Chemring swings to profit in H1, sees benefits from US defence spending

Defence contractor Chemring said on Thursday that it swung to a first-half profit and that it expects to continue to gain from increased US defence spending.

In the six months to 30 April, the company made a statutory pre-tax profit of £4.3m versus a loss of £6.8m in the same period a year ago, with underlying operating profit up 5% to £18.1m. However, revenue fell 8% to £229.3m.

The company’s countermeasures segment performed particularly well, driven by improving customer demand and continued consistency of operational performance across the segment.

The order book fell to £441.5m from £556.2m and Chemring said the reduction since October was down to the weaker US dollar and delivery of 40mm and non-standard ammunition orders, which were offset by an increase in Countermeasures driven by strong order intake in the US and UK.

Chemring declared an interim dividend of 1.1p per share, up from 1p, and said its expectations for the full year remain unchanged.

Chief executive Michael Flowers said: "Market conditions and business performance in the first half of 2018 have continued to strengthen, with margins and earnings improving across the group. We expect this trend to continue as the impact of significant increases to the US defence budget start to flow through, with the group maximising the impact of these improvements through improved delivery performance resulting from the Operational Excellence Programme.

“In light of strong order book cover and improved performance, the board's outlook for FY 2018 remains positive, with expectations unchanged. As previously highlighted, we expect a stronger contribution from countermeasures and scheduled reductions in energetics."

At 0850 BST, the shares were up 0.8% to 218.63p.