ii view: Chemring's ambition does not come cheap
A FTSE 250 defence company offering exposure to areas such as electronic warfare, secret cloud and cyber security. Buy, sell, or hold?
9th December 2025 16:35
by Keith Bowman from interactive investor
Full-year results to 31 October
- Revenue up 2% to £497.5 million
- Adjusted operating profit up 6% to £73.5 million
- Total dividend payment for the year up 3% to 8p per share
- Net debt of £89 million, up from £53 million a year ago
Guidance:
- Approximately 76% (2024: 77%) of expected 2026 revenue is already covered by the order book
Chief executive Michael Ord said:
"2025 has been another year of progress, delivering improved shareholder returns supported by strong margins and robust cash conversion. This performance reflects our commitment to building a resilient, high-quality Group.
“The outlook for sustained defence spending remains strong. Growing geopolitical uncertainty is driving increased expenditure across our target markets, particularly within NATO, and Chemring is well positioned to capitalise on this demand, which we expect to persist well into the next decade.”
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ii round-up:
Defence company Chemring Group (LSE:CHG) today reiterated its ambition to double annual revenue to £1 billion by 2030, but also flagged increased Norwegian plant expansion costs as part of ongoing investment plans.
Full-year revenue to late October rose 2% to £497.5 million, helping adjusted operating profit rise 6% year-over-year to £73.5 million. An order book up by a third from a year ago to a record £1.34 billion already supports three-quarters of revenues for the 2026 year ahead.
Shares in the FTSE 250 company eased 3% in UK trading having come into these latest results up by just under a half so far in 2025. That’s similar to the gain for shares of the UK biggest defence equipment maker BAE Systems (LSE:BA.). The FTSE 250 index is up 6% year-to-date.
Chemring operates across the two divisions of Countermeasures & Energetics and Sensors & Information. Strength in Energetics, including new business for rocket motors, offset softness in Sensors due to an ongoing delay for a UK government order.
Countermeasures & Energetics related revenues rose 18% to £327 million, with the division’s order book up 32% to £1.2 billion.
Sensors & Information revenues fell 17% to £175 million, although with the order book rising by 6% to £111 million. Order intake for the division’s specialist electronic warfare focused Roke tech-unit climbed almost a quarter to £162 million.
A planned expansion of a Norwegian manufacturing facility is now expected to cost £180 million as opposed to a previously forecast £145 million, although there is a government grant of £90 million.
The results came the same day as the German government agreed plans to spend €52 billion on new defence equipment. Shares in major German contractor Rheinmetall AG (XETRA:RHM) rose 4%.
A final Chemring dividend of 5.3p per share payable to eligible shareholders on 10 April, takes the total payment for the full year up 3% to 8p per share.
ii view:
Started in 1905, Chemring customers today include military organisations, security and law enforcement agencies, as well as commercial aerospace markets. The Hampshire headquartered company employs around 2,700 people largely across four production sites in four different countries including the UK and the US. Customers are spread across more than 50 countries.
Some investors may be put off by the defence sector on ethical grounds, and a forecast price/earnings (PE) ratio above the three- and 10-year averages could suggest the shares are not obviously cheap. Chemring’s previous production issues caused by severe weather should not be forgotten, while government spending on defence has historically been easier to cut than that of health or education.
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For the positives, demand remains robust with the order book at a record. Investment expenditure continues to be made, particularly in NATO partner Norway over the year ahead. Both product and geographic diversity exist, while the dividend payment has increased consecutively for more than the last seven years, leaving the shares on a forecast yield of around 1.7%.
On balance, and despite continuing risks, some longer-term exposure to defence looks to remain sensible, with a consensus analyst fair value estimate above 600p making Chemring a potential candidate.
Positives:
- Business type and geographical diversity
- Specialist tech-focused Roke business
Negatives:
- Defence is a volatile industry
- Exposure to currency movements
The average rating of stock market analysts:
Buy
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