Chemring shares pop on higher first-half earnings, reiterated annual outlook

Investing.com -- Shares in Chemring Group (LON:CHG) jumped more than 5% in London on Tuesday after the U.K. defense company posted higher first-half earnings, meeting board expectations, and reaffirmed its guidance for the full year.

For the first six months to April 30, Chemring’s order intake surged 42% year-on-year to £488 million, driving the order book to a record £1.3 billion. Revenue rose 5% to £234.3 million, while underlying EBITDA increased 12% to £40.4 million.

Operating profit climbed 8% to £27.5 million, lifting the margin to 11.6% from 11.2%. Underlying profit before tax was £24.6 million, up from £24.1 million a year earlier. Statutory operating profit grew 69% to £29.9 million.

The Countermeasures & Energetics segment was the key growth engine, with revenue up 20% to £141.7 million and operating profit rising 73% to £20.4 million. Segment margin improved sharply to 14.4% from 10%.

Sensors & Information, meanwhile, saw revenue fall 12% and operating profit decline 26%, amid delays to U.K. defence spending decisions.

Net debt rose to £93.3 million from £75.3 million, reflecting ongoing investment in expanding energetic materials capacity. Operating cash flow before capex reached £32 million, representing 80% of underlying EBITDA. Chemring increased its interim dividend by 4% to 2.7p per share.

“Our 2024 momentum has continued into this year with another period of record order intake and order book of £1.3bn, increasing 2025 order cover to 85%,” said CEO Michael Ord. He added: “Operational and trading performance has been in line with our expectations, with improving returns underpinned by solid cash conversion.”

Chemring reiterated its full-year guidance and remains on track to reach its target of £1 billion in annual revenue by 2030.

It also said it anticipates second-half operating profit to mirror last year’s performance, with approximately 85% of its expected 2025 revenue already delivered or secured in the order book as of the end of April.

Jefferies analysts said in a post-earnings note that "there may well be some modest profit taking in Chemring today following 1H25 results."

The analysts said they remain positive on Chemring, noting that several proposals from the recent Strategic Defence Review (SDR) align well with the company’s strengths.

“We are emboldened in our bullish stance on the stock,” they said, pointing to initiatives such as the £1.5bn investment in new munition and energetic plants, the digital targeting web, and the creation of a new Cyber and Electromagnetic Activities Command. However, they added that the absence of clear timing or funding details may moderate expectations.

The SDR was initiated in July 2024 and announced yesterday after the market close.