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Investing.com -- Shares of Chemring (LSE:LON:CHG) climbed 3% following the announcement that its subsidiary Roke has been named the Prime Contractor for the STORM project, a Science & Technology Oriented Research & Development initiative in Missile defence.
The contract with the UK Ministry of Defence (MoD) is expected to provide Roke with unprecedented revenue visibility and assist in achieving its >£250m revenue target for FY28.
The significance of the STORM contract lies in its size and duration, which offers Roke a level of revenue predictability not previously seen. This is a notable development compared to Roke’s past Prime Contractor role with the UK MoD on the ZODIAC project, which was valued at £40m over two years.
The immediate commencement of the contract is also set to address concerns over potential revenue shortfalls in the Sensors & Information division, improving the coverage ratio from 54% as of January 30, 2025, to 74% as of January 30, 2024.
Moreover, the award demonstrates the UK MoD’s willingness to issue contracts amidst the ongoing UK Strategic Defence Review, signaling a positive outlook for the defense sector and Chemring’s role within it. Analysts have taken note of the development, with JefferieS commenting, "We expect a strong share price reaction."
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