Chemring battles for its survival

CHEMRING was fighting for its life yesterday as it issued a profit warning and announced emergency plans to go cap in hand to shareholders.

Shares in the maker of ejector seats for fighter jets and military flares crashed by as much as 40pc as it revealed it had been hit by delays to an ammunitions contract in the Middle East.

Eventually clambering back up to close 23pc down at 175.25p, the defence firm admitted it is also struggling to pay back its £165m debt pile.

In the unscheduled trading update which spooked investors, it slashed its 2015 profit forecast by a third to £33m from £49m. The firm has issued a series of profit warnings in the past and has been trying to restructure for the past two years.

But chief executive Michael Flowers said managing its debts had hit its ‘ability to focus on operations’.

Alastair McCaig, market analyst at IG, said investors ‘fear for the worst’. Chemring will attempt to persuade its creditors to give it more time to repay its loans. But is also plans to raise up to £90m through a rights issue in the first quarter of 2016.

Panmure Gordon analyst Sanjay Jha slashed his recommendation from buy to sell and said: ‘The main issue for us is the balance sheet.’

The firm has been hampered by the delay of its £100m Middle East 40mm ammunition contract in a sector badly affected by global defence budget cuts.

Hoped that revenues from the deal would contribute to this years’ results have been scuppered by delays to permits and export approvals.