Defence firm Chemring (CHG) ticked 1.2% higher to 292.5p after it reported a rise in annual profit as improved margins offset a fall in revenue owing to a stronger pound.

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

The company’s underlying operating margin rose to 14.6% from 13.6%. This primarily reflected the growth of the higher margin parts of the group and the continued focus on improved operational execution, particularly at the UK countermeasures site, the company said.

The tech-led Roke business, which includes the group’s cyber security capability, continues to perform well.

‘UNDERLYING EARNINGS QUALITY IMPROVES’

The company implemented a new policy to target a medium-term dividend cover of about 2.5 times underlying earnings per share.

The final dividend was increased by 23% to 3.2p giving a total dividend of 4.8p for the year. Looking ahead, the company said its expectations for 2022 were unchanged.

Investment bank Jefferies commented: ‘FY21 was a year of strong margin progression for Chemring, as the underlying earnings quality of the group improved.

‘Roke continues to impress with double-digit order intake, revenue, and operating profit growth.

‘We expect progress on opportunities in new markets (US military, commercial industry) in FY22F. Cash conversion has become increasingly reliable and with net debt to EBITDA (earnings before interest, taxes, depreciation and amortisation) at

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Issue Date: 14 Dec 2021