Chemring interim results 2026: record order book is the headline that really matters
Chemring’s first-half results were not flashy, but they were solid where it counts. The company said trading was in-line with Board expectations, full-year guidance is unchanged, and the closing order book hit a record £1,399.4 million.
For retail investors, that is the big takeaway. An order book is the value of contracted work still to be delivered, and in a defence business it gives a very useful read-across for future revenue. When that figure is at an all-time high, it usually tells you demand is strong and visibility is good.
| Key H1 numbers | H1 2026 | H1 2025 | Change |
|---|---|---|---|
| Order book | £1,399.4 million | £1,296.0 million | +8% |
| Revenue | £237.3 million | £222.8 million | +7% |
| Underlying EBITDA | £38.2 million | £38.8 million | -2% |
| Underlying operating profit | £24.5 million | £26.5 million | -8% |
| Underlying diluted EPS | 6.1p | 6.6p | -8% |
| Interim dividend | 2.8p | 2.7p | +4% |
| Net debt | £144.5 million | £93.3 million | Higher |
Why Chemring’s £1.4 billion order book is more important than the profit dip
The market will probably give Chemring a fair amount of credit for that record order book. Management said 91% of expected 2026 revenue was either already delivered or sitting in the order book at 30 April 2026, which is a strong level of cover.
There is also decent medium-term visibility beyond this year. In Countermeasures & Energetics, the order book covers around 81% of expected 2027 revenue and around 68% of expected 2028 revenue. That is the sort of backlog investors like to see in a sector driven by multi-year defence programmes.
The broader backdrop helps too. Chemring pointed to structurally higher defence and national security spending, especially around missiles, munitions, air defence, drone threats, cyber and secure supply chains. None of that looks like a short-term theme.
Chemring profits were softer in H1, but the reasons look understandable
Not everything moved in the right direction. Underlying operating profit fell to £24.5 million from £26.5 million, while the underlying operating margin slipped to 10.3% from 11.9%.
That is not ideal, but the explanation matters. The weaker margin was mainly down to Sensors & Information, where lower utilisation at Roke and a less favourable business mix dragged on profitability. In plain English, Chemring kept capability in place for future work, but the orders did not come through fast enough in the first half to fully absorb that cost base.
That does make H1 look a bit untidy, but it is not the same thing as a structural deterioration. The company also said performance improved in the second quarter and still expects around 70% of full-year operating profit to land in H2.
Countermeasures and Energetics was the star performer in Chemring H1 results
This division did the heavy lifting. Revenue rose 9.1% to £142.1 million, underlying operating profit jumped 31.8% to £26.1 million, and operating margin improved to 18.4% from 15.2%.
That is a strong result by any standard. It suggests Chemring is not just benefiting from higher demand, but also from better commercial terms and improved operational execution.
Countermeasures order intake was especially strong, up 486% to £123 million. Energetics intake was much lower at £54 million, but that was against a very strong prior-year comparator and management said the focus had shifted towards executing large multi-year orders already won.
The bigger strategic point is capacity. Chemring invested £44 million of capex in the half, largely into Energetics expansion projects. Chicago is complete and ramping production, Scotland is in commissioning, and Norway is moving into the next phase. Management says these three programmes together are expected to add £100 million of annual revenue and £30 million of annual operating profit from 2028.
If delivered, that is meaningful. It is also why the group is willing to tolerate higher debt in the near term.
Roke and Sensors & Information had a slower first half, but there are signs of recovery
Sensors & Information was the weak spot. Revenue still edged up 2.8% to £95.2 million, but underlying operating profit dropped to £9.6 million from £16.1 million, and margin fell to 10.1% from 17.4%.
The main culprit was Roke, where delayed UK Defence Investment Plan timing held back some contracts. That is frustrating, but importantly the company says recent order intake has started to recover, with several National Security renewals secured.
There are some encouraging product signals here too. Roke launched its CORTEXA counter-drone system in April and has already made initial sales in Sweden and the UK. It also has an international sales pipeline of more than £300 million over five years.
My read is that this business has not fired on all cylinders yet, but it still looks strategically valuable. If UK contract timing improves and product sales build, this division could look much better in the second half and into 2027.
Net debt climbed sharply, but Chemring is spending for growth rather than plugging a hole
Net debt rose to £144.5 million from £89.0 million at the 2025 year end. That will catch the eye, and investors should not shrug it off. Underlying operating cash inflow also fell to £15.9 million from £32.3 million, with cash conversion down to 42% in the half.
But context matters. This was driven by expansion capex and working capital build ahead of second-half deliveries, including higher inventory and safety stocks. Chemring still expects full-year cash conversion to be 80-85%.
The leverage ratio was 1.53 times, against a covenant limit of 3 times, so there is still headroom. The balance sheet is more stretched than last year, but it does not look uncomfortable based on the numbers disclosed.
Statutory profit took a hit from one-offs and the Alloy closure
The statutory figures were messier. Statutory operating profit fell to £21.7 million from £28.9 million, and total profit after tax fell sharply to £6.1 million from £20.4 million.
That included non-underlying items such as a £6.7 million charge linked to retiring legacy production in Tennessee and an £8.1 million loss from discontinued operations, mainly tied to Alloy Surfaces Company. Chemring closed Alloy during the period after concluding disposal of the whole business was no longer highly probable, and booked an £8.3 million impairment charge.
This is clearly a negative, and it shows not every part of the portfolio is benefiting from the current defence cycle. Still, the company described the remaining options around the business with “increased confidence in a positive outcome”. Beyond that, details are limited.
Chemring dividend, outlook and what this means for retail investors
The interim dividend was lifted to 2.8p, up from 2.7p. That is not a huge increase, but it does reinforce the message that management remains comfortable with the full-year picture despite the heavier investment phase.
Overall, I think this is a credible update. The positives are the record order book, improving momentum in the core munitions and countermeasures activities, and unchanged guidance. The negatives are weaker first-half margins, higher debt, softer cash generation and the ugly discontinued operations charge.
On balance, this reads like a growth investment year rather than a profit warning in disguise. If Chemring delivers the expected H2 weighting and its new capacity starts converting backlog into earnings, these numbers should age reasonably well.
For shareholders, the simple version is this: demand looks strong, visibility is high, and the company is spending now to be bigger later. That does add risk, but for now the investment case still looks intact.
