US Department of Defense Contracts (4414B)

TIDMMAN

RNS Number : 4414B

Manroy PLC

17 April 2012

IMMEDIATE RELEASE

17 April 2012

MANROY PLC

US$10.4m (GBP6.6m) US DEFENCE CONTRACTS

NOVATED TO MANROY USA

Manroy PLC ("Manroy" or the "Group"), the AIM-quoted leading UK manufacturer of heavy machine guns and related products, today announces that the US Department of Defense (the "DoD") has novated a total of US$10.4m (GBP6.6m) of contracts to Manroy USA ("MUSA" or the "Company"), in which Manroy owns a 49% interest.

The novations are in relation to unfulfilled contracts that formed part of a larger circa US$34m (GBP21.5m) order placed by the DoD with Sabre Industries ("Sabre"), whose assets were acquired by MUSA in March 2011.

The contract awards include US$7.7m (GBP4.9m) of M2 Heavy Machine Gun ("HMG") barrels and bolts as well as a further US$2.5m (GBP1.6m) of M16 weapons, along with orders for M10 Chargers.

Initial production by MUSA to obtain First Article Acceptance ("FAA")* by the DoD for these contracts will commence during April 2012 at MUSA's new 125,000 sq. ft headquarters and manufacturing facility in Spindale, North Carolina. It is anticipated that product deliveries following FAA will commence in August 2012 with the majority of production deliveries being completed during 2013, subject to FAA.

This novation marks a highly important stage in MUSA's development as it follows a lengthy and detailed, but wholly successful, series of audits conducted by the DoD to approve the Company for this significant contract award. The audit procedure covered all aspects of the business including, operations, quality, finance, safety, government property storage and security. As a result, MUSA's Spindale facility is now fully qualified to accept DoD contracts that involve weapons and ammunition. These approvals also qualify the Company to bid for further DoD contracts in the world's largest defence market.

This award follows on from $2.0m (GBP1.3m) of contract awards won by MUSA over the past few weeks ($1.7m (GBP1.1m) of which were announced on 22 March 2012), and is a real turning point for the business, with further contract awards anticipated in the near term.

MUSA's credentials have also been further strengthened by its Small Business Accreditation status which was granted in June 2011 by the US Government. This is important as it allows the Company to bid for contracts that are 'set aside' for small businesses without competition from large companies.

The Directors believe the DoD has an annual requirement for approximately 10,000 M2 HMG barrels, of which approximately half were supplied by Sabre prior to its cessation of trade in 2010. Now the above contracts have been successfully novated, MUSA plans to bid for, and be involved with, this major DoD requirement. MUSA's extensive barrel manufacturing capability can be used for both the Group's US and UK businesses and so secure continuity of supply and quality for customers without reliance on external contractors.

The Group is currently completing a qualification process for barrels provided by MUSA. This process is expected to complete in the summer and will then trigger the supply of barrels from MUSA, keeping cash within the Group and helping to reduce UK barrel costs.

In March 2012, MUSA's previous premises in Alabama were sold and all production operations have been moved to Spindale. In addition, the small operations still being performed at Sabre's previous premises at Nashville will be closed in Autumn 2012, resulting in all production activities being managed from the company's sole US site at Spindale.

Glyn Bottomley, Manroy's Chief Executive, said: "The novation of these contracts to MUSA and the accreditation of its production capabilities is a major step forward in our planned expansion into the US defence market. This will also enable MUSA to bid directly for future defence contracts for the supply of the M2 HMG to the DoD for which it is qualified.

"MUSA continues to be the cornerstone of our expansion into this part of the world's largest defence market thereby enhancing the Group's overall ability and future performance."

Ends.

For further information please contact:

 
 Manroy Plc                                        Tel: 01252 874 177 
 Glyn Bottomley, Chief Executive 
 Paul Carter, Finance Director 
 
 Canaccord Genuity Limited - Nomad                 Tel: 020 7523 8350 
  and Broker 
 Robert Finlay 
 Peter Stewart 
 
 Tavistock Communications                          Tel: 020 7920 3150 
 Baron Phillips 
 Simon Compton

Notes to Editors:

Manroy is a UK based manufacturer of machine guns, mounts and other associated products. A key Ministry of Defence supplier for 26 years, Manroy currently manufactures, supplies and supports:

   --   the 12.7mm HMG, also known as the 0.50" calibre HMG; 
   --   the 7.62mm General Purpose Machine Gun 
   --   M2 Quick Change Barrel kits; 
   --   weapon tripods and mounting systems; and, 
   --   through MUSA, M16, M4 and M5 weapons;

The Group is focused on the opportunity to derive further value from existing partner relationships and to create additional revenue streams by continuing to expand its product offering, and to move into new territories.

*First Article Acceptance: First Article testing and approval ensures that the supplier can furnish a product that conforms to all contract requirements for acceptance. First article "testing" includes the necessary inspections and tests to ensure all product characteristics conform to drawings or specifications.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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