RNS Number:2590N
Chieftain Group PLC
07 July 2003

Chieftain Group plc
Trading Update
7 July 2003


In the Chairman's statement released on 3 April with the Preliminary Results for
the year ended 31 December 2002 we stated that turnover had been lower in 2002
due to the "delayed release of work from orders already received and delays in
agreeing final contract values", a situation which has continued into this
financial year. After many months of negotiation, the largest of these final
contract values has been agreed which, whilst crystallising a final payment to
Chieftain of #1.9 million in mid-October (which greatly benefits the Group's
cash position), will mean that there will be a loss on the contract overall. The
loss on this substantial contract will have a significant impact on the results
for the year ending 31 December 2003 which will now fall short of market
expectations and may result in the Group making a loss before taxation for the
year as a whole.

The Group has received payments on account for work done but has not taken any
profits thus far in its published report and accounts. Some provision had been
made in previous financial years against the final settlement of the contract
however, the provision will not be sufficient to cover the losses which have now
been crystallised by the settlement. Your Board believe that a better settlement
may have been achieved had the arbitration procedure set out in the contract
been invoked. However, this is a lengthy and costly procedure, and therefore it
was decided to be in the best interests of the Company to come to a negotiated
settlement with the main contractor. The alternative was to prolong the
uncertainty and incur further costs in terms of fees and expenses and tie up
senior management time to pursue the claim when it could be better utilised
elsewhere with the ongoing business.

Another important consideration in the Board's decision to agree a settlement
was that until agreement had been reached a significant amount of cash tied up
in this contract could not be used to fund other projects. The final payment of
#1.9 million, receivable on 15 October 2003, will substantially reduce
Chieftain's bank borrowings and enable the Group to embark on other work. In the
short term, the loans which were made by some of the Directors last August will
remain in place to supplement our current bank facilities and enable the Group
to take full advantage of market opportunities as they arise.

The order book remains healthy and, notwithstanding the impact of the settlement
on current year results, the Board views the future with confidence. Our interim
results for the six months ended 30 June 2003 will be announced on Friday 29
August 2003.

Enquiries:

Chieftain Group plc                                  0191 263 5544
W P Taylor, Chief Executive
S Elliott, Finance Director



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