Chemring Group PLC has provided a trading update for the period ending October 31, 2023. The company expects its financial results for the year to be in line with board and analyst expectations. Net debt at the end of the year is projected to be approximately £14.4 million, compared to £7.2 million in 2022. The company has used strong operating cash conversion to fund growth opportunities, increase dividends by 20%, and deploy £9 million into a share buyback program. Chemring continues to see robust market conditions and expects long-term growth.
The company's subsidiary, Chemring Nobel, has won over £40 million in orders for energetic materials and devices in the final month of the year. Additionally, its US-based subsidiary, Chemring Energetic Devices, has secured a $46 million order from United Launch Alliance in support of their Vulcan Launch Vehicle. Due to increased demand for energetic materials, Chemring has decided to invest an additional £30 million in increasing the capacity of Chemring Nobel. This investment is expected to deliver £25 million of incremental annual revenue. The total investment in increased capacity across the Group's three Energetics businesses over the next three years is expected to be £120 million, generating increased revenue of £85 million and increased operating profit of £21 million.
Chemring has conducted a strategic review of its US Sensors business and concluded that a focus on biological detection and security markets presents the best opportunity for growth. As a result, the Explosive Hazard Detection business will be treated as a discontinued operation in 2023, with a non-cash impairment of £31 million recorded. Additionally, a non-cash impairment of £18 million has been recorded for previously capitalized AVCAD development costs and other assets associated with the program. The company has repositioned and reshaped its US Sensors business to ensure sustainable competitive advantage in its targeted markets.
Chemring's full-year results for FY23 are scheduled to be announced on December 12, 2023.