Although Russia’s invasion of Ukraine caused the share prices of most defence-related businesses to soar, only BAE Systems (BA) and Qinetiq (QQ.) have held onto the substantial gains made in the first weeks after 24 February 2022. And despite hefty pledges of additional spending by governments on both sides of the Atlantic, many defence shares are trading below where they were this time last year.
- Growing defence budgets
- Acute demand for munitions
- Discount to sector peers
- Net debt all-but eliminated
- Order delays
- Elevated capex in 2023
Hampshire-based Chemring (CHG), for example, is still in positive territory, but only just. In some ways, this is surprising as elements of its business mirror its two stronger-performing peers. Its sensors and information (S&I) division, for instance, contains a fast-growing cyber security arm, Roke, that has benefited not only from heightened spending by military bodies but also from companies such as Rolls-Royce (RR) and Vodafone (VOD) that provide services to them.