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Summary
- Chemring Group’s order book stood at £452 million as on 31 August 2020, and it grew by 4 percent year on year.
- Cohort PLC highlighted that the new export opportunities remain subdued due to the current travel restrictions.
- It continued to win new orders, and the order book increased to £210 million as on 31 August 2020, which was up from £183.3 million at the end of April 2020.
Chemring Group PLC (LON:CHG) and Cohort PLC (LON:CHRT) are industrials stocks mainly providing the solution to the aerospace and defence sector. It is noteworthy that shares of CHG and CHRT jumped by around 7.17 percent and 6.01 percent, respectively on 15 September 2020 after both companies reported resilient performance in their trading update. Shares of CHG were down by close to 1.67 percent, whereas shares of CHRT were up by around 0.74 percent from their previous closing price (as on 16 September 2020, before the market close at 11:50 AM GMT+1).
Chemring Group PLC (LON:CHG) - Delivered the first EW system (Resolve Light) to a US customer
Chemring Group PLC is a UK based group that provides technology solutions. The Group is engaged in the business of Electronic Systems & Sensors and Countermeasures and Energetics. It has manufacturing facilities in the US, UK, Australia and Norway. The Group's key area of focus is defense, security and commercial sector in the US, UK and Australia.
Trading update as reported on 15 September 2020
The Group highlighted that its supply chain remained steady and it was able to deliver essential services and products to the clients during the pandemic. As on 31 August 2020, Chemring had an order book of £452 million, and it grew by 4 percent year on year. The order book at the end of FY19 was £449 million, so the current order book is slightly above the last year's order. Countermeasures & Energetics segment had order cover for 82 percent for FY21 and short cycle Sensors & Information segment had order cover of 47 percent. The Group is investing modernization and upgradation of its manufacturing facilities, which is funded from operating cash flow. As on 31 August 2020, Chemring had net debt of £59 million. For the financial year ending on 31 October 2020, it expects the business performance to be on the higher side of the market's expectation.
Performance by division in FY2019
Sensors & Information
Countermeasures & Energetics
Performance by Business Division
The order intake for Sensors & Information division increased by 32 percent year on year in FY20 till 31 August 2020. The national security drove the demand for Roke's information security, as the electronic warfare (EW) and individual electronic countermeasures (IECM) were consolidated under Roke's existing defence business.
The Group delivered the first EW system (Resolve Light) to a US customer and another customer of Five Eyes. Backed by the US Programs of Record, the US sensor business continued to grow. The Group received an IDIQ contract of USD 200 million, and it achieved the delivery milestone for HMDS explosive hazard detection programme with a first delivery order of USD 21 million. It progressed well in the initial phase of production of the EMBD biological agent detection programme.
Countermeasures & Energetics division performed as per the Group's expectation. It delivered the countermeasures for the US F-35 programme, which further strengthened the relationship with the US Department of Defence. The expansion of the Tennessee capacity is developing well, and the first additional revenue from this facility is expected in FY22. The order intake and the deliveries of the Energetics business are proceeding well supported by the NASA programme.
Major Regions of Operations
(Source: Group website)
Share Price Performance Analysis
1-Year Chart as on September-16-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Chemring Group PLC's shares were trading at GBX 264.50 and were down by close to 1.67 percent against the previous closing price (as on 16 September 2020, before the market close at 11:50 AM GMT+1). CHG's 52-week High and Low were GBX 288.00 and GBX 145.80, respectively. Chemring Group had a market capitalization of around £758.28 million.
Business Outlook
Chemring Group had a strong business performance so far in FY20, despite the covid-19 impact. The performance was supported by its market-leading position and the resilience of its business model. The momentum of the business activity continues, and it expects to end the FY20 on the higher side of the market's expectation range. The adjusted operating profit range is between £47 million to £53 million as per the analyst's current expectation. The Group targets to have a strong operating cash conversion and a lower level of net debt going forward.
Cohort PLC (LON:CHRT) - In the process of acquiring ELAC
Cohort PLC is a UK based group that provides technology solutions to the defence and security sectors. The Group has five operating subsidiaries that include Chess, EID, MASS, MCL and SEA. It offers products such as electro-optical & electro-mechanical systems, advanced communications systems, advanced electronic & surveillance technology.
Q1 FY2021 trading update as reported on 15 September 2020
The new export opportunities for the Group are currently subdued due to the restrictions on international travel. The Group generated 30 percent of the revenue from new export opportunities in FY20, and it would continue to be significantly important in FY21. It won new orders, and as on 31 August 2020, Cohort's order book stood at £210 million, which was £183.3 million at the end of April 2020. The net debt was £1.4 million, and it had cash and credit of £38 million at the end of August 2020.
FY2020 results (ended 30 April 2020) as reported on 23 July 2020
(Source: Group website)
Cohort reported revenue of £131.1 million in FY20, which increased by 8.2 percent year on year from £121.2 million in FY19. The revenue was driven by full-year impact of Chess that drove the growth. The operating profit was up by 12.3 percent year on year to £18.2 million in FY20. In FY20, the order intake was £124.4 million, and at the end of FY20, the total order book was £183.3 million with a revenue cover of 62 percent. As on 30 June 2020, Cohort had net debt of £4.7 million, and it declared a dividend of 10.1 pence per share.
Revenue by Destination in FY2020
(Source: Group website)
Share Price Performance Analysis
1-Year Chart as on September-16-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Cohort PLC's shares were trading at GBX 657.80 and were up by close to 0.74 percent against the previous closing price (as on 16 September 2020, before the market close at 11:50 AM GMT+1). CHRT's 52-week High and Low were GBX 738.00 and GBX 416.85, respectively. Cohort PLC had a market capitalization of around £267.46 million.
Business Outlook
Cohort expects that the growth would resume once it makes up for the production and revenue lost due to the pandemic. The Group is in the process of acquiring Wärtsilä ELAC Nautik (ELAC), which is subject to approval by the German government. The addition of ELAC would strengthen the position, and Cohort highlighted that it has sufficient liquidity headroom to complete the transaction. It would also continue to target acquisition opportunities.
