June 18 (Reuters) - Military equipment maker Chemring Group Plc’s first-half profit fell by more than a third, hurt by production delays and a slow order intake, and the company said it expected results for the year towards the lower end of estimates.
“Visibility generally, and the limited level of detail on the extent and nature of cuts to U.S. defence spending in particular, makes forecasting increasingly difficult,” Chief Executive Mark Papworth said in a statement.
About $85 billion in across-the-board government cuts known as sequestration, involving both civilian and defence programmes, kicked in in March after President Barack Obama and Congress failed to agree on a plan to bring down the United States’ budget deficit.
Chemring, which makes equipment such as flares and explosive device detectors, reported an underlying pretax profit of 25.6 million pounds ($40.23 million) for the six months ended April 30, down from 39.2 million pounds, a year earlier.
Revenue from continuing operations slid nearly 11 percent to 297.4 million pounds. The company’s order book stood at 701.1 million pounds, down 8 percent from the end of October.
Chemring is trying to overcome a torrid 2012, that was marred by profit warnings and failed takeover talks, and has embarked on a restructuring of the business under Papworth who took over last November.
As part of the restructuring, the company’s operating structure would be clustered into four units while several businesses within those units would be integrated, Chemring said.
The company has also decided to close its administrative offices at Pall Mall and Derby in the UK and in Washington and Philadelphia in the United States.
The restructuring, expected to reduce headcount by 40 percent, will cost Chemring 15 million pounds and is expected to yield savings of about 10 million pounds a year mainly from 2014.
Chemring shares, which have gained 16 percent so far this year, closed at 265.7 pence on Monday on the London Stock Exchange. ($1 = 0.6364 British pounds) (Reporting by Abhishek Takle in Bangalore; Editing by Supriya Kurane)