Slide 1: Results for the Six Months to 30 April 2023
CHEMRING GROUP PLC RESULTS FOR THE SIX MONTHS TO 30 APRIL 2023 RECORD ORDER BOOK, FULL YEAR EXPECTATIONS UNCHANGED, STRONG LONG-TERM PROSPECTS
Slide 2: Michael Ord, Group Chief Executive
MICHAEL ORD GROUP CHIEF EXECUTIVE
Slide 3: H1 2023 Overview – Delivering Sustainable Growth
H1 2023 OVERVIEW – DELIVERING SUSTAINABLE GROWTH • Group performance in line with expectations - Second half bias for Countermeasures & Energetics trading activity due to delayed order intake resulting from 2022 extended US Government Continuing Resolution • Record H1 order intake and the order book
Slide 4: Andrew Lewis, Group Finance Director
ANDREW LEWIS GROUP FINANCE DIRECTOR
Slide 5: Group Performance
GROUP PERFORMANCE H1 H2 Order intake (£m) Revenue (£m) EPS (pence) 600 450 20 450 15 300 300 10 150 150 5 0 0 0 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 OPERATIONAL HIGHLIGHTS FINANCIAL HIGHLIGHTS • Record H1 order intake of £338m, up 81% • H2 weighting for Counterm
Slide 6: Income Statement
INCOME STATEMENT £m H1 2023 H1 2022 2022 Revenue 4% 212.1 220.4 442.8 Operating profit 21% 26.6 33.5 64.0 Operating margin 270bps 12.5% 15.2% 14.5% Finance expense (1.0) (0.4) (1.5) Profit before tax 25.6 33.1 62.5 Tax rate 15.2% 8.8% 9.1% Earnings per share (diluted) 29% 7.5p 10.5p 19.7p Dividend p
Slide 7: Group Revenue Bridge
GROUP REVENUE BRIDGE Roke £23.9m US Sensors £(17.3)m £220.4m £6.6m Sensors & £(16.8)m £1.9m £212.1m Information Countermeasures & Exchange effects Energetics H1 2022 H1 2023 • Sensors & Information up 9% with a strong period for Roke offset by the reduction in revenue at our US Sensors business as a
Slide 8: Group Operating Profit Bridge
GROUP OPERATING PROFIT BRIDGE £33.5m £(0.5)m Sensors & Information £(5.7)m £(0.3)m £(0.4)m £26.6m Countermeasures & Unallocated Exchange effects Energetics central costs H1 2022 H1 2023 • Sensors & Information operating profit flat with continued opex investment at Roke ahead of the revenue curve •
Slide 9: Sensors & Information
SENSORS & INFORMATION H1 2023 H1 2022 2022 H2 £m £m £m Operating profit (£m) H1 35 Revenue 9% 97.9 90.2 162.3 30 25 EBITDA 1% 20.8 20.7 33.0 20 Operating profit 2% 19.0 19.4 30.0 15 10 Operating margin 210 bps 19.4% 21.5% 18.5% 5 0 Order book 50% 152.7 101.5 153.7 2019 2020 2021 2022 2023 Roke reven
Slide 10: Sensors & Information Bridges
SENSORS & INFORMATION BRIDGES • Roke’s products and services REVENUE revenue grew 39% Roke “pass- • Roke revenue for H1 2023 Roke through” £6.7m HMDS £(28.5)m Foreign £97.9m £90.2m EMBD £11.2m exchange included £6.7m of incremental products & £1.1m US Sensors “pass-through” revenue which services £(
Slide 11: Countermeasures & Energetics
COUNTERMEASURES & ENERGETICS H1 2023 H1 2022 2022 Operating profit (£m) H2 £m £m £m H1 60 Revenue 12% 114.2 130.2 280.5 50 EBITDA 24% 22.3 29.3 64.2 40 30 Operating profit 29% 15.2 21.3 48.9 20 Operating margin 310 bps 13.3% 16.4% 17.4% 10 0 Order book 54% 596.8 386.6 497.2 2019 2020 2021 2022 2023
Slide 12: Countermeasures & Energetics Bridges
COUNTERMEASURES & ENERGETICS BRIDGES REVENUE Energetics £130.2m £9.6m Countermeasures Foreign £(26.4)m £114.2m exchange • Energetics revenue grew by 19% £0.8m driven by strong operational execution • US countermeasures impacted by H1 2022 H1 2023 order delays in 2022 • Continuation of the H2 2022 tr
Slide 13: Cash Flow
CASH FLOW £m H1 2023 H1 2022 2022 Cash generated from underlying operations 22.9 43.3 90.1 Cash impact of non-underlying operations (1.0) (0.2) (1.1) Cash flows from operating activities 21.9 43.1 89.0 Tax paid (4.9) (4.7) (8.5) Acquisition of subsidiaries, proceeds on disposal of PPE (7.2) 6.0 6.0
Slide 14: Improving Future Visibility Through a Growing Order Book
IMPROVING FUTURE VISIBILITY THROUGH A GROWING ORDER BOOK H1 2023 ORDER BOOK UP 54% TO £750m - £232m EXPECTED TO BE DELIVERED AS REVENUE IN H2, GIVING 90% COVERAGE SENSORS & INFORMATION COUNTERMEASURES & ENERGETICS • Order intake of £100m (H1 2022: £74m), up 35% • Order intake of £238m (H1 2022: £112
Slide 15: Michael Ord, Group Chief Executive
MICHAEL ORD GROUP CHIEF EXECUTIVE
Slide 16: Market Environment
MARKET ENVIRONMENT • Russia’s illegal invasion of Ukraine and increased Asia-Pacific threats have caused UK, US and European allies to increase defence spending commitments – 2024 US Presidential Defense Budget request of $842bn is the largest ever – Upward trend in budgets across NATO to replenish
Slide 17: Growing Demand for Specialist Energetic Materials
GROWING DEMAND FOR SPECIALIST ENERGETIC MATERIALS • Demand for specialist energetic materials (HMX and insensitive munitions) manufactured by our Norwegian business has exceeded supply in recent years - Since 2022 this demand has increased very significantly • Governments are seeking to both repleni
Slide 18: Growing Demand for Specialist Propellant Materials
GROWING DEMAND FOR SPECIALIST PROPELLANT MATERIALS • Significant growth in demand for extruded double-base propellant materials, particularly across missile programmes • Growing demand from government and industry customers who are increasingly looking for longer-term partnering agreements - Fifteen
Slide 19: Growing Demand for US Space Launch and Missiles Products
GROWING DEMAND FOR US SPACE LAUNCH AND MISSILES PRODUCTS • Space established as a military domain in its own right and significant growth in Commercial Space launch activity • US DoD heavily investing in space capabilities, building missile inventories, and developing next generation hypersonic miss
Slide 20: Investing to Meet the Demand in Niche Energetics & Devices
INVESTING TO MEET THE DEMAND IN NICHE ENERGETICS & DEVICES • Significant opportunity to expand capacity across all three businesses and capitalise on increased long-term demand • Group’s decision to initiate a three year £90m capital investment programme to increase revenue by £60m per annum Norway
Slide 21: Growing Demand for Roke Products and Services
GROWING DEMAND FOR ROKE PRODUCTS AND SERVICES Roke’s growth strategy is set against an increasingly unstable global and domestic security environment • The March 2023 Integrated Review Refresh 2023 (“IRR”) of Defence, Security and Foreign Policy re-confirmed Roke’s strong market position • The IRR f
Slide 22: Increasing Activity Across All Roke Business Areas
INCREASING ACTIVITY ACROSS ALL ROKE BUSINESS AREAS National Security • The pivot towards China and Russia, and UK policy to update statecraft for systemic competition is increasing demand for active cyber defence and operational mission support services to government clients • This increased demand
Slide 23: Increasing Activity Across All Roke Business Areas (2)
INCREASING ACTIVITY ACROSS ALL ROKE BUSINESS AREAS (2) Futures • Roke Futures are providing technology solutions to a growing client base, including UKG Home Office, Rolls Royce, Waygate Technologies, and Vodafone Roke Intelligence As A Service (RIAAS) • Demand for Open Source Intelligence (OSINT) s
Slide 24: Outlook
OUTLOOK • Continue to build a high quality business for sustainable performance and investing for growth • Robust market conditions leading to record H1 order intake and strong order book • Approximately 90% of 2023 expected H2 revenue covered by order book • Second half trading bias due to delayed
Slide 25: Appendices
Chemring Innovating to protect APPENDICES
Slide 26: Appendix 1. Chemring at a Glance
APPENDIX 1. CHEMRING AT A GLANCE A TECHNOLOGY COMPANY WITH AN INTERNATIONAL FOOTPRINT AND A BREADTH OF MARKET LEADING PRODUCTS AND SERVICES SENSORS & INFORMATION COUNTERMEASURES & ENERGETICS • Focused on information and electronic warfare, chemical & biological • Focused on advanced expendable count
Slide 27: Appendix 2. Organisational Chart
APPENDIX 2. ORGANISATIONAL CHART CHEMRING GROUP PLC SENSORS & INFORMATION COUNTERMEASURES & ENERGETICS Chemring Chemring Roke (UK) Countermeasures (UK) Energetics UK Chemring Chemring Sensors & Electronic Systems Countermeasures USA Chemring Nobel (Norway) (USA) (Kilgore Flares) Chemring Chemring Ro
Slide 28: Appendix 3. ESG - Building on the Progress Made in 2022
APPENDIX 3. ESG - BUILDING ON THE PROGRESS MADE IN 2022 • Maintained good progress in line with our HSE Zero Harm strategy – Recordable injuries stable at 0.66 (H1 2022 0.66) and on course to stay below our annual limit of 1.0 – Continue to consolidate within a calculative safety culture whilst demo
Slide 29: Appendix 4. Chemring's Transformation 2018 to 2022
APPENDIX 4. CHEMRING’S TRANSFORMATION 2018 TO 2022 “Then” “Now” ACHIEVEMENTS SINCE MARCH 2019 STRATEGIC REVIEW 2018 2021 2022 Financial & Operational Revenue £297m £393m £443m • Embedded a proactive safety and risk management culture Operating profit £31.0m £57.5m £64.0m • Strategic exit from commod
Slide 30: Appendix 5. Improved Group Performance 2018-2022
APPENDIX 5. IMPROVED GROUP PERFORMANCE 2018-2022 • Good track record of improvement over the last four years • Operating margin expansion - good progress towards our medium term objective • Improved quality of earnings with no exceptional items in any of the last four years • Strong cash conversion
Slide 31: Appendix 6. Impact of Foreign Exchange Translation
APPENDIX 6. IMPACT OF FOREIGN EXCHANGE TRANSLATION Group Constant H1 2023 restated H1 2022 H1 2023 TRANSLATION & SENSITIVITIES currency at 2022 rates movement • 30% of revenue US $ denominated in H1 2023 (H1 2022: 50%) £m £m £m • P&L translation $1.24 vs $1.31 in H1 2022 Revenue 5% 210.2 220.4 212.1
Slide 32: Appendix 7. Balance Sheet
APPENDIX 7. BALANCE SHEET £m H1 2023 H1 2022 2022 Goodwill & intangibles 130.3 126.3 129.5 Development costs 32.7 31.8 34.6 Property, plant & equipment 222.3 210.2 231.3 Trade working capital 89.9 90.3 93.9 Pension surplus 10.3 18.1 11.2 Other (60.9) (70.0) (75.2) 424.6 406.7 425.3 Net debt (25.0) (
Slide 33: Appendix 8. Trade Working Capital
APPENDIX 8. TRADE WORKING CAPITAL Working capital as a % of revenue £m H1 2023 H1 2022 2022 30% Inventories 116.2 96.3 99.6 29% 28% Advance receipts from customers (38.9) (27.5) (26.6) 27% 27% 25% Net inventory 77.3 68.8 73.0 Receivables 38.7 46.8 33.3 22% 20% 21% 21% 21% 21% Payables (35.2) (30.3)
Slide 34: Appendix 9. Weekly Net Debt
APPENDIX 9. WEEKLY NET DEBT 34
Slide 35: Appendix 10. Non-Underlying Items
APPENDIX 10. NON-UNDERLYING ITEMS H1 2023 H1 2023 P&L Cash £m Note cost paid Acquired intangibles amortisation (2.2) - Acquisition expenses a (1.8) (0.4) Mark to market of FX forward contracts 0.4 - Claim related costs - (0.6) Impact on profit before tax (3.6) (1.0) Tax credit on non-underlying item
Slide 36: Appendix 11. Medium-Term Financial Objectives and Assumptions
APPENDIX 11. MEDIUM-TERM FINANCIAL OBJECTIVES AND ASSUMPTIONS • S&I - Segmental high single digit % growth from strong double digit growth in Roke, with US Sensors expected to be flat but with the potential for step changes as the US PoRs commence FRP REVENUE • C&E – Countermeasures - low single dig
Slide 37: Appendix 12. Market Consensus 2023, 2024 & 2025
APPENDIX 12. MARKET CONSENSUS 2023, 2024 & 2025 • The Group is aware of eight analysts publishing independent research on the Group • The Group has compiled consensus data* from the research it has been made aware of, as set out below: 2023 2024 2025 Revenue (£m) 468 484 505 Underlying operating pro
Slide 38: Appendix 13. Glossary
APPENDIX 13. GLOSSARY Acronym Meaning Acronym Meaning CCM UK Chemring Countermeasures UK HMDS Husky Mounted Detection System CCM US Chemring Countermeasures USA IDIQ Indefinite Delivery Indefinite Quantity CED Chemring Energetic Devices JBTDS Joint Biological Tactical Detection System CEUK Chemring
Slide 39: Disclaimer
DISCLAIMER 2023 Chemring Group PLC The information in this document is the property of Chemring Group PLC and may not be copied or communicated to a third party or used for any purpose other than that for which it is supplied without the express written consent of Chemring Group PLC. This informatio