Chemring Group H1 2026 Earnings Report

Chemring Group EPS Results

• Actual EPS: GBX 6.20
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Chemring Group Revenue Results

• Actual Revenue: $237.30 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Chemring Group Announcement Details

• Quarter: H1 2026
• Date: 6/2/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, June 2, 2026
• Conference Call Time: 4:00AM ET

We are a specialist manufacturing and technology business creating market-leading innovative solutions to meet our customers’ complex needs. Using our extensive science and engineering expertise, we turn ideas into reality, designing and developing critical solutions that protect and safeguard in unpredictable environments in today’s increasingly unstable world. We achieve this by innovating at every stage of the value chain, from research and development (“R&D”) through to design, manufacture and in-service support, working closely with our customers to deliver products, services and solutions for mission-critical success. Our customer base spans national defence organisations, security and law enforcement agencies, as well as commercial markets such as space and transport. We support our customers in more than fifty countries across the globe.

Chemring Group H1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Chemring said first-half trading was in line with expectations, with revenue up 7% and the order book reaching a record GBP 1.4 billion, giving the company 91% cover for FY2026 revenue and leaving full-year guidance unchanged.
• Positive Sentiment: Countermeasures & Energetics delivered a strong half, with revenue up 9% and operating profit up 32% as margins expanded to 18.4%, supported by strong demand and improved commercial terms.
• Neutral Sentiment: Sensors & Information returned to revenue growth, helped by a nearly 60% increase in order inflow, but margins were pressured by lower Roke utilization, early CORTEXA production, and more pass-through revenue.
• Positive Sentiment: The company highlighted ongoing capacity expansion projects in Chicago, Scotland and Norway, all progressing on schedule or on budget, with management reiterating the target of GBP 100 million in revenue and GBP 30 million in operating profit from these sites by 2028.
• Neutral Sentiment: Cash conversion was weaker in H1 at 42% due to working capital investment and inventory build for second-half deliveries, but Chemring expects full-year cash conversion of 80% to 85% and net debt to rise further as investment continues.

Presentation

[Michael Ord, Group CEO at Chemring Group]

Good morning, welcome to the Chemring's interim results presentation for the six months to April 30th, 2026. I'm Michael Ord, the Group's Chief Executive, I'm joined this morning by our CFO, James Mortensen. I'll begin with the first half headlines, James will take you through the financial and operational performance in more detail. I'll comment on the group's environment, the market environment, spend some time on our key growth drivers and why this gives us confidence in Chemring's future growth. We'll take your questions at the end. Operational and trading performance in the first half was in line with our expectations. Despite the headwinds in the U.K. market, order inflow in recent months has been encouraging, improving our near-term visibility and reinforcing our confidence in the full year.

[Michael Ord, Group CEO at Chemring Group]

Approximately 91% of forecast 2026 revenue had either already been delivered or was in the order book at April 30th. Our full-year expectations therefore remain unchanged. Market demand is strong, as growing geopolitical instability drives a shift to high-intensity deterrence and structurally higher defense and national security budgets. Against this backdrop, we continue to invest in areas which are aligned with our customers' priorities, particularly in Countermeasures & Energetics, where we delivered first half growth and where our capacity expansion projects continue at pace. We continue to execute against our strategy and positioning the group for strong future growth. James will take you through the financial performance in a moment. I won't go into detail here.

[Michael Ord, Group CEO at Chemring Group]

For me, I'd call out the increase in revenue reflecting a strong performance in Countermeasures & Energetics, the return to growth in Sensors and Information, and the order book of GBP 1.4 billion, which is another record for the group. I'd also highlight our safety performance. We have reduced our total recordable injury frequency rate from 0.63 to 0.31, which reflects the progress we are making in our proactive safety culture and our zero harm ambition. I want to acknowledge the focus and commitment of all of my colleagues across Chemring in keeping safety at the forefront of everything that we do. With that, I'll now hand over to James.

[James Mortensen, CFO at Chemring Group]

Thanks, Mick. Before I start, you'll notice a few images of the Artemis mission throughout the deck. We're proud of our growing role in the space industry, and Artemis is a great example of the critical programs we're contributing to. There's more detail in the appendix. Turning to the results, performance in the first half was in line with the expectations, and our focus is now firmly on delivering the second half. The order book reached a record of GBP 1.4 billion, up 8%. Revenue, up 7%, showing continued momentum. Operating profit and operating margin were lower year-on-year, and that flowed through to EPS. Cash conversion was lower, mainly due to working capital investment to support H2 deliveries. An interim dividend of GBP 0.028 declared, up 4%.

[James Mortensen, CFO at Chemring Group]

Next, let me take you through the segmental performance. Starting with Countermeasures & Energetics, another strong performance with both revenue growth and margin expansion. Revenue grew 9% as the businesses ramp in line with our plan, meeting our customers' unprecedented demand. This led to operating profit up 32%, a margin increase to 18.4%. This improvement was driven by better commercial terms and our rigorous focus on operational excellence. Turning to Sensors and Information, which performed as expected. Revenue growth and strong order intake, margins impacted by product mix and maintaining operational capability. There were clear positives. Order inflow was up nearly 60% as we saw the Roke business stabilize with strength in national security. We therefore return to growth with revenue up 3%.

[James Mortensen, CFO at Chemring Group]

As expected, operating profit and margin were lower, there were three main drivers. First, we deliberately maintained operational capability and so had lower utilization in Roke. This was to support improving national security demand and to position ourselves to take advantage of the significant UK MoD opportunity pipeline as it arrives. Second, revenue mix. Early CORTEXA pre-production units carried lower margins. We expect to improve commercial terms going forwards as we enter full-scale production. Third, pass-through. The first work package on the GBP 251 million Missile Defence Centre project increased the proportion of low-margin pass-through revenue. Turning to the cash flow, cash conversion was 42% in H1, mainly reflecting our decision to increase safety stocks and secure inventory for H2 expected revenue.

[James Mortensen, CFO at Chemring Group]

We expect an improvement in H2 conversion with full year guidance in the range of 80%-85%. CapEx was GBP 44 million, with good progress across our expansion projects. Net debt increased as expected through the peak investment phase. We returned GBP 19 million to shareholders, GBP 14 million through the dividend and GBP 5 million through the buyback. We also purchased some shares to satisfy acquisition consideration and employee share options. We signed an additional GBP 80 million UKEF facility, which will replace the current UKEF facility as it expires. Together with the RCF and US overdraft, we now have GBP 342 million of available facilities. We closed the period with net debt of GBP 145 million or 1.5 times leverage.

[James Mortensen, CFO at Chemring Group]

We do expect net debt to rise further In line with market expectations. Next, let me update you on the energetics expansion projects, which continue at pace. Chicago complete, on budget and on schedule. Fit-out is done, production ramping. We are now focused on lean practices to maximize output. The additional capacity positions us well for future demand and gives us optionality should needs increase following the conflict in the Middle East. Scotland remains on track, also on budget and on schedule. Construction is complete, machinery installed, and commissioning underway. We remain on track to deliver revenue in 2027. Norway phase I complete and on budget. Phase II is progressing well. Groundworks are nearly complete. Concrete foundations for nearly all the buildings laid.

[James Mortensen, CFO at Chemring Group]

As you can see, the first building is nearing completion, with the second approaching halfway. Across all the sites, we remain on track to deliver GBP 100 million in revenue and GBP 30 million in operating profit by 2028. We're also making good progress on a potential second site in Norway, the greenfield. As a reminder, this is for a facility at least as big as our enlarged facility, and a location has been identified about 25 kilometers southwest of the current site. We are now in the concept selection phase, fully funded by the Norwegian government with around GBP 16 million and expected to report out in early 2027. Next, let's look at order cover and the book and bill for the rest of the year.

[James Mortensen, CFO at Chemring Group]

What gives us confidence in our full year guidance? Our record order book provides 91% cover for the rest of the year. That's up 600 basis points on the prior year. In Countermeasures & Energetics, that order cover is strong, nearly fully covered this year and 81% and 68% in the following two years. In Sensors and Information, order cover is now 84%, up from 64% last year, a significant improvement. If we break down the book and bill, the majority relates to expected orders in Countermeasures & Energetics and high confidence renewals in national security. Those EW product sales are to a number of international customers where tenders are in process. Lastly, there are a couple of orders to the U.K. Ministry of Defence.

[James Mortensen, CFO at Chemring Group]

These are largely for programs we have been delivering on, but procurement delays have pushed timing. To guidance. FY 2026 guidance remains unchanged from the year-end, so I won't go through it in detail. It's supported by 91% order cover and an improving performance in the second quarter, with 70% operating profit expected in H2. Cash conversion is expected to be 80%-85% for the full year, reflecting a much stronger H2. As always, there are external factors to monitor. I just flag, while we have seen no supply chain issues and energy is well hedged this year, we continue to monitor the impact of the Middle East situation. We will continue to balance near-term performance with longer-term growth and value creation.

[James Mortensen, CFO at Chemring Group]

With that, I'll hand back to Mick for the strategy section.

[Michael Ord, Group CEO at Chemring Group]

Thanks, James. I'll now turn to the market environment where geopolitical tensions are at an increasingly elevated levels. This is driving a rearmament cycle, which we expect to last at least a decade and probably longer. It is these fundamental market changes which underpin our confidence in the long-term outlook. This slide summarizes why we believe defense spending is on a structurally higher trajectory, irrespective of whether we see peace deals in Ukraine or the Middle East. There are several factors behind this, but I want to focus on two. Firstly, defense planning assumptions have changed. NATO has shifted from expeditionary operations to persistent territorial defense and peer conflict readiness. To deliver these changes will require more durable and growing defense budgets. 2% of GDP is now a floor, not a ceiling.

[Michael Ord, Group CEO at Chemring Group]

Defense spending is becoming more politically embedded across Europe, with multiple NATO members moving towards the alliance's ambition of 5% by 2035. That shift also supports multi-year procurement visibility rather than sporadic demand. Secondly, the significant materiel demand arising from the conflicts in Ukraine and the Middle East have drawn down inventories and exposed vulnerabilities in the defense industrial base after years of underinvestment. Rebuilding these inventories requires sustained production at scale, not one-off orders. Defense industrial capacity is now being treated as a strategic infrastructure, with governments prioritizing sovereign and allied supply chains and supporting long-term framework contracts and capacity expansion, particularly in energetics. Against this backdrop, demand and investment is concentrated in areas where Chemring's capabilities are highly relevant.

[Michael Ord, Group CEO at Chemring Group]

These include, but are not limited to, long-range strike missiles, integrated air and missile defense systems, space capabilities, cyber and electronic warfare, and counter-drone technologies. Our differentiated capabilities are therefore well-matched to where our customers are prioritizing spend, supporting sustained growth across both our home markets. I now want to spend a few minutes on some of the group's key growth areas. Starting with missiles and munitions, where Chemring is a major merchant supplier of high-grade military explosives and energetically actuated devices that are essential to missiles and advanced munition systems. We've called out on this slide some of the key missile and munitions programs on which we are a key supplier, and at the bottom, given examples of the types of materials and devices into which we supply.

[Michael Ord, Group CEO at Chemring Group]

We supply highly engineered, designed-in products and materials that are not easily substituted. They require significant regulatory clearance and involve very long qualification cycles. As our prime contractor customers seek to increase missile and munition output, demand for these materials and devices rises, yet the pool of capable suppliers remains limited. Across the NATO defense industrial base, the supply of high-grade military explosives, such as HMX and RDX and insensitive munition compositions, is recognized as an area of significant undercapacity. Chemring already has licensed infrastructure and capacity, deep expertise in formulation, production, and handling of these materials, which positions us strongly as governments and prime contractors prioritize supply chain resilience and domestic sourcing.

[Michael Ord, Group CEO at Chemring Group]

While some European companies have announced their intention to expand supply of lower-grade explosives such as TNT, there are no mature plans for large-scale HMX production, which provides us with a first-mover opportunity in the market. It is these market dynamics which continue to reinforce our decision to invest in additional capacity through a combination of customer-funded and self-funded projects. I'm often asked whether demand across countermeasures and energetics would ease if there were peace in Ukraine and the Middle East, so I thought I'd talk to that for a moment. Operation Epic Fury and ongoing operations in the Middle East have to date cost approximately $25 billion, and have materially depleted U.S. inventories of multiple missile systems. In addition, even before Operation Epic Fury, many analysts and commentators judged stockpiles to be insufficient for peer conflict scenarios.

[Michael Ord, Group CEO at Chemring Group]

There is now a very significant imperative for the U.S. Department of Defense to ramp up production to replenish stocks of existing systems and to move new programs into production phases. As a result, the Trump administration has announced several multiyear agreements with industry prime contractors to increase output and place missile production on a wartime footing. As a merchant supplier into many of these programs, Chemring is well-placed to benefit from this increased demand. In Europe, demand is being shaped by a combination of current battlefield consumption, structural stockpile gaps, and long-term rearmament decisions. On both sides of the Atlantic, governments are increasingly seeing defense industrial capacity itself as a core element of deterrence, not just as a supporting function.

[Michael Ord, Group CEO at Chemring Group]

The bottom line is that missile ammunition demand is being shaped less by short-term crises and more by a structural shift towards sustained rearmament with higher stockpiles and usage assumptions. The next area I want to touch on is air and naval platform protection. Given missile threats relentlessly increase in both number and sophistication, platform survivability remains paramount and mission-critical across air and maritime domains, and we see a growth trajectory for countermeasures extending well into the 2030s. As the leading global supplier of countermeasures, Chemring is uniquely positioned to benefit. With more than 65% of the addressable market share, our products protect approximately 85% of NATO's air fleets and 60% of NATO's naval fleets. Our leading incumbency gives us a real advantage as customers expand stockpiles and plan for higher usage rates.

[Michael Ord, Group CEO at Chemring Group]

In the first half, we secured GBP 123 million of countermeasures orders, which is up 486% year-over-year, with demand primarily coming from European customers. Innovation also matters in this market, and we have several development programs underway on both sides of the Atlantic, including protection for uncrewed platforms and threat-agnostic countermeasures designed to address both current and emerging threats. Therefore, the group's position in air and naval platform protection continues to strengthen as the market expands. Finally, let me turn to Roke and the critical role its technologies play in the defense of the U.K. and, increasingly, international customers. On this slide, I called out the areas of cyber, electronic warfare, resilient navigation, and counter-drone, indeed, there are many more technologies I could have mentioned.

[Michael Ord, Group CEO at Chemring Group]

Whilst there's a great deal of focus on defense-related opportunities, we must always remember that national security and law enforcement remain at the very core of Roke, continuing to provide a stable underpin to the business, as evidenced by approximately GBP 40 million worth of program renewals secured to date. In addition, national security provides a technology and innovation catalyst which benefits the entire business. To help mitigate the near-term headwinds resulting from the delayed publication of the U.K.'s Defence Investment Plan, the Roke team continue to take action to protect and reposition the business and are seeking to broaden their international customer base. Roke's defence products business has a five-year international sales pipeline of more than GBP 300 million and continues to invest in expanding its product portfolio.

[Michael Ord, Group CEO at Chemring Group]

Of note, their counter-drone system, CORTEXA GUARDIAN, which is a combined radar and electro-optics system, which was officially launched to the market in April 2026, already has multiple opportunities now in sales conversion. Sales have already been made in Sweden and the U.K., as counter-UAS becomes increasingly mission-critical. In summary, with strong positions across multiple critical technologies, deep customer relationships, and a growing international footprint, Roke is well-positioned to benefit from the expected U.K. defence upturn and opportunities overseas. To summarize, operational trading performance in the first half was in line with our expectations. Despite headwinds in the U.K. market, we have seen encouraging order inflow in recent months, improving our near-term visibility and reinforcing confidence in the full year.

[Michael Ord, Group CEO at Chemring Group]

With 91% of expected 2026 revenue either delivered or in the order book at April 30th, our full-year expectations remain unchanged. With growing geopolitical instability driving a shift to high-intensity deterrence and higher baseline defense and national security budgets, and with a record order book of GBP 1.4 billion, the outlook is increasingly compelling. Our differentiated capabilities, together with the investments that we are making to expand capacity across our three energetics businesses, mean we are well positioned with where our customers are prioritizing their spend. That supports sustained growth across our major markets. I remain confident that Chemring is well positioned for strong future growth. That concludes this morning's presentation. We'd now be happy to take your questions.

[Michael Ord, Group CEO at Chemring Group]

Can I ask that you state your name and organization before asking your question? Right. Who's first? Okay.

[Ben Bourne, Head of Equity Research at Investec]

Morning, gents.

[Michael Ord, Group CEO at Chemring Group]

Morning.

[Ben Bourne, Head of Equity Research at Investec]

Ben Bourne, Investec. Mick, can you just talk a little bit more about your confidence in Alloy Surfaces, please, and the potential for a positive outcome?

[Michael Ord, Group CEO at Chemring Group]

That's an interesting question. We've been on quite a journey with Alloy Surfaces, I'm sure as people in the room will know. Alloy Surfaces, based in Philadelphia, was NATO's only production capability for pyrophoric decoys. These are airborne countermeasure decoys. As you know, we manufacture pyrotechnic decoys, which are the ones that you see coming out, which generate a lot of heat and light. Pyrophoric decoys are a different type of technology, but utilized as air protection. Alloy Surfaces up in Philadelphia was, up until last year, the only producer of those types of pyrophoric decoys for the whole of NATO. Unfortunately, there was a interruption in the ordering pattern from the U.S. DOD last year, and we had to shutter the business because we had insufficient demand.

[Michael Ord, Group CEO at Chemring Group]

In recent weeks and months, we've been in increasingly conversations with the U.S. Department of Defense about reactivating and reopening that business to supply pyrophoric decoys, primarily into the U.S. Department of Defense, but more broadly across NATO into a number of air forces that utilize those technologies. We're in discussion with the Department of Defense at the moment to do that, and we're highly confident that we should have a positive result to those negotiations.

[Ben Bourne, Head of Equity Research at Investec]

Thank you.

[Michael Ord, Group CEO at Chemring Group]

Good question. Who's next? Oh, I think Sash was.

[Sash Tusa, Analyst at Agency Partners]

Thank you. Sash Tusa from Agency Partners. Perhaps I could just follow on, first of all, your answer on Alloy Surfaces. When you're talking about highly confident of a good resolution, would that potentially include reversing the costs and charges that you incurred in previous years to shut the business? Is there any way that rather than this sort of on/off of ordering that has clearly occurred recently, you could actually get the Department of Defense to commit to a take-or-pay situation for Alloy Surfaces? Otherwise, it's not clear that it's an unmitigated success just to open it for another batch of decoys, followed by the same closure process a couple of years down the line.

[Michael Ord, Group CEO at Chemring Group]

Yeah, it's a good question. Clearly, I can't go into specific details around what we're negotiating at the moment, but the key thrust of the question of where if we do reactivate and reopen the facility, it will be for a long run as opposed to just another batch. I think, without going into specifics, Operation Epic Fury has identified the essential role in platform protection that pyrophoric decoys plays, and therefore the Department of Defense, and this goes to the broader question around defense industrial base, recognizing that the defense industrial base is an integral part of the war-fighting capability, not just of the U.S., but across all NATO allies. Therefore, the discussion that we're having with the Department of Defense is for a long run period, so three to five years, as opposed to just a single batch.

[Sash Tusa, Analyst at Agency Partners]

Great. Thank you. Just questions on just two of your other big contracts and relationships. The STORM BMD program. It's quite hard to reconcile the rate of order inflow at the moment with the total scale of the program, because otherwise it's going to be a six, seven, eight-year program at current rates. I fully accept that you can't see into what passes for the mind of MOD, but do you get any indications of whether they are changing the timescale for the program, or indeed changing the overall scale of the program? Otherwise, at some stage, just mathematically, you're going to get this enormous slug of business coming in, and it's quite hard to work out how you will scale your own business to cope with that.

[James Mortensen, CFO at Chemring Group]

Yeah, that's another good question. STORM was about GBP 250 million as an overall framework contract and to date.

[Sash Tusa, Analyst at Agency Partners]

About GBP 22 million to date. Is that the first initial call off?

[James Mortensen, CFO at Chemring Group]

I think it's really difficult, Sash, like you say, to look into the MOD's mind and understand how they're going to profile that program. No doubt, as with everything associated with defense procurement here in the U.K., it's caught up in the inevitable discussions around the Defence Investment Plan and whatever. I think the one thing I would say about STORM is that integrated air and missile defense of the U.K. homeland remains right at the top of the priority list from a U.K. defense planning assumptions perspective. Indeed, integrated air and missile defense is one area that we're seeing significant growth across the whole of the Group, on both sides of the Atlantic.

[Sash Tusa, Analyst at Agency Partners]

Thank you.

[Jamie Murray, Analyst at Bank of America]

Hi, guys. Jamie Murray from Bank of America. Can you just provide a little bit more color on potential new energetics CapEx programs? I know previously you've mentioned Germany and the UK government. Obviously, the balance sheet is a little bit constrained, so also how are you balancing that?

[James Mortensen, CFO at Chemring Group]

Yeah. I think, essentially, it's too early to say at the moment exactly what they could be, given we don't know exactly what the scale of them could be. If you think about what's going on at the moment, the facility in Germany that we're building, the blending facility, that's fully funded by the German government. We've just signed an agreement with the UK MOD here to start the next phase of the feasibility study for a potential new site, both up in Scotland and capacity addition to our site in Salisbury as well. I think, at the moment, because we're not sure exactly of the scale of them, I couldn't give a guidance on CapEx.

[James Mortensen, CFO at Chemring Group]

I think what I would say is in all of these conversations, the conversations that we're having is around supported by grant funding from the governments that we're in discussions with. It wouldn't be us fully funding these facilities. That's not the intention.

[Richard Paige, Analyst at Deutsche Numis]

Morning. It's Richard Paige from Deutsche Numis. A couple from me, please. First on, thank you for the bridge on the second half. The bigger chunk is obviously national security, which you said you've seen a recovery. Do you have decent visibility on that order?

[James Mortensen, CFO at Chemring Group]

Yeah, I think we're finding it's very much a customer that seems to have a healthy budget. We're seeing growth in that area, certainly a stabilization and growth in the second half. Yeah, we talk about that GBP 40 million of renewals already this year. We're pretty confident that the rest of them will come through. Remember, these are always work packages that we're currently working on, and so it's extending work that we're currently doing rather than new bodies of work.

[Richard Paige, Analyst at Deutsche Numis]

Again, obviously the second largest chunk is the product sales. Can you just remind us the sort of typical size of those orders?

[James Mortensen, CFO at Chemring Group]

Yeah. This is a number of different international countries. Interestingly, the majority of them begin with the letter S. The size is GBP 3 million to kind of GBP 5 million. It's not more than that. It's certainly not one big one, it's a number of smaller ones. There's a small amount of CORTEXA in there, but it's mainly Resolve and PERCEIVE to these international customers.

[Richard Paige, Analyst at Deutsche Numis]

Brilliant. Thank you. A final one. You're obviously making fantastic progress on the new capacity that you've already spoken about. Chicago in place. You're getting Scotland up and running. Signing off. Price environment, demand environments change quite positively, I would imagine, over that period. How are we feeling about the GBP 100 million and GBP 30 million figures that?

[James Mortensen, CFO at Chemring Group]

Yeah, still pretty good. I think we're certainly on track for them. Like we say, Chicago made really good progress. They're delivering against that. The same in Scotland. We're just in the commissioning phase. Expect to complete that in 2027. Then we're looking to bring the new capacity online in Norway in 2028. Yeah, you're right. The commercial terms that we're getting are certainly improving as we look forwards. The demand is certainly there. Yeah, we're pretty confident.

[Michael Ord, Group CEO at Chemring Group]

The market demand for energetics, whether that's materials or whether it's devices, is incredibly strong. A couple of stats, and I think they're in the presentation, but if you look at the business in Chicago, for instance, I think year to date, we've submitted 160 proposals to customers on back of customer requests, and we've got another 69 in work. That gives you a feel. These are hugely elevated levels to what we've seen previously. I think the team up in Scotland, year to date, they've submitted 60 proposals to customers. Again, these are funded programs where customers are seeking the key materials and devices that we produce.

[James Mortensen, CFO at Chemring Group]

I think in Norway, we've often said, haven't we could sell out that capacity that we're building in FY 2030 many times over. We're very confident that there's the demand there for that material.

[Richard Paige, Analyst at Deutsche Numis]

Thank you.

[James Mortensen, CFO at Chemring Group]

Thanks.

[Ben Varrow, VP of Equity Research at RBC]

Morning. Ben Varrow, RBC. Just building on that. Obviously, their clear demand picture has clearly improved for energetics, but order intake was GBP 52 million in the first half. How should we think about sort of timing? For those also all the proposal that you've submitted and how that feeds through.

[James Mortensen, CFO at Chemring Group]

You just look at the order book in that side of the business, right? It's 95% nearly fully covered this year, over 81% next year, and nearly 70% the year after that. I think, what we saw last year, we saw some very large order intake in that business. I think it's just timing of further orders. You can see from our order book, we're pretty well covered out into the future anyway. Lots of that cover is in that energetics business. I wouldn't read anything into the lower order intake in the first half this year on that side.

[Ben Varrow, VP of Equity Research at RBC]

Sensors & Information. The margin, obviously big step down in the first half. You mentioned it's sort of tracking better in Q2. Can you shed some light on the exit rates and the expected margin then in the second half?

[James Mortensen, CFO at Chemring Group]

Yeah. In the second half, so overall in that business, we expect it to get back to a similar margin to last year in the second half. I think, what we've seen in the second quarter is running towards that kind of run rate.

[Ben Varrow, VP of Equity Research at RBC]

Last one on that bridge as well for H2, there's still some MOD orders within that. Is there still an aspect in terms of the DIP needing to come out for you to hit the numbers, or are you relatively comfortable?

[Michael Ord, Group CEO at Chemring Group]

Certainly in the second half, there are orders from the U.K. MOD since they're a major important customer for us. We fully expect to see that those orders will flow, whether they flow as part of the DIP itself or whether, as you see, the MOD are placing orders irrespective of whether DIP's coming out or not. Clearly it's taking a lot longer, and it's far more difficult to get those orders through their approvals process. We still see that those orders will come through, and the vast majority of those orders are for extensions of programs and frameworks that we're already contracted on, as opposed to having to go out and win new programs.

[Ben Varrow, VP of Equity Research at RBC]

Thanks.

[David Farrell, SVP of Equity Research at Jefferies]

Hi, David Farrell from Jefferies. A couple of questions from me. Just firstly on space, obviously a kind of clear growth area for you. A couple of questions there. Chicago, I think when you announced the expansion, it was probably doing 30-odd million GBP of revenue. You're adding GBP 10 million, but you doubled manufacturing footprint. Could that not scale up to GBP 30 million of incremental revenue over time, therefore?

[James Mortensen, CFO at Chemring Group]

What we said in that business is we've added that new capacity, and that gives us the space to expand further should more demand come through. We talk about the Middle East and the number of systems that are being utilized there, and the increase in the space market. Yeah, certainly it gives us the capacity to do that.

[Michael Ord, Group CEO at Chemring Group]

When we expanded, when we purchased the new facility in Chicago, I think it was about 41,000 square foot of productive capacity. I would say that we're probably using about two-thirds of that at the moment. We purposely purchased a facility of that size because we saw that the demand would continue to increase. In fact, I was in Chicago, not last week, the week before. And the team are fully in that new facility. It's all laid out, lean production, modern manufacturing flow techniques as well. And there is great expansion capability further.

[David Farrell, SVP of Equity Research at Jefferies]

As a percentage of revenue, how much is space?

[James Mortensen, CFO at Chemring Group]

We don't break down and give the individual components like that. It's a small but growing percentage of the overall group.

[David Farrell, SVP of Equity Research at Jefferies]

You sounded a bit more positive around the kind of profile for countermeasures, and obviously the order intake was very strong. I think if I look at your medium-term guidance, the expected growth rate is maybe 2%-3%. Do you think that gets revised higher?

[Michael Ord, Group CEO at Chemring Group]

Is what sorry?

[David Farrell, SVP of Equity Research at Jefferies]

Does that get revised higher? Do you think that market can actually grow at mid-single digits?

[Michael Ord, Group CEO at Chemring Group]

It might do. Absolutely. Let's see. We've had an incredibly strong first half with regards to order intake, and there's some interesting trends that we're seeing in air countermeasures and naval countermeasures. Firstly, naval countermeasures, soft-kill protection capability on warships is an area that the team here in the U.K. are seeing significant growth, let's see how that develops. From an airborne protection perspective, clearly what you're seeing in Operation Epic Fury and the discussion that we had earlier around Alloy Surfaces, I think is bringing back to the fore actually the essentiality of airborne countermeasures capabilities. The thing that you have to always bear in mind is how sophisticated the missile systems are.

[Michael Ord, Group CEO at Chemring Group]

You've seen platforms of incredible complexity that have been defeated and brought down in Operation Epic Fury, that just reinforces in defense planners' minds the essentiality of protecting what are increasingly expensive platforms. Even when you see that shift into unmanned platforms and some very expensive, high capability and high technology capabilities, those themselves require protection as well.

[David Farrell, SVP of Equity Research at Jefferies]

Okay. Sorry, James, you rushed through relatively quickly what's going on in Norway. Can you maybe give us a bit more detail in terms of the progress made on the various facilities, revised cost estimates, et cetera?

[James Mortensen, CFO at Chemring Group]

Do you want to?

[Michael Ord, Group CEO at Chemring Group]

Yeah, okay. I don't think you rushed through it.

[James Mortensen, CFO at Chemring Group]

There's so much going on, I was busy making notes.

[Michael Ord, Group CEO at Chemring Group]

Yeah, I agree. There is a lot going on, and that's really exciting time. We have so many growth opportunities ahead of us that we have to try and work our way around them. In Norway, the team are making great progress out there. The first phase, which was de-bottlenecking the existing HMX plant. That's gone incredibly well. I think it's ostensibly finished, and we're already seeing those benefits flow through there. The second phase is around the NTO facility, and that is the one that we talked to you last time around. We had seen some cost increases on that baseline, and that was driven not by the facility itself, but by all of the enabling infrastructure and utilities that go around that. That's executing well.

[Michael Ord, Group CEO at Chemring Group]

In fact, there's a couple of photographs in the deck around that. The buildings are now starting to be completed. We'll soon move into installing the plant and equipment. We'll get into commissioning. That's going well. The third phase, which is a further expansion of HMX production, we're in finalizing the detailed design of those facilities and the plant and equipment so that before we start that final construction phase, we have a very de-risked baseline that we'll be able to execute against. Obviously from a Norway perspective, that's the existing site. As James mentioned, we've been funded a further, is it GBP 16 million? Is it GBP 16 million?

[Michael Ord, Group CEO at Chemring Group]

By the Norwegian government to go into this concept selection and do far more detailed engineering associated with a second facility, which the Norwegian government are incredibly positive about. Norway sees high-grade military explosives as one of the key contributions that it as a nation wants to make into the European and NATO alliances with regards to their defense industrial base, and therefore identifying the second site was a major step forward into realizing that ambition. If you look at that market for high-grade military explosives, so I'm talking about HMX and RDX, not TNT. There's lots of TNT sites being built. For high-grade HMX and RDX, on this side of the Atlantic, you're looking at one plant, which is Sorgues, I think that's southeast France, owned by Eurenco.

[Michael Ord, Group CEO at Chemring Group]

Then you have to go across to Holston Ammunition Plant in Tennessee, which again is a U.S. government-owned GOCO operated by BAE Systems. There is a very, very constrained industrial base for high-grade military explosives. Indeed, if you look at what's happening from a warfare and deterrence perspective, utilizing high-grade materials is becoming ever more important, especially when you're looking at what we talked about earlier from a missiles perspective of strike missiles. You've seen everything that's happened in Operation Epic Fury. The vast majority of those ordnance utilized the types of materials that we manufacture in Norway and also in air defense, so integrated air and missile defense, things like NASAMS and whatever. We supply the energetic material from Norway into 100% of those systems.

[Michael Ord, Group CEO at Chemring Group]

I actually think that the whole area, that there has been a realization in defense planning on both sides of the Atlantic that real constraints in the supply chain, especially around these types of materials, is the structural weak link in so much of the defense planning, and therefore that's why you're seeing very significant governmental support for us to expand capacity.

[David Farrell, SVP of Equity Research at Jefferies]

Thank you.

[Michael Ord, Group CEO at Chemring Group]

Any more for any more? No? Okay. Well, thanks very much for joining us today. We look forward to presenting our FY 2026 results in December. Thank you.

[James Mortensen, CFO at Chemring Group]

Thanks, everyone.

Participants

Executives

• James Mortensen, CFO
• Michael Ord, Group CEO

Analysts

• Ben Bourne, Head of Equity Research at Investec
• Ben Varrow, VP of Equity Research at RBC
• David Farrell, SVP of Equity Research at Jefferies
• Jamie Murray, Analyst at Bank of America
• Richard Paige, Analyst at Deutsche Numis
• Sash Tusa, Analyst at Agency Partners