UK: Chemring Group - flaremaker seeks new flair. (3 of 4)

UK: Chemring Group - flaremaker seeks new flair. (3 of 4) - With peace restored, and the Treasury sharpening its axe to savage the defence budget, reducing Chemring's dependence on the defence industry is again top priority - a tough challenge.

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Last Updated: 31 Aug 2010

With peace restored, and the Treasury sharpening its axe to savage the defence budget, reducing Chemring's dependence on the defence industry is again top priority - a tough challenge.

But in the new world order, Billington believes that Chemring is better placed to maintain demand than the major defence contractors producing long runs of tanks, submarines or planes. Its products tend to be one-use only items; they also have a limited shelf life of three to five years, after which they must be replaced by the armed forces. "They will still need passive countermeasures (decoys, radar reflectors, chaff) and, importantly, training and simulation for them," claims Billington. The world is still full of dictators and aggressors who can easily buy a £1 million missile that may do devastating damage to a £1 billion aircraft carrier.

He knows, however, that he cannot overplay his defence hand. Last year, when anxiety about defence cutbacks was rising, Chemring began looking for ways of beating swords into ploughshares. "The board directed that the product mix should be changed in favour of non-defence business," recalls Billington. A business development director was appointed at board level. The intention is that non-defence business will account for 60% of turnover by 1995, the reverse of the current ratio.

Clearly the task will not be achieved by organic growth alone. But Billington is optimistic about the internal opportunities, which he expects to come from a combination of new markets and new product development. The group leans heavily on its R and D and dedicates a high proportion of staff and cost to it. Last year Chemring spent £750,000 on its own R and D, while contracts for the MoD and private companies added another £1 million to the total budget. With MoD research establishments being run down, Billington reckons R and D could become an important growth market in itself.

In civil markets marine safety is the main focus of growth. At Pains-Wessex 35% of activity is concentrated on commercial marine. It was the first company licensed to manufacture to the international Safety of Life at Sea (SOLAS) regulations on lights, signals and other safety equipment, introduced to commercial shipping in 1983. Pains-Wessex has a worldwide distribution network with one or two outlets in every major port.

Says chief executive Howlett, who has spent his entire career in the defence and explosives industry: "We supply the safety equipment for 65% of the big ships plying the oceans." As SOLAS regulations become applicable in an increasing number of product areas, Chemring is in a good position to benefit.

The prospects are bright as more countries fall into line. For example, the Soviet Union, operating the largest commercial fleets in the world, is to comply with SOLAS regulations from this summer. Howlett also intends to enter the leisure market more aggressively. In the less regulated past, Pains-Wessex's capability - in distress flares, for example - was vastly superior to the requirements. But now some countries are beginning to adopt SOLAS standards for leisure craft going a certain distance offshore; France, for example, and Australia, where Pains-Wessex has a long-standing subsidiary in marine distress signals.

Marine markets are key to Chemring Ltd's future too, with radar reflectors the most obvious starting point. But Chemring's technology is geared to electronic warfare and is by its nature less easily applied to peaceful pursuits than that of Pains-Wessex. It is developing the chaff pack for the European Fighter Aircraft and is set to land its first contract with the US Defense Department later this year, with a new chaff product called BOL.

Chief executive Evans is frustrated by the limitations on R and D funding. However, opportunities have been identified in hydrographic and meteorological studies (radar-reflective balloon covers, for example) and rescue operations. Chemring Ltd's R and D experts are also working on a microwire, a fine filament of glass-encapsulated metal, with potential medical and environmental applications as a mini sensor.

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