Chemring (CHG) 291p

Loss to date: 7.3%

Original entry point: Buy at 314p, 5 August 2021

While the shares may not have budged off the back of Chemring’s (CHG) full year results (14 Dec), we were encouraged by signs of underlying progress. In particular, improvement in margins reflects the company’s transition to a higher quality business.

For the year to 31 October, pre-tax profit rose to £48.8 million from £43.3 million year-on-year, while revenue slipped 2% to £393.3 million.

Its operating margin rose to 14.6% from 13.6%. This primarily reflected the growth of its higher margin operations, including the cyber security division which particularly excites us, and the continued focus on improved operational execution throughout the group.

The outlook for 2022 was left unchanged, although the company has a strong order book and a very robust balance sheet leaving it well positioned at the start of its new financial year.

Numis analyst Richard Paige noted: ‘Chemring has delivered its third consecutive year of organic growth, with further good cash conversion and strong order growth as the strength and quality of earnings improves and track record builds. He says ‘momentum remains strong’ within the business.

SHARES SAYS: The market hasn’t yet caught on to the transformation afoot at Chemring but we think this is just a matter of time. Stay positive. 

‹ Previous2021-12-16Next ›