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Chemring Group PLC Photo credit: United Launch Alliance UK MOD © Crown copyright 2023Chemring Group PLCResults for the year ended 31stOctober 2024Presented on 17thDecember 2024 by:Michael Ord – Group Chief ExecutiveJames Mortensen – Chief Financial Officer Growing momentum and ambition Photo credit: Lockheed Martin
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Chemring Group PLC UK MOD © Crown copyright 2023 Michael Ord – Group Chief Executive
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Chemring Group PLC Delivering continued progress Results for the year ended 31stOctober 20243 Robust returns and strong cash conversion Geopolitical environment driving record order book Substantial strategic investment in organic growth Strong operational performance Increasing momentum as we build for future growth
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Chemring Group PLC 2024 good progress across KPIs Results for the year ended 31stOctober 20244 Throughout this presentation, references to operating profit, operating margin, EPS, operating cash and cash conversion are to continuing underlying measures Growth Safety and ESGRevenueOrder book+8% £510m+13%£1.0bn(2023: £473m)(2023: £0.9bn) Earnings Cash generationEarnings per shareOperating margin19.3p13.9%(2023: 20.0p)(2023: 14.6%)Net debt: EBITDACash conversion0.56x102%(2023: 0.16x)(2023: 90%)Recordable injury rate0.69(2023: 0.90)GHG Emissions-13.0%Waste production-21.3%On track to meet both near and longer term ESG targets
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Chemring Group PLC James Mortensen – Chief Financial Officer Photo credit: Blue Origin
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Chemring Group PLC Financial highlightsSummary:» Another record order book» Continued sales momentum» Operating margin held back by US Countermeasures» EPS impacted by higher tax and finance costs» Strong cash conversion Results for the year ended 31stOctober 20246 20232024£922m+13%£1,038mOrder book£472.6m+8%£510.4mRevenue£69.2m+3%£71.1mOperating profit14.6%(70)bps13.9%Operating margin20.0p(4)%19.3pDiluted EPS90%+120bps102%Cash conversion6.9p+13%7.8pDividend
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Chemring Group PLC Group and segmental performance»Countermeasures & Energetics – growth in Energetics offset a weaker period for Countermeasures. Margin impacted by operational challenges in H1 and delivery of lower margin legacy contract in H2»Sensors & Information – continued revenue growth in Roke, with defence in particular performing strongly, which led to strong growth in operating profit Results for the year ended 31stOctober 20247 Operating profitmarginOperating profit growthOperating profit(£m)RevenuegrowthRevenue(£m)15.6%(8)%46.5+4%298.4Countermeasures & Energetics19.5%+21%41.4+13%212.0Sensors & Information13.9%+3%71.1+8%510.4Group
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Chemring Group PLC CoveredBook & bill Countermeasures & Energetics Results for the year ended 31stOctober 20248 01020304050602022 2023 2024H2H1Operating profit (£m)01002003002022 2023 2024H2H1Order coverage02505007501,0002022 2023 2024£933mGrowthMarginBusiness update» Strong order intake continues above £0.5bn for second consecutive year» Solid growth in Energetics offset by Countermeasures» Good margin progression in Energetics and UK Countermeasures, offset by US Countermeasures» C&E order cover for 2025 97%, with coverage building in outer years97%81%52%Order book (£m)Revenue (£m) 20252026202715.6%4%
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Chemring Group PLC 3228128157PassthroughProducts & services2023CoveredBook & billBusiness update» Roke revenue growth 23% excluding passthrough, with a growing contribution from defence » US Sensors delivering on EMBD FRP and JBTDS LRIP . Full rate production award for JBTDS expected in 2025 for 2026 delivery» Operating margin improved to 19.5% (excluding passthrough 22.5%)» S&I order cover for 2025 48% with significant contract wins expected next year Results for the year ended 31stOctober 20249 010203040502022 2023 2024H2H1Operating profit (£m)0501001502002022 2023 2024Order book (£m)Breakdown of Roke revenue (£m)0501001502002502022 2023 2024H2H119.5%GrowthMarginRevenue (£m)Sensors & InformationOrder coverage2025202448%£105m13%185160
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Chemring Group PLC Group net debt bridge» Continued focus on working capital management, with cash conversion of 102%» £48m capex and intangible spend; £70m spend partially offset by £22m of grant funding» £49m spent on Energetics capacity expansion» £48m returned to shareholders in the year» Less than 1x leverage Results for the year ended 31stOctober 202410 £(14)m£96m£(11)m£(16)m£(70)m£22m£(20)m£(40)m£(53)mOperatingcashTax & finance costOtherCapexDividendsPurchase of own sharesOpening net debtClosing net debtGrantsLeverage:0.56x0.16x£nil
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Chemring Group PLC Grant funding and financing update » UK Government backed facility for up to £80m» Based on the significant investment we are making in the UK to increase capacity to supply our export customers» One year to draw down, then repay over three years on an amortising payment schedule» On similar commercial terms to our RCF Results for the year ended 31stOctober 202411 Flexibility to invest in further organic growth £90m Grant funding £80m UK Export Finance facility » Act in Support of Ammunition Production (ASAP), part of the European Council’s call in March 2023 to urgently deliver ammunition to Ukraine and to help member states refill their stockpiles» Included measures to increase capacity and to tackle identified bottlenecks throughout the supply chain» Awarded €66.7m (£57m), with the project split into three workstreams and focuses on increasing the supply of HMX, RDX and NTO» NOK 428m (£32m) grant from the Government of Norway, on similar terms, but with a different timing of cashflows» No commercial restrictions associated with the grants
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Chemring Group PLC Capital allocation Results for the year ended 31stOctober 202412 » Investment in our Energetics businesses to capitalise on unprecedented demand » Ongoing capex investment to increase automation, enhance safety and drive margin improvement» Feasibility study in Norway underway» Bolt-on acquisitions in our core and close adjacencies – in particular Roke and US Space & Missiles» Disciplined approach; healthy pipeline with a number ofopportunities currently under assessment» Key part of total shareholder return» Dividend cover target of c.2.5x underlying EPS met» Returned to shareholders» Share buyback has returned £37m since inception» Share buyback will lapse in December and will not be renewed Resilient balance sheet – target <1.5x leverage Focused M&A Invest in the business Ordinary dividends Surplus capital
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Chemring Group PLC Guidance and financial outlook» Countermeasures & Energetics targeting low double-digit growth in revenue» Sensors & Information revenue flat, with continued growth in Roke offset by a decline in US Sensors » c.40:60 H1/H2 phasing of operating profit, like 2024» Increased UK National Insurance contributions: £1.7m in 2025; £2.6m in 2026 » Tax at 21%, finance costs of about £7m» Near-term budget timing disruption due to administration changes in the US and the Strategic Defence Review in the UK» Foreign exchange – strengthening of GBP versus US$/AU$/NOK Results for the year ended 31stOctober 202413 FY25 guidance Potential near-term headwinds Balancing near-term performance with longer-term growth and value creation
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Chemring Group PLC £1bn revenue ambition» Energetics: >£170m revenue» >£100m for expansion programmes already announced» plus >£70m from underlying mid-single digit CAGR» Roke: >£100m revenue» US Sensors: >£30m revenue» Countermeasures: >£25m from low single digit CAGR» >£150m - new capacity expansions in Energetics / Acquisitions» Mid teen margins in the medium term, with some operational leverage in the longer term Results for the year ended 31stOctober 202414 Increasing momentum as we build for future growthNB – all numbers incremental revenue, per annum and by FY302024 Energetics Roke US Sensors Countermeasures New capacityexpansions /Acquisitions2030 Revenue (£m)510>170>100>30>150£1bn>25
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Chemring Group PLCResults for the year ended 31stOctober 202415 Driving innovation» We have over 1,000 engineers, scientists, and subject matter experts working at the cutting edge of technology – in AI and Data Science alone we have over 100 engineers and scientists» We spend c.£115m a year on R&D, of which c.90% is customer funded Innovation showcase – current and future missile systems» Our business in Chicago is at the forefront of pyro-actuation technology with strong relationships with all the major US missile primes» We have developed two devices for a new hypersonic missile program» But our missile heritage isn’t confined to that business; Rokehave developed a high-speed variant Miniature Radar Altimeter (MRA)» Responding quickly to changes in altitude, the software and algorithm has been optimised, enabling the new variant to cope with high speeds
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Chemring Group PLC Michael Ord – Group Chief Executive
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Chemring Group PLC Delivering on our strategic imperatives Results for the year ended 31stOctober 202417 Our strategic imperatives:GrowInvesting in capacity, technology and people to drive organic growth:•Capacity expansion across Energetics•Innovation and solution development at RokeProtectInvesting to protect sole-source and market-leading positions:•Increased modernisation and automation •Safety, operational excellence, and new product developmentAccelerateInvesting in value-enhancing bolt-on acquisitions to accelerate growth, e.g.•Advanced capabilities and scaling for Roke•Enhanced market access for US Space and Missiles
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Chemring Group PLC 45%34%21%2024 Revenue by GeographyUSUKROW Market update Results for the year ended 31stOctober 202418 Evolving market environment Rising global instability is widening the threat spectrum » Defence and national security tailwinds driven by unsettled geopolitical environment with widening threat spectrum» Increasing challenges and threats from Russia, China and Middle East» Protection of the US and deterrence against emerging threats likely to drive defence spending priorities for the new Trump-Vance administration» New UK Government committed to increasing defence spending to 2.5% of GDP; near term timing and impact of SDR uncertain» Greater European spend to increase defence capabilities and autonomy58%42%2024 Revenue by SectorCountermeasures& EnergeticsSensors & Information
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Chemring Group PLC UK National Security threats…European threats…Asia Pacific threats…» Driving demand for active-cyber defence and operational mission support services» Driving demand for Artificial and Open-Source Intelligence as customers look to modernise capabilities at pace» Driving demand for traditional defence capabilities including artillery rounds and shoulder launched missiles» Driving demand for advanced defence technology including Electronic Warfare, counter-UAS and ISTAR capabilities» Driving demand for missiles and long-range deterrent capabilities» Driving demand for both national and commercial space launchRobust demand is underpinned by three core drivers Results for the year ended 31stOctober 202419 Photo credit: United Launch Alliance UK MOD © Crown copyright 2021 Geopolitical tensions are driving strong demand for Chemring’s products RokeChemringNobelChemring EnergeticsEnergetic DevicesChemringNobelRoke Key Chemring beneficiaries:
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Chemring Group PLC Criticality of production and stockpiles well recognised Results for the year ended 31stOctober 202420 Chemring well positioned to benefit from sustained long-term demand for energetic enabled capabilities
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Chemring Group PLC Norway capacity expansion Results for the year ended 31stOctober 202421 » Increasing production of HMX, RDX and NTO – CHN key supplier to NATO» £145m investment, offset by £90m grant funding awarded in March 2024» Maximising the capacity of the current site, increasing capacity up to 275%» Project on track, CHN team enhanced with external engineersPotential further expansion being considered:» Feasibility study launched October 2024 in partnership with Norwegian Government into a new production facility» Options to perform the blending stage of €231m Diehl contract in Germany currently being explored , potential for further in-country growth Net investment of £55m generating incremental revenue of +£60m pa Visit by the Norwegian Prime Minister – November 2024
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Chemring Group PLC US capacity expansion Results for the year ended 31stOctober 202422 £10m investment generating incremental revenue of +£10m pa» 45,000 sqft building purchased in January 2024, doubling our production floorspace» Enhances our ability to maintain continuous flow manufacturing operations» Key enabler for growth ambitions, and cements position in the space launch and missiles marketKey recent contract awards:» Five year $106m award for critical components used on undisclosed missile programme» Orders over $20m from United Launch Alliance for initiators and Boeing in relation to the Harpoon missile program
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Chemring Group PLC Scotland capacity expansion Results for the year ended 31stOctober 202423 £45m investment generating incremental revenue of +£30m pa September 2023November 2024» Building the most advanced propellants manufacturing facility in Europe, which increases safety and efficiency, and adds capacity and redundancy» On schedule and within budget, on track for site handover in early 2025» Significant commissioning and validation effort planned to bring into live production in early 2027» Positive response from customers that additional capacity coming onlineKey contract awards:» £43m for the delivery of critical components used in NLAW . Deliveries commenced in 2024 and will continue into 2026» 15 year agreement with Martin Baker to supply propellant material and pyro-mechanical devices valued at up to £160m
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Chemring Group PLC Maintaining Roke’s strong growth Results for the year ended 31stOctober 202424 On track to grow 2028 revenue to >£250m pa, and maintain strong margins » Another record year with robust demand expected across Roke’s markets» ‘Tip of the spear’ strategy positions Roke well in key areas of customer requirement» Robust pipeline of Information Advantage and CEMA opportunities with UK Defence customer » Significant (>£300 million) 5-year international sales pipeline for EW products as customers increase focus on CEMA» Continued private and public-sector focus on digital solutions» “NATO first” SDR will generate additional upside opportunities» UK Government headwinds can be expected until SDR publication in H1 2025
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Chemring Group PLC Summary and outlook»Good progress despite challenges that led to a heavier H2 weighting» Granted c.£90m of funding towards EnergeticsCapex expansion plans» Record order intake with 77% of 2025 revenue covered by the order book» Board’s expectations for 2025performance remains in line with market expectations, with a similar H2 weighting»Strong growth predicted over at least the next decade –well positioned in high margin and growing markets»Record order book (>£1bn) and long-term partnering agreements give excellent visibility of future earnings» Balance sheet strength gives increased optionality for further organicand inorganic growth –strong pipeline of opportunities»On track to increase annual revenue to c.£1bn by 2030 Results for the year ended 31stOctober 202425 2024: In line with expectations Longer-term outlook increasingly robust Balancing near-term performance with longer-term growth and value creation
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Chemring Group PLC Appendices
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Chemring Group PLC Medium term financial objectives and assumptions Results for the year ended 31stOctober 202427 » Group – targeting mid-single digit growth in the near term, accelerating to low double-digit % growth as new capacity comes online» S&I – flat in FY25 with a decline in US Sensors (JBTDS LRIP completed) offsetting continued growth in Roke, with subsequent strong double-digit % growth as JBTDS FRP commences in FY26 and Roke grows to £250m by FY28» C&E – targeting low single digit % growth in Countermeasures and mid-single digit % growth in Energetics with a step change of growth in Energetics as additional capacity is commissioned adding £100m revenue in FY28Revenue» Group – targeting mid teen return on sales % in the medium term» S&I – targeting high teen return on sales % in the medium term as the US PoRs deliver mid teen return once in FRP and Roke maintains strong low 20s percentage margin» C&E – targeting mid to high teen return on sales % in the medium term as higher margin Energetics growth becomes a greater proportion of the segmentOperating margins» Expected to increase to £7m, and then remain at that level, as higher interest rates and borrowings drive increased finance costsInterest» c.£70m for 2025, £50m for 2026 and £30m for 2027 as the £200m 4-year investment in increased Energetics capacity is completed, in addition to maintenance capex of £20-30m per annum» Offset by grant funding of £90m, with about £15m in 2025, £25m in 2026 and £28m in 2027Capex» US$1.30: £1, AU$1.90 : £1 and NOK 14.00 : £1» If GBP was 10% weaker against USD, AUD and NOK this would increase revenue by £20m and increase operating profit by circa £2.1mFX» 21% in 2025 and then rising towards mid 20’s due to the increased weighting of UK profits Tax» Based on the position at 2024, the Group would expect the number of shares used in EPS calculations for 2025 to be 272.8m (basic) and 277.9m (diluted)» In 2025 circa £13m to be spent acquiring shares used for the vesting of LTIP awards, bought and held in the ESOP trustShare capital
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Chemring Group PLC OrganisationCountermeasures & EnergeticsSensors & InformationTechnology SolutionsChemringNobelEnergetics UKEnergetic DevicesCountermeasures AustraliaCountermeasuresUSACountermeasuresUKUS SensorsRokeUSARokeBUs/capabilities●Operational mission support services●Active cyber defence & OSINT●●Land EW●●Sensors●●●Air & naval countermeasures●●●Energetics material & products●●●Precision engineered devices Results for the year ended 31stOctober 202428
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Chemring Group PLC Group performance 2019 – 2024 Results for the year ended 31stOctober 202429 01002003004005002020 2021 2022 2023 2024Revenue (£m)0102030405060702020 2021 2022 2023 2024Operating profit (£m)05101520252020 2021 2022 2023 2024Earnings per share (pence)0%5%10%15%20%2020 2021 2022 2023 2024Operating margin (%)0204060801001202020 2021 2022 2023 2024Cash conversion (%)01020304050602020 2021 2022 2023 2024Net debt (£m)
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Chemring Group PLC Adjusting items20232024Note£45.4m28%£58.1mStatutory operating profit£3.0m£2.0mAcquired intangibles amortisation£3.7m£3.4maAcquisition related expenses£(1.4)m£2.0mMark to market of FX forward contracts—£7.5mPension Buy-in / Buy-out—£1.2mChange of senior management positions £18.5m—Impairment of Chemical Detection assets—£(3.1)mNon-underlying provision movement£69.2m3%£71.1mAdjusted operating profit£(1.3)m£(4.8)mFinance costs£(10.2)m£(12.3)mTax charge on adjusted profit£57.7m(6)%£54.0mAdjusted profit after tax20.0p(4)%19.3pAdjusted Diluted EPS Results for the year ended 31stOctober 202430 a – £3.2m relating to IFRS 2 charge on acquisition of Cubica and Geollect and £0.2m relating to professional fees incurred in relation to mergers and acquisitions activity
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Chemring Group PLC ESG»Maintained AAA ESG rating with MSCI »Maintained good progress in line with our HSE Zero Harm strategy » Recordable injuries decreased to 0.69 (2023: 0.90) and remains below our annual limit of 1.0» Zero injuries in connection with or arising from energetic events» Continue to consolidate within a calculative safety culture with improved systems providing data informed discussions and decision making at all levels»Ensuring we meet our ESG near and longer-term targets» Independently assured scope 1 and scope 2 GHG emissions reduced by 13.0% to 15,161 CO2e tonnes on higher revenue» New environmental data platform now in place»Continuing to build a diverse, fair and inclusive culture which supports collaboration across the business Results for the year ended 31stOctober 202431 Committed to building a strong, inclusive and sustainable company
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Chemring Group PLC Orderbook Results for the year ended 31stOctober 202432 » Expected 2025 revenue 48% covered» Customers deferring to placing annual orders over multi-year contracts» Expected 2025 revenue 97% covered, 2026 81% covered and 2027 52% covered» Significant orders for our specialist energetic materials businesses, space and missiles 2025 CoverageGrowthTotal orderbook77%13%£1,038m2025 CoverageGrowthOrderbook48%(39)%£105m2025 CoverageGrowthOrderbook97%24%£933mSensors & Information Countermeasures & Energetics
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Chemring Group PLC Impact of foreign exchange translation2024£m2023£m2024 restated at 2023 rates£mConstantcurrency movement510.4472.6517.3+9%Revenue93.788.594.8+7%EBITDA71.169.271.7+4%Operating profit1,037.8921.61,072.5+16%Order book Results for the year ended 31stOctober 202433 Sensitivities» 40% of expected revenue in 2025 is denominated in USD, AUD and NOK (2024: 39%)» If GBP was 10% weaker against USD, AUD and NOK this would increase revenue by £20m and increase operating profit by circa £2.1m in 2025» Future guidance based on US$1.30 / A$1.90 /NOK 14.00Closing rateAverage rate2023202420232024% of revenue1.211.291.241.2723%USD1.921.961.911.952%AUD13.5614.1813.1013.6911%NOKTranslation
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Chemring Group PLC 20232024£m100.598.5Goodwill & intangibles17.618.6Development costs242.2287.8Property, plant & equipment82.388.3Trade working capital5.90.1Pension surplus(55.6)(84.2)Other 392.9409.1(14.4)(52.8)Net debt378.5356.3Net assetsBalance sheet» Net debt of £52.8m and net debt: EBITDA ratio of 0.56x» Over the rolling three-year period, 101% of EBITDA has been converted to operating cash funding reinvestment in capex» Working capital as a % of revenue has remained consistent at 17% (2023: 17%)» Total available facilities of £246m, of which £157m were undrawn at 31 October 2024, providing good immediately available liquidity Results for the year ended 31stOctober 202434
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Chemring Group PLC 202620252024583535510Revenue (£m)86.676.971.1Underlying operating profit (£m)22.620.119.3Underlying earnings per share (pence)1009953Net debt (£m)Market consensus» The Group is aware of five analysts publishing regular independent research on the Group» The Group has compiled consensus data* from the research it has been made aware of, as set out in the table, with 2024 being the final results» Investec is Corporate Broker to Chemring Results for the year ended 31stOctober 202435 *Compilation of data only, does not represent the Group’s views of projections
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Chemring Group PLC GlossaryMeaningAcronymMeaningAcronymIndefinite Delivery/Indefinite QuantityIDIQChemring Countermeasures UKCCM UKJoint Biological Tactical Detection SystemJBTDSChemring Countermeasures USACCM USLow rate initial productionLRIPChemring Energetic DevicesCEDLost time incidentLTIChemring Energetics UKCEUKMiddle East & North AfricaMENACyber and Electromagnetic ActivitiesCEMAMagnesium Teflon VitonMTVChemring NobelCHNNorth Atlantic Treaty OrganisationNATOChemring GroupCHGNext Generation Anti-Tank WeaponNLAWCountermeasures & EnergeticsC&EOpen Source IntelligenceOSINTDiversity, equity and inclusionDE&IProgram of RecordPoREnhanced Maritime Biological DetectionEMBDSensors & InformationS&IEnvironmental, social and governanceESGUnited Kingdom Ministry of DefenceUK MODElectronic WarfareEW United States Department of DefenseUS DoDFull rate productionFRPReference to fiscal year 20XX20XXF-35 Lightening II FighterF-35 Results for the year ended 31stOctober 202436
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Chemring Group PLC Disclaimer2024 Chemring Group PLCThe information in this document is the property of Chemring Group PLC (“Chemring”) 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. This presentation does not constitute a recommendation to sell or buy securities of Chemring. This presentation may contain certain statements that are forward-looking statements. They appear in a number of places throughout this presentation and include statements regarding the intentions, beliefs and/or current expectations of Chemring and its subsidiaries (together, the “Group”) and those of their respective officers, directors and employees concerning, amongst other things, the results of operations, financial conditions, liquidity, prospects, growth strategies and the businesses operated by the Group. Phrases such as “aim”, “plan”, “intend”, “should”, “anticipate”, “well-placed”, “believe”, “estimate”, “expect", “target”, “consider” and similar expressions are generally intended to identify forward-looking statements. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. As such, undue reliance should not be placed on forward-looking statements. The forward-looking statements reflect knowledge and information available at the date of preparation of this presentation and, unless otherwise required by applicable law, Chemring undertakes no obligation to update or revise these forward-looking statements.No representation or warranty, express or implied, is given by Chemring or any member of its Group or any of their respective officers, directors, employees or any other person as to the fairness, accuracy or completeness of the information or opinions contained in this presentation and no liability whatsoever for any loss howsoever arising from any use of this presentation or its contents otherwise arising in connection therewith is accepted by any such person in relation to such information.This presentation contains brands that are trademarks and are registered and/or otherwise protected in accordance with applicable law. Results for the year ended 31stOctober 202437