Downbeat forecast sees Chemring shares tumble

The military equipment maker Chemring has warned profits this year will be £15m less than expected, sending its shares diving 13 per cent as investors feared the news would scare off a potential bid from the US private equity giant Carlyle.

Carlyle has until 14 September to make a firm offer or walk away. Chemring shares fell 46.5p to 324p as investors bet that the latter is more likely.

Chemring said the hit to forecasts was due to a delay in production of a system that helps troops to breach obstacles such as minefields. Errors in a new resource planning system at its Florida unit are also a factor.

The company – which manufactures flares, equipment to detect improvised explosive devices and the mechanisms used in aircraft ejection seats – said that its order book at the end of July stood at £910m, 9 per cent lower than a year ago.

Chemring said: "The outlook for the US defence market continues to be uncertain with the majority of our customers indicating they have no visibility of funding in the next financial year."

Like its peers, Chemring is being challenged by lower defence spending in the US and Europe as governments tighten their belts.