Surging defence kit giant Chemring boosts markets

When shares in a defence group rise at a time of mounting global tensions, it’s normally bad news. But there was a palpable sense of relief today as shares in Chemring shot up after posting strong first-half results.

The group, which makes improvised explosive device detectors and antennae for tanks, posted a surge in revenues and profits, which hit £24.2 million, up from £9.9 million the year before. Investors were cheered by the fact the firm had proved resilient to a global slowdown in engineering work, with a strong order book and around 95% of revenues for the second-half had been delivered.

The firm said it has received additional delivery orders worth $32 million from the US for a bomb detection system, and last month won a US Navy contract worth up to $100 million (£80 million) over the next decade.

Analysts at Peel Hunt reversed cuts to the stock made as part of a sector-wide downgrade in March. They said: “Chemring is weathering the Covid-19 storm well and the long-term outlook is also reassuring.” The shares jumped 27% to 271p. Rivals rose in its wake, with Ultra Electronics adding 50p to 2094p, Qinetiq up 4p at 300p, and Meggitt —which was dumped out of the FTSE 100 last night — rising 8p to 321p.

Holidays giant Tui was making further gains. The stock has been buoyed by the prospect of air bridges aiding holidaymakers travelling and today it rose as Boeing agreed to pay “a significant portion” of the financial impact of the grounding of its 737 Max planes. Shares shot up 37p to 485p.

The FTSE 100 was in positive territory for the second straight session, up 71.58 points at 6291.72. It followed Asian markets, which hit three-month highs as the Chinese services sector rebounded to a near-10 year peak in May due to domestic demand.

In the UK the services sector shrank at a slower pace last month than seen in April as lockdown measures started to ease. IHS Markit’s Purchasing Managers Index rose to 29, up from a record low and exceeding the flash estimate of 27.8. Over half of the survey panel reported a drop in activity, while 13% said it increased.

The data sent the pound up half a cent against the dollar.

There was a bonfire of the brickmakers at building suppliers Ibstock and Forterra. Ibstock raised the prospect of 375 job cuts and Forterra said 225 roles are under threat in its concrete arm. The shares lost 2p to 199p and gained 11p to 219p respectively.

Small-cap spotlight

Omega Diagnostics is among a cluster of UK small-cap biotech stocks flying during the Covid crisis and it saw another bounce today. The firm is part of a consortium developing and manufacturing a Covid antibody test and today said “significant progress” had been made. The design phase is expected to end this month, when the company will kickstart manufacturing a test people can use in their own homes. The shares rose 5% to 75p.