Chemring says profit fell 42 pct, expects tough market in 2013

Thu Jan 24, 2013 2:48am EST

Jan 24 (Reuters) - Military equipment maker Chemring Plc reported a 42 percent fall in profit in fiscal 2012, a year marred by profit warnings and failed takeover talks, and said difficult market conditions would persist in 2013.

The British company, which makes defence equipment such as flares and explosive device detectors, said pretax profit on an underlying basis fell to 70.1 million pounds ($111.05 million) in the year ended Oct. 31, from 120.2 million pounds a year earlier.

Revenue rose 2 percent to 740.3 million pounds.

The company more than halved its final dividend to 4.2 pence per share.

Chemring issued two profit warnings between August and November due to contract delays and technical problems, affecting takeover talks with private equity firm Carlyle Group and leading to the ouster of Chief Executive David Price.

He was replaced by Mark Papworth, credited with leading a turnaround at oil industry services company John Wood Group .

In Chemring's first results statement since Papworth took over, the company said it would simplify the management structure, integrate operating units and prioritise cash and cost management.

Chemring said a lack of clarity over defence budget cuts in the United States was likely to erode market confidence and delay purchase decisions and that defence spending in the United Kingdom and Europe would also remain under pressure.

The threat of across-the-board cuts to the U.S. defence budget is weighing on Chemring and its peers. Earlier this month, U.S. Defence Secretary Leon Panetta acknowledged for the first time that the cuts were increasingly possible.

Chemring shares closed at 282.5 pence on the London Stock Exchange on Wednesday. They shed 43 percent of their value last year.

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