Chemring Group Plc · LSE:CHG
Chemring — H1 2022 Earnings Presentation
34 slides from Chemring's earnings presentation, June 2022
Slide 1: Results for the Six Months to 30 April 2022
CHEMRING GROUP PLC RESULTS FOR THE SIX MONTHS TO 30 APRIL 2022 A STRONGER GROUP DELIVERING SUSTAINABLE GROWTH
Slide 2: Michael Ord, Group Chief Executive
MICHAEL ORD GROUP CHIEF EXECUTIVE
Slide 3: H1 2022 Overview – Delivering Sustainable Growth
H1 2022 OVERVIEW – DELIVERING SUSTAINABLE GROWTH Group Operating EPS Cash Net debt performance in Conversion line with profit 27% 52% 19% 10.8p 101% £18.5m expectations £33.5m H2 2022 Continued expected Good progress Interim progress on Order book revenue on strategic dividend per imperatives in ESG
Slide 4: Andrew Lewis, Group Finance Director
ANDREW LEWIS GROUP FINANCE DIRECTOR
Slide 5: Group Performance
GROUP PERFORMANCE H1 H2 Revenue (£m) Profit before tax (£m) EPS (pence) 450 60 20 50 15 300 40 30 10 150 20 5 10 0 0 0 2019 2020 2021 2022 2019 2020 2021 2022 2019 2020 2021 2022 FINANCIAL HIGHLIGHTS OPERATIONAL HIGHLIGHTS • Revenue up 11% to £220m • Strong performance from S&I driven by double digi
Slide 6: Income Statement
INCOME STATEMENT £m H1 2022 H1 2021 2021 Revenue 11% 220.4 198.5 393.3 Operating profit 19% 33.5 28.1 57.5 Operating margin 100bps 15.2% 14.2% 14.6% Finance expense 56% (0.4) (0.9) (1.6) Profit before tax 22% 33.1 27.2 55.9 Tax rate 8.8% 12.1% 14.8% Earnings per share (diluted) 27% 10.5p 8.3p 16.5p
Slide 7: Group Revenue Bridge
GROUP REVENUE BRIDGE US Sensors (£1.0m) Roke £14.8m £1.8m £6.3m £220.4m £198.5m £13.8m Sensors & Countermeasures & Information Energetics Exchange effects H1 2021 H1 2022 • Strong period in Sensors & Information driven by double digit growth at Roke • Countermeasures & Energetics saw a recovery in t
Slide 8: Group Operating Profit Bridge
GROUP OPERATING PROFIT BRIDGE £1.0m £33.5m £1.3m (£0.6m) £28.1m £3.7m Sensors & Countermeasures & Unallocated Information Energetics central costs Exchange effects H1 2021 H1 2022 • Strong growth in Sensors & Information driven by drop through of higher margin revenue growth at Roke resulting in seg
Slide 9: Sensors & Information
SENSORS & INFORMATION H1 2022 H1 2021 2021 H2 £m £m £m Operating profit (£m) H1 35 Revenue 21% 90.2 74.4 146.6 30 25 EBITDA 25% 20.7 16.6 34.4 20 Operating profit 27% 19.4 15.3 31.6 15 10 Operating margin 90 bps 21.5% 20.6% 21.6% 5 0 Order book 7% 101.5 108.9 113.6 2019 2020 2021 2022 Roke revenue (
Slide 10: Countermeasures & Energetics
COUNTERMEASURES & ENERGETICS H1 2022 H1 2021 2021 Operating profit (£m) H2 £m £m £m H1 50 Revenue 5% 130.2 124.1 246.7 40 EBITDA 7% 29.3 27.5 56.1 30 Operating profit 10% 21.3 19.3 40.0 20 Operating margin 80 bps 16.4% 15.6% 16.2% 10 0 Order book 13% 386.6 341.5 387.2 2019 2020 2021 2022 Operating m
Slide 11: Cash Flow
CASH FLOW £m H1 2022 H1 2021 2021 Cash generated from continuing underlying operations 43.3 36.1 80.0 Cash impact of discontinued and non-underlying operations (0.2) (0.5) (1.7) Cash flows from operating activities 21% 43.1 35.6 78.3 Tax paid (4.7) (3.8) (2.6) Acquisition/divestment of subsidiaries,
Slide 12: Improved Group Performance Continues
IMPROVED GROUP PERFORMANCE CONTINUES 60 20 400 50 15 300 40 30 10 200 20 100 5 10 0 0 0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Revenue (£m) Operating profit (£m) Earnings per share (pence) 20% 120 100 100 80 15% 80 60 10% 60 40 40 5% 20 20 0% 0 0 2018 2019 2020 20
Slide 13: Improving Future Visibility Through a Growing Order Book
IMPROVING FUTURE VISIBILITY THROUGH A GROWING ORDER BOOK H1 2022 ORDER BOOK UP 8% TO £488m - £188m EXPECTED TO BE DELIVERED AS REVENUE IN H2 2022, GIVING 85% COVERAGE SENSORS & INFORMATION COUNTERMEASURES & ENERGETICS • Order intake of £74m (H1 2021: £100m), down 26% • Order intake of £112m (H1 2021
Slide 14: Michael Ord, Group Chief Executive
MICHAEL ORD GROUP CHIEF EXECUTIVE
Slide 15: Market Environment
MARKET ENVIRONMENT • Russia’s invasion of Ukraine and rise of China causing US and allies to assess defence priorities – 2022 US Presidential Defense Budget request of $813bn is the largest ever – European NATO committing to increase defence budgets, targeting the 2% of GDP NATO threshold – Vital im
Slide 16: Strategy
STRATEGY • Our strategy is to deliver profitable growth by operating in markets where we have differentiating technology, deep customer relationships, and where high barriers to entry have been created • As we transition from turnaround to growth we will operate two mutually supportive sectors SENSO
Slide 17: ESG - Building on the Progress Made in 2021
ESG - BUILDING ON THE PROGRESS MADE IN 2021 • Maintained good progress in line with our HSE strategy – Recordable injuries up slightly at 0.76 (H1 2021: 0.66) but below annual target – Continuing to progress from a calculative to a proactive safety culture, with the goal of zero harm • Ensuring we m
Slide 18: Outlook
OUTLOOK • Continue to build a high quality business for sustainable performance and growth • Strengthening our values-based culture of Safety, Excellence and Innovation • Growing order book across our US, UK and Australian home markets • Approximately 85% of 2022 expected revenue covered by order bo
Slide 19: Appendices
Chemring Innovating to protect APPENDICES
Slide 20: 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 21: 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 22: Investment Case
APPENDIX 3. INVESTMENT CASE • Significant multi-year visibility and high barriers to entry • Diversified, protection-led portfolio, with strong customer relationships • We operate in niche markets where we have technology differentiation • Longer-term growth underpinned by increasing demand and poss
Slide 23: M&A
APPENDIX 4. M&A • Focus on creating balance sheet flexibility to be able to execute the right opportunities • Strengthened business processes and capabilities to identify, transact and integrate opportunities • Focus on Sensors & Information segment providing technology, skills and routes to market
Slide 24: Chemring's Transformation
APPENDIX 5. CHEMRING’S TRANSFORMATION “Then” “Now” ACHIEVEMENTS SINCE MARCH 2019 STRATEGIC REVIEW 2018 2021 H1 2022 Financial & Operational • Embedded a proactive safety and risk management culture Revenue £297m £393m £220m Operating profit £31.0m £57.5m £33.5m • Strategic exit from commoditised ene
Slide 25: Impact of Foreign Exchange Translation
APPENDIX 6. IMPACT OF FOREIGN EXCHANGE TRANSLATION H1 2022 Restated at Reported First level text – 22pt Gill Sans Nova Light Constant H1 2021 rates H1 2021 H1 2022 currency movement £m £m £m Second level text – 16pt Gill Sans Nova Regular Revenue (Colour of the second level to match the colour of8%t
Slide 26: Impact of Foreign Exchange Translation - Segmental
APPENDIX 7. IMPACT OF FOREIGN EXCHANGE TRANSLATION - SEGMENTAL Group Constant H1 2022 restated H1 2021 H1 2022 currency at 2021 rates movement £m £m £m Revenue 8% 214.1 198.5 220.4 EBITDA 11% 41.6 37.6 42.8 Operating profit 16% 32.5 28.1 33.5 Order book 4% 467.4 450.4 488.1 Sensors & Constant H1 202
Slide 27: Balance Sheet
APPENDIX 8. BALANCE SHEET £m H1 2022 H1 2021 2021 Goodwill & intangibles 126.3 117.0 122.8 Development costs 31.8 28.8 30.0 Property, plant & equipment 210.2 191.9 198.7 Trade working capital 90.3 83.3 84.4 Pension surplus 18.1 11.8 13.7 Other (70.0) (57.4) (70.2) 406.7 375.4 379.4 Net debt (18.5) (
Slide 28: Trade Working Capital
APPENDIX 9. TRADE WORKING CAPITAL Working capital as a % of revenue £m H1 2022 H1 2021 2021 30% Inventories 96.3 80.3 80.7 29% 28% Advance receipts from customers (27.5) (24.4) (17.1) 27% 27% 25% Net inventory 68.8 55.9 63.6 Receivables 46.8 40.4 40.9 22% 20% 21% 21% 20% Payables (30.3) (7.0) (13.1)
Slide 29: Weekly Net Debt
APPENDIX 10. WEEKLY NET DEBT 29 CHEMRING GROUP PLC | RESULTS FOR THE SIX MONTHS ENDED 30 APRIL 2022
Slide 30: Non-Underlying Items
APPENDIX 11. NON-UNDERLYING ITEMS H1 2022 H1 2022 P&L Cash £m Note cost paid Acquired intangibles amortisation (2.1) - Acquisition expenses a (0.5) - Mark to market of FX forward contracts (1.6) - Claim related costs - (0.2) Impact on profit before tax (4.2) - Tax credit on non-underlying items 0.5
Slide 31: Medium Term Financial Objectives and Assumptions
APPENDIX 12. MEDIUM TERM FINANCIAL OBJECTIVES AND ASSUMPTIONS • S&I - Segmental mid single digit % growth from double digit growth in Roke and low single digit growth in US Sensors, with the REVENUE potential for step changes as the US PoRs commence FRP • C&E - Low single digit % growth • S&I – Targ
Slide 32: Market Consensus 2022, 2023 & 2024
APPENDIX 13. MARKET CONSENSUS 2022, 2023 & 2024 • 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: 2022 2023 2024 Revenue (£m) 429 450 471 Underlying operating pro
Slide 33: Glossary
APPENDIX 14. GLOSSARY Acronym Meaning Acronym Meaning AVCAD Aerosol & Vapor Chemical Agent Detector F-35 F-35 Joint Strike Fighter CM Countermeasures GHG Greenhouse Gases CCM UK Chemring Countermeasures UK HMDS Husky Mounted Detection System CCM US Chemring Countermeasures USA IDIQ Indefinite Delive
Slide 34: Disclaimer
DISCLAIMER 2022 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