Record order book, full year expectations unchanged, strong long-term prospects
| |
As reported |
At H1 2022 exchange rates |
|
| |
H1 2023 |
Change |
H1 2023 |
Change |
H1 2022 |
| |
|
|
|
|
|
|
Order intake (£m) |
338.2 |
+81% |
338.6 |
+82% |
186.4 |
| Revenue (£m) |
212.1 |
-4% |
210.2 |
-5% |
220.4 |
| Underlying EBITDA*(£m) |
35.7 |
-17% |
35.9 |
-16% |
42.8 |
| Underlying operating profit* (£m) |
26.6 |
-21% |
27.0 |
-19% |
33.5 |
| Underlying profit before tax* (£m) |
25.6 |
-23% |
26.0 |
-21% |
33.1 |
| Underlying basic earnings per share* (pence) |
7.7 |
-29% |
7.8 |
-28% |
10.8 |
| Statutory operating profit (£m) |
23.0 |
-22% |
23.4 |
-20% |
29.3 |
| Interim dividend per share (pence) |
2.3 |
+21% |
2.3 |
+21% |
1.9 |
| Net debt at 30 April (£m) |
25.0 |
+35% |
24.7 |
+34% |
18.5 |
| Order book (£m) |
749.5 |
+54% |
765.1 |
+57% |
488.1 |
Highlights
- H1 2023 was in line with the Board’s expectations. As previously announced, delays to order intake in 2022 following the extended US Continuing Resolution have resulted in a heavier weighting of trading performance and cash generation expected in the second half of the financial year for the Countermeasures & Energetics sector
- Record H1 order intake and order book, at the highest level in over a decade at £750m
- Order intake for Sensors & Information was £100m, up 35%, with Roke continuing to execute its growth strategy
- Order intake for Countermeasures & Energetics was £238m, up 113%, driven by strong demand at our niche energetics businesses including an order for our Scottish facility of £43m for the delivery of critical components used on the Next Generation Light Anti-Tank Weapon system (“NLAW”)
- Roke revenue in the first half was up 44% to £78m and order intake up 41% to £82m with the business well positioned to continue its growth trajectory in what continues to be a buoyant market
- Sensors & Information underlying operating margin was 19.4% (H1 2022: 21.5%, 2022: 18.5%), the decrease on H1 2022 driven by the Husky Mounted Detection System (“HMDS”) program transition to sustainment in H2 2022 and continuation of operating expense investment at Roke ahead of the revenue curve
- Countermeasures & Energetics underlying operating margin was 13.3% (H1 2022: 16.4%, 2022: 17.4%), the decrease reflecting the operational gearing impact of revenue being weighted towards the second half of 2023 and increased energy costs
- Net debt was £25.0m (H1 2022: £18.5m), the increase due to timing of working capital investment required to deliver H2 revenue. Net debt to underlying EBITDA of 0.33 times (H1 2022: 0.23 times). H2 cash generation is expected to improve markedly
- £90m capacity expansion plan to 2026 initiated to capitalise on growing demand in Energetics, delivering incremental revenue of £60m per annum
- Interim dividend per share of 2.3p, up 21% (H1 2022: 1.9p)
- The Board’s expectations for 2023 are unchanged. Approximately 90% (H1 2022: 85%) of expected H2 revenue was in the order book at 30 April 2023. The Group’s longer-term prospects are strong, underpinned by activity levels and our leading technological offering
Michael Ord, Chemring Group Chief Executive, commented:
“It has been a period of heightened activity across the Group as we adapt to changing customer spending priorities. In response to increased global uncertainty and competition, demand for both technology-driven solutions and a resurgent demand for traditional defence capabilities, has resulted in record H1 order intake and an order book at its highest level for over a decade.
“The outlook for the global defence market is increasingly positive, with strong growth predicted over the next decade. This growing visibility and the increasing desire of our customers to move to long-term partnering agreements gives us the confidence to continue to invest for the future, balancing short-term performance with heightened long-term growth and value creation. Chemring is well placed to capitalise on its many opportunities and with 90% of expected H2 revenues covered by the order book, the Board’s full year expectations are unchanged.”
Notes:
* All profit and earnings per share figures in this news release relate to underlying business performance (as defined below) unless otherwise stated.
The principal Alternative Performance Measures (“APMs”) presented are the underlying measures of earnings which exclude exceptional items, gain or loss on the movement on the fair value of derivative financial instruments, and the amortisation of acquired intangibles. 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 2023 financial information at the H1 2022 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: |
Underlying |
Non-underlying |
Statutory |
| EBITDA (£m) |
35.7 |
(1.4) |
34.3 |
| Operating profit (£m) |
26.6 |
(3.6) |
23.0 |
| Profit before tax (£m) |
25.6 |
(3.6) |
22.0 |
| Tax charge on profit (£m) |
(3.9) |
0.6 |
(3.3) |
| Profit after tax (£m) |
21.7 |
(3.0) |
18.7 |
| Basic earnings per share (pence) |
7.7 |
|
6.6 |
| Diluted earnings per share (pence) |
7.5 |
|
6.5 |
| Segments: |
|
|
|
| Sensors & Information EBITDA (£m) |
20.8 |
(1.8) |
19.0 |
| Sensors & Information operating profit (£m) |
19.0 |
(2.9) |
16.1 |
| Countermeasures & Energetics EBITDA (£m) |
22.3 |
- |
22.3 |
| Countermeasures & Energetics operating profit (£m) |
15.2 |
(1.1) |
14.1 |
The non-underlying adjustments comprise:
- amortisation of acquired intangibles of £2.2m (H1 2022: £2.1m, 2022: £4.6m)
- gain on the movement in the fair value of derivative financial instruments of £0.4m (H1 2022: £1.6m loss, 2022: £4.1m loss)
- acquisition expenses of £1.8m (H1 2022: £0.5m, 2022: £2.0m) which includes £1.7m of deferred consideration accounted for as a post-acquisition expense under IFRS 2
- tax impact of adjustments of £0.6m credit (H1 2022: £0.5m credit, 2022: £1.3m credit)
Further details are provided in note 3.
For further information:
|
Rupert Pittman
|
Group Director of Corporate Affairs, Chemring Group PLC
|
+44 (0) 1794 463401
|
|
James McFarlane
|
MHP Group
|
+44 (0) 20 3128 8100
|
|
Ollie Hoare
|
|
|
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 2,500 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
A video presentation and accompanying slides will be available at the Chemring Group results centre www.chemring.com/investors/results-centre at 07.00 (UK time) on Tuesday 6 June 2023.
Analyst meeting
An analyst meeting will take place at 09.00 (UK time) on Tuesday 6 June 2023 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 Catherine Chapman, MHP Group: [email protected] / tel: +44 (0) 20 3128 8339.
View the full press release in PDF format.