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Chemring lifts dividend 23% as profits rise despite forex headwinds - Proactive Investors UK

The defence and security group said its performance for the year to 31 October 2021 was in line with its predictions and that its expectations for the current year are unchanged

Chemring Group (LSE:CHG) PLC raised its final dividend by 23% after it achieved full-year profits growth despite forex headwinds caused by the weak dollar.

The defence and security group said its performance for the year to 31 October 2021 was in line with its predictions and that its expectations for the current year are unchanged.

Full-year underlying operating profit came in at £57.5mln, a rise of 5% on the previous year, or up 13.1% on a constant currency basis.

The underlying operating margin rose to 14.6% from 13.6%, reflecting growth in the higher margin sensors and information business.

With 53% of sales dollar denominated, the 10% weakening of the US currency impacted Chemring’s full-year revenues, which dropped 2% to £393.3mln. At constant currencies, revenue grew by 1%.

Statutory pre-tax profit increased to £48.8mln from £43.3mln.

The group announced a new dividend policy to target a medium-term dividend cover of 2.5 times underlying EPS. It proposed a 23% increase in its final dividend to 3.2p a share, taking the annual pay-out to 4.8p.

In addition to the weaker dollar, the company’s performance was impacted by delays in the US Department of Defense procurement process, labour shortages in the US and various supply chain and inflationary pressures.

“These headwinds are likely to continue into 2022 and the group will continue to work to mitigate their impact,” Chemring said. 

The group said its order book stood at £501mln at end-October, up from £476mln a year earlier, primarily due to strong order intake at the Roke business, which exceeded £100mln for the first time in its history.

Around £358mln of the orders are scheduled for delivery during 2022, representing cover of 84% of expected 2022 revenue.

Chemring chief executive Michael Ord said trading since the start of the current financial year has been in line with expectations.

“With 84% of 2022 expected revenue covered by the order book, the board's expectations for 2022 performance are unchanged,” he said. “Chemring is well placed, with a robust strategy, market-leading positions across different geographies and sectors, and with products and services that are critical to our government and blue-chip customers around the world. Chemring's long-term prospects remain strong."

Net debt was £26.6mln at the end of the year, down from £48.2mln a year earlier.

Continuing underlying operating cash inflow of £80.0mln represented 105% of EBITDA.

Shares were broadly unchanged at 290.00p in midmorning trade.