CHEMRING GROUP PLC
(“Chemring”, the “Group” or the “Company”)
AGM Update Announcement
Chemring issues the following update announcement on trading in the period from 1 November 2021 to 25 February 2022, to coincide with the Company's Annual General Meeting taking place later today.
Current trading and outlook
Both sectors have performed well since the start of the current financial year, in line with management expectations. Due to recent positive order intake, including Roke's award of an £8m contract to supply electronic warfare (“EW”) equipment to the Swedish Ministry of Defence which is expected to be partially delivered in FY22, the Board now expects the financial results for the current year to be slightly ahead of the current consensus of analyst expectations.*
The Group continues to successfully manage the ongoing post-COVID-19 challenges with its supply chain, labour availability and other inflationary pressures. The Group has worked to pass through costs and to generate additional operational efficiencies, and as such does not expect there to be any material short-term financial impacts.
Balance sheet
Net debt at 25 February 2022 was £28.4m (28 February 2021: £51.0m) as strong operating cash conversion continues to fund investment in capital expenditure. We expect to reduce net debt further by the year end.
Our strong balance sheet has allowed the Group to increase organic investment and returns to shareholders while continuing to search for high quality, complementary acquisitions similar to Cubica, which continues to perform well. The Group's acquisition pipeline remains healthy.
Orders
Having started the financial year with order cover of 84% our expected FY22 revenue is now 89% (2021: 89%) covered by revenue in the period to date and the current order book, split 99% (2021: 94%) in Countermeasures & Energetics and 73% (2021: 79%) in Sensors & Information. The order book stood at £476m at 25 February 2022 (2021: £481m).
In the Sensors & Information sector, Roke has continued its positive momentum into FY22. Order intake has been strong with notable highlights during the period being the renewal of its largest UK framework contract for the next three years with an expected value of c£20m per annum, which represents growth of 40% over the average of the last three years.
As noted above, Roke also secured a further sale of EW equipment into Sweden with the award of a contract by the Defence Materiel Administration (“FMV”) of the Swedish Ministry of Defence, to provide advanced EW equipment to meet a number of Swedish Armed Forces requirements. All Roke EW systems now feature a common operations and planning software suite, designed to maximise operator effectiveness and deliver enhanced situational awareness, and this order demonstrates the strong market demand for Cyber and Electromagnetic Activities (“CEMA”) capabilities.
In the Countermeasures & Energetics sector, Chemring Countermeasures USA (“CCM USA”) has been awarded an initial delivery order valued at US$16.8m for the supply of MJU-75/B infrared countermeasures. This award was made under a five-year split award IDIQ with total contract value of up to US$250m. Deliveries for this initial contract will be made in FY22 and FY23 with all work completed at CCM USA's new fully-automated manufacturing facility in Toone, Tennessee. Characterisation and testing activity continues and we remain on track to generate revenue from the new facility in the second half of the current financial year.
Interim results date
The Group will report its interim results for the six months ended 30 April 2022 on 8 June 2022.