Chemring gunned down

Indeed, eurozone trouble and possible sequestration in the US indicate traditional markets "will not be any easier this year". Some US orders will inevitably be pushed into the second half, and chief executive David Price admits uncertainty will likely remain until after November's presidential election.

Contract delays in the countermeasures and counter-improvised explosive devices (IED) units forced £37m of revenue into the current year and weaker margins meant that a 6 per cent increase in underlying group pre-tax profit to £125.6m also missed some forecasts. Falling demand for decoys hurt the countermeasures division, where underlying operating profit sank over a fifth, while weaker sales of 81mm illuminations blew 19 per cent off pyrotechnics profits. Still, spares sales for ground penetrating radar systems, used extensively in Afghanistan, boosted counter-IED profits, and 2011 saw munitions overtake countermeasures as Chemring's biggest revenue generator – doubling to £237m. Governments in Brazil and the Middle East, in particular, are big fans and 71 per cent of the division's £372m order book is from non-Nato customers.

That's where Chemring hopes to compensate for spending cuts in the US and UK, which still generate over 60 per cent of revenue. Sales to non-Nato states jumped 81 per cent and now comprise 29 per cent of the total. Mr Price thinks that will be 40 per cent, possibly within three years, and expects news on joint ventures this year in India, Saudi Arabia and Brazil. Of the current £980m order book, 44 per cent is non-Nato.

Broker Investec Securities expects 2012 pre-tax profit of £122.5m, giving adjusted EPS of 56.8p (from £90.8m and 51.6p in 2011).