Chemring Group PLC (LON:CHG) saw its shares drop on Monday after the firm said it expects the impact of an explosion at its Chemring Countermeasures (CCM) facility near Salisbury last Friday to lower the firm’s underlying operating profit for the current year by £10mln to £20mln.
The group said the explosion, which left one person dead and another badly injured, has caused damage to parts of the factory's manufacturing operations and production is currently suspended and a detailed analysis of the possible impact of the incident on the group's financial prospects has begun.
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It added: “The impact on our 2018 and 2019 financial years cannot be accurately quantified at this stage as it will be dependent on insurance recoveries, the timeline for the investigation to be completed and the site to re-open, remediation work to be completed and at what rate production resumes.”
Chemring said that CCM's deliveries to customers in the final quarter of the financial year ending 31 October 2018 were previously expected to be £25mln and to generate a contribution of £15mln and the Group's FY18 underlying operating profit is now likely to be approximately £10mln-£20mln lower than previous expectations, with a corresponding impact on the Group's operating cash flow and net debt.
The firm added that a full and immediate investigation into the cause of the incident has been launched in co-operation with the local regulatory authorities.
It added that a further update will be provided when the group publishes its next trading statement, which is expected on 4 September 2018.
In late afternoon trading, Chemring shares were 13.1% lower at 205p, albeit easing off session lows of 180p.
Russ Mould, investment director at AJ Bell commented: “The £10mln to £20mln hit to its profit for the 12 months to 31 October is concern enough but is compounded by a statement that the company cannot yet fully quantify the impact on either this financial year or next.”
He added: “Investors will have to wait until 4 September for an update. Chief executive Michael Ord has only been in post for a matter of weeks after the retirement of his predecessor Michael Flowers.
“Flowers had led a restructuring of the group which had arguably over-stretched itself at the height of the conflicts in Iraq and Afghanistan.”
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