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FTSE 250 shares: Chemring’s share price soars on revenues rise, acquisition news

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·2-min read
A fighter jet using Chemring's flare technology
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Investor confidence in UK shares struggled on Thursday as persistent pandemic-related concerns and worries over soaring inflation weighed. The FTSE 250 for example retraced from the previous day’s record closing highs around 22,933 points. But not all stocks on Britain’s second-tier stock index struggled to make ground. Take Chemring Group (LSE: CHG) for instance.

The price of the FTSE 250 defence giant flew to fresh nine-year peaks of 324.5p following the release of half-year results. It finished Thursday trading 6% higher at 324p.

Chemring’s revenues rise

Chemring announced that revenues rose 4% during the six months to April, to £198.5m. At stable exchange rates, sales improved by an even better 8%.

The FTSE 250 firm enjoyed healthy growth across both its divisions too. At Sensors & Information sales increased 15% year-on-year to £77.1m, helped by its Roke unit again enjoying “double-digit growth in orders, revenue and operating profit”. Roke provides technology, engineering and consultancy services to the government and blue-chip engineering companies.

Meanwhile, revenues at Chemring’s Countermeasures & Energetics arm increased 4% to £129.2m. It said that “good progress was made on securing new long-term contracts” here in the six months to April. These included Chemring Countermeasures USA receiving a five-year IDIQ contract to supply infrared decoy flares, and Chemring Energetics UK sealing a long-term partnering agreement with Martin Baker Aircraft Company.

Profits soar

As a consequence, Chemring’s underlying profit before tax rose 12% year-on-year to £27.2m. Stripping out the effects of a weakening dollar, profits would have been 19% higher from the same period in the previous financial year.

Commenting on the results, Chemring chief executive Michael Ord said that its solid first-half performance “again demonstrates the progress that we continue to make in building a higher quality technology-based Group.” He added that “strong order cover for the full year” means that the company remains on track to deliver annual growth in line with expectations.

Ord also noted that “whilst there may be some macroeconomic uncertainty surrounding the level and timing of defence spending as a result of the Covid-19 pandemic, our multiple market leading positions and investment in high technology niches, provide attractive growth opportunities.”

Acquisition news

In other news Chemring announced the acquisition of Cubica Group for an undisclosed sum. The FTSE 250 business said that the deal “creates further opportunities… to enhance and further accelerate growth in its Roke business.”

Based in Surrey, Cubica is a research and development specialist in the fields of artificial intelligence, machine learning, data fusion and autonomy. It provides its services primarily for defence and security purposes and its customers include the UK Government, law enforcement, and numerous international defence suppliers and private sector organisations.

Chemring chief Ord described the group’s Cubica and Vigil AI divisions as “an excellent strategic and cultural fit for our Roke business.” He added that they “offer significant additional research and development expertise as we invest in next generation technologies and expand our product, service and capability offerings.”

The post FTSE 250 shares: Chemring’s share price soars on revenues rise, acquisition news appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021

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