Chemring shares plunge despite record orders

Chemring shares plunged on Tuesday as production and foreign exchange headwinds dented investor confidence despite booming orders.

The FTSE 250 British defence contractor’s order book reached a record £1.04bn in 2024, meaning more than two-thirds of next year’s revenue forecast is already covered.

Such soaring demand saw Chemring double down on a target of reaching £1bn in annual revenue by the end of the decade.

“Changing customer spending priorities in the face of increased global uncertainty and competition have resulted in the order book being at its highest level in Chemring’s history, giving us a strong and sustainable platform for future growth,” Michael Ord, chief executive, said in a statement.

He added the outlook for global defence markets was “increasingly robust, with strong growth expected over the decade.”

However, shares fell over seven per cent in early trading, as Chemring flagged “volatile” exchange rates throughout the year as the US dollar, Australian dollar and Norweigian krone all weakened against the sterling.

The company also said it had grappled with production challenges and delays in its Tennessee Countermeasures business, which weighed on performance in the first half.

Shares are trading down around five per cent this year to date even as the defence industry profits from huge military spending worldwide following Vladimir Putin’s invasion of Ukraine and renewed conflict in the Middle East.

European Nato members are currently holding talks about increasing the alliance’s spending target to three per cent of GDP at its annual summit next June, according to a report in the Financial Times.

Chemring’s £1.04bn order book marked a 13 per cent year-on-year increase, while the Hampshire-based firm reported a three per cent rise in underlying operating profit to £71.1m.

Revenue also increased eight per cent to £510.4m over the 12 months ending 31 October, and dividend payouts are expected to rise 13 per cent to 7.8p per share.

Underlying pre-tax earnings (EBITDA) jumped six per cent to £93.7m.