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Chemring Group (LON:CHG), a leading provider of defense technology solutions, has announced a record order intake of £345 million for the first half of 2024, along with an order book reaching £1,041 million, marking the highest in the company's history. These milestones provide significant revenue coverage in the medium term, reflecting the company's robust performance and strategic initiatives.
The performance for H1 2024 aligns with the Board's expectations, with an 8% revenue growth primarily driven by strong results at Roke, up 19%, and growth in specialist energetic materials businesses, partially offset by a weaker period for Countermeasures. The underlying operating profit margin stood at 11.2%, reflecting the impact of operational challenges at the Tennessee Countermeasures business. Despite this, an improved cash conversion of 83% was achieved, reflecting the company's focus on working capital management.
A key development during the period was the award of £90 million in grant funding to support capex investment, aimed at increasing the capacity of the company's Norwegian site to meet the unprecedented demand for its products. This investment aligns with Chemring's strategy to expand its Energetics capacity, with the overall investment increasing to £200 million, excluding grant funding, targeting increased revenues and operating profit by 2028.
Progress on capital projects has been promising, with £34 million of capex spent during the period, and customers increasingly opting for long-term partnering agreements. Additionally, the company deployed a further £28 million into its £50 million share buyback program announced in August 2023.
Despite an increase in net debt to £75.3 million, attributed to investment in capex, the net debt to underlying EBITDA ratio remains below the Group's internal target, providing financial stability. An interim dividend per share of 2.6p, up 13% from H1 2023, underlines the company's commitment to shareholder returns.
Looking ahead, Chemring maintains its expectations for 2024, with a heavier weighting of operating profit in H2, consistent with previous communications. The company aims to achieve annual revenue of approximately £1 billion by 2030, supported by strong growth prospects driven by increased geopolitical tensions and sustained demand for defense solutions.
Michael Ord, Chief Executive of Chemring Group, emphasized the company's confidence in its future outlook, fueled by record order intake, increased order cover, and strategic investments. The ambition to reach £1 billion in annual revenue by 2030 underscores Chemring's position as a key player in the defense industry, well-prepared to capitalize on future opportunities.
