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) |
(2.3) |
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: |
|
|
|
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:
- 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 2
- 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 scheme
- costs relating to the change in senior management positions within the Group of £0.9m (H1 2023: £nil, 2023: £nil)
- 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.
Further details are provided in note 3.
For further information:
Rupert Pittman
|
Group Director of Corporate Affairs, Chemring Group PLC
|
01794 463401
|
James McFarlane
|
MHP Group
|
07584 142665
|
Ollie Hoare
|
|
07817 458804
|
Cautionary statement
This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could, is confident, or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Chemring's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are: increased competition, the loss of or damage to one or more key customer relationships, changes to customer ordering patterns, delays in obtaining customer approvals for engineering or price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment projects. Chemring undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.
Notes to editors
- Chemring is a global business that specialises in the manufacture of high technology products and the provision of services to the aerospace, defence and security markets
- Employing approximately 2,600 people worldwide, and with production facilities in four countries, Chemring meets the needs of customers in more than fifty countries
- Chemring is organised under two strategic product segments: Sensors & Information and Countermeasures & Energetics
- Chemring has a diverse portfolio of products that deliver high reliability solutions to protect people, platforms, missions and information against constantly changing threats
- Operating in niche markets and with strong investment in research and development (“R&D”), Chemring has the agility to rapidly react to urgent customer needs
www.chemring.com
Presentation
The presentation slides and a live audio webcast of the presentation to analysts will be available at the Chemring Group results centre www.chemring.com/investors/results-centre at 09.00 (UK time) on Tuesday 4 June 2024.
Analyst meeting
An analyst meeting will take place at 09.00 (UK time) on Tuesday 4 June 2024 at the offices of Investec Bank plc, 30 Gresham St, London EC2V 7QP. To confirm attendance please contact MHP Group:[email protected].
Photography
Original high resolution photography is available to the media by contacting MHP Group: [email protected].
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