Chemring Group Plc (LON:CHG) has announced its interim results for the six months to 30 April 2024.
Record order book, full year expectations unchanged, strong long-term prospects
| As reported | At H1 2023 exchange rates | ||||
| H1 2024 | Change | H1 2024 | Change | H1 2023* | |
| Continuing operations | |||||
| Order book (£m) | 1,040.6 | +39% | 1,046.7 | +40% | 749.5 |
| Order intake (£m) | 344.5 | +2% | 351.0 | +4% | 338.2 |
| Revenue (£m) | 223.4 | +8% | 226.1 | +10% | 206.3 |
| Underlying EBITDA**(£m) | 35.5 | +1% | 35.7 | +1% | 35.2 |
| Underlying operating profit** (£m) | 25.0 | -5% | 25.1 | -5% | 26.3 |
| Underlying profit before tax** (£m) | 22.7 | -10% | 22.8 | -10% | 25.3 |
| Underlying diluted earnings per share** (pence) | 6.6 | -11% | 6.6 | -11% | 7.4 |
| Statutory operating profit (£m) | 17.5 | -24% | 17.5 | -24% | 23.1 |
| Interim dividend per share (pence) | 2.6 | +13% | 2.3 | ||
| Net debt at 30 April (£m) | 75.3 | +201% | 75.2 | +201% | 25.0 |
Key highlights
| · Record H1 order intake of £345m and order book of £1,041m, the highest in Chemring’s history, providing excellent medium-term revenue coverage |
| · H1 2024 was in line with the Board’s expectations:- Revenue growth of 8%, driven by strong performance at Roke, up 19%, and growth in our specialist energetic materials businesses offset by a weaker period for Countermeasures- Underlying operating profit margin of 11.2% (H1 2023: 12.7%) primarily reflecting the impact of operational challenges at our Tennessee Countermeasures business in the period- Improved cash conversion of 83% (H1 2023: 64%) as focus on working capital management maintained· Awarded £90m of grant funding in support of our capex investment to increase the capacity of our Norwegian site, amid unprecedented levels of demand for its products |
| · Strategy to increase overall investment in our Energetics capacity expansion plan from £120m to £200m, excluding grant funding. Targeting increased revenues (£100m p.a.) and operating profit (£30m p.a.) in 2028· Good progress made on capital projects to date, with £34m of capex spent in total during the period, and customers increasingly moving to long-term partnering agreements |
| · A further £28m deployed into the £50m share buyback programme announced on 1 August 2023 |
| · Net debt was £75.3m (H1 2023: £25.0m), with the increase as expected due to our decision to invest in capex. Net debt to underlying EBITDA of 0.85 times (H1 2023: 0.36 times) remains below the Group’s internal target of less than 1.5 times cover· Interim dividend per share of 2.6p, up 13% (H1 2023: 2.3p) |
| · The Board’s expectations for 2024 are unchanged, with heavier H2 weighting of operating profit as previously communicated in February 2024. Approximately 93% (H1 2023: 90%) of expected H2 revenue was in the order book at 30 April 2024· The Group has the ambition to increase annual revenue to c.£1bn by 2030· The Group’s longer-term growth prospects are strong, underpinned by robust activity levels, our leading technological offerings, our people, high barriers to entry, and the investments we continue to make in our strong, high-quality business |
Michael Ord, Chemring Group Chief Executive, commented:
“The momentum seen in 2023 has continued with another period of record order intake and an order book of over £1bn, the highest in Chemring’s history. This strong order intake across both sectors has further increased our order cover for the second half of 2024 to 93% and the Board’s expectations for the full year are unchanged.
“The increase in geo-political tensions around the world is driving a fundamental rearmament upcycle which is expected to last for at least the next decade. This visibility, together with the support of grant funding and our customers’ desire to move to long-term partnering agreements, gives us the confidence to invest further in capacity and capability, reinforcing Chemring’s position as a key supplier to NATO, and positioning the Group well for the future. We now have the ambition to increase annual revenue to c.£1bn by 2030.”
Notes:
* H1 2023 comparative values have been re-presented on the basis of the classification of operations as discontinued. See note 13 for a reconciliation of the reported comparative values to the re-presented comparative values.
** All profit and earnings per share figures in this news release relate to underlying business performance (as defined below) from continuing operations unless otherwise stated.
The principal Alternative Performance Measures (“APMs”) presented are the underlying measures of earnings which exclude the amortisation of acquired intangibles, gain or loss on the movement on the fair value of derivative financial instruments and exceptional items. The directors believe that these APMs improve the comparability of information between reporting periods as well as reflect the key performance indicators used within the business to measure performance. The term underlying is not defined under IFRS and may not be comparable with similarly titled measures used by other companies.
EBITDA is defined as operating profit before interest, tax, depreciation and amortisation. Reference to constant currency relates to the re-translation of H1 2024 financial information at the H1 2023 exchange rates to reflect the movement excluding the impact of foreign exchange. The exchange rates applied are disclosed in note 12.
A reconciliation of underlying measures to statutory measures is provided below:
| Group – continuing operations: | Underlying | Non-underlying | Statutory |
| EBITDA (£m) | 35.5 | (6.5) | 29.0 |
| Operating profit (£m) | 25.0 | (7.5) | 17.5 |
| Profit before tax (£m) | 22.7 | (7.5) | 15.2 |
| Tax charge on profit (£m) | (4.3) | 1.3 | (3.0) |
| Profit after tax (£m) | 18.4 | (6.2) | 12.2 |
| Basic earnings per share (pence) | 6.7 | (2.3) | 4.4 |
| Diluted earnings per share (pence) | 6.6 | (2.3) | 4.3 |
| Group – discontinued operations: | |||
| (Loss)/profit after tax (£m) | (0.5) | 4.7 | 4.2 |
| Segments – continuing operations: | |||
| Sensors & Information EBITDA (£m) | 24.5 | (1.7) | 22.8 |
| Sensors & Information operating profit (£m) | 21.6 | (2.1) | 19.5 |
| Countermeasures & Energetics EBITDA (£m) | 19.4 | – | 19.4 |
| Countermeasures & Energetics operating profit (£m) | 11.8 | (0.6) | 11.2 |
The adjustments comprise:
| · amortisation of acquired intangibles of £1.0m (H1 2023: £1.8m, 2023: £3.0m) |
| · gain on the movement in the fair value of derivative financial instruments of £1.1m (H1 2023: £0.4m gain, 2023: £1.4m gain)· exceptional items of £7.6m (H1 2023: £1.8m, 2023: £22.2m), comprising: |
| o acquisition expenses of £1.7m (H1 2023: £1.8m, 2023: £3.7m), relating solely to deferred consideration accounted for as a post-acquisition expense under IFRS 2o expense of £5.0m (H1 2023: £nil, 2023: £nil) in relation to the defined benefit pension buy-in and buy-out. This comprises the settlement loss following the buy-in transaction agreed on 28 November 2023, as well as ongoing costs incurred in relation to the buy-in process which will eventually conclude with a buy-out of the schemeo costs relating to the change in senior management positions within the Group of £0.9m (H1 2023: £nil, 2023: £nil)o impairment of Chemical Detection assets £nil (H1 2023: £nil, 2023: £18.5m) |
| · tax impact of adjustments of £1.3m credit (H1 2023: £0.5m credit, 2023: £3.8m credit)· discontinued operations in respect of the Explosive Hazard Detection (“EHD”) business, net of tax, of £4.7m profit (H1 2023: £0.3m loss, 2023: £31.4m loss) which includes the reversal of an impairment of inventory, following an agreement being reached to sell certain assets related to the EHD business. |
