Interactive Investor

ii view: defence firm Chemring receives record orders

6th June 2023 15:59

by Keith Bowman from interactive investor

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This FTSE 250 company offers exposure to electronic warfare and information security. We assess prospects. 


First-half results to 30 April

  • Revenue down 4% to £212 million
  • Adjusted operating profit down 22% to £23 million
  • Order book up 54% to £749.5 million
  • Interim dividend up 21% to 2.3p per share
  • Net debt down 35% to £25 million

Chief executive Michael Ord said:

"It has been a period of heightened activity across the Group as we adapt to changing customer spending priorities. 

"The outlook for the global defence market is increasingly positive, with strong growth predicted over the next decade. This growing visibility and the increasing desire of our customers to move to long-term partnering agreements gives us the confidence to continue to invest for the future, balancing short-term performance with heightened long-term growth and value creation."

ii round-up:

Defence equipment maker Chemring Group (LSE:CHG) today detailed a record level of order intake, propelling its order book to its highest in more than a decade. 

Order intake up 81% year-to-year of £338 million pushed its order book up 54% compared to the end of the first half last year, taking it to almost £750 million. 

Shares in the FTSE 250 company rose by more than 8% in UK trading having come into this latest news down 9% year-to-date. That compares to a gain of 9% for defence equipment giant BAE Systems (LSE:BA.) and an almost unchanged performance for both rival QinetiQ Group (LSE:QQ.) and the FTSE 250 index itself during 2023. 

Chemring’s Countermeasures and Energetics products are used by military aircraft to fool ground to air missiles, along with providing cutting-edge raw materials and aircraft safety components. Its electronic sensors and information business supplies products to detect biological and chemical weapons, as well as being used in the theatre of electronic warfare.

Order intake for its Countermeasures and Energetics division rocketed 113% to £238 million. Orders for electronic sensors and information climbed by just over a third to £100 million. 

Revenues and operating profit for the half year to the end of April fell 4% and 22% respectively, hit by delays to order intake during 2022 following contested US government spending programmes and increased energy costs. 

Sales for Chemring’s specialist technology business, situated within its sensors and information business, rose 44% to £78 million. Demand for Roke’s advanced electronics now goes beyond government defence and national security agencies, with customers now including Vodafone Group (LSE:VOD) and Rolls-Royce Holdings (LSE:RR.).    

The interim dividend payment was hiked by 21% to 2.3p per share. 

ii view:

Tracing its history back to 1905, Chemring today employs around 2,500 people with customers situated in more than 50 countries. Headquartered in Romsey, Hampshire, its production facilities are situated across four countries. Its Countermeasures and Energetics division generates most of its sales at close to two-thirds. Geographically, the US comes first accounting for around half of its sales, followed by the UK at around a third and Europe most of the balance. 

For investors, defence orders can be volatile, with the timing of contracts often unpredictable. Costs for businesses generally remain elevated, currency movements can offer headwinds, while defence expenditure is politically driven and arguably easier to cut than say health or education. More investors and funds also avoid defence companies these days to comply with their own ethical viewpoint or objective.

More favourably, global geopolitical tensions remain high, with relations between the West and Russia and China now more strained. As such, defence spending is now a higher priority. Chemring's Roke business has been growing given an emphasis on areas such as cyber security, secret cloud, and artificial intelligence, while its dividend payment has increased consecutively for the last six years, leaving its shares sat on a forecast yield of around 2.5%. 

In all, and given an expanding order book and an analyst estimated consensus fair value price of over 380p per share, grounds for continued optimism look to remain. 


  • Business type and geographical diversity
  • Progressive dividend payment


  • Defence is a volatile industry
  • Exposure to currency movements

The average rating of stock market analysts:


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