Financial Statements - Chemring Group PLC

C H E M R I N G G R O U P P L CReview by the Chief ExecutiveOverviewAn excellent year for the Group withall continuing operations increasingprofitability, and the disposal of theremaining non-core operationscompleted. Defence turnover was up35% to £86 million and the closingorder book was at a similar level toprovide a sound start for this year.Sales in the continuing marine safetyand security business increased by 24%,supported by 50% growth in electronicproducts sales.Kilgore resumed full operations in thesecond half. One and a half milliondecoys were produced at the newfacility during the year. Kilgorecontributed £24 million to totalcountermeasures turnover during theyear, which increased by 45% to£66.4 million.Military pyrotechnics turnoverincreased by 9% to £19.5 million,assisted by increased pyrotechnicproduct sales at Kilgore.Operational ReviewCountermeasures:Countermeasures turnoverincreased by 45% to £66.4 millionThe excellent growth in thecountermeasures business reflects ourposition as the worldwide marketThe Group’s activities are covered underthe following headings:Countermeasures:Chemring Countermeasures,Alloy Surfaces, Kilgore, Pains Wessex AustraliaMilitary Pyrotechnics: PW Defence, Kilgore,Pains Wessex AustraliaMarine Safety and Security: McMurdo Marine, ICS Electronics,McMurdo Pains Wessex,Oroquieta, Pains Wessex AustraliaTurnover by Business Area for theyear ended 31 October 2003£66.4M£19.5M£8.2M£26.4MCountermeasuresMilitary PyrotechnicsOverseas/UKSales SplitUK 24%Overseas 76%Marine Safety and SecurityDiscontinuedleader in providing expendable decoysto protect valuable military platforms.We are the pre-eminent provider ofaircraft IR expendable decoys to theUS Department of Defense. There isparticularly strong US demand for ourproducts to protect military aircraftfrom missile attack, in particular IRMan-Portable Air Defence Systems.These systems have been prevalent inthe Iraq campaign, where therecontinue to be numerous attacks onboth helicopters and fixed wingtransport aircraft.Recently there have been severalinitiatives on commercial aircraftprotection. The most significant ofthese has originated from theDepartment of Homeland Security(DHS) in the US. Alloy Surfaces isincluded in the United Airlines team,which is one of the three consortiaselected by the DHS to develop asystem to protect commercial aircraft.Decoy sales to the US militaryincreased by 33% to £31 millionduring the year. These sales accountedfor 47% of total countermeasuresturnover.Alloy Surfaces is benefiting from newprogrammes to improve helicopterprotection and increased operationaluse of its decoys in pre-emptive mode,which denies missiles the ability tolock-on and hence attack the aircraft.Alloy Surfaces is making significantinroads into the international marketwith non-US sales increasing to 30%of total sales. Major sales wererecorded in the UK, Australia, Canadaand Japan. A joint US andP 6