Chemring Group plc (LON:CHG), an international manufacturing and technology company supplying high-reliability products and innovative services into growing areas of Defence, Security, and Space markets, has issued the following update ahead of its Annual General Meeting taking place later today.
Current trading and outlook
The Board’s expectations for FY24 performance are unchanged.
In an environment of heightened geopolitical uncertainty the Group’s niche products and services position it well for continued growth. Both business sectors are aligned to areas of increased activity and budgets as customers revise their operational usage and stockpile assumptions, whilst also investing in digital and electronic capabilities such as active-cyber-defence, electronic warfare, and open-source intelligence.
The outlook for global defence markets is increasingly robust, with continued growth expected over the next decade. This growing visibility together with the flexibility provided by the Group’s strong balance sheet gives the Board confidence to continue to invest for the future, balancing near-term performance with longer-term growth and value creation.
Orders
The order book at 30 January 2024 was £991m (30 January 2023: £654m). Having started the financial year with order cover of 79%, Group expected FY24 revenue is now 87% (30 January 2023: 87%) covered by revenue generated in the period to date and the current order book.
In our Sensors & Information sector Roke has continued its positive momentum with strong order intake, a notable highlight being further wins in the area of electronic warfare with awards received from customers in Sweden and Japan. The order for ten Resolve electronic warfare systems to Japan is Roke’s first into the East-Asia region, securing a high quality reference customer.
Roke also received a £10m increase to the Project ZODIAC award received in September 2023. ZODIAC is the backbone of the British Army’s Land Intelligence, Surveillance, Target Acquisition, and Reconnaissance (“ISTAR”) Programme which will deliver an integrated ISTAR system to transform how the Army undertakes data-led decision-making to gain operational advantage. In total Roke’s ZODIAC programme contract awards now stand at £50m which will be delivered over the next two years.
Having started the year with 61% cover the Sensors & Information sector now has cover of 74% of expected FY24 revenue (30 January 2023: 70%).
In our Countermeasures & Energetics sector we continue to see increasing levels of demand for propellants and energetic materials. Our Norwegian-based subsidiary, Chemring Nobel, secured a contract from Diehl valued at £42m. Deliveries under this contract will be made between 2025 and 2030.
Our Chicago business continues to make good progress in winning new orders with commercial space launch providers, furthering our position as a leading supplier of mission critical components into the strategically important space launch and payload deployment markets. Recent wins include a $9m order from United Launch Alliance (“ULA”) for the ULA Standard Initiator which complements our existing position as the sole provider to NASA for the NASA Standard Initiator.
In Countermeasures, Chemring Australia secured a US$31m contract for the supply of MJU-68/B infrared countermeasures. The customer is the US Navy, which is also procuring on behalf of the US Air Force, and the governments of Italy, Belgium, Great Britain, Japan, Germany, Denmark, and Poland. This order, which was expected to have been received earlier in the financial year, will see deliveries being made from H2 FY24 through to February 2025.
Severe winter weather conditions have been experienced across a number of our northern hemisphere Countermeasures & Energetics sites giving rise to interruptions of manufacturing operations and resulting in delays to some deliveries scheduled in the first quarter; delivery impacts are expected to be recovered in the second half of the year.
Having started the year with 90% cover, the Countermeasures & Energetics sector now has cover of 94% of expected FY24 revenue (30 January 2023: 99%).
Interim results date
The Group will report its interim results for the six months ended 30 April 2024 on 4 June 2024.
Michael Ord, Group Chief Executive, commented:
“The current financial year continues broadly to plan despite severe weather impacting operations at some of our manufacturing sites which has increased our H2 weighting. Our order book momentum has been maintained with the receipt of several significant orders, demonstrating continued customer confidence in Chemring’s market leading products and services. The strong order intake across both sectors has further increased our order cover for FY24 to 87% and continues to build our order cover in the outer years, positioning the Group well for the future.”
