2002
C HEMRING
GR OUP
PLC
F INANCIAL
S T A TEMENTS  • Statement by the Chairman 2
• Review by the Chief Executive 5
• Review by the Finance Director 9
• Directors and Professional Advisers 12
• Directors’ Report 13
• Report on Directors’ Remuneration 17
• Statement on Corporate Governance 21
• Independent Auditors’ Report on the Financial Statements 24
• Consolidated Profit and Loss Account 26
• Additional Financial Performance Statements 27
• Consolidated Balance Sheet 28
• Parent Balance Sheet 29
• Consolidated Cash Flow Statement 30
• Notes to the Consolidated Cash Flow Statement 31
• Notes to the Financial Statements 33
• Financial Highlights 53
• Summary Financial Information 54
• Notice and Agenda of Annual General Meeting 55
PAGE 1
CONTENTS
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 This has been an exceptionally demanding year for the Group and its senior executives. In particular the continuing
negotiations with Royal & Sun Alliance (RSA) over appropriate compensation in respect of the Kilgore insurance
claim was compounded by the unfounded allegations made by the BBC regarding the alleged sale of illegal arms
by one of our companies, PW Defence, which depressed our share price to the detriment of shareholders.
Despite these pressures the Group, excluding Kilgore, performed well, with very strong performances from Alloy
Surfaces and the military pyrotechnics business.The Group’s turnover and profitability was inevitably impacted
by the losses at Kilgore due to the prolonged shutdown.The defence order book increased by 10% over the year
to a record £78 million.
RESULTS
2002 2001
£000 £000
Operating profit 7,690 11,971
Credit to operating profit relating to insurance claim 5,559 5,533
Profit before tax 5,416 9,399
Profit after tax 3,811 6,747
Earnings per share 14.16p 26.72p
A total of £7.3 million (2001: £5.5 million), including the related profit on disposal, has been accrued in the
results as additional proceeds from the Kilgore insurance claim.The total amount of £12.8 million accounted
for over the last two financial years is considered to be conservative against your Board’s opinion, supported by
our professional advisers, of the sum recoverable under the policy. Our claim is significantly in excess of £15
million and this does not include the substantial damages which might be awarded by the Tennessee court for
“bad faith” on the part of RSA.
The Board and its advisers cannot understand the reluctance of RSA to enter meaningful negotiations to settle a
liability which everyone recognises exists. Earlier attempts to void the policy or limit its scope using exclusions
written after the incident may give shareholders some flavour of the difficulties your Board has faced.
This incident and RSA’s failure, to date, to meet its obligations under the policy have inevitably restricted the
development of your Group over the last year and contribute to depress the share price.
The Group invested further significant resources in research and development in the year, particularly in the
areas of countermeasures and marine safety. Expenditure was £4.5 million (2001: £5 million).The Group has
adopted a policy of writing-off capitalised development expenditure over three years.
BUSINESS ACTIVITIES
In my statement at the half year I indicated that Kilgore should return to profitability in the second half.
Unfortunately, difficulties were encountered during the commissioning of the new automated manufacturing
process because of the need to ensure absolute safety for employees by minimising exposure to inherently
hazardous materials, and this delayed the restart programme.The major pressed flares line has been operating
satisfactorily since August, and commissioning of the extruded flares line will be completed this month.
The capacity of the new decoy facility at Kilgore is now estimated at £3 million turnover per month, six times
that of our UK facility.
Despite the incident at Kilgore which shut down the flares operations until August 2002 (manufacture of other
products at Kilgore continued), the Group has still been able to increase its presence in the US, the UK and
around the world as the foremost manufacturer and developer of decoys to protect aircraft, helicopters, ships and
land vehicles.The Group is the largest supplier of such devices to both the US and UK armed forces.The order
book in our countermeasures business is currently £66 million, a record high.
Alloy Surfaces has continued its formidable growth pattern, with its countermeasures activity growing 52% since
2000. Since moving the operation to a new factory in 1998, we have invested £6 million in production facilities
to cope with the growing demand for Alloy Surfaces’ proprietary products. Our proprietary technology is now
clearly recognised as providing distinct advantages for pre-emptive aircraft protection which denies a missile
lock-on capability to the aggressor.
Chemring Countermeasures, as expected, had lower sales in the year following the high level of naval decoy
sales in the previous year.The business remained very successful in the air decoy market and entered the current
financial year with a strong order book both for the UK and overseas. Chemring Countermeasures’ research and
development capabilities remain the most advanced in the industry.
STATEMENT BY THE
CHAIRMAN
PAGE 2
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 The military pyrotechnics business had a solid year, despite the distractions of the BBC allegations, with turnover
up 38%.This progress is expected to continue. Opportunities are increasing for co-operation with other defence
manufacturers, particularly in Europe.
In May 2002 the BBC broadcast unfounded statements that PW Defence was engaged in the manufacture of
anti-personnel landmines which have been banned under the Ottawa Convention since 1997.The BBC
proceeded with the broadcast despite having received our denials and knowing full well that all arms exports
require UK Government approval which would never be granted for such products. PW Defence has not been
involved in the illegal manufacture or sale of landmines as stated by the BBC, a position which has now been
confirmed by all the appropriate authorities.
As someone of an age brought up to believe in the accuracy of BBC reporting it is exceedingly disappointing to
witness a programme of such previous repute resort to “gutter journalism” with rigged interviews, selective and
misleading reporting and the suspicion of relationships with certain pressure groups. Inevitably, without the
imperatives for the factual accuracy of such statements others chose to jump on the bandwagon for their own
political or other prestige.
These disgraceful statements defamed your Company, its directors and certain other executives, by implication
accusing them of criminal acts. Following clearance from the authorities the Group’s lawyers have written to the
BBC in the strongest terms and we will pursue the matter until the BBC corrects the gross inaccuracies.
The matter has obviously taken up a great deal of management time which could have been more productively
used within our operations.
Our marine business is amongst the foremost, if not the foremost, of providers of marine safety products.
Whilst pyrotechnics remains a solid market, our electronic products demonstrate the growth potential of the
current technological era with sales having increased by 59% over the last three years.The recent acquisition of
ICS Electronics not only adds to our capabilities by enlarging our scope to meet new marine legislation but its
electronic products also complement our existing range.
The markets for our marine business are mainly commercial and driven by international legislation.
Our challenge is to develop and persuade the leisure market to recognise the essential benefits of our safety
equipment. Significant loss of life could be avoided if our automatic distress signalling products became
mandatory on leisure vessels, as is the case in France, Spain and Australia.
BALANCE SHEET AND CASH FLOW
Kilgore has invested £12 million in capital expenditure rebuilding its plant over the last two years.
This substantial commitment plus the operational losses during the shutdown period have inevitably caused a
major increase in borrowings.Against this background, at 31 October 2002 RSA had only advanced 
£3.2 million under the insurance claim.A further payment of £2.5 million was received in January 2003.
It is a pleasure to be able to thank our bank, Bank of Scotland, for its understanding of the situation and for its
co-operation, relationship banking at its best.
Our indebtedness and gearing will be rectified in the medium term.The Group has adequate facilities to
maintain its growth supported by strong operational cash flow but it is hoped that a settlement can be reached
with RSA in order to reduce current borrowing levels.
PENSIONS
As is the case with an enormous number of companies, the Board has given considerable attention to the
problems facing occupational pension schemes.Two issues have coincided to produce a highly complex scenario.
The first is the sharp fall in the value of pension fund investments due to the fall in the stock market.A similar
occurrence took place in the 1970s. Pension funds are for the long term.Your directors are not contemplating a
“knee jerk” reaction but are determined to find a solution after due consideration.The second is the proposed
new accounting recommendation for valuation of pension schemes.This new method contains contentious
issues of both principle and technique and is certainly not an appropriate base for corrective action.Your Board
recognises the Group’s obligations to the members of its schemes and has engaged pension advisers to assist in
developing our future strategy.
PAGE 3
STATEMENT BY THE
CHAIRMAN
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 DIVIDENDS
Against the background of the Kilgore position, the Board has given careful consideration to the Group’s
dividend policy and the recommendation of a final dividend for the year. The Board believes that its confidence
in the future prosperity of the Group will be clearly demonstrated by the recommendation of a final dividend as
normal, maintained at last year’s level of 4.25p. This, together with the interim dividend of 2.45p (2001: 2.45p)
paid in August 2002, gives a total dividend for the year of 6.70p (2001: 6.70p).
EMPLOYEES
In a very difficult year for the Group, all its directors, senior executives, staff and employees have responded to
the challenges and ensured that the Group has maintained its forward momentum. My thanks go to everyone for
their efforts, loyalty and responsibility.
PROSPECTS
Many commentators, recently, have pointed out the scale of US military operations, its increasing budget over
the coming years and its proportionate size to the rest of the world.Your Group’s countermeasure decoys are
enviably placed to satisfy most of these requirements for the US military machine.The impact of September 11,
the subsequent appreciation of the terrorist threat, both domestically and internationally, and other world events
gives confidence of the growing demand for our protective products.
In addition, with the increasing demand for our marine safety products and a solid contribution from our other
operations, I believe the Group will return this year to the strong performance of previous years. Resolution of
the Kilgore insurance claim with RSA would enable the Board to expand its horizons beyond existing activities.
K C SCOBIE – Chairman
3 February 2003
STATEMENT BY THE
CHAIRMAN
– continued
PAGE 4
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 The Group’s activities are covered under the following headings:
DEFENCE
Countermeasures: Chemring Countermeasures,Alloy Surfaces,
Kilgore, Pains W essex Australia
Military Pyrotechnics: PW Defence, Pains Wessex Australia 
NON-DEFENCE
Marine Safety: McMurdo Marine, ICS Electronics,
McMurdo Pains Wessex, Oroquieta 
Wiring Harnesses: Kembrey Wiring Systems
Chemical Coatings: Alloy Surfaces
TURNOVER BY BUSINESS AREA for the year ended 31 October 2002
OVERVIEW
The Group’s excellent growth since 1998 was stalled this year by the impact of Kilgore’s plant rebuild following
the incident in 2001. However, the defence order book is now at a record high of £78 million, £56 million of
which is for our US countermeasures businesses.
The Kilgore rebuild was completed in May 2002 but subsequent commissioning took longer than anticipated
due to the need to ensure a fully safe process. Kilgore’s sales in the year were only £13 million, against potential
sales of £33 million which were covered by orders.As a result of this and the absence of UK naval contracts, the
turnover of the countermeasures business was down 11% on last year, with a consequential reduction in profitability.
We expect this to be reversed in the future.Total Group turnover was £96.3 million, marginally ahead of 2001.
Our military pyrotechnics and marine safety businesses increased turnover in the year by 38% and 10% respectively.
Kembrey Wiring Systems performed at a similar level to last year.The reduced activity in the civil aviation sector
was offset by increased military aircraft business.
STRATEGY
The Group’s strategy is to increase our recognised market leadership in each of our businesses.We aim to achieve
this through our continuing investment in research and development and manufacturing capabilities, enabling us
to offer innovative, quality and value for money products to our respective markets. Organic growth will be
supported with complementary acquisitions.
DEFENCE BUSINESSES
• COUNTERMEASURES
The Group is the international market leader in the development and manufacture of expendable countermeasures
to protect valuable military platforms.We have a significant operational presence in both the US and the UK,
offering an extensive range of decoys across the RF & IR spectrum, which are capable of combating both legacy
and emerging threats.
Chemical Coatings (£2.0m) 2%
Wiring Harnesses (£9.3m) 10%
Military Pyrotechnics (£17.9m)  19%
Marine Safety (£21.4m) 22%
Countermeasures (£45.7m) 47%
PAGE 5
REVIEW BY THE
CHIEF EXECUTIVE
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 The Group’s countermeasures business further strengthened its market position in the year with the order book
increasing to £66 million, up 24% on 2001.This was achieved despite the difficulties associated with the
implementation of state-of-the-art manufacturing techniques, including the fully automated manufacture of
expendables, at US-based Kilgore.Total turnover was £45.7 million in the year, down £5.6 million due to the
issues at Kilgore and anticipated lower demand for naval decoys at Chemring Countermeasures in the UK.
In the US we are the leading provider of IR expendable decoys to the US Department of Defense.
The combined sales of our US countermeasures businesses to the US DoD contributed 24% of total Group
turnover in the year, and with Kilgore now operational this is expected to increase substantially in 2003.
Demand has increased for Alloy Surfaces’ proprietary special material area decoys, particularly for pre-emptive
applications.Alloy Surfaces’ products are critical, leading-edge technology decoys at the heart of all US services’ decoy
programmes, and feature prominently in a number of pre-emptive countermeasures programmes denying a missile
lock-on capability.After extensive testing, special material decoys have been selected as the US Air Force’s advanced
solution to protect fixed-wing transport aircraft, US Army helicopters and US Navy aircraft. Programmes are also in
place with both the US DoD and the UK MoD to provide this pre-emptive capability for frontline combat aircraft.
Kilgore is expanding into land and ship protection. During the year Kilgore was awarded a contract to develop a
range of decoys for armoured vehicle protection, and the business is also supporting the US Navy on advanced
concept IR ship decoys.
Commissioning of the pressed flares facility at Kilgore was completed during the year, and volume deliveries of
pressed flares are now being made to Kilgore’s customers. Export deliveries of extruded flares have also commenced,
and US deliveries will commence in February.The manufacture of pressed flares constitutes approximately 70% of
Kilgore’s decoy sales, with the balance being extruded flares.
Our full decoy product range for the protection of land, sea and air platforms leads the market.The range
includes point source magnesium flares for widely exploited traditional threats, spectrally-matched point source
flares, and area pyrophoric spectral decoys to defeat legacy and new generation anti-platform missiles and threat
systems. Our decoys have been qualified for use on existing and new generation air platforms such as the
European Eurofighter and the US F22 aircraft.
Against a background of increasing use of military aircraft in supporting anti-terrorist activity, improved
protection for transport aircraft and helicopters against the ever-increasing IR Man-Portable Air Defence
Systems (MANPADS) threat is essential. IR decoy flares play a vital role in increasing the self-protection
provided for these platforms.According to official sources, there are an estimated 500,000 shoulder-fired, heat-
seeking missiles in the world.Although most remain in government hands, many have found their way out into
the ‘black market’ arms trade and into the hands of terrorist groups.
The unique Modular Expendable Block (MEB) is an excellent example of the Group’s countermeasures research
and development efforts to provide optimised platform protection.The MEB can incorporate both multi-
spectral IR and RF payloads to increase platform survivability. It is specified on many platforms including the
UK MoD Apache helicopter, the Swiss Cougar helicopter, the Italian Navy EH101 and SH3D helicopters, and
on C130 and F16 aircraft in numerous NATO and non-NATO countries.
The Group continues to invest in research and development as well as production facilities to protect our
prominent position in expendable countermeasures.
• MILITARY PYROTECHNICS
Turnover in the year increased by 38% to £17.9 million, and current demand remains strong for military
pyrotechnics. Sales for the current financial year are more than 50% covered by the opening order book, and the
worldwide spread of orders provides stability and further opportunities for the future.
The collaboration referred to last year with Bück of Germany has resulted in improved joint sales in overseas
markets, and the companies are now jointly progressing new enquiries.
Collaboration between PW Defence and Kilgore has proved successful, with PW Defence assisting Kilgore in
overseas markets and Kilgore assisting PW Defence in the US market.
We continue to support the MoD in its stated aim of achieving long term cost reductions in munitions.As a result
of this initiative, we are assisting the MoD in an end-to-end study of its logistics chain.This activity, together with
associated product and manufacturing improvements, will also benefit PW Defence in its overseas markets.
REVIEW BY THE
CHIEF EXECUTIVE
– continued
PAGE 6
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 PW Defence remains an international market leader in providing specialist military pyrotechnic products, used in
illumination, signalling, screening and training.
Increased demand for military vehicle screening products assisted growth during the year.We continue to
maintain our market share in standard military pyrotechnics.
NON-DEFENCE BUSINESSES
• MARINE SAFETY
Turnover increased by 10% to £21.4 million in the year. Sales of electronics increased by 20%, again providing
the growth in this business area and supporting our strategy of investment in developing new electronic products
against known legislation. Our priority going forward is to ensure that profitability matches sales growth.
The Group is a global market leader in providing legislated marine products to aid location and safety, including
location beacons, portable VHF radios, fixed VHF class D radios incorporating Digital Selective Calling (DSC),
Automatic Identification Systems (AIS) transponders, marine location lights and distress signals.
The business is primarily driven by global legislation set by the International Maritime Organisation (IMO)
under its Safety of Life at Sea (SOLAS) convention.This mandates the carrying of pyrotechnic products and
marine safety lights. Electronic products in support of the legislated Global Maritime Distress and Safety System
(GMDSS) include 406 EPIRBs, SARTs and portable VHF radios.To date the major thrust for our products has
been with the commercial and legislated areas but our extensive range of electronic products is now being
marketed in the leisure sector with considerable acceptance in the US.
The acquisition of ICS Electronics in July 2002 complemented the existing capability of the marine business by
adding MF/HF/VHF radio communications, DSC, Navtex, satellite marine terminals, weather facsimile, weather
satellite systems and coast radio stations to the product range.The ICS Electronics business enhances our already
excellent growth prospects in marine electronics products.
These prospects are supported by new legislation being implemented by the IMO. In December 2002 the IMO
brought forward the deadline for fitting of AIS on ships engaged in international voyages. Now all such ships
over 300 tons, not required to fit AIS at an earlier date, will have to fit AIS at the first safety equipment survey
after 1 July 2004, but in any case not later than 31 December 2004.The deadline for ships not engaged in
international voyages remains at 1 July 2008, but national authorities can move this date forward in their own
waters.The introduction of AIS will assist our growth.
On 25 November 2002, President George Bush signed the Maritime Transportation Security Act of 2002.
This Act increases the number of vessels to be fitted with AIS when operating in the navigable waters of the US.
This represents a significant opportunity for the Group’s marine business with an estimated overall market
opportunity of £100 million over the next two years.
Demand for our 406MHz products remains high, with our award winning EPIRB with integral Global
Positioning System (GPS) selling well, particularly in the US. During the year, we received a five year supply
contract from the US Coast Guard for our 406MHz Personal Locating Beacon (PLB).This product will become
standard equipment for every US Coast Guard boat crewmember, and other government authorities are now
adopting the product.
We are holding our market share on marine distress pyrotechnics and lights, although demand generally is not
increasing in these markets.
The combination of new electronic products which are being introduced and significant market opportunities
offers our marine business continuing growth prospects over the coming years.
• WIRING HARNESSES
Kembrey Wiring Systems (Kembrey) is the largest independent UK manufacturer of high specification cable
harnesses for the aerospace industry. It has an excellent reputation for supplying quality wiring systems to
manufacturers of airframe and aircraft engines. During the year Kembrey expanded its role by providing
engineering and logistics services to its customers.
PAGE 7
REVIEW BY THE
CHIEF EXECUTIVE
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 Turnover was £9.3 million in the year, at a similar level to last year, which is a good result against the general
downturn in the civil aviation sector. Increased sales of military aircraft wiring harnesses compensated for the
downturn in the civil aviation business.
Following a competitive tender instigated by Rolls-Royce for the majority of its aero engine wiring harnesses,
Kembrey was awarded a five year contract, which is expected to increase current annual sales to Rolls-Royce by
£3 million.This increase should offset delays in the Nimrod programme.
• CHEMICAL COATINGS
Alloy Surfaces has a niche market in supplying special chemicals to the aerospace sector for use in diffusion
coating of engine components, and demand is expected to continue at current levels.
D R EVANS – Chief Executive
3 February 2003
REVIEW BY THE
CHIEF EXECUTIVE
– continued
PAGE 8
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 OPERATING RESULTS
Group turnover was £96.3 million (2001: £95.2 million), an increase of 1%.The turnover of acquired
operations was £0.6 million, arising from four months’ ownership of ICS Electronics.
Gross and net operating profits have been impacted by the accounting for the Kilgore insurance claim as
outlined below.
Total overheads increased during the year, due principally to higher insurance costs of approximately £1 million
and a full year of overheads for businesses acquired last year.
ACCOUNTING FOR INSURANCE CLAIM
Group operating profits are arrived at after crediting £5.6 million (2001: £5.5 million) in respect of business
interruption proceeds arising out of the Kilgore insurance claim.
Under FRS15 Accounting for fixed assets an estimated profit on disposal of £1.1 million arises due to the
allocation of £1.7 million of material damage proceeds in excess of historic net book value of assets, less legal
and professional fees incurred of £0.6 million.
At the end of October 2002, the unrecovered amount in respect of insurance proceeds was £9.6 million
(2001: £3.0 million), and this has been included in other debtors.
Since the year end a further £2.5 million has been recovered from RSA, reducing the debtor to £7.1 million.
RESEARCH AND DEVELOPMENT
Research and development expenditure totalled £4.6 million (2001: £5.0 million), of which £1.4 million
(2001: £1.4 million) was funded by customers and £1.0 million (2001: £2.2 million) was capitalised.
Amortisation of previously capitalised development costs was £0.7 million (2001: £0.6 million).The Group’s
policy is to write-off capitalised development costs over a three year period.
Internally funded research and development expenditure written-off to the profit and loss account in the year
was £2.2 million (2001: £1.4 million).
PROFIT ON DISPOSAL
A profit on disposal of £1.1 million arose from the insurance claim accounting as outlined above.
In 2001 a gain of £0.4 million was made on the disposal of one of the Group’s freehold properties.
INTEREST
The interest charge for the year was £3.5 million (2001: £3.0 million). Interest cover on operating profit was
2.2 times (2001: 4.0 times). Interest was high due to delays in the receipt of insurance proceeds following the
incident at Kilgore and higher net debt resulting from losses at Kilgore.
TAXATION
The tax charge of £1.6 million (2001: £2.7 million) is based on an effective rate of 30% (2001: 28%).
Tax losses at Kilgore were used to offset profits at Alloy Surfaces and gain tax refunds in the US.
The Group adopted FRS19 Deferred taxation during the year.A prior period adjustment of £0.4 million has
been made to adjust the deferred tax charge for the year ended 31 October 2001 and the opening balance sheet.
The impact on the deferred tax charge for the year is negligible.
It is anticipated that tax rates will rise to around 32% in this financial year due to the incidence of higher profits
in the US.
PAGE 9
REVIEW BY THE
FINANCE DIRECTOR
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 PENSIONS
In accordance with FRS17 Accounting for pension costs, the Group has disclosed the additional information
required in Note 8 of the financial statements. Under FRS17, the calculated deficit on the Group’s two defined
benefit pension schemes was £9.4 million (2001: £6.4 million).
SHAREHOLDER RETURNS
Earnings per ordinary share were 14.16p (2001: 26.72p).
The dividend per ordinary share of 6.70p (2001: 6.70p) is covered 2.07 times (2001: 3.68 times).
Shareholders’ funds at the year end were £48.7 million (2001: £46.0 million).
GOODWILL
Goodwill arose in the year as follows:
£m
Acquisition of ICS Electronics 3.2
Adjustments to prior years 0.4
Total additions 3.6
The goodwill relating to ICS Electronics is made up of:
£m
Goodwill on acquisition 1.3
Deferred consideration 0.3
Deferred contingent consideration 1.6
Total 3.2
The deferred contingent consideration is payable over a three year period from acquisition, and is contingent
upon the achievement of certain profit targets.The deferred contingent consideration has been calculated on a
prudent basis with reference to ICS Electronics’ budget; the maximum payable is £3.3 million. In future years
goodwill will be adjusted if ICS Electronics exceeds its current budget and the deferred contingent
consideration increases.
The Board has carried out an annual impairment test on the Group’s total goodwill of £28.3 million.This has
demonstrated that no amortisation is necessary on the constituent parts of the goodwill balance.
CASH FLOW AND GEARING
Operating cash flow was £10.1 million (2001: £4.1 million), representing a conversion rate from operating
profit of 131% (2001: 35%), and was particularly strong in the second half of the year.Working capital balances
have fallen and contract receivables outstanding at the last year end of £5.6 million have been collected.
Total fixed asset expenditure in the year was £13.1 million (2001: £7.6 million). Of the total spend on fixed
assets, £9.0 million (2001: £3.0 million) was incurred by Kilgore as part of the investment in its facilities.
The capital expenditure was funded as follows:
£m
Cash 9.6
Finance leases 3.5
Total 13.1
Net debt stood at £47.3 million at the year end (2001: £40.9 million). Gearing was 97% (2001: 89%).At the
end of April 2002 net debt stood at £52.0 million.
REVIEW BY THE
FINANCE DIRECTOR
– continued
PAGE 10
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 FACILITIES
The Group has agreed total facilities of £49 million with Bank of Scotland to provide funding and working
capital for the UK businesses and Kilgore. In addition, facilities of £6.5 million are in place with Wilmington
Trust and Pennsylvania Industrial Development Authority to provide funding for Alloy Surfaces, and facilities of
£0.5 million in Australia provide funding for Pains Wessex Australia. In June 2002 Kilgore entered into a finance
lease of £2.5 million to acquire certain assets.The finance lease is repayable over five years.Total leasing lines of
credit of £4.0 million exist to fund plant purchases in the UK and at Kilgore.
The Board has reviewed the latest guidance on going concern and considers that the above facilities provide the
Group with adequate resources.
P A RAYNER – Finance Director
3 February 2003
PAGE 11
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
REVIEW BY THE
FINANCE DIRECTOR
– continued DIRECTORS AND
PROFESSIONAL
ADVISERS
31 October 2002
PAGE 12
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
NON-EXECUTIVE CHAIRMAN
Kenneth C Scobie
EXECUTIVE DIRECTORS
David R Evans
Chief Executive
Timothy W Hayter
Chief Operating Officer
Paul A Rayner FCA
Finance Director
NON-EXECUTIVE DIRECTORS
Peter J Molony
General Sir John Stibbon KCB OBE
Chairman: ITT Defence Ltd
PROFESSIONAL ADVISERS
AUDITORS
Deloitte & Touche, Southampton
SOLICITORS
Ashurst Morris Crisp, London
Seyfarth Shaw,Washington
BANKERS
Bank of Scotland, Southampton
STOCKBROKERS
Investec Henderson Crosthwaite, London
SECRETARY
Sarah Ellard ACIS
HEADQUARTERS AND REGISTERED OFFICE
1650 Parkway,Whiteley, Fareham
Hampshire PO15 7AH, England
Tel: +44 1489 881880
Fax: +44 1489 881123
Website: www.chemring.co.uk
REGISTRATION NUMBER
86662
REGISTRARS
Computershare Investor Services PLC
7th Floor, Jupiter House
Triton Court
14 Finsbury Square
London EC2A 1BR Your directors present the financial statements of the Group for the year ended 31 October 2002.
 PRINCIPAL ACTIVITIES
The principal activities of the Group are the design and manufacture of a range of electronic, engineering and
chemical products for use in the military, marine, aerospace and industrial fields.
 REVIEW OF THE YEAR AND RESULTS
A review of the year can be found in the Chairman’s Statement, the Chief Executive’s Review and the Finance
Director’s Review on pages 2 to 11.
 DIVIDENDS
The directors recommend a final dividend of 4.25p per ordinary share, which together with the interim
dividend of 2.45p per ordinary share paid in August 2002, gives a total for the year of 6.70p (2001: 6.70p).
 DIRECTORS
The present directors are shown on page 12. Mr T W Hayter was appointed as a director on 1 November 2001.
Mr D R Evans and Mr P A Rayner will be retiring by rotation at the forthcoming Annual General Meeting and
will be offering themselves for re-election.The details of their service contracts with the Company are set out in
the report on directors’ remuneration on page 19.
None of the directors had a beneficial interest in any contract of significance to which the Group was a party
during the year to 31 October 2002.
Information required as to directors’ shareholdings is set out in the report on directors’ remuneration.
 EMPLOYEES
The Group pursues a policy of employee communication through meetings (including team briefings and works
councils) and house magazines by which employees are made aware of the progress of the Group and the
companies in which they work.
The Group employs disabled persons wherever circumstances permit, and full and fair consideration is given to
applications for employment by disabled persons having regard to their particular aptitudes and disabilities.
Disabled persons in employment receive equal treatment to that afforded to other employees.
 CHARITABLE AND POLITICAL DONATIONS
Charitable donations amounting to £2,440 (2001: £5,723) were made during the year. No political donations
were made during the year (2001: £nil).
PAGE 13
DIRECTORS’
REPORT
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002  SUBSTANTIAL SHAREHOLDINGS
At 3 February 2003 the following interests in the ordinary share capital of the Company exceeding 3% had been
notified to the Company under the provisions of section 198 of the Companies Act 1985:
%
Name Interest
Deutsche Bank AG 14.8
Artemis Investment Management 10.1
Standard Life Group 7.0
Prudential Corporation PLC 6.0
Legal & General Investment Management 4.3
 THE CHEMRING GROUP SHARE OPTION SCHEME
No options were granted in the year to 31 October 2002. During the year options on 6,000 shares were
exercised.There were no options outstanding under this scheme at 31 October 2002.
 THE CHEMRING 1998 EXECUTIVE SHARE OPTION SCHEME
On 23 January 2002, options were granted over 54,000 ordinary shares to Mr T W Hayter. During the year
options on 30,000 shares were exercised.Additional information is set out in Note 22.
 THE CHEMRING GROUP SHARESAVE SCHEME
No options were granted in the year to 31 October 2002. During the year options on 6,587 shares lapsed.
There were no options outstanding under this scheme at 31 October 2002.
 THE CHEMRING GROUP PLC SHARE BASED INCENTIVE SCHEME (“THE ESOP”)
No options were granted in the year to 31 October 2002. During the year options on 5,397 shares were
exercised.Additional information is set out in Note 22.
 SHARE CAPITAL
Under the provisions of section 80 of the Companies Act 1985 (“the Act”) the Board is prevented from
exercising its powers under the Articles of Association (“the Articles”) to allot shares without an authority in
terms of the Act contained either in the Articles or in a resolution of the shareholders in general meeting.The
authority, when given, can last for a maximum period of five years, but your Board proposes that renewal should
be sought at each annual general meeting. Such proposal is set out as resolution 6 in the notice of meeting.
Section 89 of the Act requires that an allotment of shares for cash may not be made unless the shares are first
offered to existing shareholders on a pre-emptive basis in accordance with the terms of the Act. In accordance
with general practice, to ensure that small issues of shares can be made without the necessity of convening a
general meeting, your Board proposes that advantage be taken of the provisions of section 95 of the Act to
disapply the Act’s pre-emptive requirements.Accordingly, a special resolution (set out as resolution 7 in the
notice of meeting) will be proposed which, if passed, will have the effect of granting the directors the power to
allot not more than 5% of the present issued ordinary share capital free of the requirements of section 89 of the
Act. No issue of these shares will be made which would effectively alter the control of the Company without
prior approval of the shareholders in general meeting.
DIRECTORS’
REPORT
– continued
PAGE 14
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002  ARTICLES OF ASSOCIATION
Your Board will seek shareholder approval at the Annual General Meeting to amend the Articles, which have
been in force since 1998. The proposed changes will bring the Articles into line with current practice on
various aspects and will take account of recent legislation.
A summary of the principal amendments appears below.A copy of the revised Articles, incorporating and
showing all the amendments, will be available for inspection at the registered office of the Company and also at
the offices of Ashurst Morris Crisp, Broadwalk House, 5 Appold Street, London EC2A 2HA, during normal
business hours until 24 March 2003, and at the place of the meeting from one hour prior to, and during,
the meeting.
The proposed amendments to the Articles are:
 Electronic communications
It is proposed that the Articles be amended to reflect the Companies Act 1985 (Electronic Communications)
Order 2000 which allows for the electronic transmission by the Company to recipients of notices of
meetings, annual reports, accounts and summary financial statements (Articles 157, 159 and 170). Such
notices and documents will only be transmitted electronically where the intended recipient has provided the
Company with an electronic address for such purposes.
It is proposed that Article 74 be amended to enable the directors to permit members to electronically
transmit their proxy appointments to the Company.
It is proposed that a new Article 170 be inserted to allow the Company to place notices or other documents
on a website and send a notification e-mail to the intended recipients informing them that such notice or
documents are available on a website for them to access. No notices or other documents will be treated as
having been sent or given to any person unless such person has agreed with the Company that such notices
or documents may instead be accessed on a website.
It is proposed that consequential amendments are made to Articles 75, 78 and 162.
In addition, the inclusion of definitions for “address”,“communication”,“electronic communication”,
“Electronic Communications Act” and “Statutes” is proposed.
 Retirement of directors
It is proposed that Article 92 be amended to accord with the Combined Code on corporate governance by
providing that each director is to retire at the third annual general meeting after the annual general meeting
at which he/she was last elected. It is proposed that Article 93 be deleted as a consequence.
It is proposed that consequential amendments are made to Article 95.
 Financial Services and Markets Act 2000
It is proposed that minor amendments be made to Article 81 to recognise the creation of the UK Listing
Authority under the Financial Services and Markets Act 2000. It is also proposed that a definition of
“UK Listing Authority” be included.
PAGE 15
DIRECTORS’
REPORT
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002  Updating share capital figures
It is proposed that Article 5 be amended to include the changes made to the share capital of the Company
by special resolution passed on 8 March 2001.
 STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are required by the Companies Act 1985 to prepare financial statements for each financial year
which give a true and fair view of the state of affairs of the Company and the Group as at the end of the
financial year and of the Group’s profit or loss for that period. It is also the directors’ responsibility to maintain
adequate accounting records which disclose with reasonable accuracy the financial position of the Company and
the Group, to ensure that the financial statements comply with the Companies Act 1985, safeguard the assets of
the Company and the Group, and prevent and detect fraud and other irregularities, and prepare the financial
statements on a going concern basis.
The directors confirm that suitable accounting policies, consistently applied and supported by reasonable and
prudent judgments and estimates, have been used in the preparation of the financial statements, and that
applicable accounting standards have been followed.
 POLICY ON PAYMENT OF SUPPLIERS
It is the policy of the Group that each of the Group companies should agree appropriate terms and conditions
for its transactions with suppliers.These will range from standard written terms to individually negotiated
contracts. Payments are then made in accordance with these terms and conditions, provided that the supplier has
accorded with them. Creditor days as at 31 October 2002 amounted to 61 days (2001: 67 days).
 CLOSE COMPANY PROVISIONS
As far as the directors are aware, the close company provisions of the Taxes Acts do not apply to the Group nor
has there been any change in that respect since 31 October 2002.
 AUDITORS
A resolution to re-appoint Deloitte & Touche as auditors will be proposed at the Annual General Meeting.
Approved by the Board of Directors on 3 February 2003.
Signed on behalf of the Board
S L ELLARD – Secretary
DIRECTORS’
REPORT
– continued
PAGE 16
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002  REMUNERATION COMMITTEE
The Remuneration Committee comprises the three non-executive directors and is chaired by Mr K C Scobie.
The Committee determines the remuneration packages of the executive directors and also reviews remuneration
packages for senior management. Fees for the non-executive directors are determined annually by the Board.
 REMUNERATION POLICY
It is the Company’s policy to provide remuneration packages which are competitive by reference to market rates
and which take into account the individual contribution and performance of each executive director.
Remuneration packages comprise the following elements:
(i) basic salary and benefits;
(ii) annual bonuses linked to Group performance; and 
(iii) awards of share options linked to long term growth of the Group.
The performance-related elements of the bonuses and share options are intended to align the interests of
executive directors with those of shareholders.
 DIRECTORS’ EMOLUMENTS
The emoluments of all the directors who served during the year are shown below:
Salaries Taxable
and fees Cash bonuses benefits Total
2002 2001 2002 2001 2002 2001 2002 2001
£000 £000 £000 £000 £000 £000 £000 £000
Executives
D R Evans 175 175 – 20 18 18 193 213
T W Hayter 120 – – – 13 – 133 –
P A Rayner 107 89 – 10 13 12 120 111
Non-executives
P J Molony 20 20 – – – – 20 20
K C Scobie 56 56 – – – – 56 56
J Stibbon 20 20 – – 2 1 22 21
Total remuneration 498 360 – 30 46 31 544 421
Amounts shown above in the salaries and fees column relate to basic salary in the case of executive directors and
fees in the case of non-executive directors.
Mr Scobie’s remuneration includes payments to his company, K C Scobie Limited, in respect of his consultancy
services. In addition to the remuneration shown above, Mr Scobie has a long term incentive scheme, details of
which are given on page 19, in respect of which the Group had accrued £268,000 as at 31 October 2002.
The main taxable benefits for directors are company cars, fuel for private motoring and private medical insurance.
PAGE 17
REPORT ON
DIRECTORS’
REMUNERATION
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002  PENSIONS
Mr Evans and Mr Rayner are members of the Chemring Group Executive Pension Scheme.This is a non-
contributory scheme, to which the Company makes contributions at the rate advised by the scheme actuary.
The scheme provides a pension of up to two-thirds of basic salary on retirement dependent on service, and also
provides life assurance cover, dependants’ pensions and lump sum payments on death-in-service.
Contributions paid by the Company in respect of Mr Evans and Mr Rayner are shown below.
2002 2001
£000 £000
D R Evans 53 47
P A Rayner 32 24
85 71
Pension benefits earned by Mr Evans and Mr Rayner during the year were as follows:
Transfer value of increase in
Increase in accrued benefit accrued benefit
(excluding inflation) (excluding inflation)
Pension Cash sum
D R Evans £3,842 pa £5,446 £51,821
P A Rayner £2,152 pa £6,457 £10,946
The Committee is currently reviewing the options for appropriate pension provision for Mr Hayter.
The basic salaries of the executive directors are pensionable; bonuses are not pensionable.The non-executive
directors’ remuneration is not pensionable.
 DIRECTORS’ SHARE INTERESTS
The interests of the directors in the ordinary shares of the Company at 1 November 2001 and 31 October 2002
are shown below.All are beneficial holdings.
2002 2001
Number Number
D R Evans 89,997 88,997
T W Hayter 5,000 –
P J Molony – –
P A Rayner 11,500 11,000
K C Scobie 129,864 103,900
1
J Stibbon – –
1
Mr Scobie’s interests at 1 November 2001 have been restated and now exclude shares held by his adult children in which he
has no interest.
No movements have taken place between 31 October 2002 and 3 February 2003.
In addition to the interests detailed above, by the virtue of section 324 of the Companies Act 1985, all the
executive directors are technically deemed to be interested in all of the shares held by the Trustee of the
Chemring Group ESOP .
REPORT ON
DIRECTORS’
REMUNERATION
– continued
PAGE 18
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002  SHARE OPTIONS
The holdings by the directors of options over ordinary shares in the Company at 1 November 2001 and
31 October 2002 are shown below.
Number of share options Market Date
At Granted Lapsed Exercised At price at from
1 Nov during during during 31 Oct Exercise date of which Expiry
2001 the year the year the year 2002 price(p) exercise(p)exercisable Date
D R Evans
1998 Executive 3 Feb 2 Feb
Scheme 100,000 ––– 100,000 236 – 2003 2010
T W Hayter
1998 Executive 23 Jan 22 Jan
Scheme – 54,000 –– 54,000 380.5 – 2005 2012
P A Rayner
1998 Executive 3 Feb 2 Feb
Scheme 50,000 ––– 50,000 236 – 2003 2010
The market price of the ordinary shares at 31 October 2002 was 248p. During the year, the ordinary shares
traded within the range 243.5p to 392.5p.
Options under The Chemring 1998 Executive Share Option Scheme (the “1998 Executive Scheme”) were
issued subject to a performance condition which requires the Company’s earnings per share to exceed RPI by
9% over a consecutive three year period prior to exercise. Participation in the 1998 Executive Scheme is also
extended to senior management of the Group. Future grants of options under the 1998 Executive Scheme will
be phased over a period of time and will be subject to appropriate performance conditions, in order to provide
genuine long term incentives for participants.
The non-executive directors do not normally participate in the Company’s share option schemes. However, a
long term incentive scheme, known as The Chemring Group Phantom Share Option Scheme, was established in
1997 to secure the appointment of Mr Scobie as Chairman of the Board at a difficult time when the Group was
undergoing a fundamental reorganisation. Mr Scobie, who will be the only participant in the scheme, acquired a
contractual entitlement on his appointment to the grant of phantom options over 141,025 ordinary shares in the
Company at a notional exercise price of 78p per share. On exercise of the phantom options at least three years
after the date of grant, Mr Scobie will be entitled to a cash payment from the Company equivalent to the
difference between the then current market value of the ordinary shares less the total exercise price.The scheme
has a performance condition linked to growth in earnings per share, which must be greater than RPI for a three
year period prior to exercise. It is not envisaged that any further awards will be made under this scheme.
 SERVICE CONTRACTS
The service contracts of Mr Hayter and Mr Rayner provide for termination by the Company on twelve
months’ notice. Mr Evans’ service contract is terminable by the Company on two years’ notice.The
Remuneration Committee believes the respective notice periods to be appropriate and in line with the
requirements of the Company.
PAGE 19
REPORT ON
DIRECTORS’
REMUNERATION
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002  NON-EXECUTIVE DIRECTORS
Mr Scobie has a contract with the Company terminable on twelve months’ notice by either party.
His remuneration under the contract, part of which is paid to his company for consultancy services, is 
£55,000 per annum for 50 days’ service.Additional services are paid for at the rate of £1,000 per day.
Mr Molony and General Sir John Stibbon do not have service contracts with the Company.
On behalf of the Board
K C SCOBIE – Chairman of the Remuneration Committee
3 February 2003
REPORT ON
DIRECTORS’
REMUNERATION
– continued
PAGE 20
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 This statement sets out how the Company has applied the fourteen principles of good governance set out in
Part 1 of the Combined Code, and whether or not the Company has complied throughout its accounting
period with the provisions set out in Part 2 of the Combined Code.
 APPLICATION OF THE PRINCIPLES OF THE COMBINED CODE
 The Board of directors
The Board currently comprises three executive and three non-executive directors.The Board, which meets
formally at least ten times a year, approves the Group’s long term goals and strategies and provides overall
financial and organisational control. Matters specifically reserved to the Board include acquisitions and disposals,
financing, major capital expenditure and approval of annual budgets.
All directors are entitled to take independent advice in furtherance of their duties at the Company’s expense if
the need should arise, and each director has full access to the advice and services of the Company Secretary.The
Company meets the cost of appropriate training for directors and newly-appointed directors are provided with
detailed information on their duties and responsibilities.
The Company separates the roles of Chairman and Chief Executive in accordance with the recommendations of
the Combined Code.The Combined Code requires that the majority of non-executive directors should be
independent of management and free from any business or other relationship which could materially interfere
with the exercise of their independent judgment.The Board believes that all three non-executive directors
currently satisfy these requirements.
The non-executive directors perform an essential role in safeguarding shareholders’ interests by monitoring the
Group’s performance and its executive management. In addition to participating in Board meetings, they are the
members of the standing committees set up to deal with audit and the remuneration of executive directors and
senior management.The Board is satisfied that the present balance of executive and non-executive influence
which exists is appropriate for the Company, taking into account its size and status.
 Directors’ remuneration
Details of the Company’s policy on directors’ remuneration are set out in the report on directors’ remuneration
on pages 17 to 20.
 Relations with shareholders
The Company encourages dialogue with institutional shareholders through regular briefing meetings and formal
presentations following the release of interim and annual results. Communication with private investors is
achieved largely through the medium of the interim report and the financial statements.The Company’s website
(www.chemring.co.uk) also provides financial and business information on the Group.
All directors are available to take questions from shareholders or address any concerns at the AGM.At other
times of the year, the directors can be contacted via the Company’s head office.
 Financial reporting
The statement of directors’ responsibilities in respect of the financial statements and accounting records
maintained by the Company is set out on page 16.
PAGE 21
STATEMENT ON
CORPORATE
GOVERNANCE
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002  Internal control
The Combined Code has introduced a requirement that the directors review the effectiveness of the Group’s
systems of internal control at least annually.This extends the previous requirements in respect of internal
financial controls to cover all controls including operational controls, compliance and risk management.
The Board acknowledges its responsibility for the Group’s systems of internal control and attaches considerable
importance to these systems, which are designed to meet the Group’s particular needs and identify those risks to
which it is exposed. However, the systems can only provide reasonable, not absolute, assurance against material
misstatement, loss or mismanagement of the Group’s assets.
In carrying out its review of the effectiveness of the Group’s systems of internal control, the Board has taken
into consideration the following key features of the Group’s risk management systems and control procedures
which operated during the year:
 The Board assesses the key risks associated with achievement of the Group’s business objectives as part of the
annual strategic planning process. Out of this process, each business establishes a three year plan and annual
budget, which are subject to approval by the Board.The performance of each business against budget and
prior years is reviewed on a monthly basis at both operational level and by the Board.Achievement of
strategic business objectives and the associated risks are monitored by the Board on an ongoing basis.
 All businesses hold monthly operating meetings, which are attended by at least one main Board director,
either in person or, in the case of the overseas companies, by video conference. In the case of the US
businesses, formal Board meetings are held quarterly and these are attended by both main Board directors
and external non-executive directors appointed in the US.The US non-executive directors are available to
provide guidance and monitor governance in the US businesses throughout the year.
 Each business is required to comply with the Group’s accounting manual, which sets out formal procedures
for incurring certain types of expenditure and making contractual commitments. Compliance with the
accounting manual is reviewed by both the Audit Committee and the full Board.
 The Board retains primary responsibility for acquisitions and disposals, and financing arrangements for the
Group.Treasury management, IT strategy, insurance and significant legal matters are dealt with centrally from
the Group head office, and the Board receives regular reports on each of these items. Reviews of the Group’s
pensions, insurance and risk management arrangements are carried out by external advisers on a regular basis.
 A Group Health and Safety Management Committee co-ordinates and controls the activities of each
business in relation to health and safety, which is a key focus for the Board in view of the nature of the
Group’s operations. External auditors carry out an annual review of the health and safety management
systems at each of the Group’s operations.
 A Risk Management Committee co-ordinates and reports to the Board on the risk control procedures
implemented by each business at an operational level.
The Board confirms that it has reviewed the effectiveness of the Group’s systems of internal control and risk
management which were in place during the financial year ended 31 October 2002, and it confirms that systems
compliant with the Combined Code and the Turnbull Guidance were in place throughout the year and have
remained in place up to the date of approval of these financial statements. Notwithstanding this, the Board will
continue to take steps to embed internal control and risk management further into the operations of the Group
and to deal with any areas of improvement which come to the attention of management and the Board.
STATEMENT ON
CORPORATE
GOVERNANCE
– continued
PAGE 22
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002  Audit Committee and auditors
The Company has an established Audit Committee, of which all three non-executive directors are members.
The Audit Committee meets at least twice a year and operates within formal written terms of reference.
Meetings are attended by the external auditors and the Finance Director by invitation.The Audit Committee
considers matters relating to the interim and annual results, and also reviews internal and external audit
requirements.The Audit Committee has considered the need for a dedicated internal audit function and has
concluded that this function is adequately covered by existing procedures and controls at the present time.
 COMPLIANCE WITH THE PROVISIONS OF THE COMBINED CODE
The directors confirm that the Company has complied throughout the year with the provisions of the
Combined Code, with the following exceptions because the directors believe that these are not appropriate to
the size of the Company (references to the relevant sections of the Combined Code are given in brackets):
 The Board has not nominated a non-executive director as the Senior Independent Director.This
requirement will be kept under review (A.2.1).
 Mr Scobie’s appointment as Non-Executive Chairman is not for a specified term; however, he is subject to
retirement by rotation (A.6.1).
 The Company’s Articles of Association currently provide that at each annual general meeting one-third of
the directors shall retire by rotation and new directors should offer themselves for re-election at the next
annual general meeting following their appointment.This is not strictly in line with the provisions of the
Combined Code which require that directors should stand for re-election at intervals of no more than three
years. It is proposed that the Articles of Association will be amended at the Annual General Meeting of the
Company on 24 March 2003 which will result in each director retiring at the third annual general meeting
after the annual general meeting at which he/she was last elected (A.6.2).
 Mr Evans has a service contract with a notice period in excess of one year, details of which are disclosed in
the report on directors’ remuneration (B.1.7).
 GOING CONCERN
The directors have acknowledged the latest guidance on going concern and, after making appropriate enquiries,
have formed a judgment at the time of approving the financial statements that there is a reasonable expectation
that the Company has adequate resources to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
Approved by the Board of Directors on 3 February 2003.
Signed on behalf of the Board
S L ELLARD – Secretary
PAGE 23
STATEMENT ON
CORPORATE
GOVERNANCE
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 PAGE 24
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CHEMRING GROUP PLC 
We have audited the financial statements of Chemring Group PLC for the year ended 31 October 2002 which
comprise the profit and loss account, the balance sheets, the consolidated cash flow statement, the statement of
total recognised gains and losses, the reconciliation of movements in shareholders’ funds, the notes to the cash
flow statement and the related notes 1 to 27. These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the Company’s members, as a body, in accordance with section 235 of the
Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditors’ report and for no other purpose.To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described in the statement of directors’ responsibilities, the Company’s directors are responsible for the
preparation of the financial statements in accordance with applicable United Kingdom law and accounting
standards. Our responsibility is to audit the financial statements in accordance with relevant United Kingdom
legal and regulatory requirements and auditing standards and the Listing Rules of the Financial Services
Authority.
We report to you our opinion as to whether the financial statements give a true and fair view and whether the
financial statements are properly prepared in accordance with the Companies Act 1985.We also report to you if,
in our opinion, the directors’ report is not consistent with the financial statements, if the Company has not kept
proper accounting records, if we have not received all the information and explanations we require for our audit,
or if information specified by law or the Listing Rules regarding directors’ remuneration and transactions with
the Company and other members of the Group is not disclosed.
We review whether the corporate governance statement reflects the Company’s compliance with the seven
provisions of the Combined Code specified for our review by the Listing Rules and we report if it does not.
We are not required to consider whether the Board’s statements on internal control cover all risks and controls,
or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and
control procedures.
We read the directors’ report and the other information contained in the annual report for the above year as
described in the contents section and consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the financial statements.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing
Practices Board.An audit includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments
made by the directors in the preparation of the financial statements and of whether the accounting policies are
appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed.
INDEPENDENT
AUDITORS’ REPORT
ON THE FINANCIAL
STATEMENTS
for the year ended 
31 October 2002 An audit does not provide assurance on the maintenance and integrity of the website, including controls used to
achieve this, and in particular on whether any changes may have occurred to the financial statements since first
published.These matters are the responsibility of the directors but no control procedures can provide absolute
assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements differs
from legislation in other jurisdictions.
PAGE 25
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the
financial statements.
UNCERTAINTY RELATING TO INSURANCE CLAIM
In forming our opinion, we have considered the adequacy of the disclosure made in note 26 concerning the
amounts recoverable under an insurance claim relating to an incident at Kilgore Flares, a subsidiary undertaking
of the Company, in April 2001.The future settlement of this claim could result in a shortfall, or a surplus, when
compared with the recorded debtor at 31 October 2002. It is not possible to quantify the effect, if any, of this
uncertainty. Details of the circumstances relating to this uncertainty and the amount of the related debtor
recorded at 31 October 2002 are disclosed in note 26. Our opinion is not qualified in this respect.
OPINION
In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the
Group as at 31 October 2002 and of the profit of the Group for the year then ended and have been properly
prepared in accordance with the Companies Act 1985.
DELOITTE & TOUCHE
Chartered Accountants and Registered Auditors
Southampton
3 February 2003
INDEPENDENT
AUDITORS’ REPORT
ON THE FINANCIAL
STATEMENTS
– continued PAGE 26
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
2002 2001
As restated
1
Continuing Continuing
operations operations
Note £000 £000
Turnover 2 96,327 95,245
Operating profit 4 7,690 11,971
Associated undertaking 89 43
Profit on disposal 5 1,123 369
Profit on ordinary activities before interest 8,902 12,383
Analysis of profit on ordinary activities before interest:
Kilgore – normal operations (4,851) (2,141)
– insurance claim 26 6,682 5,533
1,831 3,392
Rest of Group 7,071 8,991
Profit on ordinary activities before interest 8,902 12,383
Interest payable 9 (3,486) (2,984)
Profit on ordinary activities before taxation 5,416 9,399
Tax on profit on ordinary activities 10 (1,605) (2,652)
Profit on ordinary activities after taxation 3,811 6,747
Equity minority interest 29 (25)
Profit for the financial year 3,840 6,722
Dividends 11 (1,843) (1,831)
Retained profit 23 1,997 4,891
Basic earnings per ordinary share 12 14.16p 26.72p
Diluted earnings per ordinary share 12 14.11p 26.62p
1
See Note 21.
CONSOLIDATED
PROFIT AND LOSS
ACCOUNT
for the year ended 
31 October 2002 PAGE 27
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
2002 2001
As restated
1
£000 £000
Statement of total recognised gains and losses
Profit on ordinary activities after taxation 3,811 6,747
Currency translation differences on foreign currency net investments (756) (469)
Total recognised gains and losses relating to the year 3,055 6,278
Prior year adjustment (see Note 21) (389) –
Total recognised gains and losses since last financial statements 2,666 6,278
Reconciliation of movements in shareholders’ funds
Profit on ordinary activities after taxation 3,811 6,747
Equity minority interest 29 (25)
Dividends (1,843) (1,831)
Retained profit 1,997 4,891
Other recognised losses (756) (469)
Ordinary shares issued 25 151
Share premium arising 1,391 8,216
Net addition to shareholders’ funds 2,657 12,789
Opening shareholders’ funds as restated 46,014 33,225
Closing shareholders’ funds 48,671 46,014
The historical cost profit and loss for the year is not materially different to that shown on the previous page.
1
See Note 21.
ADDITIONAL
FINANCIAL
PERFORMANCE
STATEMENTS
for the year ended 
31 October 2002 PAGE 28
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
2002 2001
As restated
1
Note £000 £000 £000 £000
Fixed assets
Intangible assets
Development costs 13 3,002 2,690
Goodwill 13 28,343 24,789
31,345 27,479
Tangible assets 14 42,746 33,901
Investments 15 972 924
75,063 62,304
Current assets
Stock 16 17,807 18,231
Debtors 17 32,636 30,494
Cash at bank and in hand 3,774 2,418
54,217 51,143
Creditors due within one year 18 (49,288) (33,910)
Net current assets 4,929 17,233
Total assets less current liabilities 79,992 79,537
Creditors due after more than one year 19 (29,375) (32,097)
Provisions for liabilities and charges 21 (1,644) (1,095)
Equity minority interest (302) (331)
48,671 46,014
Capital and reserves
Called-up share capital 22 1,434 1,409
Reserves
Share premium account 23 20,726 19,335
Special capital reserve 23 12,939 12,939
Revaluation reserve 23 2,482 2,518
Revenue reserves 23 11,090 9,813
47,237 44,605
Shareholders’ funds 48,671 46,014
Attributable to equity shareholders 48,609 45,952
Attributable to non-equity shareholders 62 62
48,671 46,014
These financial statements were approved by the Board of Directors on 3 February 2003.
Signed on behalf of the Board
D R Evans
P A Rayner
1
See Note 21.
CONSOLIDATED
BALANCE SHEET
as at 31 October 2002 PAGE 29
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
2002 2001
Note £000 £000 £000 £000
Fixed assets
Tangible assets 14 986 1,014
Investments 15 39,584 33,675
40,570 34,689
Current assets
Debtors 17 54,824 46,321
Cash at bank and in hand 237 541
55,061 46,862
Creditors due within one year 18 (34,355) (16,022)
Net current assets 20,706 30,840
Total assets less current liabilities 61,276 65,529
Creditors due after more than one year 19 (22,491) (26,448)
38,785 39,081
Capital and reserves
Called-up share capital 22 1,434 1,409
Reserves
Share premium account 23 20,726 19,335
Special capital reserve 23 12,939 12,939
Revenue reserves 23 3,686 5,398
37,351 37,672
Shareholders’ funds 38,785 39,081
Attributable to equity shareholders 38,723 39,019
Attributable to non-equity shareholders 62 62
38,785 39,081
These financial statements were approved by the Board of Directors on 3 February 2003.
Signed on behalf of the Board
D R Evans
P A Rayner
PARENT
BALANCE SHEET
as at 31 October 2002 PAGE 30
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
2002 2001
Note £000 £000 £000 £000
Net cash inflow from operating activities A 10,056 4,134
Returns on investments and 
servicing of finance B (2,899) (3,077)
Taxation 671 (1,522)
Capital expenditure B (10,622) (8,058)
Acquisitions B (145) (15,401)
Equity dividends paid (1,818) (1,640)
Cash outflow before use of liquid 
resources and financing (4,757) (25,564)
Financing - issue of shares B 54 4,833
Financing - (decrease)/increase in debt B (2,111) 16,896
(2,057) 21,729
Decrease in cash C (6,814) (3,835)
Reconciliation of net cash flow to 
movement in net debt
Decrease in cash (6,814) (3,835)
Cash outflow/(inflow) from the decrease/
(increase) in debt and lease financing 2,111 (16,896)
Change in net debt resulting from cash flows (4,703) (20,731)
New finance leases (3,479) (115)
Translation difference 1,212 22
New finance costs applied to loans 737 -
Amortisation of debt finance costs (102) -
Movement in net debt (6,335) (20,824)
Opening net debt (40,942) (20,118)
Closing net debt (47,277) (40,942)
CONSOLIDATED
CASH FLOW
STATEMENT
for the year ended
31 October 2002 PAGE 31
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
A. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM
OPERATING ACTIVITIES
2002 2001
£000 £000
Operating profit 7,690 11,971
Amortisation charge 702 550
Depreciation charge 2,929 2,286
Loss on disposal of fixed assets 27 –
Decrease in stock 514 929
Increase in debtors (838) (6,906)
Decrease in creditors (968) (4,696)
10,056 4,134
B. ANALYSIS OF CASH FLOWS 
2002 2001
£000 £000 £000 £000
Returns on investments and servicing
of finance
Interest paid (2,907) (3,074)
Preference dividend paid (4) (3)
Dividend from associate 12 –
Net cash outflow from returns on investments 
and servicing of finance (2,899) (3,077)
Capital expenditure and financial investment
Purchase of intangible fixed assets (990) (2,238)
Purchase of tangible fixed assets (9,632) (7,457)
Purchase of trade investments – (10)
Sale of tangible fixed assets – 1,647
Net cash outflow from capital expenditure
and financial investment (10,622) (8,058)
Acquisitions
Acquisitions of subsidiary undertakings (243) (14,645)
Net cash acquired with subsidiary undertakings 98 32
Acquisition of business – (788)
Net cash outflow from acquisitions (145) (15,401)
Financing
Issue of ordinary share capital 54 4,833
Capital elements of finance lease payments (427) (130)
Debt due beyond one year:
- bank loans – 15,030
Debt due within one year:
- loan stock – (4)
- bank loans (1,684) 2,000
(2,111) 16,896
Net cash (outflow)/inflow from financing (2,057) 21,729
NOTES TO THE
CONSOLIDATED
CASH FLOW
STATEMENT
for the year ended
31 October 2002 PAGE 32
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
C. ANALYSIS OF NET DEBT
At Other non- Exchange At
1 Nov 2001 Cash flow cash changes movement 31 Oct 2002
£000 £000 £000 £000 £000
Cash at bank and in hand 2,418 1,513 – (157) 3,774
Overdrafts (9,138) (8,327) – 120 (17,345)
(6,720) (6,814) – (37) (13,571)
Debt due within one year (2,040) 1,684 (5,047) – (5,403)
Debt due after one year (31,782) – 5,682 1,249 (24,851)
Finance leases (400) 427 (3,479) – (3,452)
(40,942) (4,703) (2,844) 1,212 (47,277)
NOTES TO THE
CONSOLIDATED
CASH FLOW
STATEMENT
- continued 1. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable United Kingdom accounting standards.
The particular accounting policies adopted are described below.
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention as modified by the revaluation
of property.
BASIS OF CONSOLIDATION
The financial statements consolidate those of the Parent with the Group’s share of the results and post
acquisition reserves of all its subsidiary and associated undertakings.All companies within the Group make up
their financial statements to the same date. No profit and loss account is presented for the Parent as provided by
section 230 of the Companies Act 1985.
REVENUE RECOGNITION
Sales comprise the net value of deliveries made, work completed or services rendered during the year. Sales are
recognised when title passes, or when production of goods has been completed in accordance with contract
terms, and inspection and quality procedures have been completed but goods await collection. Long term
contracts are accounted for in accordance with SSAP 9 (revised), whereby a prudent level of income is recognised
based on the estimated percentage completion of contracts where the final outcome can be reasonably assessed.
ACQUISITIONS
On the acquisition of a business fair values are attributed to the Group’s share of net separable assets.Where the
cost of acquisition exceeds the fair values attributable to such net assets, the difference is treated as purchased
goodwill and capitalised in the balance sheet in the year of acquisition.
The results and cash flows relating to an acquired business are included in the consolidated profit and loss account
and the consolidated cash flow statement from the date of acquisition.
INTANGIBLE FIXED ASSETS
The purchased goodwill of the Group is regarded as having an indefinite useful economic life and in accordance
with FRS10, is not amortised but is subject to annual tests for impairment.This represents a departure, for the
purpose of giving a true and fair view, from the requirements of schedule 4:21 of the Companies Act 1985, which
requires goodwill to be amortised. In the opinion of the Board, it is not possible to determine a finite useful
economic life for goodwill arising, due to the inherent durability of the corporate profile in the countermeasures,
military and marine industries, and the continued position of market leadership within these chosen business
sectors.The complexities of the processes, technologies and regulatory barriers to entry support and corroborate
this position. Since it is not possible to identify any finite useful economic life, it is not possible to quantify any
amortisation which would be charged. In reviewing the carrying value of goodwill of the various businesses, the
Board has considered the separate plans and cashflows of these businesses consistent with the requirements of
FRS11, and is satisfied that these demonstrate that no impairment has occurred.Accordingly no charge for
impairment is required.
Research, development, patent and licence costs are charged to the profit and loss account as incurred, except
where a major project is undertaken and it is reasonably anticipated that costs will be recovered through future
commercial activity. Such costs are written-off over three years.
PAGE 33
NOTES TO THE
FINANCIAL
STATEMENTS
for the year ended
31 October 2002
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 1. ACCOUNTING POLICIES – continued
TANGIBLE FIXED ASSETS
No depreciation is provided on freehold land. On other assets depreciation is provided at rates calculated to
write down their cost or valuation to their estimated residual values by equal instalments over their estimated
useful economic lives, which are considered to be:
Freehold buildings - up to 50 years
Leasehold buildings - the period of the lease
Plant and equipment - up to 10 years
FIXED ASSET INVESTMENTS
Except as stated below, investments held as fixed assets are stated at cost less provision for impairment.
In the consolidated financial statements, shares in the associated undertaking are accounted for using the equity
method of accounting.The consolidated profit and loss account includes the Group’s share of the profit and
attributable taxation of the associated undertaking. In the consolidated balance sheet, the shares in the associated
undertaking are shown as the Group’s share of net assets.
STOCK
Stock is stated at the lower of cost and net realisable value. Raw materials are stated at their purchase price,
while work in progress and finished goods comprise the cost of materials, labour and overheads applicable to the
stage of production.
DEFERRED TAXATION
The requirements of FRS19 Deferred taxation have been adopted.This represents a change in accounting policy
and hence a prior year adjustment has been made in the financial statements (see Note 21). Deferred taxation is
provided in full at the anticipated tax rates on differences arising from the inclusion of items of income and
expenditure in taxation computations in periods different from those in which they are included in the financial
statements. Deferred taxation is not provided on timing differences arising from the revaluation of fixed assets
where there is no commitment to sell the asset. Deferred tax assets and liabilities are discounted.
SPECIAL CAPITAL RESERVE
The special capital reserve was created as part of a capital reduction scheme involving the cancellation of the
share premium account which was approved by the Court in 1986 and is in accordance with the requirements
of the Companies Act 1985.
FOREIGN CURRENCY
Transactions of the UK companies denominated in foreign currencies are translated into sterling at the rates
ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are translated at the rates ruling at that date.These translation differences are dealt with in the
profit and loss account.
Trading results of overseas subsidiary undertakings are translated into sterling at an average rate for the period
and net assets are translated at the rate ruling at the balance sheet date. Exchange differences arising between
average rate and closing rate and from the translation of the opening net investment in overseas companies and
matched long term foreign currency borrowings are taken directly to reserves.
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
PAGE 34
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 1. ACCOUNTING POLICIES – continued
PENSIONS
The Group operates defined benefit pension schemes which cover the majority of UK employees.The cost of
providing pensions is estimated on the basis of independent actuarial advice and is charged to the profit and loss
account over the expected service lives of the participating employees.The accounting policy follows the
funding policy except where an actuarial valuation indicates a deficiency or surplus. Such deficiencies or
surpluses are for funding purposes dealt with as advised by the actuary. For accounting purposes they are spread
over the expected remaining service lives of the participating employees.
The Group also operates money purchase pension arrangements for overseas employees, the costs of which are
charged to the profit and loss account as incurred.
LEASED ASSETS
Where the Group enters into a lease which entails taking substantially all the risks and rewards of ownership of
an asset, the lease is treated as a finance lease.The asset is recorded in the balance sheet as a tangible fixed asset
and is depreciated over the shorter of the estimated useful economic life and the lease term. Future instalments
under such leases, net of finance charges, are included in creditors.The finance element of the instalments is
charged to the profit and loss account at a constant rate of charge on the remaining balance of the obligation.
All other leases are operating leases and the rental charges are taken to the profit and loss account on a straight
line basis over the life of the lease.
2. ANALYSIS OF TURNOVER, PROFIT AND NET ASSETS
2002 2001
Continuing Continuing
operations operations
£000 £000
Turnover
UK 31,499 22,886
Overseas 64,828 72,359
Total 96,327 95,245
An analysis of turnover by business area is given in the summary financial information on page 54 and forms
part of these financial statements.An analysis of profit and net assets has not been given since in the opinion of
the directors this would be seriously prejudicial to the commercial interests of the Group.
3. COST OF SALES, GROSS PROFIT AND OTHER OPERATING EXPENSES
2002 2001
Continuing Continuing
operations operations
£000 £000
Cost of sales – normal 78,360 76,336
– insurance claim (see Note 26) (5,559) (5,533)
72,801 70,803
Gross profit 23,526 24,442
Distribution costs 3,177 3,208
Administrative expenses 12,659 9,263
Other operating expenses (net) 15,836 12,471
PAGE 35
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 4. OPERATING PROFIT
2002 2001
£000 £000
Operating profit is stated after charging:
Depreciation – owned assets 2,658 2,181
– leased assets 271 105
Amortisation – intangible assets 702 550
Operating lease rentals – land and buildings 644 496
– plant and equipment 1,077 1,060
Auditors’ remuneration – Group 114 105
– Parent 6 5
During the year £341,000 (2001: £357,000) was paid to the auditors for non-audit work, including £46,000
(2001: £294,000) in respect of acquisitions.
During the year £4,550,000 (2001: £5,038,000) of research and development costs were incurred by the
Group, of which £990,000 (2001: £2,238,000) was capitalised (see Note 13).
5. PROFIT ON DISPOSAL
A profit on disposal of £1,123,000 arose from the allocation of material damage insurance proceeds in excess of
historic net book value of assets, less legal and professional fees incurred of £618,000.As no tax arises in respect
of the disposal of the related asset, the tax effect is limited to a credit of £244,000 in respect of the costs
incurred. For further details see Note 26.
A gain of £369,000 was made on the disposal of a freehold property during the year ended 31 October 2001.
6. EMPLOYEES
2002 2001
Number Number
The average number employed by the Group within each category of persons was:
Production 1,334 1,277
Sales and administration 241 264
1,575 1,541
The costs incurred in respect of these employees were: £000 £000
Wages and salaries 30,098 24,734
Social Security costs 4,692 3,586
Other pension costs 1,444 1,170
36,234 29,490
7. DIRECTORS’ EMOLUMENTS
Disclosures on directors’ remuneration, share options, long term incentive schemes, pension contributions and
pension entitlements required by the Companies Act 1985 and those specified for audit by the UK Listing
Authority are set out in the report on directors’ remuneration on pages 17 to 20 and form part of these audited
financial statements.
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
PAGE 36
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 8. PENSIONS
PENSION ARRANGEMENTS
The pension cost figures used in these financial statements comply with the current accounting standard
SSAP 24 Accounting for pension costs.A new accounting standard, FRS17 Retirement benefits, has been issued and
applies to accounting periods ending on or after 22 June 2005, with transitional requirements applying this year.
Within the UK the Group operates two defined benefit schemes, the Chemring Group Staff Pension Scheme
(the “Staff Scheme”) and the Chemring Group Executive Pension Scheme (the “Executive Scheme”), as detailed
below.The overseas arrangements are all defined contribution schemes.The assets of the schemes are held in
separate trustee administered funds.
REGULAR PENSION COSTS – SSAP 24
The total pension costs for the Group for the year ended 31 October 2002 were £1,444,000
(2001:£1,170,000). Disclosures given relate to the Group as the pension assets and liabilities of the Parent
cannot be separately identified.
The costs of the defined benefit schemes are assessed in accordance with the advice of a qualified actuary using
the attained age method. Contributions to the schemes are charged to the profit and loss account so as to spread
the cost of pensions over employees’ working lives with the Group.
The last actuarial valuation of the Staff Scheme was carried out as at 6 April 2000.The main assumptions used
by the actuary in carrying out this valuation were as follows: return on investments of 7.5% per annum pre-
retirement and 5.5% to 6% per annum post-retirement; increase in salaries of 5% per annum; and increase in
pension accrued after 6 April 1993 of 3% per annum.
At the date of the last actuarial valuation, the market value of the assets of the Staff Scheme was £22,472,000,
which was sufficient to cover 101% of the benefits that had accrued to members. Following the valuation, it was
agreed that the Group would pay contributions at the rate of 10.5% of pensionable salaries, increasing to 11%
with effect from 1 April 2002 and 11.5% with effect from 1 April 2003. Members pay contributions at the rate
of 6% of pensionable salaries.
The last actuarial valuation of the Executive Scheme was carried out as at 6 April 2001.The main assumptions
used by the actuary in carrying out this valuation were as follows: return on investments of 7% per annum pre-
retirement and 5% per annum post-retirement; increase in salaries of 4.75% per annum; and increase in pension
accrued after 6 April 1993 of 2.5% per annum.
At the date of the last actuarial valuation, the market value of the assets of the Executive Scheme was
£2,797,000, which was sufficient to cover 63% of the benefits that had accrued to members. Following the
valuation, it was agreed that the Group would pay increased contributions at the rate of 32% of pensionable
salaries, together with additional payments of £14,000 per month.The Executive Scheme is closed to new
entrants.The Group’s contribution rate over the average remaining service lives of the members of the Executive
Scheme takes account of the deficit disclosed by the valuation.
Included within other debtors (see Note 17) is £237,000 (2001: £237,000) in respect of pension contributions
to defined benefit schemes, being the difference between amounts recognised as costs and amounts paid or
funded directly.
PAGE 37
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 8. PENSIONS – continued
As required by SSAP 24, the figures included in the financial statements in respect of the Group’s pension
schemes are based on actuarial valuations carried out as at 6 April 2000 and 6 April 2001.These do not take into
account any impact of the fall in stock market values since these dates.Any such impact will be reflected in the
next SSAP 24 triennial valuations as at 6 April 2003 and 6 April 2004, based upon which subsequent pension
costs will be determined until the adoption of FRS17.
FRS17 DISCLOSURES
Under the transitional arrangements of FRS17, the Group is required to disclose the following information
about the schemes and the figures that would have been shown in the Group’s balance sheet if FRS17 applied in
full today.
The last actuarial valuations for the Staff Scheme and the Executive Scheme were updated to 31 October 2002
by a qualified actuary, using the projected unit valuation method.
The total assets and liabilities of the Staff Scheme and the Executive Scheme updated to 31 October 2002 in
accordance with FRS17, along with the expected rates of return on assets were as follows:
2002 2001
Long term rate Value Long term rate Value
of return expected £000 of return expected £000
Equities 6.7% 10,938 7.0% 11,588
Bonds 4.7% 7,230 5.0% 6,618
Managed fund units –– 7.0% 2,598
Other (with profit) assets 4.7% 113 7.0% 49
Total market value of assets 18,281 20,853
Present value of scheme liabilities (31,748) (29,990)
Deficit in schemes (13,467) (9,137)
Related deferred tax 4,040 2,741
Net pension liability (9,427) (6,396)
If the FRS17 net deficit in respect of the two schemes of £9,427,000 at 31 October 2002 (2001:£6,396,000)
had been accounted for as a liability of the Group at that date, the balance on the Group’s profit and loss reserve
at that date would have been reduced from £11,090,000 to £1,663,000 (2001:£9,813,000 to £3,417,000).
The figures shown above were calculated on the basis of the following assumptions:
2002 2001
Discount rate 6.1% 6.0%
Rate of increase in salaries 3.4 – 4.4% 3.4 – 4.4%
Rate of increase in deferred pensions 2.4 – 5.0% 2.4 – 5.0%
Rate of increase in pensions in payment (where applicable) 2.4% 2.4%
Inflation assumption 2.4% 2.4%
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
PAGE 38
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 8. PENSIONS – continued
Analysis of movement in the deficit in the schemes during the year:
2002
£000
Opening deficit in the schemes (9,137)
Current service cost (785)
Contributions 889
Other finance costs (468)
Actuarial losses (3,966)
Closing deficit in the schemes (13,467)
Amounts that would have been included within the financial statements for the year ended 31 October 2002
had FRS17 been applied are as follows:
Amounts included within operating profit:
2002
£000
Current service cost 785
Amounts included as other finance costs:
2002
£000
Expected return on scheme assets 1,341
Discount on scheme liabilities (1,809)
Net charge (468)
Amounts that would have been included within the statement of total recognised gains and losses for the year
ended 31 October 2002 had FRS17 been applied are shown below, expressed in monetary amounts and as a
percentage of:
(i) scheme assets at the balance sheet date;
(ii) present value of the scheme liabilities at the balance sheet date.
2002
£000 %
Difference between actual and expected return on scheme assets (i) (4,333) (23.7)
Experience gains and losses arising on scheme liabilities (ii) (217) (0.7)
Effects of changes in assumptions underlying the present value of the scheme liabilities (ii) 584 1.8
Total actuarial losses (3,966) (12.5)
9. INTEREST PAYABLE
2002 2001
£000 £000
Bank overdraft interest 1,114 984
Loan stock interest (see Note 18) 2 2
Medium term loan interest 2,052 1,872
Finance lease interest 216 126
Amortisation of debt finance costs 102 -
3,486 2,984
PAGE 39
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 10.TAX ON PROFIT ON ORDINARY ACTIVITIES
2002 2001
As restated
1
£000 £000
Corporation tax:
Corporation tax charge for the year 298 593
Overseas taxation 2,362 1,285
(Over)/under provision in prior years (680) 15
Total current tax 1,980 1,893
Deferred tax:
Timing differences – current year (951) 794
Under/(over) provision in prior years 547 (47)
Total deferred tax (404) 747
Associate’s tax 29 12
Tax on profit on ordinary activities 1,605 2,652
The standard rate of current tax for the year is 30% (2001:30%).The current tax charge for the year is higher
(2001: lower) than 30% for the reasons set out in the following reconciliation:
2002 2001
As restated
1
£000 £000
Profit on ordinary activities before taxation 5,416 9,399
Tax on profit on ordinary activities at standard rate 1,625 2,820
Factors affecting charge:
Income not deductible for tax (624) (56)
Prior year adjustments (680) 15
Overseas profits taxed at rates higher than the standard rate 784 216
Deferred tax movements 875 (1,137)
Other – 35
Total current year tax rate 1,980 1,893
1
See Note 21.
11.DIVIDENDS
2002 2001
£000 £000
Dividends on cumulative preference shares of £1 each
Paid 30 April 2002 3.50p (2001: 3.50p) 2 2
Paid 31 October 2002 3.50p (2001: 3.50p) 2 2
4 4
Dividends on ordinary shares of 5p each
Interim paid 29 August 2002 2.45p (2001: 2.45p) 673 629
Final proposed 4.25p (2001: 4.25p) 1,166 1,145
Under provided in previous year – 53
1,839 1,827
Total dividends 1,843 1,831
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
PAGE 40
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 PAGE 41
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
11. DIVIDENDS – continued
The interim dividend paid on 29 August 2002 was higher than that provided for in the half year results to
30 April 2002 due to the issue of shares in July 2002 ranking for dividend.
The under provision for the final dividend in the year ended 31 October 2001 arose due to the issue of shares
after the previous year end ranking for dividend.
12. EARNINGS PER ORDINARY SHARE
The earnings and shares used in the calculations are as follows:
2002 2001
As restated
1
Ordinary Ordinary
shares shares
Earnings Number EPS Earnings Number EPS
£000 000s Pence £000 000s Pence
Basic 3,836 27,098 14.16 6,718 25,140 26.72
Additional shares issuable other than at
fair value in respect of options outstanding – 88 (0.05) – 98 (0.10)
Diluted 3,836 27,186 14.11 6,718 25,238 26.62
Earnings comprise profit for the financial year after deducting preference dividends of £4,000 (2001: £4,000).
Ordinary shares are calculated by reference to the average number of shares in issue in the year.An analysis of the
movement in ordinary shares during the year is shown in Note 22.
1
See Note 21.
13. INTANGIBLE FIXED ASSETS 
Group Development
costs Goodwill Total
£000 £000 £000
Cost
At 1 November 2001 4,256 24,789 29,045
Foreign exchange movements (34) – (34)
Acquired with subsidiary 60 – 60
Additions 990 3,554 4,544
Disposals (56) – (56)
At 31 October 2002 5,216 28,343 33,559
Amortisation
At 1 November 2001 1,566 – 1,566
Foreign exchange movements (30) – (30)
Acquired with subsidiary 32 – 32
Charge for the year 702 – 702
Disposals (56) – (56)
At 31 October 2002 2,214 – 2,214
Net book value
At 31 October 2002 3,002 28,343 31,345
At 31 October 2001 2,690 24,789 27,479
Goodwill arose on the acquisition of parts of the countermeasures, marine and military businesses.Additions to
goodwill during the year comprise goodwill arising on the acquisition of I.C.S. Electronics Ltd of £3,153,000 and
adjustments to goodwill arising in the prior year of £401,000. For further details of acquisitions see Note 25.
NOTES TO THE
FINANCIAL
STATEMENTS
– continued PAGE 42
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
14. TANGIBLE FIXED ASSETS
(a) Group Land and Plant and
buildings equipment Total
£000 £000 £000
Cost or valuation
At 1 November 2001 17,812 32,062 49,874
Foreign exchange movements (610) (669) (1,279)
Acquired with subsidiary 27 135 162
Additions 3,152 9,959 13,111
Disposals – (6,269) (6,269)
Transfers between categories (352) 352 –
Fair value adjustments (248) – (248)
At 31 October 2002 19,781 35,570 55,351
Depreciation
At 1 November 2001 1,032 14,941 15,973
Foreign exchange movements (22) (98) (120)
Acquired with subsidiary 22 43 65
Charge for the year 368 2,561 2,929
Disposals – (6,242) (6,242)
Transfers between categories (58) 58 –
At 31 October 2002 1,342 11,263 12,605
Net book value
At 31 October 2002 18,439 24,307 42,746
At 31 October 2001 16,780 17,121 33,901
Included within additions for the year is own work capitalised of £2,807,000 (2001: £931,000) relating to the
reconstruction of the production facility at Kilgore Flares Company LLC.
(b) Parent Land and Plant and
buildings equipment Total
£000 £000 £000
Cost
At 1 November 2001 1,168 491 1,659
Additions – 43 43
At 31 October 2002 1,168 534 1,702
Depreciation
At 1 November 2001 200 445 645
Charge for the year 37 34 71
At 31 October 2002 237 479 716
Net book value
At 31 October 2002 931 55 986
At 31 October 2001 968 46 1,014 PAGE 43
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
14. TANGIBLE FIXED ASSETS – continued
(c) Land and buildings Group Parent
2002 2001 2002 2001
£000 £000 £000 £000
Land and buildings comprise:
Freehold 18,613 16,644 – –
Long leasehold 1,168 1,168 1,168 1,168
19,781 17,812 1,168 1,168
Land and buildings are stated at cost or value:
30 September 1997 - depreciated replacement cost 5,820 5,820 – –
At cost 13,961 11,992 1,168 1,168
19,781 17,812 1,168 1,168
The 1997 land and buildings valuation was carried out by Chestertons, Chartered Surveyors, on the UK
properties, on a depreciated replacement cost for the two pyrotechnic sites, and on open market value for the
remainder.The effect of the revaluation is to increase annual depreciation by £36,000. In accordance with the
transitional requirements of FRS15 this valuation has not been updated.
If stated under historical cost principles the comparable amounts for the total of land and buildings would be:
Group Parent
2002 2001 2002 2001
£000 £000 £000 £000
Cost 17,684 15,715 1,168 1,168
Accumulated depreciation (1,727) (1,453) (237) (200)
Historical cost value 15,957 14,262 931 968
All other tangible fixed assets are stated at historical cost. Included in plant and equipment are assets of net book
value £3,627,000 (2001: £419,000) held under finance leases.
(d) Future capital expenditure Group Parent
2002 2001 2002 2001
£000 £000 £000 £000
Contracted for but not provided for 310 2,279 – -
15. FIXED ASSET INVESTMENTS
(a) Group Associated
undertaking
Trade share of
investments net assets Total
£000 £000 £000
At 1 November 2001 10 914 924
Retained profit of associated undertaking – 60 60
Dividend received – (12) (12)
At 31 October 2002 10 962 972
NOTES TO THE
FINANCIAL
STATEMENTS
– continued PAGE 44
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
15. FIXED ASSET INVESTMENTS – continued
(b) Parent Shares in Shares in Loans to
subsidiary associated subsidiary Trade
undertakings undertaking undertakings investments Total
£000 £000 £000 £000 £000
Cost
At 1 November 2001 28,738 13 6,250 10 35,011
Additions 5,909 ––– 5,909
At 31 October 2002 34,647 13 6,250 10 40,920
Provision for impairment
At 1 November 2001 and 31 October 2002 1,336 ––– 1,336
Net book value
At 31 October 2002 33,311 13 6,250 10 39,584
At 31 October 2001 27,402 13 6,250 10 33,675
(c) Subsidiary and associated undertakings
The subsidiary and associated undertakings which, in the opinion of the directors, affected the results of the
Group are shown below.
% of issued
ordinary share
capital controlled
Country of by Chemring
Subsidiary undertakings incorporation Group PLC Activity
Pains Wessex Ltd England 100 Countermeasures and pyrotechnics
PW Defence Ltd England 100 Pyrotechnics
McMurdo Ltd England 100 Marine safety and electronics
Kembrey Wiring Systems Ltd England 100 Wiring harnesses
I.C.S. Electronics Limited England 100 Marine electronics
Alloy Surfaces Company, Inc. Delaware, USA 100 Countermeasures and chemical coatings
Kilgore Flares Company LLC Delaware, USA 100 Countermeasures and pyrotechnics
Pains Wessex Australia Pty Ltd Australia 100 Countermeasures and pyrotechnics
Pirotécnia Oroquieta S.L. Spain 51 Marine pyrotechnics
Associated undertaking
CIRRA S.A. France 49 Countermeasures
16. STOCK
Group
2002 2001
£000 £000
Raw materials 9,017 9,026
Work in progress 6,017 5,602
Finished goods 2,773 3,603
17,807 18,231
There are no significant differences between the replacement costs and the stock values shown above.
NOTES TO THE
FINANCIAL
STATEMENTS
– continued PAGE 45
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
17. DEBTORS
Group Parent
2002 2001 2002 2001
£000 £000 £000 £000
Trade debtors 19,692 18,279 7 4
Amounts recoverable on contracts – 5,563 – –
Amounts owed by subsidiary undertakings – – 52,388 43,315
Group relief recoverable – – 1,238 1,256
Advance corporation tax recoverable 467 691 – 691
Other debtors 11,489 5,316 1,097 843
Prepayments and accrued income 988 645 94 212
32,636 30,494 54,824 46,321
Included within other debtors are amounts recoverable under an insurance claim relating to an incident at
Kilgore Flares Company LLC (see Note 26) and amounts held in respect of own shares of £264,000
(2001:£264,000).
18. CREDITORS DUE WITHIN ONE YEAR
Group Parent
2002 2001 2002 2001
£000 £000 £000 £000
Bank overdrafts (see Note 19) 17,345 9,138 18,073 5,880
Bank loans (see Note 19) 5,363 2,000 4,365 2,000
Loan stock (unsecured) 40 40 40 40
Trade creditors 12,293 12,509 279 201
Amounts owed to subsidiary undertakings – – 9,046 5,985
Other creditors 3,563 4,247 – –
Obligations under finance leases (see Note 19) 928 185 – 4
Corporation tax payable 974 125 – –
Overseas tax payable 2,684 1,727 – –
Other taxation and Social Security 1,538 659 – –
Accruals and deferred income 3,394 2,135 1,386 767
Proposed dividends 1,166 1,145 1,166 1,145
49,288 33,910 34,355 16,022
Loan stock is repayable on three months’ notice from holders and attracts interest at 1% below base rate.
The loan stock is held by certain vendor shareholders of Kembrey Limited (formerly Kembrey Plc), acquired in
August 1994, and is guaranteed by National Westminster Bank Plc.
Bank loans and overdrafts held with Bank of Scotland are secured by a full debenture over the assets of the UK
businesses and Kilgore Flares Company LLC, and are also subject to cross guarantees between all UK
subsidiaries. Finance lease obligations are secured on the related assets.
NOTES TO THE
FINANCIAL
STATEMENTS
– continued PAGE 46
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
19. CREDITORS DUE AFTER MORE THAN ONE YEAR
Group Parent
2002 2001 2002 2001
£000 £000 £000 £000
Medium term loan – UK 20,491 26,348 20,491 26,348
– overseas 4,360 5,434 – –
Obligations under finance leases 2,524 215 – –
Other creditors 2,000 100 2,000 100
29,375 32,097 22,491 26,448
The average interest rate applicable to the UK medium term loan is 6.5% (2001: 8.0%) and the average rate for
the overseas medium term loan is 5.1% (2001: 5.8%) per annum.The overseas medium term loan is secured on
the assets of certain of the overseas businesses. Finance lease obligations attract interest rates of between 2% and
3% above base rate. Obligations under finance leases falling due within one to two years included above total
£909,000.
An analysis of the Group’s borrowings and the maturity profile of these borrowings is as follows:
Group
2002 2001
£000 £000
Bank overdraft 17,345 9,138
UK medium term loans –  sterling denominated 14,002 15,250
–  US dollar denominated 10,854 13,098
Overseas medium term loans –  US dollar denominated 4,803 5,018
–  Australian dollar denominated 555 416
Obligations under finance leases 3,452 400
Unsecured loan stock 40 40
51,051 43,360
Creditors falling due within:
One year 23,676 11,363
One to two years 6,176 6,753
Two to five years 19,362 23,546
After five years 1,837 1,698
51,051 43,360
NOTES TO THE
FINANCIAL
STATEMENTS
– continued 20. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
The Group’s financial instruments comprise borrowings, cash and various non-derivative financial instruments
such as trade debtors and trade creditors.As permitted by FRS13 Derivatives and other financial instruments:
Disclosures short term debtors and creditors have been excluded from all FRS13 disclosures.
The Group uses financial instruments to manage financial and commercial risk wherever it is appropriate to do so.
The main risks arising from the financial instruments of the Group are interest risk, foreign exchange risk and
liquidity risk.The Group’s policies in respect of the management of these risks, which remained unchanged
throughout the year, were as follows:
Interest risk: The Group finances its operations through a mixture of retained profits, bank
borrowings and leasing lines of credit.The UK borrowings are denominated in sterling
and US dollars and are subject to fixed rates of interest through an amortising LIBOR
swap and floating rates of interest linked to Bank of Scotland base rate to provide
flexibility.The overseas borrowings are denominated in local currency and are
predominantly subject to fixed rates of interest.
Foreign exchange risk: Foreign exchange risk can be subdivided into two components, transactional risk and
profit translation risk:
Transactional risk – The Group policy is for subsidiaries to maximise the use of hedging
against transactional currency exposures against the currency in which their results are
measured.The measurement and control of this risk is closely monitored on a Group-
wide basis.
Profit translation risk –The Group translates overseas profits and net assets in accordance
with the accounting policy in Note 1.The translation risk on net assets is controlled by
the transfer of currencies between Group companies.Any remaining translation
differences are dealt with through the Group’s statement of total recognised gains and
losses.
Liquidity risk: Details of the maturity profiles of the Group’s funding can be found in Note 19.
The total undrawn committed borrowing facilities at the financial year end amounted to £5,273,000
(2001: £9,704,000).
PAGE 47
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 20. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS – continued
The interest rate risk profile of the Group’s financial assets and liabilities is as follows:
(i) Financial assets
2002 2001
Floating Fixed Floating Fixed
rate rate Total rate rate Total
£000 £000 £000 £000 £000 £000
Sterling 4,957 – 4,957 3,436 – 3,436
US dollar 2,837 – 2,837 2,416 – 2,416
Australian dollar 219 – 219 127 – 127
Other currencies 679 – 679 405 – 405
8,692 – 8,692 6,384 – 6,384
Offset in the UK (4,918) (3,966)
3,774 2,418
Disclosed as:
Cash at bank and in hand 3,774 2,418
(ii) Financial liabilities
2002 2001
Floating Fixed Floating Fixed
rate rate Total rate rate Total
£000 £000 £000 £000 £000 £000
Sterling (28,123) (11,634) (39,757) (17,354) (12,413) (29,767)
US dollar (10,854) (4,803) (15,657) (12,098) (5,018) (17,116)
Australian dollar – (555) (555) – (443) (443)
(38,977) (16,992) (55,969) (29,452) (17,874) (47,326)
Offset in the UK 4,918 3,966
(51,051) (43,360)
Disclosed as:
Bank loans and overdrafts (22,708) (11,138)
Medium term loan – UK (20,491) (26,348)
– overseas (4,360) (5,434)
Obligations under finance leases (3,452) (400)
Loan stock (40) (40)
(51,051) (43,360)
A right of offset exists for currency amounts held within the UK by Bank of Scotland.These are used to offset
the interest charged on the UK overdraft which bears interest at 1.75% above LIBOR. Cash at bank and in hand
consists primarily of overseas funds which are used as short term intra-group financing as well as an internal
exchange rate hedge.
The weighted average interest rate of fixed rate financial liabilities at 31 October 2002 was 7% (2001: 7%) and
the weighted average period of funding was five years (2001: six years).
The Group has an amortising interest rate swap that expires in 2005 at a rate of 7.42%, but otherwise had no
derivative financial instruments outstanding at 31 October 2002.The opinion of the Board is that the fair value
of the Group’s financial liabilities after taking account of the interest rate swap is £847,000 (2001: £891,000)
higher than the book value.The Board has no intention of realising this liability.The fair value of the financial
assets is their book value.
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
PAGE 48
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 21. PROVISIONS FOR LIABILITIES AND CHARGES
(a) Movement in the year – Group
Deferred Other
taxation provisions Total
£000 £000 £000
Balance at 1 November 2001 as previously reported 606 100 706
Prior year adjustment on adoption of FRS19 389 – 389
At 1 November 2001 as restated 995 100 1,095
Provided in the year (404) 655 251
Utilised in the year – (100) (100)
Transfer from current tax 398 – 398
At 31 October 2002 989 655 1,644
The other provisions are held in respect of commitments to fund dilapidations claims in respect of certain
Group leasehold properties, warranty claims and self insurance reserves, and are expected to be utilised within
two to five years.
Prior year adjustment
As explained in Note 1, FRS19 has been adopted in the year.As a result, a prior year adjustment of £79,000 to
shareholders’ funds at 31 October 2000 was required to make full provision for deferred tax liabilities.The adoption
of FRS19 also resulted in a reduction to the previously reported profits for the financial year ended
31 October 2001 by £310,000, and a reduction in profits for the current financial year of £11,000.
(b) Deferred tax provision at year end
Deferred tax provided in the financial statements is as follows:
Group Parent
2002 2001 2002 2001
As restated
1
£000 £000 £000 £000
Capital allowances in excess of depreciation 1,950 1,848 (1) (31)
Other timing differences (650) (706) 124 (36)
Discount (311) (147) (123) 67
989 995 – –
1
See above.
22. CALLED-UP SHARE CAPITAL
2002 2001
£000 £000
Authorised
62,500 7% cumulative preference shares of £1 each 62 62
30,000,000 ordinary shares of 5p each 1,500 1,500
1,562 1,562
Issued, allotted and fully paid
62,500 7% cumulative preference shares of £1 each 62 62
27,435,972 (2001: 26,931,222) ordinary shares of 5p each 1,372 1,347
1,434 1,409
The 7% cumulative preference shares confer no rights to vote, except on certain specified matters.
PAGE 49
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 22. CALLED-UP SHARE CAPITAL – continued
During the year 504,750 ordinary shares were issued as detailed below:
Number Consideration
£000
Acquisition (see Note 25) 468,750 1,362
Share options exercised 36,000 54
504,750 1,416
Share options
The following options to subscribe for ordinary shares granted under various share option schemes were
outstanding at 31 October 2002:
(a) The Chemring 1998 Executive Share Option Scheme
Exercise price
Date Number of ordinary per share Dates between which options
of grant shares under option £ may be exercised
6 Apr 1998 0010,824 1.395 6 Apr 2001 – 5 Apr 2008
3 Feb 2000 0280,000 2.36 3 Feb 2003 – 2 Feb 2010
23 Jan 2002 0054,000 3.805 23 Jan 2005 – 22 Jan 2012
(b) The Chemring Group PLC Share Based Incentive Scheme (“The ESOP”)
Exercise price
Date Number of ordinary per share Dates between which options
of grant shares under option £ may be exercised
13 Jan 1997 3,936 – 13 Jan 1997 – 13 Jan 2004
13 Jan 1997 7,872 – 13 Jan 2000
1
– 13 Jan 2004
1
From 13 January 2000 – 12 January 2002, only 50% of the option could be exercised; thereafter 100% of the
option could be exercised.
The shares under option in this scheme have been purchased in the market and are held by the Trustees of the ESOP .
23. RESERVES 
(a) Group Share Special Revenue
premium capital Revaluation reserves
account reserve reserve As restated
1
Total
£000 £000 £000 £000 £000
As previously reported at 31 October 2001 19,335 12,939 2,518 10,202 44,994
Prior year adjustment (see Note 21):
Effect of adoption of FRS19 ––– (389) (389)
As restated at 1 November 2001 19,335 12,939 2,518 9,813 44,605
Arising on issue of shares 1,391 ––– 1,391
Retained profit ––– 1,997 1,997
Loss arising from foreign exchange translations ––– (756) (756)
Transfer between reserves –– (36) 36 –
At 31 October 2002 20,726 12,939 2,482 11,090 47,237
The share premium account, special capital reserve and the revaluation reserve are not distributable.
Included within revenue reserves is £949,000 of retained profits (2001: £901,000) relating to the associated
undertaking.
1 
See Note 21.
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
PAGE 50
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 23. RESERVES – continued
(b) Parent Share Special
premium capital Revenue
account reserve reserves Total
£000 £000 £000 £000
At 1 November 2001 19,335 12,939 5,398 37,672
Arising on issue of shares 1,391 –– 1,391
Loss after taxation –– (466) (466)
Dividends –– (1,843) (1,843)
Foreign exchange differences –– 597 597
At 31 October 2002 20,726 12,939 3,686 37,351
The share premium account and special capital reserve are not distributable.
24. OBLIGATIONS UNDER NON-CANCELLABLE OPERATING LEASES
Group Group
2002 2001
Land and Plant and Land and Plant and
buildings equipment buildings equipment
£000 £000 £000 £000
Within one year 3 679 32 256
Two to five years 383 1,406 330 657
More than five years 268 – 268 –
654 2,085 630 913
25. ACQUISITIONS
The Group acquired all of the issued share capital of I.C.S. Electronics Limited on 9 July 2002.An analysis of
the assets acquired and provisional fair value adjustments is shown below:
Alignment of
Book accounting Fair value Fair
value policies adjustments value
£000 £000 £000 £000
Fixed assets 247 – (122) 125
Stock 598 (188) – 410
Debtors 407 –– 407
Cash 98 –– 98
Creditors (417) – (350) (767)
Deferred taxation (29) –– (29)
Total net assets acquired 904 (188) (472) 244 
Goodwill 3,153
3,397
Consideration:
Cash 135
Share capital issued (see Note 22) 1,362 
Deferred consideration 300
Deferred contingent consideration 1,600
3,397
During the year ended 31 October 2002, I.C.S. Electronics Limited contributed turnover of £634,000 and
operating profit of £65,000 to the Group’s results. I.C.S. Electronics Limited also contributed £155,000 to the
Group’s net operating cash flows, utilised £30,000 of capital expenditure and paid interest of £2,000. During
the year ended 31 May 2001 I.C.S. Electronics Limited made profits before tax of £7,000.
PAGE 51
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 25. ACQUISITIONS – continued
2000/01 Acquisitions
The financial statements for the year ended 31 October 2001 did not disclose that fair values were provisional but
in accordance with FRS7 Fair values in acquisition accounting, fair values and goodwill in respect of acquisitions
made in the previous financial year have now been adjusted as follows:
Kilgore Flares Company LLC
The fair value of the net assets acquired has been revised from £11,946,000 to £11,243,000.This is due to a
reduction in the value of fixed assets acquired of £248,000, a reduction in the value of stock acquired of
£320,000 and an increase in liabilities acquired of £135,000. In addition, the fair value of the consideration has
been reduced by £418,000. Goodwill is now calculated to be £5,762,000.
Pirotécnia Oroquieta S.L.
The fair value of assets acquired has been reduced by £75,000 to reflect additional liabilities that existed at
acquisition. Goodwill is now calculated to be £663,000.
Martin Electronics Inc.
The fair value of consideration has been increased by £41,000. Goodwill is now calculated to be £519,000.
26. INSURANCE CLAIM
Following the incident at Kilgore Flares Company LLC on 18 April 2001, the Group lodged a claim with its
insurers for property damage and business interruption. Legal proceedings in respect of this claim were filed in a
Tennessee Court in March 2002 for an additional £11,000,000 over and above the £3,200,000 which had been
received from insurers at that time.Alongside the legal process, negotiations with the Group’s insurers have
continued throughout the year ended 31 October 2002.
At 31 October 2002, the Board has made a further estimate of the additional proceeds which it believes that
Kilgore is entitled to receive under the insurance policy, after taking advice from its professional advisers,
of which £7,300,000 has been recognised in these financial statements. Of this, £5,559,000 (2001: £5,533,000)
has been credited to cost of sales with the balance, net of legal and professional costs of £618,000, being allocated
as material damage proceeds.As the material damage related to fixed assets, the surplus of £1,123,000 has been
accounted for as a profit on disposal, in accordance with FRS15, and included separately in the profit and loss
account (2001: profit on disposal relates to sale of freehold property). See Note 5.
At 31 October 2002, payments totalling £3,200,000 had been received from the Group’s insurers. Subsequent to the
year end a further payment of £2,500,000 was received, bringing the total received to date to £5,700,000.This level
of recovery approximates to the amount recognised in the financial statements for the year ended 31 October 2001.
The balance of the claim that had not been recovered from the insurers at the year end was £9,633,000
(2001: £3,007,000) which has been included within other debtors.This outstanding balance has been reduced to
£7,133,000 since the year end following receipt of the further payment of £2,500,000 detailed above.
27. CONTINGENT LIABILITIES
The Group’s captive insurance company CHG Insurance Limited, based in Guernsey, has provided the following
insurance cover for the Group since 31 October 2001:
• the first £2.5 million of material damage and business interruption cover, subject to a maximum liability of
£3.5 million in any one year;
• the first £1 million of public and products liability insurance for the Group’s products which are exported to
the US.
Additional cover in respect of these risks is placed with external insurers.
NOTES TO THE
FINANCIAL
STATEMENTS
– continued
PAGE 52
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002 FINANCIAL
HIGHLIGHTS
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
96,327
14.16
5,416
48,671
67,169
95,245
7,127
9,399
22.04
26.72
33,225
46,014
PAGE 53 SUMMARY
FINANCIAL
INFORMATION
PAGE 54
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
2002 2001 2000
As restated
1
As restated
1
£000 £000 £000
Turnover
Defence
Countermeasures 45,725 51,352 28,538
Military pyrotechnics 17,942 12,991 11,169
63,667 64,343 39,707
Non-defence
Marine safety 21,345 19,356 17,700
Wiring harnesses 9,305 9,594 7,608
Chemical coatings 2,010 1,952 2,154
32,660 30,902 27,462
96,327 95,245 67,169
Operating profit 7,690 11,971 8,806
Profit before taxation 5,416 9,399 7,127
Dividend per ordinary share 6.70p 6.70p 6.30p
Basic earnings per ordinary share 14.16p 26.72p 22.04p
Shareholders’ funds 48,671 46,014 33,225
1 
See Note 21 PAGE 55
NOTICE AND
AGENDA OF
ANNUAL GENERAL
MEETING
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
Notice is hereby given that the ninety-seventh Annual General Meeting of the shareholders will be held at
14.30 hours on Monday 24 March 2003 at The Solent Hotel, Rookery Avenue,Whiteley, Fareham, Hampshire
PO15 7AJ for the purpose of transacting the ordinary business referred to at “1” to “5” below and also, as special
business, for the purpose of considering and (if thought fit) passing the resolution numbered “6” below as an
ordinary resolution and the resolutions numbered “7” and “8” below as special resolutions.
1. To receive and adopt the financial statements for the year ended 31 October 2002 together with the reports
of the directors and auditors thereon.
2. To approve the payment of a final dividend of 4.25p per ordinary share for the year ended 31 October 2002
to be paid on 11 June 2003 to shareholders on the register at the close of business on 16 May 2003.
3. To re-elect Mr D R Evans who retires by rotation under the provisions of Article 92.1 of the Company’s
Articles of Association.
4. To re-elect Mr P A Rayner who retires by rotation under the provisions of Article 92.1 of the Company’s
Articles of Association.
5. To re-appoint the auditors and to authorise the directors to fix their remuneration.
Ordinary Resolution
6. THAT the Board be and it is hereby generally and unconditionally authorised pursuant to and in accordance
with section 80 of the Companies Act 1985 (‘the Act’) to exercise all the powers of the Company to allot and
to make offers or agreements to allot relevant securities (as defined in section 80(2) of the Act) up to an
aggregate nominal amount of £128,201 as at the date hereof provided that this authority shall expire at the
commencement of the next Annual General Meeting of the Company after the passing of this resolution save
that the Company may before the expiry of this authority make an offer or agreement which would or might
require relevant securities to be allotted after such expiry and the Board may allot relevant securities in
pursuance of such offer or agreement as if the authority conferred hereby had not expired.
Special Resolutions
7. THAT subject to resolution 6 being passed and pursuant to and in accordance with the authority thereby
granted, the Board be and it is hereby empowered pursuant to section 95 of the Act to allot equity securities
(as defined in section 94 of the Act) pursuant to such authority as if section 89(1) of the Act did not apply
to any such allotment provided that this power shall be limited to the allotment of equity securities up to an
aggregate nominal value of £68,589 and shall expire at the commencement of the next Annual General
Meeting of the Company after the passing of this resolution or on 31 May 2004 (whichever is the earlier)
save that the Company may before such expiry make an offer or agreement which would or might require
equity securities to be allotted after such expiry and the Board may allot equity securities in pursuance of
such offer or agreement as if the power conferred hereby had not expired.
8. THAT the Articles of Association of the Company be amended by incorporating the changes marked upon
the form produced to the meeting and signed by the Chairman for the purposes of identification.
By Order of the Board
S L ELLARD – Secretary
1650 Parkway
Whiteley
Fareham
Hampshire
PO15 7AH
3 February 2003 PAGE 56
CHEMRING GROUP PLC
FINANCIAL STATEMENTS 2002
NOTES
1. A member entitled to attend and vote at the above meeting is entitled to appoint one or more proxies (who
need not be members of the Company) to attend and (on a poll) vote instead of him.
2. Preference shareholders are not entitled to attend and vote at the meeting.
3. A form of proxy for those entitled to vote is enclosed with this notice and to be valid, must be lodged with
the Company’s Registrars not less than forty-eight hours before the time appointed for holding the
meeting.
4. Copies of service contracts between the Company and certain of its directors are available for inspection at
the registered office during normal business hours on each business day, and will be available for inspection
at the place of the Annual General Meeting from 14.15 hours until the close of the meeting.
5. Explanatory notes on resolutions 6, 7 and 8 are given in the directors’ report on pages 14 to 16.
NOTICE AND
AGENDA OF
ANNUAL GENERAL
MEETING
– continued  CHEMRING GROUP PLC
1650 Parkway,Whiteley, Fareham, Hampshire PO15 7AH, England
Telephone +44 1489 881880 Facsimile +44 1489 881123