ii view: record era for defence firm Chemring

First-half results to 30 April

• Revenue up 5% to £234 million
• Order book up 25% to £1.3 billion
• Adjusted operating profit up 8% to £27 million
• Net debt of £93 million, up from £75 million
• Interim dividend up 4% to 2.7p per share
• Total of £3.3 million of a previously announced £40 million share buyback programme used

Guidance:

• Continues to target annual revenue of £1 billion by 2030, up from £510 million in 2024

Chief executive Michael Ord said:

"Operational and trading performance has been in line with our expectations, with improving returns for our shareholders underpinned by solid cash conversion. Both sectors benefitted from the receipt of several significant orders in the period, evidencing confidence in our market leading products and services.”

• Invest with ii: What is a Managed ISA? | Open a Managed ISA | Transfer an ISA

ii round-up:

Chemring Group (LSE:CHG) today reported a record order book, with the maker of defence equipment including fighter aircraft countermeasures to fool heat seeking missiles, again flagging long-term confidence in prospects. 

Record new orders of £488 million for the first half to late April pushed the group’s order book up by a quarter from a year ago to just over £1.3 billion. Revenues up 5% year-over-year to £234 million drove adjusted operating profit up 8% to £27 million. Chemring again reiterated its ambition to achieve annual revenues of £1 billion by 2030, a potential increase from £510 million last year. 

Shares in the FTSE 250 company rose 4% in UK trading having come into these latest results up by close to half so far in 2025 and near a 14-year high. That’s way ahead of a 1.5% improvement for the FTSE 250 index year-to-date. The UK’s biggest defence equipment maker BAE Systems (LSE:BA.) is up by just over two-thirds during that time.     

Chemring operates across the two divisions of Countermeasures & Energetics and Sensors & Information. Group products include cutting-edge raw materials and aircraft safety components as well as sensors to detect chemical weapons and equipment for used in electronic warfare. 

Hampshire headquartered Chemring highlighted factors including uncertainty around US support for NATO, ongoing events in Ukraine and enduring tensions in the Asia-Pacific region, as reasons for increased demand for defence equipment. 

Order intake for Countermeasures & Energetics rose 68% year-over-year to £418 million, pushed by demand for components used in light anti‐tank weapon systems and precision engineered devices for space and missile applications.  

New orders for the Sensors & Information business, including its specialist Roke technology unit, focused on areas such as cyber security, secret cloud, and artificial intelligence, reduced to £70 million from £96 million. As expected, demand was hit by delays in the publication of the UK’s Strategic Defence Review (SDR), although demand is expected to rise during the second half and following the UK’s recent SDR publication. 

Chemring's net debt rose 24% from a year ago to £93 million, fuelled by ongoing investment expenditure. An interim dividend of 2.7p per share, payable to eligible shareholders on 5 September, is up from 2.6p last year. 

ii view:

Started in 1905, Chemring today employs around 2,700 people largely across four production sites in four different countries including the UK and the US. Group customers include military organisations, security and law enforcement agencies, as well as commercial aerospace markets. Countermeasures & Energetics accounted for most revenues in 2024 at 58%, with Sensors & Information the balance.  

Chemring’s involvement in manufacture of defence equipment may deter some investors on ethical grounds. A forward price/earnings (PE) ratio above the three- and ten-year averages may suggest the shares are not obviously cheap. The group’s previous production challenges in the US 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.    

• 10 hottest ISA shares, funds and trusts: week ended 30 May 2025
• Time to be bullish or bearish? Five pros give their take
• How are retail investors investing their SIPPs?

On the upside, global geopolitical tensions continue to drive Chemring’s order book to new records, supportive of future revenues and profits. Both product and geographical diversity exist, with the Roke unit bringing a specialist focus on technological warfare. Investment expenditure continues to be made, while the dividend payment has increased consecutively for more than the last six years, leaving the shares on an estimated future yield of around 1.7%.

In all, and despite ongoing risks, some exposure to defence looks sensible in an uncertain world and as European countries announce big increases in military spending, with Chemring remaining a favoured play in the City.   

Positives: 

• Business type and geographical diversity
• Ongoing share buyback programme

Negatives:

• Defence is a volatile industry
• Exposure to currency movements

The average rating of stock market analysts:

Buy