group is heavily involved inresearch and development programmesdesigned to find solutions to thisproblem. This includes being part ofone of the three consortia which havebeen selected in the US by theDepartment of Homeland Security totake the proposed solutions to afurther stage. It is too early to predictwhat additional business could resultfrom these developments.PW Defence produced a solidperformance, with increased sales toboth the UK MoD and overseascountries.Our marine business once againdemonstrated excellent growth of over50% in electronics, where sales reached£11.3 million. The marinepyrotechnics business maintained itsmarket share and profitability in astatic market. Although the overallgrowth in profits of our marinebusiness was creditable, the combinedeffect of our robust policy on thewrite-off of development costs anddifficult, highly-competitive marketconditions meant that our internalexpectations were not met.The Chemical Coatings division ofAlloy Surfaces was successfullydisposed of during the year for£1.5 million after costs, giving riseto an exceptional profit of£0.7 million. Kembrey WiringSystems was disposed of inNovember 2003 for net assetvalue of £1.9 million.Balance Sheet andCash FlowThe Group returned to positive netcash flow in the year as Kilgorereturned to profitability. Our debt isnow at a more manageable level.However, the balance sheet will befurther strengthened by the receipt ofmonies due from RSA.PensionsThe Board has spent a considerableamount of time reviewing the Group’spension schemes - a highly complexissue. It has decided to continue toprovide and maintain its final salaryschemes for UK employees, as itbelieves that this is an attractiveemployee benefit. The Group has,however, increased employeecontributions in order to help meetthe increased costs of providing thefinal salary schemes, which have beenaffected by, amongst other things, anincrease in life expectancy. Afterconsultation with its external advisers,the Group has also agreed to makeadditional contributions to the finalsalary pension schemes, which over theduration should ensure a matching ofassets and liabilities.DividendsThe Board recommends a finaldividend of 4.85p per ordinary share, a14% increase on the final dividend forPains Wessex Australia had an excellentyear, both in defence and marine,supporting the sale and distribution ofother Group products plus its ownindigenously manufactured items.Increased Australian defence spending,together with the appointment ofPains Wessex Australia as thein-country agent for our UScountermeasures businesses, shouldensure continuing solid profitability.P 4