Chemring interim profit, revenue rise; 2022 guidance backed

In the six months to 30 April, underlying pre-tax profit pushed up 22% to £33.1m and revenue rose 11% to £220.4m. The interim dividend was lifted 19% to 1.9p a share.

Chemring said it performed in line with the board’s expectations, with a strong performance in both segments.

In the Sensors & Information segment, Roke continued the recent trend of double digit growth in orders, revenue and operating profit in a positive market.

In Countermeasures & Energetics, the underlying operating margin increased from 15.6% to 16.4% due to improved operational execution across the segment, it said.

Chemring maintained its expectations for the year. It said that around 85% of expected second-half revenue was in the order book as at 30 April, or has been delivered to date.

"Utility inflation, discretionary investment in Roke in H2 and adverse US order timing are expected to offset current FX tailwinds and an expected improved H1 weighting in 2022," it said.

Chemring also said delay in passing the US Department of Defence budget has slowed the process of doing business with government departments, and that as a result, some orders expected in the second quarter have been delayed.

"Given the level of order book coverage of second half revenue, this is not expected to impact FY22 results, but may adversely impact the first half/second half phasing in FY23," it said.

Chief executive Michael Ord said: "Current geo-political uncertainty, brought about by Russia's invasion of Ukraine, has highlighted the need for increased defence expenditure, particularly amongst European members of NATO. More broadly it has highlighted the need for countries to re-equip and modernise their defence capabilities to meet the threat of peer on peer conflict.

"Against this background, and with market-leading innovative technologies and services that are critical to our customers, I am confident that Chemring will continue to deliver both organic and inorganic growth, balancing near-term performance with long-term value creation."

At 0935 BST, the shares were down 6.8% at 341p. The shares are up 15% year-to-date, having benefited from Russia’s invasion of Ukraine.

Jefferies, which rates the stock at ‘hold’, said the lack of an upgrade to FY22 adjusted operating profit, despite first-half results representing 53% of FY22F consensus, "will surprise but this reflects investment in Roke's future growth and delayed contracts in the US".