Chemring posts jump in first half profits on the back of strong countermeasures market

Chemring posted a jump in first half profits, helped by insurance recoveries, reiterating its forecasts for the full-year on the back of strength in the countermeasures market as the company works to restart production at its UK countermeasures site.

Commenting on the firm's performance, Chemring chief Michael Ord stressed how "significant" changes had been implemented throughout the most recent trading period in order to improve safety and corporate governance, amid strong growth in the countermeasures market and with "significant" orders received during the period.

The company, which provides electronics and services for the aerospace, defence and security markets posted a 5% rise in sales for the six months ending on 30 April to reach £139.3m on as reported basis, for a 19% jump in underlying profits before tax versus a year earlier to hit £9.9m.

Also on an underlying basis, earnings per share printed at 1.2p, for a 9% increase, while net debt reduced by 1% to £84.0m.

Revenues at its Countermeasures and Energetics division fell by 6% to £85.5m and underlying profits by 22% to £7.1m, while in Sensors & Information sales soared by 27% to £53.8m and underlying profits by 47% to £10.0m.

The phased restart of the UK Countermeasures site remained on track and was scheduled to reach its steady state level of output by the end of the curent financial year, Ord said.

Chemring enjoyed £13m of insurance recoveries during the half related to the incident in 2018 at the UK Countermeasures site, offsetting site operating and remediation costs, such that the UK countermesures broke even for the period.

Financial expenses also declined, from £3.3m to £2.2m thanks to a reduction in the volatility of its working capital.

Sensors and Information was also said to be continuing to perform strongly, on the back of progress in US Programs of Record and deliveries on the Husky Mounted Detection System IDIQ contract with the Pentagon having already started.

Fully 95% of the anticipated second half revenues were now in the current order book or had been delivered to date, leading the board to keep its expectations for the financial year unchanged.

At period end, the group's order book stood at £494m, versus £363m one year ago, boosted by an order for F-35 countermeasures received by its Australian subsidiary and on the back of the HDMS contract won by the US Sensors and Information business, with £188m scheduled for delivery over the back half of 2019.

Commenting on the trading conditions within the various markets in which it operates, the company described those in the Countermeasures & Energetics sector as "robust", although in Energetics the domestic military market in the UK was said to be "challenging".