Chemring hails record order book, shares rally

Chemring posted a drop in interim profit and revenue on Tuesday, but shares surged as it reported a record order book.

In the six months to 30 April, underlying pre-tax profit fell 23% to £25.6m, with revenue down 4% to £212.1m. However, order intake jumped 81% to £338.2m and the order book rose 54% to £749.5m - its highest level in more than a decade.

Order intake for Sensors & Information was up 35% at £100m, while intake for Countermeasures & Energetics grew 113% to £238m, driven by strong demand at the company’s niche energetics businesses.

Chemring said the half was in line with the board’s expectations. "As previously announced, delays to order intake in 2022 following the extended US Continuing Resolution have resulted in a heavier weighting of trading performance and cash generation expected in the second half of the financial year," it said.

Chief executive Michael Ord said: "It has been a period of heightened activity across the group as we adapt to changing customer spending priorities. In response to increased global uncertainty and competition, demand for both technology-driven solutions and a resurgent demand for traditional defence capabilities, has resulted in record H1 order intake and an order book at its highest level for over a decade.

"The outlook for the global defence market is increasingly positive, with strong growth predicted over the next decade."

The company backed its full-year guidance.

At 0945 BST, shares were up 9.3% at 293.50p.

Russ Mould, investment director at AJ Bell, said: "While profits fell in its latest half-year results due to contract delays, investors seem to like the fact that Chemring is one of many companies experiencing stronger prospects thanks to the Russia-Ukraine war encouraging governments around the world to spend more on defence.

"It is also worth noting that Chemring’s cybersecurity arm Roke continues to see fast revenue growth as companies and governments boost their digital defences."