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British defence specialist Chemring said its order book rose to a record £1bn in the first six months of the year as the company reaps the benefits from rising geopolitical tensions.
The FTSE 250 group, which supplies explosives and propellants to a range of larger defence contractors, as well as to Nato allies, predicted increased government spending for the foreseeable future, setting out an ambitious target to generate about £1bn in annual revenues by 2030.
“The increase in geopolitical tensions around the world is driving a fundamental rearmament upcycle, which is expected to last for at least the next decade,” said chief executive Michael Ord.
The UK group said on Tuesday it would increase its investment into the explosives business in response to what it described as “unprecedented demand levels for speciality energetic materials and energetic propulsion devices”.
Order books at defence companies are at record highs as the industry has benefited from a surge in military spending in the wake of the conflict in Ukraine and escalating tensions in the Middle East and Asia.
Military spending around the world rose almost 7 per cent to a record $2.4tn last year, the steepest annual increase in 15 years, according to the Stockholm International Peace Research Institute.
Chemring, which also makes a range of sensors as well as countermeasures to protect air and sea platforms against missiles, said its order book rose 39 per cent to £1.04bn in the six months to the end of April, the highest in its history. Revenues were up 8 per cent to £223.4mn in the period.
Despite the stellar order intake, Chemring’s pre-tax profit dropped 31 per cent in the first half of the year owing to pension costs, higher finance costs and operational problems at its plant in Tennessee, which makes infrared devices to counter enemy attacks.
Shares in the company have surged more than 45 per cent over the past 12 months as investors have bought into the prospect of more orders. They were trading at 390p on Tuesday morning, down 1 per cent.
Chemring said it would increase its interim dividend by 13 per cent to 2.6p a share.