Chemring Group (CHG) H1 2024 earnings summary

Executive summary

• Revenue increased 8% year-over-year to GBP 223.4 million, with record order intake of GBP 345 million and an order book exceeding GBP 1.04 billion, providing strong medium-term revenue coverage.

• Operating profit declined 5% to GBP 25.0 million, mainly due to operational challenges at the Tennessee facility, but business momentum and demand remain robust.

• Cash conversion improved to 83% (up from 64%), reflecting productivity and disciplined working capital management.

• Board expectations for the full year remain unchanged, with 93% of H2 2024 revenue covered by the order book and strong visibility into 2025 and 2026.

• Long-term demand is robust, underpinned by geopolitical tensions and increased defense spending across NATO and allied markets.

Financial highlights

• Revenue up 8% to GBP 223.4 million; underlying operating profit down 5% to GBP 25.0 million; margin down to 11.2%.

• Underlying diluted EPS down 11% to 6.6p due to lower profits and higher tax/finance costs.

• Interim dividend of 2.6p declared, up 13%, progressing toward a 2.5x cover target.

• Net debt at GBP 75.3 million, net debt/EBITDA at 0.85x, well within headroom and below 1x leverage.

• Operating cash inflow of GBP 29.4 million, with working capital as a percentage of revenue stable at 18%.

Outlook and guidance

• Full-year outlook and board expectations remain unchanged, with 93% of H2 revenue covered and strong order book visibility.

• Medium- and long-term outlook increasingly robust, with strong growth expected in Energetics, Sensors & Information, space, missile devices, and Roke.

• Ambitious goal to reach GBP 1 billion annual revenue by 2030, supported by capacity expansion and bolt-on acquisitions.

• Capex guidance: GBP 40 million in 2024, peaking at GBP 80 million in 2025 as part of a GBP 200 million Energetics investment program.

• H2 operating profit expected to be higher, as previously communicated.