Pentagon spending boosts Chemring sales

Chemring, the small UK defence contractor which specialises in countermeasures to protect aircraft from attack by ground-to-air missiles, yesterday demonstrated how far sales are benefiting from the surge in Pentagon spending.

Chemring, the small UK defence contractor which specialises in countermeasures to protect aircraft from attack by ground-to-air missiles, yesterday demonstrated how far sales are benefiting from the surge in Pentagon spending.

Shares in the group rose 6 per cent after Chemring reported a 13 per cent rise in pre-tax profits to £13.3m for the year to the end of October.

The improvement was due largely to a record performance from its countermeasures business in the US, where turnover grew by 43 per cent to $106m, meaning that the Pentagon now accounts for nearly half Chemring's total turnover of £125m.

The company's decoy-based countermeasure equipment is in use in Iraq on fixed-wing aircraft and helicopters and was also deployed during the Afghanistan campaign.

Chemring bid unsuccessfully with United Airlines for a contract from the US Department of Homeland Security to protect commercial airliners from attack by terrorists using shoulder-launched missiles. The US opted instead for a laser-based system proposed by BAE Systems and Boeing but it has continued to fund development work at Chemring on a civilian version of its decoy-based countermeasure.

The one blot on the company's results was a poor performance from its marine division which suffered setbacks on a number of products. Chemring suffered delays in developing a naval transponder able to give the speed and position of a vessel and also with a personal location device being developed for the leisure market. Work on a VHF radio, was scrapped altogether after £800,000 had been spent on development.

During the year, Chemring also settled a $17m insurance claim against Royal & Sun Alliance over an explosion in 2002 at a magnesium flare plant in Toone, Tennessee. The final payment was received last August. A separate claim is still outstanding against Chemring's former insurance brokers, Willis, over expenses involved in pursuing the claim against RSA.

Gearing fell from 74 to 47 per cent and a dividend of 9p was declared for the year - up 22 per cent on the previous year's payout.