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CHEMRING GROUP PLC ANNUAL REPORT AND ACCOUNTS 2022

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CHEMRING GROUP PLC ANNUAL REPORT AND ACCOUNTS 2022

OUR PURPOSE

Chemring helps make the world a safer place. Across physical and digital environments, our

exceptional teams deliver innovative technologies and products that detect and defeat

ever-changing threats.

Read more on page 19

STRATEGIC REPORT

01 2022 performance

02 What we do

04 Sustainability overview

06 

08 Investment case

10 Chairman’s statement

12 Market overview

14 Group Chief Executive’s review

18 Business model

20 Section 172 statement

21 Stakeholder engagement

24 Strategy

26 Key performance indicators

30 Focus on Sensors & information

34 Focus on Countermeasures & energetics

37 Introduction to sustainability

40 Health and safety

42 Environment

45 Task Force on Climate-Related Financial

Disclosures (“TCFD”) report

50 

57 Ethics and business conduct

59 Financial review

64 Risk management

66 Principal risks and uncertainties

74 Viability statement and going concern

75 Non-financial information statement

GOVERNANCE

76 Chairman’s introduction to governance

78 Board of directors

80 Corporate governance report

90 Audit Committee report

94 Nomination Committee report

96 Directors’ remuneration report

120 Directors’ report

FINANCIAL STATEMENTS

123 Consolidated income statement

124 Consolidated statement of



125 Consolidated statement of changes in equity

126 Consolidated balance sheet

127 Consolidated cash flow statement

128 Notes to the Group financial statements

153 Parent company balance sheet

154 Parent company statement of



154 Parent company statement of changes



155 Notes to the parent company



159 Accounting policies

166 Independent auditor’s report to the members

of Chemring Group PLC

172 Five-year record

OTHER INFOMATION

173 Corporate information and website

CONTENTS

HIGHLIGHTS





economic environment

Roke revenue exceeded £100m for the first time and with order intake

of £168m, up 59%, is well positioned to continue its growth trajectory



Post year-end acquisition of Geollect completed on 7 December 2022



driven by multi-year orders received across the sector

Investment in the Group’s manufacturing infrastructure continues to



with the Countermeasures & Energetics margin improving from 16.2%





strong operating cash generation and cash conversion of 109%. Net debt

to underlying EBITDA of 0.09 times









FINANCIAL HIGHLIGHTS

UNDERLYING OPERATING PROFIT*

REVENUE



(+13%) (+7% at constant currency)

Increase in revenue at constant

currency driven by strong

performance at Roke and steady

growth in Countermeasures



CASH CONVERSION

109%

(2021: 105%)

Continued strong cash conversion,

with an average of 108% on a





on working capital disciplines.

UNDERLYING OPERATING

PROFIT*



(+11%) (+8% at constant currency)

Reflects the growth of the











STATUTORY OPER ATING

PROFIT



(+6%) (+3% at constant currency)

The difference to underlying

operating profit reflects the

amortisation of acquired intangible

assets, acquisition expenses and loss

on the movement in fair value of

derivatives which are the only items



2023 OUTLOOK





GROUP



£64.0m

£57.5m

2022

2021

2020

£54.7m

SENSORS & INFORMATION



Read more on pages 34 to 36

 



refer to page 60 for further explanation.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 01

2022 PERFORMANCE

WHAT WE DO









safeguard in an uncertain world.

We achieve this by innovating at every stage of the value chain, from research

and development (“R&D”), through to design, manufacture and in-service

support for our sensors and detection systems, countermeasures, precision

engineering and energetic products.



enforcement agencies, as well as commercial markets such as space, medical



the globe.

At Chemring we create market-leading technology

solutions and develop world-class thinking to solve



WHERE WE OPERATE



substantial and enduring commitment to defence and national security.

We also export our technology solutions to additional markets. The

percentages represent the proportion of sales for that destination in the



ASIA PACIFIC



Regional instabilities, capability upgrades and technology advancements



business positions us to contribute towards meeting the defence

requirements of Australia and other countries in the region.

50%





underpinned by a Special Security Agreement (“SSA”) that enables us to





relatively good visibility for future earnings as we respond to the

customer’s modernisation priorities.

EUROPE

12%

In Europe, our Norwegian

business is experiencing ever

greater demand for its niche

speciality chemicals as customers

seek to strengthen their defence

capabilities in response to Russia’s







benefit from the increased demand

for intelligence and cyber-security

solutions signalled by the Integrated

Review. We are also seeing

accelerated demand for our

Countermeasures & Energetics

capabilities resulting from the conflict

in Eastern Europe.

Chemring Group PLC Annual report and accounts 202202

CHEMRING IS ORGANISED INTO TWO STRATEGIC SECTORS

SENSORS & INFORMATION

Innovation is core to solving our clients’ difficult problems.

With over 700 scientists, engineers and consultants, our Sensors & Information

sector continues to invest in technologies that safeguard and protect in an

uncertain world.



domains, we enable our clients to deliver competitive advantage, defend

their people, assets and information, and defeat their adversaries.



confidence, be they explosive, biological, chemical, radio or cyber.



communications, cyber and artificial intelligence to innovate and apply

these technologies in new ways.

We operate across the whole lifecycle providing advice, R&D, engineering,

design and in-service support for our products and services.

COUNTERMEASURES & ENERGETICS

Chemring is the world leader in the design, development and manufacture



platforms against the growing threat of guided missiles.

We combine a deep understanding of platform signatures, missile seekers







devices that perform critical functions for the space, aerospace, defence and

industrial markets.

Every day, our products, services and experts assist customers, including

NASA and SpaceX, to achieve mission success. This ranges from cutting-edge

technology to enable our customers to launch rockets and satellites into orbit,

to the provision of aircraft safety systems including oxygen mask deployment

on commercial aircraft and ejector seats for aircrew egress.

Crown copyright

REVENUE





UNDERLYING OPERATING PROFIT





£30.0m

£31.6m

2022

2021

2020

£27.4m

REVENUE

£280.5m



UNDERLYING OPERATING PROFIT





£48.9m

£40.0m

2022

2021

2020

£39.9m

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 03







At Chemring we acknowledge and embrace our collective responsibility

to contribute to a sustainable future. We have a strong and recognised

obligation to ensure the responsible operation of our business and are fully

committed to long-term sustainable value creation through safe, sustainable



protect our planet and our people, support our customers and their critical

needs, and that we have a positive impact on the communities in which



Improving our sustainability performance plays a key role in the way in





goals are now directly linked to targets for remuneration and reward across

our leadership teams.

We also recognise that our ESG credentials are an increasingly important

factor in our ability to attract and retain first-class people. Engaged,

motivated, empowered and appropriately skilled employees are integral to





PURPOSE

Chemring helps make the world a safer place. Across physical and digital environments, our exceptional teams deliver innovative technologies



STRATEGY

To be a leading provider of critical and innovative technologies that detect and protect people, platforms, missions and information



APPROACH

The long-term success of Chemring can only be enhanced by a positive interaction with all of our stakeholders. An engaged and constructive

approach is therefore important to us. Following the stakeholder materiality assessment that was undertaken in 2021, our approach is now





it includes our planet and broader society and is underpinned by our values and behaviours.

VALUES

SAFETY

We place safety at the heart

of everything we do

EXCELLENCE

We are focused on ensuring we consistently

meet high standards in all that we do

INNOVATION

We create world-class solutions and

develop world-class thinking

HEALTH AND SAFETY

- Control of major accident hazards

- Injury prevention

- HSE risk management

- 

Read more on pages 57 to 58

MAKING THE

WORLD A SAFER

PLACE

Chemring Group PLC Annual report and accounts 202204

PROGRESS IN 2022

Chemring’s purpose is to help make the world a safer place and Russia’s



and security industry plays in preserving peace, democracy and freedom in

the western world. It has reinforced the argument that for sustainability to

thrive, it requires global stability at its foundations. We are proud of the role

that Chemring plays in providing that stability and are equally focused on

ensuring that we manage and progress our own sustainability agenda, and



It has been another busy year in which we have built on the good progress





areas where our activities can have most impact. Plans are now in place to

continue this journey and to ensure that we meet the growing disclosure

requirements of our stakeholders and demonstrate our ability to successfully

address ESG-related issues.

As of 2022, Chemring Group PLC received an MSCI ESG Rating of AAA.*

DISCOVER MORE ABOUT SUSTAINABILITY:

CHEMRING.COM/SUSTAINABILITY/COMMITTED-TO-A-

SUSTAINABLE-FUTURE

ESG HIGHLIGHTS

HEALTH AND SAFETY

Total recordable injury frequency rate 0.78 (2021: 0.67)







PEOPLE

100% of our senior leaders have participated in diversity, equity





development programme which started in November 2021

ENVIRONMENT

Green House Gas (“GHG”) and carbon emissions flat (<1% difference

year-on-year)

Carbon reduction plans being implemented in every business

Sustainability Committee formed to shape, monitor and ensure







Continued implementation of Chemring Compliance Portal



* The use by Chemring Group PLC of any MSCI ESG research LLC or its affiliates

(“MSCI”) data, and the use of MSCI logos, trademarks, service marks or index





property of MSCI or its information providers, and are provided ‘as-is’ and without

guarantee. MSCI names and logos are trademarks or services marks of MSCI.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 05

OUR PURPOSE IN ACTION













national security and commercial operations in



SAFETY

CONTINUING OUR JOURNEY TO ZERO HARM



actions to reduce the likelihood of anyone getting hurt by focusing



strengthen our assets’ integrity. For process, we are investing in









SPOT IT, STOP IT, SHARE IT

Last year, we launched a new internal campaign called Spot it, Stop it,

Share it, encouraging our colleagues to step up their focus on

reporting unsafe conditions, behaviours and near misses. Following up

those near miss reports with corrective actions is essential, and that is

where leadership and the health and safety teams on site make a real

difference. This year, the campaign continued with a safety poster

design competition for our colleagues’ children to promote good

behaviours and procedures.

Building a strong, proactive safety culture is our number one priority

at Chemring. We will continue to develop that health and safety





SP T IT

ST P IT

SHARE IT

Journey to

Zero Harm

Young artist: Vaughn, aged 7

Manual handling

Manual handling includes lifting, lowering, pushing, pulling and carrying. If any of

these tasks are not carried out appropriately there is a risk of injury. Prevent

injuries by:

• Not twisting, stooping and overreaching



• Assess the weight to be carried

Be careful

when lifting

SP T IT

ST P IT

SHARE IT

Journey to

Zero Harm

Young artist: Amber, aged 15

Common causes

of accidents

Look out for these common causes of accidents and injuries. Always think



• Slips, trips and falls

• Injured while handling, lifting or carrying

• Struck by a moving object

• Falls from a height

• Personal health & wellbeing

SP T IT

ST P IT

SHARE IT

Journey to

Zero Harm

Young Artist: Viola, aged 7

Stop slips and trips

Slips and trips are the most

common cause of injury at

work, causing over a third

of all major injuries. Stop

slips and trips by:

• Having routine and

responsive cleaning

• Cleaning up

spillages quickly

• Stop people walking



• Look out for trip

hazards

SP T IT

ST P IT

SHARE IT

Journey to

Zero Harm

Young artist: Charles, aged 10

Emergencies can occur in any location

and it’s important to know what to do in

case you experience an emergency.

What to do in an emergency:

• Know your site’s plan

• Know your evacuation route

• Keep calm

• Follow evacuation procedures

• Use stairwells for evacuation, not the

elevators, and hold on to handrails

Be prepared for

emergencies

Chemring Group PLC Annual report and accounts 202206

INNOVATION

HELPING TO ADDRESS UK’S TECHNICAL SKILLS GAP



Earlier this year, the Roke Academy was launched as part of



candidates to their intensive six-month programme, the Ignite

Development Pathway (“IDP”). The IDP focuses on life skills and

enthusiasm for technology that candidates bring rather than a



In the face of “the war for talent”, the Academy focuses on developing



benefiting those already qualified for hire. This creates an alternate,

fully inclusive pathway into employment for those that might

otherwise have faced barriers to entry.

Targeting the national technical skills gap, the Roke Academy provides

high quality training in key technology areas and the supporting skills

needed to deliver it effectively.

The Academy is designed to be a centre of excellence for learning and

development, focusing on non-traditional areas of recruitment to

embrace undiscovered talent who may not have previously had the

opportunity to enter the technology field. Individuals who have found

the traditional recruitment process a challenge are returning to work

after a break, transitioning from military and law enforcement service,

or looking for a change of career. Candidate selection also seeks to

challenge traditional technology demographics in areas of gender,

ethnicity and neurodiversity.

Paul MacGregor, Roke Managing Director, commented:

“ The Roke Academy provides the opportunity to attract new









EXCELLENCE

COGSWELL AWARD FOR AN EXCEPTIONAL



Chemring Sensors & Electronic Systems (“CSES”) was awarded a





(“DCSA”) can bestow on a cleared defence contractor. It was







National Industrial Security Program (“NISP”), only the top 0.5% are

selected to receive a Cogswell Award.

With this award, CSES was recognised for establishing and



requirements, demonstrates a commitment to excellence and



















OUR PURPOSE IN ACTION





STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 07

INVESTMENT CASE









intellectual property, niche technology and high





Against the background of growing defence



Chemring is well positioned in niche segments





These include the Group’s global market-leading

positions on airborne and naval countermeasures,

advanced sensors, Electronic Warfare and

software engineering. We are also well placed to

benefit from growth in the space segment where

we are a key supplier of mission critical specialist

devices to customers including NASA and SpaceX.

The Group’s strong order book provides good

medium-term visibility. A significant proportion





partnering agreements. Market-leading positions,

incumbent supplier status and high barriers to

entry position Chemring well for the future.

STRONG GROWTH IN ROKE’S NATIONAL

SECURITY AND DEFENCE MARKETS

Roke’s consulting, technology and R&D service

activities are experiencing strong growth, driven

principally by information security for the national

security and defence markets.

The Group’s capabilities are well aligned to





intelligence, data science, autonomy and Electronic

Warfare (“EW”). This validates our Sensors &

Information sector strategy, and should increase

the opportunity space for Roke to deploy its

market-leading technologies.



Roke’s capabilities and offerings, both through

acquisitions and opportunities in adjacent markets

and territories.

MAJOR INTERNATIONAL PROGRAMMES

Chemring is exposed to a substantial pipeline of

major international programmes that have the

potential to deliver strong long-term growth.





and having technologies and products to address



hazard detection, chemical detection and biological

detection – increasingly relevant in a post-

pandemic world.

As Cyber and Electromagnetic Activity (“CEMA”)

becomes increasingly important in today’s threat

environment, and as a consequence of Russia’s





products in the international market.

We are seeing growing customer enquiries for

Roke’s suite of world-leading Electronic Warfare

products and are supporting ongoing customer



orders from this potentially significant market.

We continually review our portfolio to ensure that we maintain sustainable

niche positions where technical and qualification barriers to entry enable

high margins. These, along with strong and enduring customer relationships,

provide us with a strong platform for future growth. We will achieve our

growth by total commitment to our enduring purpose, which is to relentlessly

innovate to protect our customers.

Chemring Group PLC Annual report and accounts 202208



Since 2019 the Group has communicated certain

medium-term financial objectives, which have been

rolled forward at each set of results. These included:

- Targeting mid-teen return on sales in the

medium term. Margins have progressed from



- Improving cash flow. Across the last three

years, operating cash conversion has been 108%

of EBITDA, demonstrating the improvement in

business practices is permanent and sustainable

- Reducing indebtedness. Net debt has







Chemring is focused on building a financially

sustainable and robust Group. These actions

provide strong foundations for future growth.

PROVEN MANAGEMENT



Chemring’s executive management team has

significant sector experience, with a proven track

record of business restructuring, strategic

investment and the delivery of profitable growth.

The team continues to manage delivering both

organic and inorganic growth, balancing near-term





Chemring has a robust balance sheet and strong

ongoing operating cash generation, providing a

platform for future investment in the business,

both organic and inorganic, and sustainable,

growing dividend payments.

DISCOVER MORE ABOUT

INVESTING: CHEMRING.COM/

INVESTORS

FY22FY21FY20FY19FY18

£651m

£501m

£476m

£449m

£394m

m)

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 09

CHAIRMAN’S STATEMENT



INTRODUCTION

The past year has seen a number of ongoing challenges, and opportunities



Europe. These have resulted in changing defence priorities, increasingly

competitive global markets and a business environment that is seeing supply

chain interruption, increased energy costs and a shortage of labour availability.

Despite these challenges the Group has again delivered a robust performance



long-term sustainable value creation through safe, sound and ethical business

conduct at all times has ensured that we have met our customers’ critical

needs whilst performing to the highest standards. None of this would be

possible without the commitment and dedication of our people and on behalf

of the Board I wish to acknowledge and thank them for their professionalism

and support.



industry plays in preserving peace and democracy in the western world, and

that for sustainability to thrive, it requires global stability at its foundations. It

has also highlighted the need for countries to re-equip and modernise their

defence capabilities to meet the threat of peer on peer conflict. With the

global defence market predicted to show strong growth over the next

decade I believe that Chemring is well placed to continue delivering both

organic and inorganic growth, balancing near-term performance with

long-term value creation.

STRATEGY

The Group’s strategy is to deliver sustainable, profitable growth by operating

in markets where we have differentiators such as intellectual property, niche

technology, high barriers to entry and deep long-term customer relationships.

We will achieve this by continuing to focus our efforts and investment on

those areas of the defence and security market where we see increasing

customer budgets.

The Sensors & Information sector remains Chemring’s principal area of focus

for long-term growth reflecting increasing customer demand and one where

we can capitalise on the opportunity presented by our customers’ pivot

towards the acquisition of high technology capabilities. We will expand the

Group’s product, service and capability offerings, constantly innovating to

enable our customers to deliver competitive advantage and to defend their

people, assets and information.

Read more on pages 34 and 36

As a Board we remain alert for opportunities to expand and accelerate our

growth strategy through incremental acquisitions and by leveraging market

adjacencies. However, any acquisition target must meet a strict set of criteria,

enhance shareholder value and fit in with our wider growth plans. To date

this activity has been principally focused around our Roke business and we



sectors. Both areas, which play to the Group’s high technology skillsets, offer

significant opportunities for long-term growth.

Elsewhere we will continue to focus our efforts on building a safe, sustainable

and resilient business that is able to deliver progression through continuous

improvement in operational performance and execution. We shall continue

to invest in both our people and our infrastructure in order to deliver further

growth into the future.

HEALTH, SAFETY AND THE ENVIRONMENT

At Chemring our goal is zero harm. This goes beyond the management of

safety and recognises that we have a duty to ensure that we take appropriate

actions to minimise the impact of our operations on many different levels,

from employee wellbeing to climate change.

The Board recognises that the highest levels of safety are required in order to

protect employees, product users and the general public. The Board believes

that all incidents and injuries are preventable, and that all employees have the

right to expect to return home safely at the end of every working day. Safety

therefore remains one of the core values within Chemring and is central to

our operating philosophy. A key part of our health, safety and environmental

(“HSE”) strategy is the collation and analysis of data at every level to focus on

the underlying causes of incidents and the impact of our operations. This

facilitates appropriate decision making at all levels of our organisation.

Through the use of enhanced risk assessment techniques, supported by the

roll-out of common asset integrity and electro-static discharge review

programmes, we continue to focus on the control of residual risks within our

high-hazard processes.

In addition, we have extended our current data platform to better assess the

environmental impacts of our operations and performance against the targets

that were set in 2021 in support of our wider ESG commitment. Improving

our sustainability performance plays a key role in the way we both run our

businesses today, and how we plan for the future. Further details on this can

be found in the sustainability section of this report.

Whilst consolidating in a calculative culture we are also keen to ensure

learning is transferred to the relevant parts of the organisation, accelerating

our continuous improvement cycle. To date good progress has been

maintained on our journey to become a proactive organisation.

Read more on pages 40 to 49

PEOPLE AND OUR COMMUNITY

Chemring people are at the heart of our business and are our greatest asset.

Engaged, motivated, empowered and appropriately skilled colleagues are

integral to our success as it is through them that we will progress our strategy

and deliver long-term growth.

Carl-Peter Forster

Chairman

Chemring Group PLC Annual report and accounts 202210

In 2022 we continued to develop Chemring’s culture with actions delivered

both within the individual business units and globally. In doing so we have

continued to develop our people, ensuring that they are able to do their best

work every day. Development programmes are now in place for all colleagues

in management roles and for our Early Careers colleagues. Allied to the

Talent and Succession framework launched in 2021, these programmes

support the development of our future leaders as well as providing a platform

for continuing the development of the Chemring culture.

Chemring is committed to ensuring that we are able to attract and develop





suite of diversity, equity and inclusion (“DE&I”) training modules which form

part of all development programmes from Early Careers to Senior Leadership

Team development. With a specific focus on gender diversity, the global

Women at Chemring Committee was also established in the year to

encourage local women’s networks in each business unit alongside delivering

a global day for Women at Chemring which occurred in September.

Early Careers colleagues form an increasing proportion of our population and

in 2022 we welcomed over 80 graduates and apprentices into our businesses



launched in year, complements the technical development provided through

each business unit by providing early leadership and skills development.

Listening to our colleagues is a key pillar of our approach to developing the

Chemring culture. As the non-executive director with responsibility for

employee engagement on behalf of the Board and as Chair of the

Remuneration Committee, Laurie Bowen again met with groups of colleagues

across Chemring to hear their experiences of working at Chemring. These

sessions also provide the opportunity for Laurie to share with colleagues the

work of the Board. This year these groups included colleagues at all levels

from operators to the senior leadership teams at Chemring Countermeasures

in Toone, Tennessee, and at Chemring Energetic Devices in Downers Grove,

Illinois. The groups Laurie met were very positive about their experiences



activities and events now possible since the easing of CV-19 restrictions.



develop, and colleagues provided clear and constructive input on areas of

additional focus which are being acted on.

Read more on pages 50 to 56

GOVERNANCE AND ETHICS

In recent years significant effort has been placed on strengthening the

governance and ethics across the Group, ensuring that we have the necessary

policies and procedures in place to enable the business to operate with







of the Group, its subsidiary Chemring Technology Solutions Limited and



followed a voluntary report by the Group. Chemring has co-operated fully



now closed, with no fines paid or payable.

Chemring remains committed to conducting its business in an ethical and

responsible manner at all times, and in full compliance with all applicable laws

and regulations. We will continue to strengthen our policies and procedures

to ensure that the Group’s governance remain fit for purpose.



Framework, both of which bind our purpose, values, behaviour, policies and

procedures, and provide the necessary governance to enable us to operate in



which meets regularly throughout the year and is chaired by me, is responsible

for the oversight and monitoring of Chemring’s governance framework and



Further details on the Committee’s activities during the year can be found on

page 57 of this report.

Good governance and ethical behaviour underpin our evolving sustainability

agenda and ensure that we operate safely, responsibly and in compliance



DIVIDENDS

The Board continues to recognise that dividends are an important

component of total shareholder returns. The Board’s objective is for a

growing and sustainable dividend and continues to target a medium-term

dividend cover of c.2.5 times underlying EPS, subject inter alia to maintaining



The Board is recommending a final dividend in respect of the year ended



dividend of 1.9p per share (2021: 1.6p), this results in a total dividend of 5.7p









CURRENT TRADING AND OUTLOOK

Trading since the start of the current financial year has been in line with





have a greater bias towards the second half of the financial year as a result of







cover, which provides excellent visibility for the full year.

With market-leading innovative technologies and services that are critical to

our customers, together with the flexibility provided by the Group’s strong

balance sheet, the Board is confident that Chemring will continue to deliver

both organic and inorganic growth, balancing near-term performance with

long-term value creation. Chemring’s long-term prospects remain strong.

Carl-Peter Forster

Chairman



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 11

MARKET OVERVIEW



TOTAL SPEND





2021

2020

2019

2018

Source SIPRI





Chemring is an international technology company,





geopolitical and technology trends are rapidly







accelerated NATO expansion.



increasing its investment and action to strengthen its position towards an

assertive China with its own extensive defence and military modernisation

programmes. Alongside the high-intensity, kinematic, conflict between Russia





continue to be prevalent. The Group’s diverse and niche capabilities make





UNITED STATES

OUR POSITION



infra-red (“IR”) pyrotechnic decoys that protect airborne and naval assets from



the design, development and manufacture of precision engineered devices for

distinct aerospace and defence applications including space and missiles.

We are also the largest provider of advanced chemical and biological sensors







electronic warfare (“EW”) requirements with growing budgets.

MARKET TRENDS









activities at the Department of Energy, the Federal Bureau of Investigation

and other agencies.







competition in the region, with a consequent shift away from counter-insurgency

doctrines and capabilities.







priorities were already geared toward great power competition before



OUR CHALLENGES AND OPPORTUNITIES





capability enablers and R&D can create opportunities for us to deploy

Group-wide capabilities and technologies particularly in the customer

priorities of space, hypersonic technology, EW, sensors, biotechnology,

artificial intelligence (“AI”), cyber and quantum computing.





countermeasures suite supports our leadership position in this capability area.

LINK TO STRATEGY 

UNITED KINGDOM

OUR POSITION





communications, cyber and AI, for national security and defence customers





naval forces from the threat posed by guided missiles, through the design,

development and supply of radio frequency (“RF”) and IR pyrotechnic decoys,



assembly, testing and through-life support of advanced energetic products for

defence, security and commercial markets.

TOTAL SPEND









2021

2020

2019

2018

Source SIPRI

1 2 3

Chemring Group PLC Annual report and accounts 202212

MARKET TRENDS

2021’s “Integrated Review of Security, Defence, Development and Foreign

Policy”, and the accompanying “Defence Command Paper” and the “Defence

and Security Industrial Strategy”, outline how national advantage through





has been allocated to defence, with this allocation being part of a multi-year

settlement to invest in pioneering technology in areas such as cyber, AI,





By means of an example, digital integration across all defence domains will be

key and a £1.5bn investment will be provided over the next decade to build

and sustain a “Digital Backbone” that will be part of underpinning armed

forces modernisation. An investment of some £500m will be made in Cyber



capabilities in this environment, with £200m also provided over ten years





long-term defence investment as part of adapting to a more competitive and

riskier world.

OUR CHALLENGES AND OPPORTUNITIES







significance as new capability priorities mature.

The enhanced focus on S&T, AI, data science and autonomy as set out in the

Integrated Review, with the creation of new military and security constructs that

are data and intelligence driven, will enlarge the opportunity space for Roke

to deploy its unrivalled capabilities to address these next-generation technology

requirements. Lastly, as the sole-source supplier of countermeasures to the







LINK TO STRATEGY 

EUROPE

OUR POSITION

Although the Group continues to vie with highly capable competitors



countermeasures, EW systems and improvised explosive device (“IED”)

detectors to several European customers including Germany, France, Italy

and Spain. Additionally, our Norwegian based business provides energetic

materials to many leading prime contractors across the region.



% of Chemring’s global sales (2018 – 2022)



 

Europe 12%

Asia Pacific 6%

 



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MARKET TRENDS



geostrategic landscape, with Sweden and Finland formally set to end decades



other European countries that are presently outside the alliance.

Significant growth in European defence budgets is also being signalled, with

countries looking to make increased capital investments to deter and protect

their national interests. Seven European countries – Belgium, Germany, Italy,

Norway, Poland, Romania and Sweden – have already announced their plans

to increase defence budgets given the invasion, targeting at least the 2% GDP



The Netherlands have indicated they will follow suit in the near term.

France has announced it will review its Loi de Programmation (“Programming

Law”) owing to the changed geopolitical situation, and a new era of German

foreign and security policy has been heralded with the creation of a special

fund of €100bn to be spent on defence procurement and a commitment to

allocate more than 2% of German GDP to defence.

OUR CHALLENGES AND OPPORTUNITIES

The medium-term outlook for the European market is positive, and several

opportunities for our niche capabilities can be anticipated. Against the new

geostrategic backdrop, the Group will continue to support the requirements

of European allied nations.

LINK TO STRATEGY 

AUSTRALIA

OUR POSITION

Chemring’s in-country capabilities are founded on our integral place in the



Australia is the country’s pre-eminent manufacturer and supplier of airborne

countermeasures, and the modern Lara plant is the world’s most advanced

manufacturing facility for such products.

MARKET TRENDS

An enduring emphasis on future great power competition in the Indo-Pacific

region is driving increased Australian defence spending with a focus on force





in advanced cyber, AI, autonomy, quantum, undersea, hypersonic and

counter-hypersonic, EW, innovation, and information sharing capabilities,



security and stability.

OUR CHALLENGES AND OPPORTUNITIES



Group is well placed to respond to relevant opportunities resulting from the



LINK TO STRATEGY 















US President

5 April 2022

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STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 13

GROUP CHIEF EXECUTIVE’S REVIEW





INTRODUCTION

The Group has delivered another year of good growth in 2022.









Government budget until the middle of March 2022.

The current geopolitical uncertainty, brought about by both Russia’s invasion



role that the defence industry plays in society. Delivering in support of our

customers and their critical needs has never been more important, and I am

again hugely grateful to all my colleagues across Chemring. The response of

our people and their families has been outstanding and this team effort has

delivered results that exceeded our expectations at the start of the year.

In response to the current threat environment, defence spending is expected

to rise and with it we can expect to see strengthening demand for the





drive greater co-operation and alignment between allies. In particular, the

increased importance that is being placed on Cyber and EW, information

advantage, intelligent networks and multi-domain integration, is expected to

maintain and accelerate demand for Roke’s market-leading technologies.

The Group is well positioned with a robust strategy and a relentless focus





At Chemring our purpose is to help make the world a safer place, delivering

innovative technologies and products that detect and defeat ever-changing



embraces many different stakeholders including our people and our suppliers,

and it recognises the need for us to contribute towards a sustainable future.











negotiate numerous near-term challenges

and the Group remains well placed to





From an ESG perspective 2022 has seen us make further progress as we

proactively manage our sustainability agenda. Focus areas included health



wellbeing. As a business we are committed to building a sustainable company

of which all our stakeholders can be proud, both now and in the future.

HEALTH AND SAFETY

Safety is our core value, with the health, safety and wellbeing of our

colleagues, their families, our customers and the communities in which







(“TRIF”) is currently at 0.78 which shows a slight increase when compared to

last year’s 0.67 but still below our annual limit of 1. The nature of most

injuries were either slips, trips and falls, or muscular skeletal type of events.

We are proud to report that during 2022 there were no injuries in

connection with or arising from energetic events.



CONTROL OF MAJOR ACCIDENT HAZARDS



enhance our focus in this area by ensuring we design, maintain and operate



technology to remove our employees from exposure to energetic hazards.

During the design of these processes we have placed more scrutiny on the

application of process hazard analysis.

In 2019 we mandated that all Countermeasures & Energetics businesses

would need to conduct regular reviews to identify the potential for major

process safety events. This year saw the fourth iteration of that review

process, with an increase in the number of hazard scenarios being identified

as the rigour of process hazard analysis matured. As a result of this maturing

process, we continue to deepen our understanding of our residual risks and

throughout the year have taken steps to reduce these to a level as low as is

reasonably practicable.

INJURY REDUCTION

Injury prevention focuses on the reduction of injuries through the adoption of

safety as an inherent part of everything we do. This is enacted through safety

leadership, clear expectations, accountability and establishing a safety culture



This year we consolidated our corporate reporting platform to capture

better understanding of root causes and increased levels of assurance. These

additional data points will help our continued focus on becoming a learning

organisation. This data has established trends regarding musculoskeletal

disorders due to the manual handling nature of some of our processes

together with cuts to fingers and hands. The relevant businesses have

developed plans to reduce the risk of injuries and it is expected that this





Safe delivery of our business continues through the management of risk and





HSE policy into practice by setting standards on eight core elements across

the Group to drive a robust and common approach to the management of

HSE. Each business is audited every two years to ensure compliance, with

high-priority non-compliances being reported and monitored at Executive



Statement process have helped the businesses focus on strengthening their

processes within the HSE framework requirement, which in turn provides





measures for people working from home and their mental and emotional

wellbeing, and is now supported by the newly formed Group-wide Healthy

Workplace Sub-Committee.

Michael Ord



Chemring Group PLC Annual report and accounts 202214



CAUSING HARM OR INJURY

Nil

2022

2021

REVENUE



£443m

£393m

2022

2021

We measure our overall HSE performance to reflect both occupational safety

and process safety. In doing this we have multiple data points, one of which



third review since 2018 by a team of specialist consultants from global subject

matter experts, ERM. The review, which was based on progress made



becoming a high reliability organisation. In particular the review confirmed



processes and systems generating data and signals around our high-hazard

operations. The level of collaboration has also increased with many businesses

sharing best practice on a regular basis to help accelerate our performance,

all of which is supported by a positive tone from the top and underpinned



ENVIRONMENT



emissions as part of our ongoing commitment to becoming Carbon Neutral



manage our ESG-related risks – balancing both the near and longer-term







Climate-related Financial Disclosures (“TCFD”). In addition, the Group has



completed its first CDP submission. By translating the TCFD recommendations

and pillars into actual disclosure questions and a standardised annual format,

CDP provides investors and disclosers with a unique platform where the

TCFD Framework can be brought into real-world practice in a comparable

and consistent way.

As our disclosure increases, so has the need to ensure that the data



auditable framework for our emissions reduction activities, with external

subject matter experts appointed to verify the data and to report to the

Group’s Audit Committee.

Chemring is committed to ensuring that we are able to attract and develop





programmes from Early Careers to Senior Leadership Team development.

With a specific focus on gender diversity, the global Women at Chemring

Committee has been established to encourage local women’s networks in

each business unit alongside delivering a global day for Women at Chemring

in the second half of the year.

2022 PERFORMANCE

It is pleasing to report a strong set of results for the financial year despite



was ahead of the Board’s expectations at the start of the year, demonstrated

continued progress against our strategic goal of balancing short-term

performance with longer-term value creation.







20% to 20.2p (2021: 16.9p).





achieving the mid-teen Group margin objective that we set out in early 2019.

The flat margin primarily reflects the improvement in operational execution

in Countermeasures & Energetics offset by the operating expense investment





Roke is a leading participant, have remained extremely buoyant in the period.

Roke delivered double digit growth in orders, revenue and underlying

operating profit and has maintained strong margins despite increased

investment in people, infrastructure and product development.

Roke’s order intake during the year was up 59% to £168m (2021: £106m)

with revenue for the year exceeding £100m for the first time. A significant

order, Hyperion, valued at £26m was awarded under the Serapis framework



phased array radar technologies to address the challenges associated with

hypersonic missile defence.

In the last four years successful execution of its strategy has seen Roke double



800 today, driven in part by the success of its graduate and apprenticeship

schemes, which saw 71 new joiners in September 2022. Building on this

success, Roke has invested in the launch of the Roke Academy. This unique

offering will be a centre of excellence for learning and development and is

designed to target the recruitment and development of undiscovered talent,

and the enhancement of skillsets within the business.

In order to drive scalable growth and unlock future potential, Roke has

combined its Public Sector, Industry and Cubica business units to create



business units. In doing so, it has brought together its market-leading skill





intellectual property and unique technologies in support of customers in





The acquisition of Geollect Limited in December 2022 creates further

opportunities for Chemring to enhance and further accelerate growth in



commercially curated intelligence growing at 28% CAGR, Roke’s customers

require an exponential increase in capability to achieve digital advantage

against complex threats.

CAPITAL ALLOCATION POLICY

INVESTMENT CAPEX

Continued investment to support

organic growth through enhanced

capacity and automation to drive

margin improvement

DIVIDENDS

Recognising that dividends are a

key part of total shareholder

return. The Group targets a

medium-term dividend cover of

c.2.5 times underlying EPS, subject

inter alia



MERGERS AND ACQUISITIONS

Focus on Sensors & Information,



bolt-on acquisition targets to

accelerate growth and





Low risk, high return on

investment option for excess



long-term holders

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 15

GROUP CHIEF EXECUTIVE’S REVIEW continued

2022 PERFORMANCE continued

The acquisition will enable Roke to build on its Intelligence as a Service (“Roke

IaaS”) proposition by utilising the intelligence gathering and analysis capabilities

of Geollect, and enhancing their already impressive processing capabilities



The strategic goal for Roke is to continue to focus on growth across all its







EW orders from this potentially significant market. We continue to invest in





clearance. This investment has allowed us to support ongoing customer

demonstrations and field trials. Customer feedback remains very positive

albeit anticipated follow-on orders have been delayed as a result of budget



March 2022.





and full rate production, and on exploiting a growing opportunity in

bio-security and surveillance. In a post-pandemic and contested world,

governments are becoming increasingly concerned by the risks of both

naturally occurring and engineered biological threats. Advances in synthetic

biology now give our national adversaries the capability to deliberately

engineer organisms to create hazards and cause harm.

Chemring’s experience and expertise in fielding biological agent detectors



which to pursue opportunities in existing and adjacent markets, such as

homeland security. Chemring continues to invest in its Mobius R&D project,

which aims to develop a deployable and cost-effective solution for the

identification of biological threats.





develop and deliver an aerosol bio-sensor that can detect, classify, and provide

presumptive identification in real time of pathogenic bio-threats in both indoor

and outdoor environments. Chemring’s technology dramatically shortens the

time taken to identify the bio-threat, which is critical to rapidly implementing

an effective response. Chemring’s product is also considerably less expensive

to procure and operate than current equipment, thus allowing the customer

to afford greater unit coverage while remaining within their budget.



summarised below.

The Enhanced Maritime Biological Detector (“EMBD”), an automated sensor

to rapidly detect, collect, identify and sample airborne biological warfare

agents, has seen a positive start to its full rate production phase. The value











Development (“EMD”) phase and we are now working with the customer



Production (“LRIP”) and Full Rate Production (“FRP”) thereafter. The next



The Aerosol and Vapor Chemical Agent Detector (“AVCAD”) program has

now completed its EMD phase. The next customer procurement decision



contractors currently selected for this competitive program.

Production continued as expected on the Husky Mounted Detection System

(“HMDS”) program with customer deliveries on schedule throughout the

year. Following a delay in the placement of the annual delivery order, expected







realigning its budget priorities from a focus on counter-insurgency operations



re-alignment of DoD funding priorities and our expectations are that the



additional five years as the HMDS program transitions to sustainment mode.

We continue to work with the customer to determine funding levels and

timings moving forward.



expanding the Group’s product, service and capability offerings in the areas





Programs of Record. We will continue to actively explore opportunities to

expand and accelerate the Sensors & Information sector capabilities and

offerings, both by leveraging opportunities in adjacent markets and through

further bolt-on acquisitions.



continue strengthening and protecting our niche, world-leading positions



working closely with our customers in the development of new solutions





Partnering Arrangement (“SPA”) with the Royal Air Force, Defence

Equipment & Support (“DE&S”) and the Defence Science and Technology

Laboratory (“DSTL”), to ensure long-term provision of optimum air platform

protection, including the exploitation of current capabilities and the

development of new technology. This ten-year SPA will provide a framework







such decoy technology available to a wide range of allies and partner nations,

increasing survivability of aircraft and aircrew.

The investment in the expansion and automation of our Tennessee facility to

meet the expected demand for airborne countermeasures continued during



saw the commissioning process progress through characterisation and testing

as production gradually ramped up. We expect customer First Article testing











launched its passenger spacecraft, CST-100 Starliner, to the International

Space Station (“ISS”). Chemring provided various mission-critical components







The future focus for the Countermeasures & Energetics sector remains on

safeguarding and growing the Group’s market-leading positions in niche

markets through the modernisation and automation of our manufacturing

facilities, and in improving our competitiveness through investment in lean

manufacturing capabilities and developing new products and technologies.

Chemring Group PLC Annual report and accounts 202216



















Net debt at the year end was £7.2m (2021: £26.6m), the decrease since



offset by the investment in capital projects in the year. Strong operating cash





showing that the ongoing focus on working capital improvements is delivering

long-term, sustainable positive results.

CULTURE

Chemring people are at the heart of our business. Engaged, motivated,

empowered and appropriately skilled colleagues are integral to our success

which is founded in the quality of our people. It is imperative that we are able

to sustain an environment where we have the right people, in the right place,

at the right time, with the right skills working in a safe, healthy and inclusive

environment. We continue to invest in our people at all levels across every

location and function creating strong foundations for our future success.



Excellence and Innovation, continued throughout 2022 and is firmly embedded



Local Accent supports year-on-year progress and we continue to focus



2022 saw the gradual easing of the pandemic restrictions in every geography.

This enabled renewed focus on bringing colleagues together both socially and

for professional networking and sharing of ideas. Alongside this we have been

able to meet with customers and third parties at all our locations for the



colleagues to reconnect face to face. Whilst I have been incredibly impressed

at how the whole business has been able to embrace remote working

protocols and virtual interactions, there is no substitute for face-to-face

discussions to further both our approach to operational excellence and to

continue the development of our culture.



time, continues to underpin our approach to measuring how far we have

come in achieving our cultural aspirations. Dashboards help business units

understand how colleagues are feeling and where we need to focus.

Participation with the tool and positivity towards the key cultural themes

continue to show improvements throughout 2022 despite the challenges



of the business unit leadership teams in ensuring each business provides a

positive and engaging workplace.

Making sure that we have an appropriately diverse pool of talent within



across 2022.

This year has seen both formal and informal networking groups developing



with shared characteristics or interests and complement the more formal

work we are doing around education and awareness of diversity and inclusion.

Notably in 2022 every business has established a Women’s Network to

support our female colleagues at all levels and in all roles. Women make up



ongoing focus on this key population and support both engagement and

future success of female colleagues.

These networks form part of the established strategy and framework around

DE&I at Chemring which started in 2021 with a programme of ensuring

corporate and personal awareness of the importance of a diverse population,

an inclusive culture and systems that help support equality and drive equity.

The programme of workshops put in place for all our senior leaders and

managers in 2021 continued across 2022 and was extended to include







business goals and to ensure that we continue to invest in our people.

CONCLUSION

Despite a challenging macro-economic environment, I am delighted with



Group as we build a stronger, higher quality and technology focused business.

We maintain our relentless focus on living our shared values of Safety, Excellence

and Innovation, and in doing so we are driving our collective purpose: delivering

innovative protective technologies to help make the world a safer place.

I would like to thank all my colleagues across Chemring for their determination,

hard work and support. The progress made over the past few years would

not have been possible without their collective efforts.

With market-leading technologies and services that are critical to our customers,

our niche market positions and our strong balance sheet, I look to the future

with excitement and confidence in our continued success.

Michael Ord





CHEMRING WOMEN’S





Inclusivity Network (WIN@Chemring) day. Celebrated across

Chemring, the day was an opportunity to raise awareness of the

issues surrounding gender diversity in the workplace. It was also a

day to celebrate some of the great things going on locally across the

business in support of and organised by the women of Chemring.

The network is all about building a community locally while sharing

great ideas and knowledge across the Group. The intention of this

event is that it provides a focus for the women’s network groups in

each part of the business – both new and existing networks – and

to leave a legacy that continues far beyond the September event.

DISCOVER MORE ABOUT



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 17





KEY STRENGTHS

EMPLOYEES

We have a highly skilled and knowledgeable

workforce operating in specialist capability areas.

Their expertise is critical to us delivering

innovative solutions to our customers’ challenges.

CUSTOMER RELATIONSHIPS

We enjoy long-term, high quality relationships

with defence and intelligence customers in the

member countries of the multilateral “Five Eyes”





relationships in selected other markets where





We maintain close relationships and





FACILITIES

We are investing in the resilience of our facilities,

including increasing automation to deliver our

products safely, securely and efficiently.









WHAT WE DO

INVEST IN PEOPLE, PROCESSES



Chemring is a technology business



worldwide. We invest in our future by

developing the capabilities of our people,

maintaining safe and efficient operations

and developing next-generation solutions

to meet our customers’ current and

emerging needs.



We operate in niche segments of the

international defence and security market.





advanced and dependable technology

solutions to meet our customers’ needs,

and we continually look for new growth

opportunities to deploy our capabilities.

In Countermeasures & Energetics, we



countermeasures, through our leading

technology and manufacturing position.





performance and superiority of our

products. In Sensors & Information,



multiple technologies to develop

differentiated solutions for meeting ever

more demanding customer requirements.

DELIVER SOLUTIONS

We focus on providing innovative and

competitive solutions that meet our

customer needs efficiently and on time.



investments, we also invest in continuous

improvement – a key element of

minimising the cycle time from order



INNOVATING







Chemring Group PLC Annual report and accounts 202218

OUR VALUES

SAFETY

We place safety at the heart of

everything we do.

- We ensure we operate safely and



- We promote best safety practices across

our operations and beyond.

- We are committed to ensuring we

minimise our impact on the environment.

EXCELLENCE

We are focused on ensuring we

consistently meet high standards in all

that we do.

- A culture of continuous improvement



- We act to ensure that we maintain



- We always deliver on our promises.

INNOVATION

We create world-class solutions and

develop world-class thinking.

- We inspire imaginative solutions.

- We work together to turn ideas into

technologies and solutions.

- We value collaboration and



Read more about our sustainability

on pages 37 to 39



STAKEHOLDER VALUE

CUSTOMERS



contractors and other commercial businesses.





INVESTORS

We return money to our shareholders through

dividends and, through successfully executing our

strategy, we grow the value of their investment

over time.

EMPLOYEES

The skills and experience of our employees



commitments. We provide development

opportunities and a safe, stimulating and rewarding

working environment for all of our people.

SUPPLIERS

We form strong relationships with our suppliers

who partner with us to deliver innovative solutions

and are supported consequently through our

procurement of their goods and services.

COMMUNITIES

We make a positive contribution to the

communities where our people live and work



economic prosperity through providing high



GOVERNMENTS

Through paying taxes in the jurisdictions in which

we operate, we support the development of public

infrastructure and services such as healthcare,

transport systems, policing and education.

Read more about our stakeholders

on pages 21 to 23

OUTCOMES

INVESTMENT







£69.7m was customer-funded. The capacity

expansion project at the Tennessee

countermeasures site continues to progress on

schedule and, excluding significant investments such

as this, we aim for investment to at least match

depreciation and amortisation each year.

INVESTMENT

£118.2m

(2021: £88.9m)

CASH FLOW

We aim to convert 100% of underlying EBITDA

underlying operating cash flow over the medium

term, accepting that timing differences will arise at

individual period ends. In 2022, the conversion

ratio was 109%, reflecting strong operating cash

generation and the continued focus on managing

working capital.

UNDERLYING CASH CONVERSION

109%

(2021: 105%)

DIVIDENDS





19% on the prior year, subject to the approval of

the final dividend at the Annual General Meeting.

DIVIDENDS

5.7p

(+19%)

CLIMATE CHANGE

We recognise the profound impact of climate change. We are actively seeking ways to reduce our

effects on the environment and build resilience to climate change by focusing on energy, waste and



Read more on pages 42 to 49

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 19

SECTION 172 STATEMENT





Section 172 (1) of the Companies Act 2006 requires the directors to act in

the way they consider, in good faith, would most likely promote the success

of the company for the benefit of its members as a whole. In doing so,





- likely consequences of any decision in the long term;

- interests of the company’s employees;

- need to foster the company’s business relationships with suppliers,

customers and others;

- impact of the company’s operations on the community and environment;

- desirability of the company maintaining a reputation for high standards



- need to act fairly as between members of the company.

In discharging our section 172 duties the directors have regard to the factors

set out above and any other factors which we consider relevant to the

decision being made. We acknowledge that every decision we make will not

always result in a positive outcome for all of our stakeholders. However, by

considering the Company’s purpose, vision and values, together with our

strategic objectives and having a process in place for decision making, we



Further details on how the Board operates and reflects stakeholder views in

its decision making are set out in the corporate governance report on pages

80 to 89. Further information on how the Board has had regard to section

172 matters during the year can also be found in the following sections of the

annual report:

SECTION 172 FACTOR KEY EXAMPLES PAGE

CONSEQUENCES OF ANY DECISION IN THE

LONG TERM

- 

- Investment case

- Business model

- Market overview

- Strategy



INTERESTS OF EMPLOYEES - 

- Stakeholder engagement

- Health and safety

- 





SUPPLIERS, CUSTOMERS AND OTHERS

- Business model

- Stakeholder engagement

- Market overview

- Strategy

- Ethics and business conduct



IMPACT OF OPERATIONS ON THE

COMMUNITY AND THE ENVIRONMENT

- Introduction to sustainability

- Health and safety

- Environment

- 







MAINTAINING HIGH STANDARDS OF



- Ethics and business conduct

- Corporate governance report

 - Investment case

- Stakeholder engagement

- Corporate governance report

Chemring Group PLC Annual report and accounts 202220

STAKEHOLDER ENGAGEMENT

EMPLOYEES

WHY WE ENGAGE



of our strategy and the future growth of the business. We recognise the

importance of attracting, developing and retaining the best talent, and the

need to provide a safe and inclusive environment where individuals can thrive.



- Regular all-hands meetings and team briefings

- Works councils, trade unions, representative bodies and forums which

support and connect people with shared characteristics or interests

- 

employees to provide immediate and anonymous feedback on

developments within the business

- Publication of a monthly video blog by the Group Chief Executive,



- Publication of regular company notices and the in-house magazine,

Chemring-I, which features news and events from across the Group

- Development programmes and succession planning



- Monthly reporting to the Board on health and safety matters

- 

supplemented by periodic culture “check-ins” facilitated by an external

consultant

- Direct engagement with the Board’s nominated non-executive director,

Laurie Bowen, through meetings with colleagues from across the business

and at different levels of the organisation

- Board engagement with a wide range of employees during collective and

individual site visits throughout the year

- Nomination Committee reviews diversity initiatives, senior leadership

succession plans and talent development programmes

HOW WE MONITOR

- Employee Voice participation and positivity scores

- Safety performance indicators

- Diversity statistics

- 

- External ESG ratings

OUTCOMES

- Development of people strategy and related investment

- Safe, healthy and motivated workforce

- Focus on diversity and inclusion

- Improved employee retention

- Attractive proposition for potential new employees

LINK TO STRATEGY

CUSTOMERS

WHY WE ENGAGE

Ensuring that we provide innovative solutions that meet our customers’









- Regular meetings, teaming arrangements and engagement at all levels of our

customers’ organisations

- Partnering with customers on a broad range of technology and product

development programmes

- Participating in industry forums and working groups, and hosting customer

visits to our sites

- Attending and exhibiting at selected trade shows, which enables high-level

interaction and the opportunity to brief customers on key product

developments and other initiatives



- 

our businesses through regular interactions with senior customer

representatives, and provide feedback to the Board

- External market updates and customer views are obtained to support the

Board’s strategy review

- 





- Site visits enable the Board to develop a deeper understanding of our

products, technical capabilities and customer requirements

HOW WE MONITOR

- 

- R&D expenditure

- Capital investment

- Process safety events

OUTCOMES

- Customer-focused inputs into the Group strategy

- Innovation and investment driven by customer requirements

- Collaborative, strategic customer relationships

- Improved customer satisfaction

LINK TO STRATEGY

The Board recognises that positive interaction and collaboration with all of

our stakeholders is essential to the delivery of sustainable long-term value.

Effective engagement allows the Board to understand relevant stakeholder

views on material issues which may impact the business and helps to inform

the Board’s decision making.

We engage with a wide range of stakeholders at the Board level, at a Group

level and within our business units. In understanding what matters to our

stakeholders we are able to take this into account when setting our strategy

and also in planning our day-to-day business operations. The table below sets

out how we engage with our key stakeholders.

1 2 3

1 3

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 21

SHAREHOLDERS

WHY WE ENGAGE

The continued support of our shareholders is something that we value

greatly. We therefore recognise the importance of providing all of our

shareholders with regular updates on the Group’s operational and financial

performance, strategy and future prospects, and ensuring that shareholder

views are taken into consideration in relation to major developments in





- Engagement with shareholders predominantly led by the Group Chief



Affairs

- Publication of our interim and full year results statements, along with

regular trading updates throughout the year

- Sustainability Report published on our website

- Face-to-face meetings or video calls following the publication of any

significant news update or at the request of the shareholder

- Formal presentations and structured roadshows for our institutional

investors following the publication of the Group’s interim and full



- 



receive notification of corporate updates



- Board receives feedback collated by our brokers and other financial advisers

from our institutional investors, in which their views can be expressed on a

non-attributable basis

- 



- The Chairman, the Senior Independent Director and Chair of the

Remuneration Committee meet with shareholders to discuss



HOW WE MONITOR

- Earnings per share

- Dividends paid

- Total shareholder return

- ESG metrics

- External ESG ratings

OUTCOMES

- Development of capital allocation and dividend policy

- Development of ESG strategy

- Supportive, long-term shareholder base

- Access to funding

LINK TO STRATEGY

SUPPLIERS

WHY WE ENGAGE

We rely on our suppliers to provide us with quality raw materials, products

and services. Constructive engagement ensures that our suppliers are able to

meet our high expectations on safety, quality, value, delivery performance and

ethical business conduct. We recognise that prompt payment terms and

strong supplier relationships are important in building a long-term, sustainable

and supportive supply chain.



- Day-to-day interaction with suppliers is conducted largely by supply chain

management teams within our businesses

- Long-term agreements are entered into with our key suppliers, which





- 

the standards of ethical business conduct we expect of them



- Business continuity and supply chain dependency reviews included within

the internal audit programme

- 

Compliance Committee

- 

HOW WE MONITOR

- Payments made within payment terms

- Statistics on issue of the Supplier Code of Conduct and inclusion



OUTCOMES

- Collaborative, long-term relationships

- Delivery of safe and reliable products and services to customers

- Appropriate working capital management

LINK TO STRATEGY

STAKEHOLDER ENGAGEMENT continued

1 1 3

1 2 3

Chemring Group PLC Annual report and accounts 202222



WHY WE ENGAGE



ensure that we maintain our licences to operate and continue to run our

businesses in full compliance with all laws and regulations. We also need to



operations in future.



- Maintenance of a regular dialogue with contacts within governments and



- 

- Consultation with local governing bodies on planned business developments

and investments



- 

the associated assurance processes ensures our businesses are meeting

governmental and regulatory requirements

- 

assurance to the Board that the business is operating in accordance with our

Special Security Agreement

HOW WE MONITOR

- Compliance statistics

- Safety-related capital investment

OUTCOMES

- Ethical and compliant business conduct

- Trusted supplier to government customers

- Government support for proposed acquisitions

- Sustainable business operations

LINK TO STRATEGY

COMMUNITIES AND THE ENVIRONMENT

WHY WE ENGAGE

We recognise the important role that each of our businesses play in their local

communities and we actively encourage our businesses to support local

initiatives and charitable causes. Equally, our businesses take pride in the

contribution that they make to their local communities, both as a local

employer and in the work they do to support good causes. We also recognise

the impact of our business on wider society and our responsibility to contribute

to a sustainable future for all.



- 

selected charitable causes with a focus on the military and armed services,

STEM-related initiatives and those linked to the local communities in which

our businesses operate

- 



- In addition to making cash donations, we also encourage and support



- 

initiatives and as a business we have relationships with several universities,

whereby funding is provided for students’ research activities

- Sponsorship through the Horizons Bursary Scheme run by the Institution of

Engineering and Technology, which provides financial support during degree

study for students who have faced or continue to face adversity whilst they

study; these students are all studying STEM degree courses which are relevant

to the disciplines required within Chemring

- Implementation of environmental and carbon reduction initiatives



- Development of ESG strategy, objectives and targets subject to



- Sustainability Committee, chaired by the Group Chief Executive, reports

regularly to the Board on ESG-related matters

- ESG-related targets included in the annual bonus plan and performance



HOW WE MONITOR

- Charitable donations

- Environmental performance indicators

- External ESG ratings

OUTCOMES

- Development of ESG strategy

- Informed communities

- Contribution to local businesses and employment

- Contribution to wider society

- Sustainable business operations

LINK TO STRATEGY

1 1 3

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 23

STRATEGY



WIN MARKET SHARE

In addition to targeting threat-focused growth segments, we also aim to win market

share by focusing on meeting established customer needs in an effective and competitive





continuing demand for airborne countermeasures driven by air platform sales including



 



Countermeasures & Energetics and Sensors & Information are well placed on a number



Programs of Record. This positioning, underpinned by our operational performance and



our business in the world’s largest defence market.

TARGET GROWING SEGMENTS





can be expected to grow. Simultaneously, our customers’ strategic context will continue



capabilities including those in CEMA, artificial intelligence, autonomous systems and space.

With a greater threat of peer-level competition, demand for energetic capabilities can be

anticipated to strengthen as the traditional battlefield continues to feature, alongside the







market based on our in-depth understanding of our customers’ mission requirements and





At Chemring, our purpose



technologies and products that detect and defeat ever-changing threats.

Connected to our purpose, our vision provides a clear definition of the future

state Chemring wishes to attain. It is to be a leading provider of critical and

innovative technologies that detect and protect people, platforms, missions



strategy

vision, and guides the choices that we will make as a company. We will continue







1. Target growing segments

2. Win market share

3. Grow our US business

Chemring Group PLC Annual report and accounts 202224

STRATEGY IN ACTION



Countermeasures & Energetics sector will improve safety



and deliver the extrusion capacity required for next-generation



Elsewhere, we are seeing strong opportunities that support

significant growth for Chemring Energetic Devices. The Chicago

business’ precision-engineered devices being critical to achieving

mission success for increasing customer activities involving space

and missile assets.



£551m

+28%

£551m

£431m

2022

2021

2020

£437m

STRATEGY IN ACTION

In Countermeasures & Energetics we continue to take a pan-

Group approach to our countermeasures activities. Within the

boundaries of security classifications, we share conventional,

spectral and kinematic flare capabilities and processes developed





In Sensors & Information we have established a new sales and



security clearances and delivered a number of proof-of-concept



customer stakeholders.

REVENUE





£443m

£393m

2022

2021

2020

£402m

STRATEGY IN ACTION



position in sensors to develop and implement a technology-led

strategy for the capture of future opportunities. We are also

responding to the strong demand signals that we are seeing for



applications, and are exploring additional opportunities to

complement organic growth.



growth opportunities for Roke – focused in particular on

developing the businesses in its core specialist areas of AI, machine

learning, data science and autonomy.



£651m



£651m

£501m

2022

2021

2020

£476m

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 25

KEY PERFORMANCE INDICATORS







These KPIs enable progress to be monitored on the implementation of the

Group’s strategy, levels of investment, operational performance and business

development. They also give an early insight into how well the principal risks

and uncertainties are being managed.

Similar indicators are used to review performance by each of the Group’s

businesses, albeit that the exact nature of these varies between business units

to reflect the differing nature of their operations.

The KPIs that the Board and senior management utilise to assess Group

performance are set out below. All financial KPIs refer to continuing

operations and therefore exclude businesses classified as discontinued



STRATEGIC PRIORITY SAFETY ORDERS REVENUE

KPI



EVENTS CAUSING HARM



Nil

(2021: 2)





HAZARD REPORTS









FREQUENCY RATE



ORDER INTAKE



£551m



SENSORS & INFORMATION





£651m

(2021: £501m)

SENSORS & INFORMATION

REVENUE







SENSORS & INFORMATION

R ATE

0.78

(2021: 0.67)

COUNTERMEASURES

& ENERGETICS

COUNTERMEASURES

& ENERGETICS

COUNTERMEASURES

& ENERGETICS

DESCRIPTION

Number of energetic events causing

harm or injury.

Number of near miss and potential

hazards reported.

Number of recordable injuries per

200,000 man hours worked.



and represents the last 12 months’ activity.



and indicates future potential.

Revenue is measured at sales value less any

applicable sales taxes.

WHY IS IT A KPI?

A process safety event is one of the

key strategic safety risks of the

business. This indicator measures

those events that have caused injury

or harm.

This indicates employee awareness of

hazards and the greater the reporting

the more engaged our people are.

This is the rate for all injuries including

medical treatment, restricted workday

and lost time injuries. It is a more

sensitive indicator of occupational

safety than lost time injury frequency

rates, as more minor events



The trend of order intake gives an indication of

market conditions and our competitiveness within

our markets.

The level of order book, in particular for delivery

in the next year, gives a degree of confidence in

expected future financial performance.

The trend of revenue gives an indication of both

the state of the end market and our business’s

ability to execute orders on time to satisfy

customer needs.

2022 PERFORMANCE



injuries associated with energetic

events compared to two last year.

Since 2010 the only other time this

has happened was 2017.

As we journey towards our goal of

zero harm we need a workforce that

is fully engaged and proactive in

reporting unsafe actions and



reporting of near misses, providing us

with the opportunity to learn and

prevent accidents from happening. It

is very encouraging therefore to see

we have maintained a high level of

near miss reporting this year.

We had 17 employee injuries this



resulted in a slight increase in our

recordable injury rate, from 0.67 to

0.78, but remains below our limit of

1. There were no fatalities or serious

injuries during the year.



seeing order intake increase by 59% as customers increasingly place multi-year contracts for Roke’s services



and strong order intake across the Countermeasures & Energetics sector where customers are increasingly

placing multi-year orders. This was offset by orders on the HMDS PoR being significantly lower than in the

previous year.





Group revenue was in line with our expectations,

with strong performance at Roke, steady growth

in Countermeasures & Energetics and a foreign



2022

2021

4,036

3,518

2022

2021

2022

2021

0.78

0.67

2022

2021

Chemring Group PLC Annual report and accounts 202226

£195m

£176m

2022

2021

£114m

£154m2022

2021

£162m

£147m

2022

2021

£356m

£255m

2022

2021

£497m

£387m

2022

2021

£281m

£246m

2022

2021

STRATEGIC PRIORITY SAFETY ORDERS REVENUE

KPI



EVENTS CAUSING HARM



Nil

(2021: 2)





HAZARD REPORTS









FREQUENCY RATE



ORDER INTAKE



£551m



SENSORS & INFORMATION





£651m

(2021: £501m)

SENSORS & INFORMATION

REVENUE







SENSORS & INFORMATION

R ATE

0.78

(2021: 0.67)

COUNTERMEASURES

& ENERGETICS

COUNTERMEASURES

& ENERGETICS

COUNTERMEASURES

& ENERGETICS

DESCRIPTION

Number of energetic events causing

harm or injury.

Number of near miss and potential

hazards reported.

Number of recordable injuries per

200,000 man hours worked.



and represents the last 12 months’ activity.



and indicates future potential.

Revenue is measured at sales value less any

applicable sales taxes.

WHY IS IT A KPI?

A process safety event is one of the

key strategic safety risks of the

business. This indicator measures

those events that have caused injury

or harm.

This indicates employee awareness of

hazards and the greater the reporting

the more engaged our people are.

This is the rate for all injuries including

medical treatment, restricted workday

and lost time injuries. It is a more

sensitive indicator of occupational

safety than lost time injury frequency

rates, as more minor events



The trend of order intake gives an indication of

market conditions and our competitiveness within

our markets.

The level of order book, in particular for delivery

in the next year, gives a degree of confidence in

expected future financial performance.

The trend of revenue gives an indication of both

the state of the end market and our business’s

ability to execute orders on time to satisfy

customer needs.

2022 PERFORMANCE



injuries associated with energetic

events compared to two last year.

Since 2010 the only other time this

has happened was 2017.

As we journey towards our goal of

zero harm we need a workforce that

is fully engaged and proactive in

reporting unsafe actions and



reporting of near misses, providing us

with the opportunity to learn and

prevent accidents from happening. It

is very encouraging therefore to see

we have maintained a high level of

near miss reporting this year.

We had 17 employee injuries this



resulted in a slight increase in our

recordable injury rate, from 0.67 to

0.78, but remains below our limit of

1. There were no fatalities or serious

injuries during the year.

seeing order intake increase by 59% as customers increasingly place multi-year contracts for Roke’s services

and strong order intake across the Countermeasures & Energetics sector where customers are increasingly

placing multi-year orders. This was offset by orders on the HMDS PoR being significantly lower than in the

previous year.



Group revenue was in line with our expectations,

with strong performance at Roke, steady growth

in Countermeasures & Energetics and a foreign



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 27

KEY PERFORMANCE INDICATORS continued





STRATEGIC PRIORITY UNDERLYING OPERATING PROFIT AND MARGIN  WORKING CAPITAL AND INVENTORY 

KPI

UNDERLYING OPERATING

PROFIT





(2021: £57.5m)

UNDERLYING OPERATING

MARGIN







UNDERLYING EARNINGS



20.2p

(2021: 16.9p)

20.2p

16.9p

2022

2021

WORKING CAPITAL







INVENTORY



£99.6m

(2021: £80.7m)





0.09x



0.09x

0.35x

2022

2021

UNDERLYING OPERATING

CASH FLOW

£90.1m

(2021: £80.0m)

£90.1m

£80.0m

2022

2021

SENSORS & INFORMATION

£30.0m

£31.6m

2022

2021

COUNTERMEASURES &

ENERGETICS

£48.9m

£40.0m

2022

2021

SENSORS & INFORMATION

18.5%

21.6%

2022

2021

COUNTERMEASURES &

ENERGETICS

17.4%

16.2%

2022

2021

CHANGE FROM PREVIOUS YEAR

up 20%

(2021: up 12%)

20%

12%

2022

2021

SENSORS & INFORMATION

£30.6m

£38.3m

2022

2021

COUNTERMEASURES &

ENERGETICS

£63.3m

£46.1m

2022

2021

SENSORS & INFORMATION

£27.1m

£19.8m

2022

2021

COUNTERMEASURES &

ENERGETICS

£72.5m

£60.9m

2022

2021

CONVERSION OF



UNDERLYING OPERATING

CASH

109%

(2021: 105%)

109%

105%

2022

2021

DESCRIPTION



need to be separately disclosed to properly understand the Group’s underlying quality



divided by revenue.

Calculated as underlying earnings after

tax divided by the number of shares



Working capital is defined as

inventories, trade and other receivables,

less trade and other payables excluding

payroll related and other liabilities



Inventory is measured at cost. Measured as net debt divided by

underlying EBITDA for the previous

12 months.

Cash flow from operating activities

before tax outflows, non-underlying

items and pension payments.

WHY IS IT A KPI?





allows the impact of changes in revenue and cost base to be monitored, enabling

comparisons to be made of management performance and trading effectiveness.

The measurement of underlying EPS

reflects all aspects of the Group’s

income statement including the

management of interest and tax.

Efficiently turning profit into cash

demands a degree of control over

working capital.

The primary focus for improvement



This is a measure of leverage within

the business and is a banking covenant.

This is a key measure to ensure

profit turns into cash in short order.

2022 PERFORMANCE

The underlying operating profit increased by 11% during the year. The changes



performance improvement actions, as set out in this strategic report.



2022, driven by increased underlying

operating profit and lower interest



Working capital as a percentage



year-on-year, demonstrating the

continued effective management of

working capital.

Inventory increased, as did advance

payments from customers, reflecting

the timing of customer procurement



This has decreased in 2022, as

underlying EBITDA has increased

and net debt has decreased.



exceeded 100% as our focus on the

effective management of working

capital was maintained.

Chemring Group PLC Annual report and accounts 202228

KPI

UNDERLYING OPERATING

PROFIT





(2021: £57.5m)

UNDERLYING OPERATING

MARGIN







UNDERLYING EARNINGS



20.2p

(2021: 16.9p)

20.2p

16.9p

2022

2021

WORKING CAPITAL







INVENTORY



£99.6m

(2021: £80.7m)





0.09x



0.09x

0.35x

2022

2021

UNDERLYING OPERATING

CASH FLOW

£90.1m

(2021: £80.0m)

£90.1m

£80.0m

2022

2021

SENSORS & INFORMATION

£30.0m

£31.6m

2022

2021

COUNTERMEASURES &

ENERGETICS

£48.9m

£40.0m

2022

2021

SENSORS & INFORMATION

18.5%

21.6%

2022

2021

COUNTERMEASURES &

ENERGETICS

17.4%

16.2%

2022

2021

CHANGE FROM PREVIOUS YEAR

up 20%

(2021: up 12%)

20%

12%

2022

2021

SENSORS & INFORMATION

£30.6m

£38.3m

2022

2021

COUNTERMEASURES &

ENERGETICS

£63.3m

£46.1m

2022

2021

SENSORS & INFORMATION

£27.1m

£19.8m

2022

2021

COUNTERMEASURES &

ENERGETICS

£72.5m

£60.9m

2022

2021

CONVERSION OF



UNDERLYING OPERATING

CASH

109%

(2021: 105%)

109%

105%

2022

2021

DESCRIPTION

need to be separately disclosed to properly understand the Group’s underlying quality

divided by revenue.

Calculated as underlying earnings after

tax divided by the number of shares



Working capital is defined as

inventories, trade and other receivables,

less trade and other payables excluding

payroll related and other liabilities



Inventory is measured at cost. Measured as net debt divided by

underlying EBITDA for the previous

12 months.

Cash flow from operating activities

before tax outflows, non-underlying

items and pension payments.

WHY IS IT A KPI?

allows the impact of changes in revenue and cost base to be monitored, enabling

comparisons to be made of management performance and trading effectiveness.

The measurement of underlying EPS

reflects all aspects of the Group’s

income statement including the

management of interest and tax.

Efficiently turning profit into cash

demands a degree of control over

working capital.

The primary focus for improvement



This is a measure of leverage within

the business and is a banking covenant.

This is a key measure to ensure

profit turns into cash in short order.

2022 PERFORMANCE

The underlying operating profit increased by 11% during the year. The changes

performance improvement actions, as set out in this strategic report.



2022, driven by increased underlying

operating profit and lower interest



Working capital as a percentage



year-on-year, demonstrating the

continued effective management of

working capital.

Inventory increased, as did advance

payments from customers, reflecting

the timing of customer procurement



This has decreased in 2022, as

underlying EBITDA has increased

and net debt has decreased.



exceeded 100% as our focus on the

effective management of working

capital was maintained.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 29

DISCOVER MORE ABOUT SENSORS &

INFORMATION: CHEMRING.COM/WHAT-WE-DO/

SENSORS-AND-INFORMATION

FOCUS ON



KEY FACTS

REVENUE





UNDERLYING OPERATING PROFIT











UNDERLYING OPERATING MARGIN

18.5%

(2021: 21.6%)

STATUTORY OPERATING PROFIT



(2021: £25.9m)







partners worldwide to solve the most technically





jamming electronic communications, and world-leading systems for detecting





domains the Sensors & Information sector is constantly innovating to enable

customers to deliver competitive advantage and to defend their people, assets

and information.

STRATEGY



for long-term growth, reflecting customer demand and opportunities in this

area. We continue to focus on expanding the Group’s product, service and

capability offerings in the areas of tactical electronic warfare, artificial

intelligence, machine learning and information security. We are also focused





explosive hazard detection and chemical and biological threat detection.

The Group’s specialist consulting and technology services business, Roke,

operates in the growing Cyber market. Investing in retaining, developing and

recruiting people, together with expanding our geographical and customer

coverage, is key to long-term profitable growth in this area. We continue to

actively explore opportunities to expand and accelerate Roke’s capabilities

and offerings to drive medium and long-term growth including leveraging

opportunities in adjacent markets and territories. In the short term this will

require continued operating expense investment in Roke Academy, Roke



The integration of Cubica Group, acquired in 2021, has progressed extremely

well and has brought significant additional research and development expertise as

we invest in next-generation technologies and expand our product, service and

capability offerings. We continue to actively explore opportunities and have



MARKETS

The current geopolitical uncertainty, brought about by both Russia’s invasion



for increased defence expenditure, particularly amongst European members



and modernise their defence capabilities to meet the threat of peer on peer



seen as becoming increasingly important, with greater co-operation and

alignment between allies to the fore.



and remains opportunity-rich for the Sensors & Information sector. The



ever and has a strong modernisation agenda including investment priorities



should give us the opportunity to address many of these requirements. The









not funded, and we are currently working with the customer to appropriately

plan for their expected future requirements which we anticipate will be at

lower volumes.

Chemring Group PLC Annual report and accounts 202230

OUR PURPOSE IN ACTION



Roke continues to support key European partners with respect to

high performance, networked electronic surveillance capabilities

capable of delivering “find & fix” capabilities against a peer-to-





supports different deployment stances, and Roke has seen initial

orders and significant interest in the latest PERCEIVE mobile

electronic surveillance system.



mission analysis tools and centralised command and control of the

electromagnetic environment. This is drawing interest from

Defence customer’s agnostic of hardware which demonstrates the

functionality and ease of use of this Roke-designed mission toolset.

Roke continues to undertake collaborative development of



operational requirements.

LINK TO STRATEGY

LINK TO OUR VALUES

INNOVATION



2021 Integrated Review of Defence, Security and Foreign Policy (“IR”) and the

subsequent raft of policy papers that were published in support. The IR took

a comprehensive view of the peer-level threats to British interests so its





information advantage, intelligent networks, artificial intelligence, machine

learning, and multi-domain integration, when matched with increasing budgets,

is expected to accelerate the demand for Roke’s market-leading technologies.

In both these home markets, the need to keep pace with rapidly evolving







for Chemring to deploy its market-leading technologies in these areas of

growing requirement.

PERFORMANCE



by a 59% increase in Roke’s order intake, with a growing number of multi-year

contracts which include an increasing element of “pass-through” products and

services which are included in revenue (see table below for an analysis of the



year of EMBD full rate production. This was offset by orders on the HMDS

Program of Record being significantly lower than in the previous year.



2022



2021

£m Change

Order intake

Products and services 132 100 

Pass-through 36 6 +500%

As reported 168 106 +59%

Revenue

Products and services 94 75 +25%

Pass-through 16 7 +129%

As reported 110 82 





as underlying operating profit margin declined to 18.5% (2021: 21.6%) driven

by the operating expense investment in Roke Academy, Roke Futures and



currency basis revenue would have risen 8% to £157.8m and underlying

operating profit would have fallen by 5% to £29.9m. The statutory operating





Roke is a leading participant, have remained buoyant in the period. As shown

above Roke has delivered strong growth in orders and revenue with double

digit growth in underlying operating profit and has maintained strong margins

despite increased investment in people, infrastructure and product development.

Read more on page 19

1 3

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 31

PERFORMANCE continued

The acquisition of Geollect Limited was completed in December 2022 having

now received NSIA approval, creates further opportunities for Chemring to

enhance and further accelerate growth in its Roke business. Geollect, based in







assess human activity and physical geography anywhere in the world and has

the potential to transform some of the most traditional and complex



commercially curated intelligence growing at 25% CAGR, Roke’s customers

require an exponential increase in capability to achieve digital advantage

against complex threats. The acquisition will enable Roke to build on its

Intelligence as a Service (“Roke IaaS”) proposition by utilising the intelligence

gathering and analysis capabilities of Geollect, and enhancing their already

impressive processing capabilities with Roke’s innovative approach to AI,

machine learning and data science. Roke’s unique customer relationships in

National Security and Defence will provide a growth accelerator while

providing new markets for Roke’s Futures business.

In the last four years successful execution of its strategy has seen Roke



800 today, driven in part by the success of its graduate and apprenticeship







Building on this success, Roke invested £2.5m of annualised operating expenses

in the launch of the Roke Academy, to address the challenge of recruiting

appropriately skilled engineers in this competitive market. This unique offering



target the recruitment and development of undiscovered talent, and the

enhancement of skill sets within the business. This is a significant step in

Roke’s employee value proposition and will deliver a welcome increase in





Roke continues to invest in high value, cutting-edge technology that is directly

relevant to the rapidly emerging needs of its markets. Roke’s Technology

Roadmap focuses on the delivery of autonomous, intelligent and integrated

capabilities. Historically, Roke has provided ground-breaking technologies in

areas ranging from Electronic Warfare to Precision Navigation and Timing,



Roke’s capabilities in an open architecture that enables autonomous tasking





triggered by an EW sensor results in the autonomous tasking of an unmanned





significantly to ensure our thought leadership proactively drives the market.

In order to drive scalable growth and unlock future potential, Roke has

combined its Public Sector, Industry and Cubica business units to create

business units. In doing so, it has brought together its market-leading skill





intellectual property and unique technologies in support of customers in



As part of its strategy to broaden its geographic spread and access to

different talent pools, Roke has expanded its footprint in Woking and in doing

so has increased its office capacity from 25 to over 150 staff. This will provide

a first class working experience with an improved environmental impact and

OUR PURPOSE IN ACTION



In the ever increasing war for talent and alongside ambitious

growth plans, Roke recognises the importance of bringing in

individuals early in their careers to develop alongside the existing

experienced population of Roke experts.

Such was the success of the 2021 intake that the business







overall business headcount.

The final preparation for the 2022 intake focused on the

programme itself. Some core principles were applied:

- streamlining the learning experience to meet the needs of the

early career intake through groupings based on their academic

background and future roles;

- maximising classroom time with Roke engineers to make the

most of unique Roke experience and knowledge by using a

partner to deliver introduction or industry standard learning; and

- building in problem solving to provide challenge and collaboration.

FOCUS ON continued

the ability to work at a classified level. The Roke Futures business unit and





We are seeing growing customer enquiries for Roke’s suite of world-leading

Electronic Warfare products. The business received an £8m order in

November 2021 from the Swedish Ministry of Defence for the supply of



increasing importance of Cyber and Electromagnetic Activity (“CEMA”) in

today’s threat environment, heightened further as a consequence of Russia’s



EW orders from this potentially significant market. We continue to invest in









Chemring Group PLC Annual report and accounts 202232

This investment has allowed us to support ongoing customer demonstrations

and field trials. Customer feedback remains very positive albeit anticipated

follow-on orders have been delayed as a result of budget restrictions caused

by the Continuing Resolution.



and full rate production, and on exploiting a growing opportunity in

bio-security and surveillance. In a post-pandemic and contested world,

governments are becoming increasingly concerned by the risks of both

naturally occurring and engineered biological threats. Advances in synthetic

biology now give our national adversaries the capability to deliberately

engineer organisms to create hazards and cause harm.

Chemring’s experience and expertise in fielding biological agent detectors

which to pursue opportunities in existing and adjacent markets, such as

homeland security. Chemring continues to invest in its Mobius R&D project,

which aims to develop a deployable and cost-effective solution for the

identification of biological threats.



develop and deliver an aerosol bio-sensor that can detect, classify and provide

presumptive identification in real time of pathogenic bio-threats in both indoor

and outdoor environments. Chemring’s technology dramatically shortens the

time taken to identify the bio-threat, which is critical to rapidly implementing

an effective response. Chemring’s product is also considerably less expensive

to procure and operate than current equipment, thus allowing the customer

to afford greater unit coverage while remaining within their budget.

summarised below.

Following a delay in the placement of the annual delivery order, expected





its budget priorities from a focus on counter-insurgency operations to the



re-alignment of DoD funding priorities and our expectations are that the



for an additional four years as the HMDS program transitions to sustainment

mode. We continue to work with the customer to determine funding levels

and timings moving forward.

The EMBD system, an automated sensor to rapidly detect, collect, identify

and sample airborne biological warfare agents, has seen a positive start to its

full rate production phase. The value of this sole source framework contract













The AVCAD program is also progressing through its EMD phase. The next

customer procurement decision point is still expected to be at the conclusion



of two contractors currently selected for this competitive program.

OPPORTUNITIES AND OUTLOOK

The focus for Sensors & Information continues to be on expanding the

Group’s product, service and capability offerings in the areas of national

security, AI and machine learning, tactical electronic warfare and information







analytics. With increasing customer budgets and growing market opportunities



five years is to maintain Roke’s recent record of growth, doubling annual

revenue to greater than £200m organically, whilst maintaining strong margins.

Roke will continue to focus its efforts on growing across all its business areas,

delivering research, design, engineering and advisory services using its high

quality people and capabilities.

We will continue to actively explore opportunities to expand and accelerate

the Sensors & Information sector capabilities and offerings, both by leveraging

opportunities in adjacent markets and through further bolt-on acquisitions.

However, any acquisition must meet a strict set of criteria, enhance

shareholder value and fit in with our wider growth plans.



its primary focus being on the delivery of explosive hazard detection systems



priorities from counter-insurgency operations to equipping forces for







enhance medium-term visibility but first full rate production revenue is















Information is expected to show a continuation of the levels of business seen

in 2022, with continued growing demand for Roke’s products and services,

offset by the expected reduction in HMDS-related revenue. Medium-term

growth opportunities are driven by the Group’s sole source positions on the

biological detection Programs of Record moving into full rate production.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 33

DISCOVER MORE ABOUT COUNTERMEASURES &

ENERGETICS: CHEMRING.COM/WHAT-WE-DO/

COUNTERMEASURES-AND-ENERGETICS

FOCUS ON continued



KEY FACTS

REVENUE

£280.5m



UNDERLYING OPERATING PROFIT











UNDERLYING OPERATING MARGIN



(2021: 16.2%)

STATUTORY OPERATING PROFIT





In our Countermeasures & Energetics sector,





Chemring is the world leader in the design, development and manufacture







devices that perform critical functions for the space, aerospace, defence and

industrial markets including satellite deployment, aircrew egress and aircraft

safety systems.

During the course of 2022 the Countermeasures & Energetics sector







STRATEGY

The Countermeasures & Energetics sector strategy continues to be



through continuously improving our technological and operational base,

whilst working closely with our customers in the development of new

solutions to meet emerging needs. Investment in the sector will principally be

directed towards safety, automation and the enhancement of current facilities

including capacity and capabilities. We also see great opportunity through



Protection solutions against conventional threats in the traditional domains



maintain technology leadership.



their activities, sharing intelligence, products and processes, and promoting

the benefits of these capabilities to our international customers. This includes

the development of multi-shot countermeasures that combine multiple







Chicago facility is well placed to benefit from growth in the space segment.



Countermeasures & Energetics sector will improve safety through remote

operations, improve quality though automation and deliver extrusion capacity

required for next-generation flare production. Elsewhere, we continue with

our programme of significant investment in safety and automation as part of

creating a robust group of high-performing manufacturing facilities.

MARKETS





protect their international interests. Given the threat environment, several



committed to increasing their defence spend with a large proportion of funds

allocated towards capital investment. In the medium to long term Chemring

has the opportunity to benefit as demand for the Group’s capabilities is

expected to increase.

In the Countermeasures & Energetics sector the need for our niche

capabilities will continue to remain relevant in the contested environment



expected to remain robust.

Chemring Group PLC Annual report and accounts 202234

OUR PURPOSE IN ACTION



THE ROYAL AIR FORCE, DEFENCE EQUIPMENT & SUPPORT

AND THE DEFENCE SCIENCE AND TECHNOLOGY









Science and Technology Laboratory (“DSTL”) earlier this year.

The SPA ensures the long-term provision of optimum air platform

protection, including exploiting current capabilities and developing

new technology.







achieved and ensure countermeasures keep pace with ever-

evolving missile capabilities.

The ten-year SPA will underpin the development of the next



such decoy technology available to a wide range of allies and

partner nations, helping save the lives of more aircrew.

LINK TO STRATEGY

LINK TO OUR VALUES

INNOVATION

Whilst there is a general trend in defence spending towards modernisation



position in the addressable air countermeasures market. Demand in the

countermeasures sector over the next five years is primarily being driven





Sole source positions on several products and platforms in conjunction



Three additional countries, Canada, Finland and Germany, have announced











programmes will contribute to us maintaining our market-leading position in

the addressable air countermeasures market.



Strategic Partnering Arrangement (“SPA”) with the Royal Air Force, Defence

Equipment & Support (“DE&S”) and the Defence Science and Technology

Laboratory (“DSTL”), to ensure long-term provision of optimum air platform

protection, including the exploitation of current capabilities and the development

of new technology. This ten-year SPA will provide a framework for development,



jet, transport and helicopter platforms fitted with self-defence systems.



the highest level of air platform protection to counter threats, this SPA will

underpin the development of the next generation of countermeasures.



must keep pace with the ever-evolving missile capabilities, anticipating



information sharing to facilitate a collaborative approach and encouraging

co-operation such that the right level of capability is available to the front line



decoy technology available to a wide range of allies and partner nations,

increasing survivability of aircraft and aircrew.

In the specialist energetic devices and materials businesses our focus remains

on the high value niche areas of the market where market conditions continue

to strengthen as a consequence of increased global tension. Demand for our

range of energetic devices, propellants and explosive products continues to

grow year-on-year. Increasingly, customers are signing long-term contracts in

order to secure supply and this improved visibility is enabling greater focus on

our investment into manufacturing capacity, efficiency and product R&D.

Whilst the outlook for the global defence market is increasingly positive,



between announcement and budget increases translating into new orders can

be expected as governments take time to reposition and reallocate funding



PERFORMANCE



multi-year orders received across the sector.











Toone, Tennessee.

Read more on page 19

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 35

PERFORMANCE continued







countermeasures to international customers.



precision engineered devices and specialist materials, have also seen strong



demonstrating the value our customers place on the high-reliability products

provided by Chemring in the critical areas of space, aerospace, defence and

industrial markets.



mid-March 2022, slowed the process of doing business with government

departments. As a result some Countermeasures & Energetics orders that



We expect this to result in an increase to the weighting of revenue in the



The investment in the expansion and automation of our Tennessee facility to

meet the expected demand for airborne countermeasures continued during

saw the commissioning process progress through characterisation and testing

as production gradually ramped up. We expect customer First Article Test















OPPORTUNITIES AND OUTLOOK

The focus for Countermeasures & Energetics remains on safeguarding







We will continue the process of modernisation and automation across



manufacturing capabilities. We will also invest in new product development to

ensure that our product portfolio remains highly relevant to our customers

and will continue the process of operational alignment to share technology

and manufacturing excellence across the Group.

The Group’s niche propellant and devices businesses in Scotland and Chicago

are increasingly securing long-term contracts with customers, supporting

greater short and medium-term visibility and providing a framework for



placed to benefit from growth in the space segment. Similarly, demand for

high quality energetic materials has enabled Chemring Nobel in Norway to

work proactively with its customer base on long-term contracting models,

providing much improved visibility.







where customers are increasingly placing multi-year orders. Foreign exchange

has been a tailwind in the year and on a constant currency basis using the







FOCUS ON continued

OUR PURPOSE IN ACTION

CHEMRING SUPPORTS THE LAUNCH OF





CST-100 Starliner, to the International Space Station (“ISS”).

Starliner is part of NASA’s Commercial Crew Program, an initiative

tasked with developing spacecraft capable of taking NASA





Canaveral Air Force Station in Florida and docked with the ISS on







that supported this test flight. Chemring provided various

mission-critical components on the Atlas V, as well as components

for the landing sequence for Starliner’s return home.

The safe return of the Starliner spacecraft helps to prove the

system is ready to fly astronauts. After NASA and Boeing review

processes data from this test flight, teams will continue plans for

Starliner and its next mission, the Crew Flight Test to the



Chemring Group PLC Annual report and accounts 202236

INTRODUCTION TO SUSTAINABILITY

COMMITTED TO A

SUSTAINABLE FUTURE

PURPOSE

Chemring helps make the world a safer place. Across physical and digital

environments, our exceptional teams deliver innovative technologies and

products that detect and defeat ever-changing threats.

VISION

To be a leading provider of critical and innovative technologies that detect

and protect people, platforms, missions and information against constantly-

changing threats.



run our businesses today and plan for the future, as we manage our

ESG-related risks. We also recognise that our ESG credentials are an



people. Engaged, motivated, empowered and appropriately-skilled employees



Whilst our approach to sustainability continues to mature we are committed

to implementing transparent policies and procedures, and to fostering an

inclusive culture across the Group where everyone does the right thing and

takes responsibility for their actions. Increasingly this focus will develop from

working as a trusted partner to our many customers and ensuring that our

internal standards are fit for purpose, to working with our supply chain to

ensure that they too work to the same standards. In doing so we will build a

sustainable company of which all our stakeholders can be proud, now and in

the future.

OUR APPROACH TO SUSTAINABILITY

The long-term success of the Chemring business can only be enhanced by a

positive interaction with all of our stakeholders and therefore a positive and

engaged approach to corporate responsibility and sustainability is important

to us. Our approach is focused around the following key areas:

- health and safety;

- environment;

- people; and

- ethics and business conduct.

“ Chemring acknowledges its

responsibilities to contribute to a



recognised obligation to ensure the

responsible operation of our business

and are fully committed to long-term





at all times.”

Our approach to corporate responsibility and sustainability is embedded

within the business units and all senior leaders have specific objectives around

these areas identified which are linked to their incentive plans.

PROGRESS IN 2022

Chemring’s purpose is to help make the world a safer place and Russia’s

invasion of Ukraine has tragically highlighted the critical role that the defence

and security industry plays in preserving peace, democracy and freedom in

the western world. It has reinforced the argument that for sustainability to

thrive, it requires global stability at its foundations. We are proud of the role

that Chemring plays in providing that stability and are equally focused on

ensuring that we manage and progress our own sustainability agenda, and



It has been another busy year in which we have built on the good progress

made during FY21.

ESG forms part of our everyday thinking, from how we run our businesses

from day to day, to long-term strategic planning. Climate-related issues, such

as emissions, are now part of every monthly Board report and ESG is a

scheduled Board agenda item every six months. It is also a standing agenda

item for every meeting of the Group’s Executive Committee and forms part

of the monthly reporting cycle of each of our business units.

Across the Group we continue to actively seek ways to reduce our impact on

the environment and build resilience to climate change by focusing on energy,

waste and water, and understanding the impact of global climate change on

our operations. These four focus areas have been identified based on an

overall evaluation of environmental impacts and risks, with a focus on impacts

that we can influence and have consequently influenced financial planning.



improvements in this area. Our strategy is to reduce our global GHG emissions

through improving energy efficiency to reduce consumption and by



Many of our Chemring businesses have environmental management systems and

have undertaken local initiatives and programmes to reduce environmental

impacts. To improve energy efficiency for example, improvements have been

made to operations through the installation of new energy efficient buildings

to replace old buildings, upgrading heating, ventilation and air conditioning

(“HVAC”) systems and improving lighting. In 2022 we improved the steam

heat distribution system at our Scotland facility by replacing valves, installing

new steam traps and improving insulation. This has contributed to significant

reductions in natural gas usage and greenhouse gas emissions. In addition, we

replaced ageing HVAC systems at our Pennsylvania facility, reducing electricity

use and associated scope 2 emissions. We have also increased our use of

biodiesel fuels.

In 2021 we committed to becoming carbon neutral for market-based scope 1

and 2 emissions by 2030 and working to be a net zero organisation by 2050.

Against those longer-term targets we set the near-term target of reducing

scope 1 and 2 GHG emissions year-on-year, with this being linked into

remuneration and rewards across all our senior teams. In 2022 we have



As our disclosure has increased, so has the need to ensure that the data that

we report to the market is accurate. We have now put in place an auditable

framework for our emissions reduction activities, with external subject

matter experts appointed to verify the data and to report to the Group’s

Audit Committee.

A key focus for both the Board and the Group’s Sustainability Committee has

been to ensure that we not only actively manage our sustainability agenda in

order to meet the near and longer-term targets that were set in FY21, but



Michael Ord



Chairman of the Group

Sustainability Committee

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 37

PROGRESS IN 2022 CONTINUED

FY22 sees the Group report for the first time under the Task Force on

Climate-related Financial Disclosures (“TCFD”), the details of which can be

found on pages 45 to 49 of this report. In addition, the Group progressed its

commitment to further improve its non-mandatory disclosure by completing

its first CDP submission (formerly the Carbon Disclosure Project) at the end

of July 2022. By translating the TCFD recommendations and pillars into actual

disclosure questions and a standardised annual format, CDP provides investors

and disclosers with a unique platform where the TCFD Framework can be

brought into real-world practice in a comparable and consistent way.

In addition to our environmental activity, this year has seen us progress our

activities around DE&I and employee wellbeing.

Chemring is committed to ensuring that we are able to attract and develop an

appropriately diverse workforce. Our programme of education for all senior

leaders continued in the first half of FY22 and was complemented by a suite

of DE&I training modules which form part of all development programmes

from Early Careers to Senior Leadership Team development. With a specific

focus on gender diversity, the global Women at Chemring Committee has

been established to encourage local women’s networks in each business unit,

alongside delivering a global day for Women at Chemring in the second half

of the year.

The Board has played an active role in supporting our DE&I activity with

Board members taking part in various employee round-table discussions



responsibility for employee engagement on behalf of the Board and as Chair

of the Remuneration Committee, met with groups of colleagues from





as well as being able to share with them the work of the Board. These groups

included colleagues at all levels from operators to the senior leadership teams

at Chemring Energetic Devices, as well as at Chemring Countermeasures

USA’s facility in Tennessee. The groups Laurie met were overwhelmingly

positive about their experiences of working at Chemring and pointed to many

examples of support from the Group. Laurie also gathered input as to how

we can continue to develop, and colleagues provided clear and constructive

input on areas such as enhancing cross-business collaboration which are being

acted on.

Our ESG strategy over the current and future years will seek to identify those

areas where our activities can have most impact. Plans are now in place to

continue this journey and to ensure that we meet the growing disclosure

requirements of our stakeholders and demonstrate our ability to successfully

address ESG-related issues.

We will also continue to work with our advisers and shareholders to identify

how we can constructively feed into and inform the debate on the future of

ESG reporting and the creation of a common set of standards against which

we can be measured. Chemring is now a business whose evolving purpose







may be used by our customers in the production of offensive capabilities.



INTRODUCTION TO SUSTAINABILITY continued

OUR PURPOSE IN ACTION

STORAGE FACILITY UPGRADE AT CHEMRING NOBEL

Chemring Nobel (CHN) is further improving its sustainability

credentials by investing in a new storage tank facility. The new

facility will meet future government directives and environmental,

health and security compliance. The tank facility will increase the

storage capacity of essential raw materials helping CHN guarantee

supply to customers, and better protect the surrounding

environment from leaks or emissions.

CHN produces and delivers specialist chemicals to customers for

use in a range of performance and manufacturing applications.

During the production of RDX and HMX, acetic acid is made and

recovered. This is an important part of the process, as the acetic

acid is sold to customers, as well as being used as an ingredient in

the production of other chemicals.

The team recovers the acetic acid through several steps of

evaporation and distillation, resulting in pure acetic acid at the end of

the process. The acid recovery area at the CHN facility originally

had 19 storage tanks, in which the acid was kept ready for sale or

use. These storage tanks needed an upgrade and expansion.

The old storage tank area was built in 1968 and expanded in 1985.

In January 2021, the CHN team started a two-year project to

establish a new storage tank capacity.

This £6m investment will increase the amount of acetic acid that

can be stored and bring the tanks in line with new compliance



the life of the project and allow the team to consider and

implement new technology and further improvements to the

recovery and storage area.

CHN buys in the chemical compound acetic acid anhydride, which

is then converted into acetic acid in the production of RDX/HMX.

This project will double the storage capacity of both the incoming

acetic acid anhydride and the outgoing acetic acid. This will secure

production, especially during the winter when shipment to and

from Europe can be challenging.

The project, which is due for completion in 2023, also has the

following benefits:

- More automated operations (health and safety benefits).

- A new system for fire detection and firefighting via a foam system

(health and safety and risk prevention/management benefits).

- A system to purify emissions to air (environmental benefits).

- Safe operations for loading and unloading trucks (health and

safety benefits).

- New retaining walls or “bunding” around the storage facility to

better protect the surrounding environment (environmental and

health and safety benefits).

Chemring Group PLC Annual report and accounts 202238

As a business we remain fully committed to building a sustainable company of which all our stakeholders can be proud, both now and in the future.

OUR SUSTAINABILITY GOALS

UN SDG   Further information

ENVIRONMENTAL

- Reduce our impact on the environment and build



waste and water, and by understanding the impact

of global climate change on our operations

- 

operational, resource and energy efficiency and to

minimise environmental impact

- Invest in support of product development and

production techniques that meet our customers’

needs and support their environmental goals

- Chemring will be carbon neutral



- Chemring is working towards being







- We will reduce our total direct





- We will continue to focus our efforts

on reducing energy consumption and

on embracing green technology

- We will target zero waste to landfill

by 2030

Environment on



Respecting and protecting

our planet by actively seeking

ways to reduce our

environmental impact.

SOCIAL

- Maintain the highest standards of safety and the

wellbeing of our workforce

- Ensure that, in support of our wider commitment

to ethnic and gender diversity, our workforce

represents the diversity of the local communities

we operate in

- Implement effective policies and procedures and

continually invest in support of operational

excellence and the development of our people

- 

- 

- We will set a total recordable injury

frequency rate limit of below 1





- We will continue to reduce the risk



- We will increase the proportion







Health and safety on



Our people on



The safety, wellbeing and

development of our people is

at the heart of our business.

GOVERNANCE

- Operate with integrity and transparency and to the



- Ensure the highest standards of product safety and

comply with all relevant standards

- Promote a culture where everyone does the right

thing and takes personal responsibility for their

actions

- Actively seek to increase representation of

ethnicity and gender on our Board, within our

leadership teams and across all our localities

- 

- Maintain prudent and responsible financial and tax



- 

representation on the Board

- We will seek to meet the guidelines of

the Parker Review on ethnic diversity

as we refresh the composition of



- All Chemring employees and third

parties acting on our behalf must

comply with the Chemring Code of

Conduct, wherever they are located

in the world

Ethics and business





Conducting business in



manner at all times.

CONTINUING TO INNOVATE,

PROTECT A ND GROW

CHEMRING GROUP PLC

SUSTAINABILITY REPORT 2022

Goal Aim Goal Aim

Ensure healthy lives and promote wellbeing

for all at all ages



Achieve gender equality and empower

all women and girls

Ensure sustainable consumption and

production patterns

Ensure access to affordable, reliable,

sustainable and modern energy for all

Take urgent action to combat climate change

and its impacts

Promote sustained, inclusive and sustainable

economic growth, full and productive

employment and decent work for all

Promote peaceful and inclusive societies for

sustainable development, provide access to



inclusive institutions at all levels

READ MORE IN OUR

SUSTAINABILITY REPORT:

CHEMRING.COM/

SUSTAINABILITY

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

ACHIEVEMENTS

2022 has continued to be a challenging year as we maintained a safe CV-19

environment despite the pandemic. As a result of the restrictions associated

with CV-19, the Management of Change Process was used effectively to

ensure safe and continued operations aligned with in-country requirements.

Whilst this created a need for continued focus, we have been able to progress

our HSE strategy – Journey to Zero Harm, further consolidating the

processes implemented last year:

- control of major accident hazards;

- injury reduction; and

- HSE risk management.

Actions taken in delivering the HSE plan included:

- continued roll-out of the asset integrity management system;

- design and implementation of the electrostatic discharge protocols; and

- deployment of the Spot it, Stop it, Share it campaign.

CONTROL OF MAJOR ACCIDENT HAZARDS

Our Countermeasures & Energetics businesses are required to manage



their respective operating countries. Over the last three years, we have

implemented a number of processes to enhance our focus in this area





from exposure to energetic hazards. During the design of these processes



In 2019 we mandated that all Countermeasures & Energetics businesses

would need to conduct regular reviews to identify the potential for major

process safety events. The reviews are based on a “stress test” that addresses

the following questions:

- Have potential major accident hazards been identified?

- Are there effective controls in place to prevent and contain a major event?

- Are these controls being actively monitored?

This year saw the fourth iteration of that review process, with an increase



hazard analysis matured. As a result of this maturing process, we continue



have taken further steps to reduce these to a level as low as is reasonably

practicable. To help reduce our residual risks the implementation of a

common computerised maintenance management system has begun across

selected businesses, improving management and accountability for safety

critical assets.

HEALTH AND SAFETY

ESTABLISHING A STRONG HEALTH

AND SAFETY CULTURE







POLICIES AND PRACTICES

The Board recognises that the highest levels of safety are required in order to

protect employees, product users and the general public. The Board believes

that all incidents and injuries are preventable, and that all employees have the

right to expect to return home safely at the end of every working day. The

Group Chief Executive has overall responsibility for health, safety and

environmental (“HSE”) matters across the Group.

The Group HSE Director reports directly to the Group Chief Executive and

is responsible for the ongoing development and assurance of the Group’s

health, safety and environment strategy, known as our Journey to Zero Harm.

The Group HSE Director is a member of the Executive Committee and

reports on the performance of all businesses against agreed limits and

objectives. The Group Chief Executive reports monthly to the Board on all

key HSE KPIs.

The Board requires that all businesses systematically manage their health and

safety hazards, set objectives and monitor progress by regular measurement,

audit and review. Each managing director is responsible for the implementation,

management and ongoing compliance of health and safety within their

business, and for providing adequate resources to satisfy the Board’s

requirements. All managing directors have health, safety and environmental

related objectives incorporated within their annual incentive plan.

Managers and supervisors in the Group’s businesses are required to ensure

compliance with procedures, and to provide leadership and commitment



emphasises the importance of individual responsibility for health and safety at

all levels of the organisation, and expects employees to report all hazards, to

be involved in implementing solutions and to adhere to rules and procedures.

A key element in the continuous improvement of health and safety

management is collaboration at all levels resulting in the sharing of best

practice and lessons learnt from incidents across the Group’s businesses



with actions generated to prevent recurrence.









working day.”

Chemring Group PLC Annual report and accounts 2022

Towards the end of last year, we established the Technical Safety Committee

with the purpose of sharing best practices and advice on the development of

new standards and guidance. This year the Committee has become more

established, providing the focal point for the delivery of the electrostatic

discharge protocols and oversight regarding the asset integrity management

system deployment.

INJURY PREVENTION

Injury prevention focuses on the reduction of injuries through the adoption of

safety as an inherent part of everything we do. This is enacted through safety

leadership, clear expectations, accountability and establishing a safety culture



This year we consolidated our corporate reporting platform to capture

better understanding of root causes and increased levels of assurance. These



organisation. This data has established trends regarding musculoskeletal

disorders due to the manual handling nature of some of our processes,

together with cuts to fingers and hands. The relevant businesses have

developed plans to reduce the risk of injuries and it is hoped that this will be

reflected in future reporting.

With regards to leadership on safety, this again has never been more critical

than during the pandemic. Business unit leaders continue to manage an

evolving situation through the Chemring CV-19 Playbook, ensuring the

appropriate rigour and governance through our change management process.

Our focus on injury prevention, in response to CV-19, continues to place

more emphasis on people’s emotional wellbeing, which is supported by the

Healthy Workplace Sub-Committee.

HSE RISK MANAGEMENT

Safe delivery of our business continues through the management of risk and

and consistency. Our HSE Management System Framework Standard puts our

HSE policy into practice by setting standards on eight core elements across

the Group to drive a robust and common approach to the management of

HSE. Each business is audited every two years to ensure compliance, with

high-priority non-compliances being reported and monitored at Executive

Committee level. The changes made last year to our Operational Assurance

Statement process has helped the businesses focus on compliance with the

HSE Framework which in turn provides useful insights when planning the



OUR HSE PERFORMANCE

We measure our HSE performance to reflect both occupational and process

safety. In doing so we have several data points, one of which is an external

review of our prevailing safety culture. This year we invited back a team of

experts to review our progress since their previous reviews back in 2018



becoming a high reliability organisation. In particular the review confirmed



processes and systems generating data and signals around our high-hazard

operations. The level of collaboration has also increased, with many

businesses sharing best practice on a regular basis to help accelerate our

performance, all of which is supported by a positive tone from the top and

underpinned by risk-informed, visible and proactive safety leadership.

OCCUPATIONAL SAFETY

We focus not only on actual injuries but also hazards and near miss events.

We therefore place an emphasis on near miss and hazard reporting as a

leading indicator of our maturing safety culture. This year we had 2,828







We are embedding this learning into the organisation through quarterly

Learning from Incidents reviews with all business leaders and increased use



PROCESS SAFETY

In addition to our reactive metrics we also measure process safety near miss

events, with a total of 880 recorded in 2022 compared to 625 in the previous

year. Near miss reporting is crucial if we are to understand and prevent

incidents which is why we encourage all our employees to stop, warn and

inform so we can manage any emerging risks. The increase in near miss

reporting represents good progress as an organisation willing to learn and

improve on a continuous basis. During 2021 we consolidated the reporting of

our leading indicator for process safety events (“PSE”), which are categorised

as level 1, 2 and 3, with 3 being the event with the most serious potential.



and this year we achieved 1.86.

HSE STRATEGY FORWARD OUTLOOK

In 2021 we reviewed the current three-year strategy focused on the control

of major accident hazards, injury prevention and HSE risk management. This

review resulted in an additional element regarding the right capability being

added as well as a more balanced approach towards health, wellbeing and the

environment. The revised strategy is therefore a natural evolution and reflects

the maturity of the business. As such, during the next three years we will

continue to focus on:

- asset integrity and process safety – relating to the control of major accident

hazards and PSE events including a review of all electrostatic discharge risks;

- occupational health and safety – focusing on injury and illness prevention,

including psychological health and wellbeing;

- environment and sustainability – to co-ordinate our work on reducing our

environmental impact; and

- improved data – enabling data-driven discussions and decisions leading to a

more proactive culture.

Our progress against this strategy will be reported in the next annual report

and accounts.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

Our goal of zero harm goes beyond the

management of safety. We are committed to







OUR COMMITMENT

In 2021 we committed to reduce our total direct and indirect greenhouse gas

(“GHG”) emissions year-on-year and to be carbon neutral by 2030. In this

report we include information on our climate-related risks and opportunities

in alignment with the recommendations of the Task Force on Climate-related

Financial Disclosures (“TCFD”). We have made good progress on our goals,



our 2021 baseline. We also have identified a path to become carbon neutral

by 2030. In 2022 we published our first CDP report and we have begun to

collect and report selected scope 3 carbon emission data. This work is

overseen by our Sustainability Committee with regular progress reports to

the Board.

INTRODUCTION

Our environmental performance information is presented in accordance with



as specified under the Companies Act 2006 (Strategic Report and Directors’

Report) Regulations 2013. Data is presented for our financial year, from



significant environmental aspects: energy consumption and associated GHG

emissions; freshwater use; and waste generation. The scope of the reporting

includes all continuing global businesses under our operational control and does

not include several small leased office spaces, where we do not have energy



Our GHG emissions calculations are undertaken in accordance with the GHG

Protocol Corporate Accounting and Reporting Standard. We are reporting

2021 and 2022 data and include scope 1 GHG emissions, as well as location

and market-based approaches for scope 2 emissions of purchased electricity.

Our key scope 1 emissions sources are natural gas and fuel oil used for

building and process heating, with small contributions from fuels used in

on-site vehicles and refrigerant releases. Primary scope 1 emissions are



Our energy and carbon figures are now recorded on a monthly basis





(except non-UK electricity where US eGRID and IAE factors are used).



OUR APPROACH

We are actively seeking ways to reduce our impact on the environment and

build resilience to climate change by focusing on energy, waste and understanding



were updated in 2021 based on a materiality review of our environmental

impacts and risks, with a focus on impacts that we can influence. These focus

areas are periodically reviewed by our Environmental Committee, consistent



Many of our Chemring businesses have environmental management



environmental impacts. In addition, in 2022 we began using a new data

collection and dashboard reporting system.

OUR STRATEGY

Our strategy is to reduce our global GHG emissions through improving energy

efficiency to reduce consumption and by purchasing electricity from renewable

sources. In 2021 we committed to becoming carbon neutral for scope 1 and 2

emissions by 2030 and working to be a net zero organisation by 2050.

To improve our energy efficiency, we continue to make improvements to our

operations, including installing new energy-efficient buildings to replace old

buildings, upgrading HVAC systems and improving lighting.

In 2022 we installed new HVAC systems at our Pennsylvania facility and

reduced natural gas usage at our Scotland site.

CLIMATE CHANGE RESILIENCE

We recognise that climate change has the potential to have an impact on our

operations, having experienced flooding from a severe weather event at our

Tennessee facility in 2018 and wildfires in areas surrounding our Australia

operations in 2019. We have begun to review the physical and transition risks



ENERGY USE AND ASSOCIATED GHG EMISSIONS

Our Countermeasures & Energetics businesses in Norway and Scotland are





energy consumption. In 2022 we developed our updated carbon reduction





energy use.



2 carbon emissions, from 20,684 tCO



e in 2022.





52.6 to 43.3 tCO

e per £m of revenue.

We made significant improvements in our market-based carbon emissions.

Reductions have been achieved across the businesses through initiatives such

as the use of biofuels at our Roke and Salisbury sites; improved efficiency and

maintenance of our steam systems in Scotland; and the use of renewable

energy in Australia. We also acquired and retired Renewable Energy

Certificates (“RECs”) for some of our US electricity consumption.

ENVIRONMENT

REDUCING OUR

ENVIRONMENTAL IMPACT

Chemring Group PLC Annual report and accounts 2022

2022 2021

US,

Norway,

Australia

Group

total UK

US,

Norway,

Australia

Group

total



Combustion of fuel in any premises, machinery or equipment operated, owned or controlled by the Group

e (tonnes)

Gas    5,303 504 

Heating oil  388   96 

Bio fuels  —  — — —

LPG   278 29 249 

Fuels consumed by Group-owned and leased vehicles, excluding business travel and employee commuting

e (tonnes)

Diesel  78  93  190

Petroleum —   —  

LPG —   — 19 19

The operation or control of any manufacturing process by the Group

e (tonnes)

On-site waste incineration    21  168

Refrigerants discharged     488 561



e (tonnes)    6,994  

Scope 2 emissions

Total emissions CO

e (tonnes)

Electricity – location-based    3,086 10,889 

Electricity – market-based —   — 12,013 12,013



Location-based CO

e (tonnes)    10,080 12,566 22,646

Market-based CO

e (tonnes)    6,994 13,690 20,684

Total energy consumption (Mwh)     81,689 130,062

We engaged ERM CVS to provide independent assurance of our 2021 and 2022 total scope 1 and total scope 2 location-based emissions figures as well as total scope 2 market-based

emissions figures. Their Independent Assurance Statement can be found on page 12 of our Sustainability Report 2022. The basis of reporting document can be found on the Group’s

website at www.chemring.com/basisofreporting.

2022 2021

Total scope 1 and scope 2 emissions CO

e (tonnes) – location-based  22,646

Total scope 1 and scope 2 emissions CO

e (tonnes) – market-based  20,684

Group revenue (£m)  393.3

Total CO

e (tonnes) per £m of revenue (location-based)  

Total CO

e (tonnes) per £m of revenue (market-based)  52.6

SCOPE 3 CARBON DATA COLLECTION

In 2022 we initiated the collection of a limited set of scope 3 carbon data. Details of this can be found on page 10 of our Sustainability Report 2022.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

WATER CONSUMPTION



of freshwater. There was a considerable drop in usage from 2021 (1,220,000 m

) due to reduced water usage in Scotland.

None of our operations are in water-stressed regions as defined by the United Nations. Our Australian facility continues to collect and use rainwater that falls on

the site for facility needs.

2022 2021

US,

Norway,

Australia

Group

total UK

US,

Norway,

Australia

Group

total

Freshwater (m)

Freshwater use    668,000 552,000 1,220,000

WASTE GENERATION

In 2022 we introduced a new reporting system for waste which allow tracking of waste destinations.

Our hazardous waste reporting increased from 2021 due to inclusion of a recycled waste that was not included in previous reports. This accounts for the

significant rise in recycled hazardous waste reported (1,361 tonnes from 33 tonnes). In 2022 our total hazardous and non-hazardous waste was 1,914 and 2,103



2022 2021

US,

Norway,

Australia

Group

total UK

US,

Norway,

Australia

Group

total

Waste (tonnes)

Recycled, non-hazardous     635 1,032

Recycled, hazardous    32 1 33

Not recycled, non-hazardous    164  1,141

Not recycled, hazardous    88 242 330

Total waste (tonnes)    681 1,855 2,536

ENVIRONMENT continued

At our Countermeasures & Energetics businesses we generate unique waste

which is often best managed by destroying it at on-site treatment facilities. In

2022, we continued work on upgrading the testing and treatment facilities at

our Scotland facility.

With respect to waste management there are two priority areas: the

reduction of waste generation and the reduction of waste sent to landfill.

To help track progress in these areas we have begun recording the amount



plans at our largest waste-generating businesses.

LAND QUALITY

Our facility in Chicago, US, is located on a site which has “superfund” status



consultants and the regulatory authorities to ensure that its legal obligations

in relation to this matter are fully satisfied.

In 2022 we also incurred costs in connection with environmental remediation

on the sites of the munitions businesses formerly owned by the Group in

Belgium and Italy in accordance with the terms of sale of those businesses.





Chemring Group PLC Annual report and accounts 2022

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) REPORT

GOVERNANCE

BOARD OVERSIGHT OF

CLIMATE-RELATED RISKS

AND OPPORTUNITIES

The Board is responsible for overseeing climate-related risks and opportunities in delivering the Group’s strategy and

running the Group’s operations. The Group Chief Executive is the Board director responsible for sustainability across

the Group which includes climate-related risks and opportunities. The Board reviews the Group Risk Register as a

scheduled agenda item every six months in which both physical and transitional climate-related-risks alongside

opportunities are considered.

The Board is informed of progress against the Group’s carbon reduction targets implemented in 2021. Associated



MANAGEMENT’S ROLE



MANAGING CLIMATE-

RELATED RISKS AND

OPPORTUNITIES

To facilitate and ensure a centralised approach to sustainability across all our businesses, the Group Sustainability

Committee (consisting of members of the Group’s Executive Committee) was formed during 2021. The Committee



assessing and managing climate-related risks and opportunities.

The Group Chief Executive, informed by the Sustainability Committee, is responsible for ensuring that the Board is

updated quarterly on all key matters including the impact of climate-related issues. Members of the Committee are

informed through their respective departments on matters relevant to climate-related issues.



Group’s carbon reduction targets through their annual bonus and long-term incentive plan (Performance Share Plan

(“PSP”)) as detailed on pages 96 to 119.

STRATEGY

CLIMATE-RELATED RISKS AND OPPORTUNITIES IDENTIFIED OVER THE SHORT, MEDIUM AND LONG TERM

THE IMPACT OF CLIMATE-

RELATED RISKS AND

OPPORTUNITIES ON

CHEMRING’S BUSINESSES,

STRATEGY AND

FINANCIAL PLANNING

The risks and opportunities associated with climate are reflected in our strategy and plans, and we strive for

continuous improvement to reflect our purpose, our growth strategy, the external landscape and the expectations



were considered during the year. Associated time horizons associated were viewed as short-term (0 to 2 years),

medium-term (2 to 5 years), or long-term (5 to 30 years). The basis for the time horizons was to align with our

internal strategic and financial planning processes. Short-term being the immediate budget period, medium-term

covering the remaining detailed financial planning period and long-term being outside of these periods. From this, the

key risks and opportunities that could have a material financial impact on the organisation have been identified. Where

material, the Group is committed to managing regulatory, reputational and market risk related to climate change.

Details of the principal risks and uncertainties which could have a material impact on the Group’s business model,

strategy, future performance or reputation, of which climate change has been identified as a risk, are covered in the



pages 46 to 49.

1. IEA (2021), World Energy Model, IEA, Paris https://www.iea.org/reports/world-energy-model.

The Task Force on Climate-related Financial





and consistent information about the risks and

opportunities presented by climate change.

The Board notes the recommendations in relation to the mandatory

disclosures of climate-related financial risk arising from Listing Rule 9.8.6(8)

and has concluded that the business strategy remains resilient given the

mitigations already implemented and planned.

We consider our disclosure to be consistent with all the TCFD Recommendations

and Recommended Disclosures including section C of the TCFD Annex

entitled “Guidance for all Sectors” excluding full completeness of scope 3

emissions for which we continue to embed the relevant capabilities across



developing our reporting to enable future disclosure.

Our statement to meet these requirements, providing information on the

governance of climate-related issues, integration with overall risk management,

strategy in managing climate-related issues and opportunities, and the metrics



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

STRATEGY

CLIMATE-RELATED RISKS AND OPPORTUNITIES IDENTIFIED OVER THE SHORT, MEDIUM AND LONG TERM

THE RESILIENCE OF

CHEMRING’S STRATEGY,

TAKING INTO

CONSIDERATION

DIFFERENT CLIMATE-

RELATED SCENARIOS,

INCLUDING A 2°C OR

LOWER SCENARIO

In 2021/22 the Group began to develop its climate-related scenario analysis to improve understanding of the

behaviour of certain risks given different climate outcomes. We have utilised three public climate-related scenarios

which we deem to be reliable and related to our business operations to aid our understanding of the business

resilience to climate change. We will revisit these scenario analyses to ensure these remain appropriate. The scenarios

are as follows:

- Sustainable Development (SDS)

outlining a global low carbon transition which limits the global temperatures rise



- Stated Policies (STEPS)

outlining a combination of physical and transitions risk impacts as temperatures rise



- RCP 8.5



Scenarios have been supplemented with additional sources that are specific to each risk to inform assumptions

included in projections. The Group continues to refine its approach to quantitative aspects of this modelling and



Assumptions have been made as part of this scenario analysis:

- Chemring will have the same business activities that are in place today. That means impacts should be considered



- Impacts are assumed to occur without the company responding with any mitigation actions, which would reduce

the impact of risks.

- The analysis considered each risk and scenario in isolation, when in practice they may occur in parallel as part



- Carbon pricing was informed by the Global Energy Outlook 2021 report from the International Energy Agency (“IEA”).



2. I PCC, 2014: Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change.

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) REPORT continued

Chemring Group PLC Annual report and accounts 2022

RISK MANAGEMENT

ALL BUSINESS UNITS ARE REQUIRED TO ASSESS RISK IN RELATION TO THE DELIVERY OF THEIR STRATEGY AND OBJECTIVES,



CHEMRING’S PROCESSES

FOR IDENTIFYING AND

ASSESSING CLIMATE-

RELATED RISKS

Current and emerging climate-related risks and opportunities are considered, whether they arise within the Group’s

operations or within the value chain, including existing and emerging regulations. In 2021/22, climate risks and

opportunities relevant to the Group were identified and reviewed with the aid of external consultants, and refined

through consultation with key Chemring personnel, including members of the Sustainability Committee, Risk

Management Committee and the Board. Risks and opportunities were assessed in line with the Group’s methodology

to assess principal risks. A probability and impact matrix defines the likelihood of the risk, assessed based on historical

evidence or experience that such consequences have materialised (Very Unlikely, Unlikely, Neutral, Likely, Very Likely).

The magnitude of impact is also classified (Low, Low-Medium, Medium, Medium-High, High) and, where possible, a

single figure estimate for the financial impact was calculated.

CHEMRING’S PROCESSES

FOR MANAGING

CLIMATE-RELATED RISKS

Once each climate-related risk and opportunity was identified, the Group sought to quantify the financial impact,

appropriate strategic response, and the cost of implementing the mitigations. This process includes considering the

long-term impacts arising from the risks identified on our products and services. This in turn helped to determine the

materiality, allowing the Group to prioritise resources to manage its most significant climate-related impacts,



change risks and opportunities are covered by existing or planned mitigation and adaptation strategies.

PROCESSES FOR

IDENTIFYING, ASSESSING,

AND MANAGING

CLIMATE-RELATED RISKS

INTEGRATED INTO

CHEMRING’S OVERALL

RISK MANAGEMENT

Climate is considered as a Group principal risk alongside the risks identified in the wider risk management process.



The management of each business is responsible for the identification, management and reporting of local risks,



The Risk Management Committee meets quarterly and, utilising the input from the business risk registers and the US

risk register, identifies those principal risks which are material to the Group as a whole. The completed climate-related

risk and opportunity register was reviewed by the Board during the financial year.

METRICS AND TARGETS

METRICS USED TO ASSESS CLIMATE-RELATED RISKS AND OPPORTUNITIES IN-LINE WITH CHEMRING’S STRATEGY





APPROPRIATE, 3 GHG

EMISSIONS AND THE

RELATED RISKS

Chemring monitors scope 1 and 2 emissions with aspects of scope 3 disclosed on page 43. The Group also discloses

other environmental metrics such as freshwater use and waste generated, as reported on page 44. For the current

year disclosure of scope 3 emissions, please refer to page 10 of the Sustainability Report 2022.

CHEMRING’S TARGETS

FOR MANAGING

CLIMATE-RELATED RISKS

AND OPPORTUNITIES

AND PERFORMANCE

AGAINST TARGETS

A crucial first step in Chemring’s approach to addressing climate-related risks and opportunities in FY21, Chemring



These included but were not limited to reducing our direct (scope 1) and indirect (scope 2) emissions year-on-year,





STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

CLIMATE-REL ATED RISKS

Risk Wildfires Severe weather events Technology

Type Physical Physical Transition

Area Own operations Own operations Own operations/downstream

Primary potential financial

impact

Lost revenue Lost revenue Higher expenditure

Time horizon Short-term Short-term Medium/Long-term

Likelihood Likely Likely Unlikely

Magnitude of impact Low Low-Medium Low

IMPACT ON THE

BUSINESS AND

STRATEGY

WILDFIRES

Climate change poses an increased risk to the likelihood and severity of grass fires, which have the potential to disrupt

production and product delivery due to physical damage to surrounding infrastructure and Chemring facilities, as well as

creating additional costs of remediation. Wild grass fires that occurred in 2019 on one of the business sites in Victoria,

Australia, which, although did not impact operations, highlighted this threat.

Current mitigations have already been deployed in the form of cutting back grassland close to operations and ensuring local

mitigations in place for activities such as planned burns.

Using analysis conducted for the risk assessment of wildfires in Australia (the area in which the likelihood for the risk





impacts from this risk are highlighted within the Australia region in the physical risks table (Table 1).

SEVERE WEATHER EVENTS

Extreme weather events resulting from cyclones and storms are exacerbated by climate change, having the potential to impact

the Group’s operations. Physical damage to Chemring facilities and surrounding infrastructure could result in disruption to



exposure to tropical storms. For example, in 2018, a severe weather event caused partial flooding at the Tennessee facility.



flooding events in the future.

In looking at future scenarios, the physical risk of severe weather events remained localised to sites within the US, particularly

Tennessee. Even in the RCP 8.5 scenario, the risk of expected damage from river flooding projected out to 2050 remains similar

to scenario SDS. This is also summarised within Table 1.

TECHNOLOGY

Climate-related requirements are changing in key customer procurement contracts, which presents a risk that the Group’s

costs could increase in order to comply. This would influence expenditure along with other potential impacts including loss



In response to this risk, Chemring maintains continual assessment of government priorities in terms of technology roadmaps

and procurement requirements as necessary. Additionally, close relationships with customers are maintained to facilitate

effective risk management and long-term planning.

Under the scenario (SDS), the Ministry of Defence has outlined its approach to climate change and sustainability strategy.



Future procurement decisions may focus on the sustainability of a supplier’s business operations, for which Chemring has a

roadmap towards becoming a net zero organisation by 2050.





Site location

Scenario Australia Europe UK North America

SDS l l l l



l l l l

l Low impact

l Medium impact

l High impact

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) REPORT continued

Chemring Group PLC Annual report and accounts 2022

CLIMATE-RELATED OPPORTUNITIES

Opportunity More efficient production Sourcing low-emission energy Supply chain resilience

Type Resource efficiency Energy source Resilience

Area Own operations Own operations Own operations/upstream

Primary potential financial

impact

Reduced costs Reduced costs Reduced costs of input goods and



Time horizon Short-term Short to Medium-term Short to Medium-term

Likelihood Likely Very likely Very likely

Magnitude of impact Low Low Low-Medium

IMPACT ON THE

BUSINESS AND

STRATEGY

MORE EFFICIENT PRODUCTION

Improving energy efficiency through initiatives such as upgrading building facilities, and LED lighting retrofits has the benefit of

saving on direct energy costs. Plans for future initiatives are in place with planned financial savings.

This opportunity is largely unaffected by external changing policy scenarios, as future initiatives are already in place with planned

financial savings.

SOURCING LOW-EMISSION ENERGY

Increased renewable energy availability and improvements to technology are leading to renewable energy becoming

increasingly inexpensive. Chemring will benefit from de-linking energy costs to fossil fuel prices through the procurement

of renewable energy for its sites. In addition, this will reduce the Group’s exposure to GHG emissions and therefore lower

sensitivity to changes in the cost of carbon.

The carbon price (US$/tCO

e) is projected to increase as follows:

Scenario 2030  

STEPS 65  90

SDS 120  200

Difference   

There is an opportunity to benefit from the avoided emissions of sourcing energy from fossil fuel based providers.



transitions such as those under the European Green Deal (STEPS) provide further impetus for procuring energy from more

renewable sources.

SUPPLY CHAIN RESILIENCE

Chemring has identified opportunities to improve resilience in the supply chain, including from the physical impact of climate

change by understanding supplier risks and developing redundancy. Some suppliers within the supply chain are sole

suppliers, which requires an understanding of their potential risks and the implementation of mitigations to minimise any

supply disruptions.



geographic location and current risk to extreme weather events. As a further supply chain investigations are developed,

location-based data for sole suppliers will be available and can inform the climate-related risk scenario analysis.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

CHEMRING CULTURE

Our people approach is underpinned by our culture. Engaged, motivated,





growth. Our goal continues to be to ensure that we have the right people, in

the right place, at the right time, with the right skills, working in a safe, healthy

and inclusive environment.

The Chemring cultural framework has four pillars and these provide





In 2022 we continued to build on the progress made since 2019. Using a

well-practised blend of global direction and structure, delivered locally

through individual business units, we continue to support our Chemring

colleagues in their mission to do their best work every day.

Since the initial culture review, every part of the business has developed



work done previously, as well as putting in place new activity to support



The ESG agenda is now well embedded across the business and leadership

support has ensured that the work around the environment, diversity, good

governance and continuous improvement has become a key part of the

culture at Chemring.

During 2022 the HSE teams have worked closely with the people teams







OUR OVERALL PEOPLE

APPROACH IS FOCUSED ON

FIVE KEY AREAS:

CULTURE

UNDERSTANDING

OUR POPULATION

DEVELOPING



CHEMRING IN THE

COMMUNITY

ENGAGING WITH

OUR PEOPLE

DIVERSITY AND

INCLUSION AT

CHEMRING

CUSTOMER

CENTRICITY

THE

EMPLOYEE

EXPERIENCE

LEADERSHIP

DIVERSITY,

EQUITY AND

INCLUSION

OUR PEOPLE

INVESTING IN OUR PEOPLE

Chemring people are at the heart of our business.





for our future success.

Chemring Group PLC Annual report and accounts 2022

We have further embedded our approach to providing development

opportunities at all key career levels – Early Careers, First Line Managers,

Experienced Managers and Senior Leadership Teams – and extended this



inclusion appropriate for each level.

With the restrictions of the pandemic easing throughout the year in all

geographies, the focus has been on bringing colleagues back together and

resetting ways of working. Local employee forums have been revitalised





as appropriate for each part of the business, providing further flexibility



recognition events, such as charity fundraising, working with veterans’

organisations and the return of social events for colleagues, have provided

further opportunities for in-person interaction and this supports the

development and reinforcement of the Chemring culture.

Measuring progress is key to understanding how far we have come in

achieving our cultural aspirations. Our Employee Voice initiative ensures that

we are regularly checking in with colleagues to track and share our progress

towards the aspirational culture goals. The real-time bespoke sentiment

tracking tool creates dashboards of participation and positivity based on the

four cultural pillars. Business unit leaders review these regularly and share



Wellbeing continued to be a key theme in 2022. In line with the approach



maintaining a healthy workplace, which was established in 2021, continued



Teams locally to focus on areas of local interest and importance, and to

deliver activities and support to promote wellbeing on site.

As part of line manager development and through the early careers network

events, areas such as maintaining mental health have been addressed, as well



focus in the early stages of our talent pipelines to ensure these topics become

“business as usual” as colleagues move through the organisation.

Mental health first aid training has continued across all business units in 2022,

with some business units also providing specific mental health training on site

throughout the year.

Support through the provision of occupational health services on demand in

each location has been used extensively in 2022. Additionally, the provision







UNDERSTANDING OUR POPULATION

Our Chemring business is highly diverse. Our success depends on

understanding our global population. During 2021 a full review of all



and importantly in the ability to derive data to understand the population.



move towards a more consistent systematic approach to managing employee

information. In the US, the people team have commenced work to implement

a single vendor solution for end to end employee lifecycle support using an

existing supplier as the start point. A similar programme will commence for

the UK businesses in 2023.



>90

graduates and apprentices



120

graduates and apprentices took

part in UK wide Early Careers

Development Programme



>340

line managers and supervisors

involved in global Leading our

People programme

experienced managers enrolled

on Aspire@Chemring, our first

fully virtual management

development programme

senior leaders took part in

quarterly development sessions

as individual senior leadership

teams as part of the Leading our

Organisation initiative, including

DE&I training and safety

development



>2,300

colleagues with regular access



pulse survey



regular response rate of

participants in Employee Voice



positivity score

>5,000

individual comments

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

Male Female



TOTAL POPULATION

2022

2021





UNDERSTANDING OUR POPULATION CONTINUED



recruit, on-board and then manage and develop colleagues, as well as reducing

the risk around key activities such as payroll processing. The ability to report

both key static metrics, as well as to interrogate process metrics such as



progression, will provide the opportunity to leverage further our key asset

– our people.

Our investment in 2019 in the Employee Voice sentiment monitoring



we did”. The launch of the Experienced Manager Development Programme in

2022 was in response to both a recognised gap in the development approach

as well as addressing comments raised through the Employee Voice tool.

Similarly, the ongoing focus on Performance Conversations supports requests

from colleagues for regular feedback from their managers. Continuing

improvements in internal communications – such as the programme to put TV

screens across all locations to enable real-time communications to those who

are not able to access email at work – are also in direct response to feedback

from the Employee Voice statements.

ENGAGING WITH OUR PEOPLE

Communication both within and across the Group is key to engagement. Each

business unit uses a range of formal and informal channels including all-hands

meetings, smaller team briefings, employee forums, direct email messaging

and the CEO’s vlog, with an active Q&A session encouraging anyone from

across the business to ask a question, as well as regular distribution of the

Chemring magazine, Chemring-i. As pandemic restrictions eased, every

business unit has taken the opportunity to bring colleagues together face to

face for a range of different activities and events – from development, lunch

and learn sessions, fundraisers to community activity.

The recruitment challenge being felt globally has also focused attention in all

businesses. A wide range of colleagues have been involved in supporting

activity to both ensure retention – through communication of the benefits of

working at Chemring, sharing more widely information and updates on

products and customer activities – and to generate new hires. Activities such

as in-person careers events held in local communities, through veterans’

associations and direct through the business units, have created the

opportunity to remind colleagues of what a great place Chemring is to work,

as well as providing much-needed colleague interaction after the past two

years of limited contact.

Despite the challenges of the pandemic, our colleagues remain positive about



feedback via the Employee Voice tool through reacting to statements or

providing written feedback. A regular review of the responses at business



different groups) ensures that concerns are identified quickly and addressed



During the year, Laurie Bowen, as Chair of the Remuneration Committee and

non-executive director charged with employee engagement on behalf of the

Board, met again with groups of colleagues to hear direct from them their

views on working at Chemring as well as sharing the work of the Board.

Laurie visited multiple locations across the UK and US and hosted eight

feedback groups across three different business areas and at different levels of

the organisation from our front line colleagues through to senior leaders.

Feedback from these sessions covered a variety of topics on the minds of our

employees, such as how inflation is impacting the cost of living through to

how our values of Safety, Excellence and Innovation are lived and breathed in

our businesses. Leadership and Communication were specifically raised as

areas where improvements have been made and employee ideas were shared

on how we could further improve.

This feedback was shared with our local leadership teams at those locations

to allow them to respond and take action. Employee feedback remains a



engagement priorities.

In 2022 we continued to ensure that all colleagues were able to share in our

corporate success. Discretionary bonus schemes are now in place at all levels

in our organisation for colleagues working in every business area. These

schemes, which are tailored to suit local business requirements and focus,

provide bonus awards quarterly, half yearly or annually tied to the





Development is at the heart of the people strategy at Chemring. It is essential

in ensuring we have the capabilities today and in the future to appropriately

support the business. This development also underpins our retention and

attraction capability with current colleagues and future candidates becoming

increasingly demanding of the organisation and the investment in their future.

There were some significant additions to the development framework



framework taking colleagues from their Early Careers as graduates or

apprentices and providing development at key career milestones in



Highlights of our development approach are:

- A UK-based Early Careers Development Programme which commenced







by technical development provided within each business unit specific to the

role colleagues have been brought in to learn.

- Continued development of the Leading our People programme for all line

managers globally in support of developing Chemring leadership bench

strength. The initial programme – Leading our People Foundation – is

undertaken by all new line managers as they progress or are hired to ensure

that every colleague in this role has a strong foundational understanding of

what is expected of them. Launched in 2022, Leading our People Futures

provides quarterly learning and networking focused on local as well as

global business challenges.

- The launch of Aspire@Chemring in 2022 supports the development of

managers who have moved beyond supervisor and first line management and

who are identified as future talent for our key senior roles. This creative,

digitally-enabled programme encompasses group learning, networking

through the use of mixed learning “pods” and links to global executive

business schools including Columbia and MIT to leverage a mix of learning.

The focus on Leading Human Performance and Leading Organisational

Performance connects development into the personal, functional and

business goals.

- Leading our Organisation is run quarterly across the year to ensure our

most senior colleagues are also benefiting from the opportunity to reflect

on the areas of culture which they can influence and work together to

develop action plans around their local priorities.

OUR PEOPLE continued

Chemring Group PLC Annual report and accounts 2022

Development is the cornerstone of the drive to continuously improve the

quality of our business. Our colleagues are involved in performing a huge

number of often complex processes and procedures which challenge their

technical expertise every day. Alongside the above programmes for leadership

development, work continues to ensure high levels of operator competence

throughout the organisation. Individuals across the organisation are encouraged

to undertake continuing professional development as required to ensure that

expertise and knowledge remain up to date. Additionally through different

routes, further technical development, including workplace PhD programmes

and MBA study, is actively undertaken by a number of colleagues.

In 2022 over 30 college undergraduates joined our business units in the UK

throughout the summer to experience working for Chemring as part of our

summer internship programme. Summer placements are a key part of our

outreach to support students pursuing STEM subjects and to encourage them

to establish a career in this important area.

The Chemring Early Careers cohort continues to grow with over







group of colleagues is fundamental to our future success.

Our commitment to apprentices means that we welcomed 25 apprentices



to start their career at Chemring and so our attention is now on developing

those colleagues already working with us who might benefit from formalised

development beyond the Leading our People programme. Partnering with an

outside organisation we will be using Apprentice Levy funding in 2023 to

support colleagues in achieving ILM accredited level 3 and 5 apprenticeships

as well as enabling them to benefit from creating an external network.

SENIOR LEVEL LEADER

MID LEVEL LEADER

FIRST LEVEL LEADER

DEVELOPING AT CHEMRING

LEADERSHIP ACCELERATE TALENT EARLY CAREERS

LEADING OUR ORGANISATION

ASPIRE@CHEMRING

LEADING OUR PEOPLE

LEADING OURSELVES

PERFORMANCE

CONVERSATIONS

EMERGING LEADERS

PROGRAMME

EARLY CAREERS

PROGRAMME

EARLY CAREERS

PARTICIPANTS/

NETWORK

We continue our commitment to sponsoring bursaries for undergraduates

through the Institute of Engineering and Technology which underlines our

commitment to supporting future generations of scientists and engineers.



students as permanent colleagues as part of the Graduate Scheme.

The market for talent remains challenging and nowhere more so than in

providing the type and number of colleagues required by our Roke business.

In response, in 2022 we launched the Roke Academy in partnership with

Hatch, a specialist in digital skills recruitment. The Roke Academy is a



non-traditional areas of recruitment to embrace undiscovered talent who

may not have previously had the opportunity to enter the tech field.

In 2022 and 2023 the Roke Academy will look to attract those who may have

faced barriers to work for a variety of reasons; individuals who have found

the traditional recruitment process a challenge, are returning to work after



The Academy supports these diverse individuals who can bring unique

strengths to our business in terms of creativity, data analysis and innovation to

then progress in their chosen field. In 2022 we welcomed 24 new colleagues

through this route and will continue to expand this programme in future

years. The Roke Academy presents a wider opportunity to combine all

development from Early Careers through technical training and to provide

support for the most senior leaders at Roke as a true centre for development

excellence. This will continue to evolve in 2023 and beyond.

In 2021 a global framework for assessing and supporting talent and succession

planning was introduced into every business unit. This framework provides a

consistent approach to understanding key roles in the business and creating

an understanding of the talent pipeline for each role. This process has

continued into 2022 with development plans in place at an organisational



Aspire@Chemring programme content was designed around the outputs

commonly identified in the organisational talent reviews.

MANAGING YOURSELF

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

DIVERSITY AND INCLUSION AT CHEMRING

Chemring strives for diversity on a broad basis including gender, age,

background, education, disability, neurodiversity and nationality (within



continue to develop both globally and locally and which will be central to our

success in the coming years. In 2021 we introduced DE&I goals for all of our

senior leaders which form part of our incentive plans.

We have an increasing number of formal and informal groups around the

business which support and connect people with shared characteristics



WIN@Chemring, with a focus on supporting female colleagues globally.

OUR PURPOSE IN ACTION

JOE SPIRES’ GRADUATE JOURNEY

Joe Spires is a Graduate Engineer at Roke in Romsey, UK. He

studied nuclear engineering at Lancaster University with support

from The Institution of Engineering and Technology’s (“IET”)

Horizons Bursary. The Bursary provides financial support of up to

£4,000. Through the bursary scheme, Joe was partnered with

Chemring in his second year, completing a summer internship with

Chemring Countermeasures UK (“CCM UK”) and leading him to

his current role at Roke.

Says Joe, “The financial support I gained from the Horizons

Bursary helped with quality resources such as the many expensive

books needed for my course. I come from a low-income

household, so this support also meant that I didn’t have to work

during my degree and could focus on my studies.

“I got the chance to work with a great team with a great culture at

CCM UK, and, following a conversation with the Managing



was offered a position at the end of my degree course and have

been working on special projects with Roke since then. The

mentoring and support I’ve received from the team have been

second to none, and I’m learning so much.

“It’s my hope to continue building my expertise in areas like

robotics and sensors to enable me to architect solutions myself

with confidence. I’m also excited about the travel opportunities

that a role in a global organisation could offer in the future.”

Male Female





KEY ROLE TALENT PIPELINE

2022

2021

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





These groups made up of female colleagues from every function and level

have put in place actions to support both male and female colleagues and

provided the opportunity for colleagues to discuss local challenges and issues

affecting this key population.

Across 2022 we have worked to ensure we understand the ethnic diversity



reflective of the communities we operate in and are developing approaches

to more formally monitor this. We are pleased to be able to provide additional

reporting on ethnic diversity at Chemring in this year’s annual report.

Asian



Black



Mixed

race



White



Other *



Senior managers 3.8 5.0 0.0 91.2 0.0

Mid-level managers 1.8 4.2 1.5 91.3 1.2

All other employees  16.3 1.2  3.0

* (Inc Hispanic, NHOPI, Native American).

OUR PEOPLE continued

Male Female

Chemring Group PLC Annual report and accounts 2022

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TOTAL GRADUATES AND APPRENTICES

2022

2021

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







COLLEAGUES INVOLVED IN LEADERSHIP DEVELOPMENT

PROGRAMMES IN 2022

2022





As an employer we make no distinction between disabled and able-bodied

persons in recruitment, employment and training, career development and

promotion, provided that any disability does not make the particular

employment impractical or impossible under the stringent regulatory

requirements under which Chemring operates.

Today we ensure that any external bodies we work with to support our

hiring efforts have diverse candidate pools and attraction approaches that are

open to all suitably qualified individuals and we ask questions at appointment

around these important areas. The Executive Committee has a formal

requirement to review the process for appointing all senior team members,

including ensuring processes are without bias and open to all candidates

regardless of characteristics.

As a business, we are committed to meeting, at a minimum, the labour rights



we often exceed these requirements.

CHEMRING IN THE COMMUNITY

We recognise that each of the Group’s businesses has an important role to

play in its local community. We have a recognised community investment policy,

which confirms our commitment to support selected charitable causes with



communities in which the Group’s businesses operate. Each business has its



considered by the Executive Committee.

In addition to providing financial support, the Group also encourages and

supports employees who undertake voluntary work in the local community.

Looking to specific communities, our relationship with the Institution of



directly to undergraduates studying for engineering and science-related

degrees in the UK who have faced some level of hardship in achieving a place

to study their chosen programme. These high-calibre students are provided

with financial support via a Chemring funded bursary and the opportunity



We are aware that on occasion our manufacturing activities can impact









operations on the local environment, and is addressing this through its

environmental strategy.

OUR PURPOSE IN ACTION

MAKING MENTAL HEALTH A PRIORITY

Chemring Energetics UK (“CEUK”) made mental health a priority

in 2022 and employed the services of a company called Headtorch.

Headtorch, based in Glasgow, are a team of specialists in learning,

development and psychology. They work with organisations both

nationally and internationally to build a positive mental health

culture and support mental health in the workplace.

Headtorch delivered a bespoke two-day event with 30 managers,

covering all areas of the site, to help them feel better equipped to

encourage and facilitate mental health conversations with their

teams. In addition, a group of actors from Headtorch filmed

different mental health scenarios in full CEUK uniform and PPE to

really bring the stories to life for those involved.

The aim was to build a positive mental health culture on site so

that colleagues feel able to speak openly if they have issues. We

also want to remove the stigma of talking about mental health and

rather than setting KPIs and targets around mental health, which

are extremely hard to measure, our priority is on supporting line

managers, helping staff feel able to talk openly at work and

providing access to the right professional resources to help people.

The CEUK team also established a Wellbeing Forum on site.



emotional, social and mental wellbeing of staff by providing a

mechanism for all our colleagues to contribute to the CEUK

wellbeing agenda.





commitment to support selected charitable

causes with a focus on the military and



communities in which the Group’s

businesses operate.”

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

Male Female





EXECUTIVE COMMITTEE

2022

2021











BOARD OF DIRECTORS

2022

2021











SENIOR MANAGERS

2022

2021







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OUR PEOPLE continued

CHEMRING IN THE COMMUNITY CONTINUED

Across Chemring our colleagues support a wide range of charities, both local

and national. Highlights this year include:

Since March 2022, Chemring colleagues have pulled

together across the organisation to fundraise and donate to support the

humanitarian crisis in Ukraine, with Chemring matching all money raised.

A number of charities directly related to



Activities range from fundraising to donations and providing time and

resources to initiatives.

In the US, Chemring Energetic Devices

(“CED”) is supporting Habitat for Humanity, an international charity fighting

global poverty and homelessness, by spending a day helping build homes as

well as fundraising in support of the charity.

There is much local activity supporting charities

close to our sites. Chemring Australia are supporting a women’s refuge

through the WIN@Chemring team, and at CED colleagues support local

families over the holiday season through the Adopt-a-Family scheme.

Colleagues across Chemring regularly take on individual challenges for causes

special to them with donations often matched by the company. Climbing

mountains, moving large objects and running marathons have all been tackled

in the year.

Chemring Group PLC Annual report and accounts 2022

ETHICS AND BUSINESS CONDUCT

DOING THE RIGHT THING





and in full compliance with all applicable laws



OUR APPROACH

We are committed to promoting a culture within Chemring where everyone

does the right thing and takes personal responsibility for their actions. Our

Operational Framework and Code of Conduct set out the standards of

business conduct and behaviours we expect of all of our businesses, our

employees and all third parties who act on our behalf. We require all

employees and third parties who act on our behalf to conduct business

honestly and with integrity, and to take personal responsibility for ensuring



ETHICS & COMPLIANCE COMMITTEE

The Board has established an Ethics & Compliance Committee, chaired by

Carl-Peter Forster, with the other members being the Group Chief Executive,

the President of our US operations and the Group Legal Director &

Company Secretary. The Committee has oversight of the Group’s ethical

business conduct and compliance framework, including our anti-bribery

processes. It monitors the implementation of the framework across the

Group and recommends areas for future improvement.

The Committee met three times during the year. At every meeting the

Committee reviews and monitors compliance with our anti-bribery processes

and reviews whistleblowing reports received and associated investigations.

During the year the Committee also reviewed:

- reports from PwC on their internal audits of the business’s compliance with

our anti-bribery processes and their review of the implementation of the

Chemring Compliance Portal;

- metrics on the due diligence of third party sales partners, service providers

and suppliers conducted through the Chemring Compliance Portal;

- reports on the independent audit of selected third party sales partners;

- training material on the Code of Conduct; and

- approvals granted under our policy on sales to customers located in higher

risk territories.

The Chairman reports to the Board on the Committee’s activities following

each meeting.

OPERATIONAL FRAMEWORK

Our Operational Framework incorporates a broad range of more than 35

policies and procedures which have been adopted by all of our businesses.

The Operational Framework implements a robust governance and

compliance framework to enable us to operate in a safe, consistent and

accountable way.

The leaders of each of our businesses are required to ensure that:

- every employee, at every level of the organisation, has access to and

understands the requirements of the Operational Framework;

- appropriate training and monitoring processes are in place to ensure proper

implementation of the Operational Framework; and

- local procedures and processes are adopted to implement the requirements

of the Operational Framework.

All of our Operational Framework policies, procedures and associated training

material are hosted on the Chemring Compliance Portal. This innovative online

system allows us to issue new and updated policies and training to employees

across the Group, targeted to their specific roles, and enables us to monitor



Our governance framework also includes a requirement for all businesses



providing a detailed assessment of their compliance with the Operational

Framework. The output from the operational assurance process enables



framework, including the identification of additional training requirements





internal audit programme.

CODE OF CONDUCT

Our Code of Conduct, which sits alongside our Operational Framework,

embraces our fundamental values of Safety, Excellence and Innovation.





All employees and all third parties who act on the Group’s behalf are

required to comply with our standards of behaviour and business conduct,



countries in which we operate. All employees, current and new, are provided

with a copy of the Code of Conduct and asked to confirm that they will

adhere to its standards. The Code is reproduced in Norwegian for our

employees in Norway.

Updated scenario-based training on the Code was provided to employees

during the year.

Operational

assurance process



risks and areas for

improvement

Continuous

improvements to

the Operational

Framework

Implementation

of new procedures

and training

programmes

Internal audit

review and

consideration



READ OUR CODE OF CONDUCT POLICY:

CHEMRING.COM/SUSTAINABILITY/ETHICS-

AND-BUSINESS-CONDUCT

CONTINUING TO INNOVATE,

PROTECT A ND GROW

CHEMRING GROUP PLC

SUSTAINABILITY REPORT 2022

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

WHISTLEBLOWING

Our Chemring culture embraces transparency and openness, and we

encourage all employees to speak up if they have any concerns. We have a

whistleblowing policy and associated procedures in place which enable all

employees to raise concerns, in confidence, about possible improprieties or

wrongdoing within the business, without fear of reprisal or retaliation.

Employees are able to raise issues by contacting our 24-hour ethics reporting

service by phone or email or by accessing an external website. All issues





Our internal procedures on the handling of whistleblowing reports are

designed to ensure that all reports made, whether through the external

service or through other internal channels, are dealt with in a proper and

consistent manner, with appropriate oversight from the UK and US legal

departments. Training is provided to members of our leadership teams on

how to identify whistleblowing reports which may emanate through

less-obvious channels and how to engage with employees who make

whistleblowing reports.

ANTI-BRIBERY AND CORRUPTION

The Group has well established anti-corruption policies, which are included

within our Operational Framework. Specifically, these cover bribery and

corruption, conflicts of interest, gifts and hospitality, and facilitation payments.

A number of other policies within the Operational Framework also address

bribery and corruption risks in areas such as finance, political donations and

lobbying, charitable donations and offset.

The Group has also adopted a policy on sales to customers located in

higher-risk territories, which requires our businesses to prepare a risk

mitigation plan for any proposed transaction in a territory rated less than





which may be encountered in doing business in such territories.

Our detailed anti-corruption procedures are incorporated within our Bribery

Act Compliance Manual (“BACM”), which is updated on a regular basis, and

includes requirements for:

- each business to routinely conduct informed bribery risk assessments as

part of normal operating procedures, to determine the nature and extent

of the Group’s exposure to potential internal and external risks of bribery

and corruption on its behalf by persons associated with it;

- approval of the appointment of all sales partners and other third party

advisers, which in all circumstances requires the completion of risk-based

due diligence, appropriate management approvals, use of standard form

contracts, and ongoing monitoring and review;

- risk-based anti-corruption due diligence processes for the engagement of

service providers and suppliers;

- regular mandatory training on BACM and its application to their respective

roles for management, supervisors and all employees working within

commercial, sales and marketing, finance and human resource functions or

in customer-facing roles;

- approval of the giving and receiving of reasonable, proportionate and

appropriate gifts and hospitality in the normal course of business; and

- proper identification, disclosure and management of potential or actual

conflicts of interest.

A BACM “Pocket Guide” is issued to all employees across the Group, which

provides an overview of our anti-corruption policies and the requirements



All businesses are required to complete a BACM Compliance Certificate on

an annual basis, confirming that all policies and procedures within BACM have

been complied with and providing supporting information to demonstrate

compliance. BACM Compliance Certificates are reviewed by the Ethics &

Compliance Committee following each submission.

We recognise that the appointment of third party sales partners in our

routes to market can present particular bribery and corruption risks, and



engagement of sales partners where there is a genuine business need



- restrictions on the number of sales partners to be engaged in



- the preparation of a full business case to justify the appointment of all new

third party sales partners, including a two-stage bribery risk assessment

incorporating the requisite level of risk-based due diligence, which must





- due diligence reports from external consultants for higher-risk appointments;

- a full periodic reappointment process for all retained sales partners,

including recommissioning of the appropriate risk-based due diligence and

resubmission of a full business case for approval by the Group Chief

Executive; and

- increased reporting requirements for all payments made to third party sales

partners and higher risk service providers.

The review and approval processes for our third party sales partners are

automated through the Chemring Compliance Portal, which enables us to

adopt a consistent approach to the application of our due diligence and

approval processes across the Group. Due diligence processes for the third

party service providers and higher risk suppliers engaged by our non-US

businesses are also managed in the Chemring Compliance Portal. The US

businesses have adopted a similar automated system for their service

providers and higher-risk suppliers.

The Chemring Compliance Portal also incorporates a module for employees

to seek approval online prior to giving or receiving gifts and hospitality, or

making charitable donations on behalf of the business.

Selected third party sales partners are subject to an independent audit by



suitability of our sales partners and help to further strengthen our

anti-bribery and corruption processes.

Compliance with BACM procedures continued to be a core aspect of PwC’s

internal audit programme during the year.

HUMAN RIGHTS

The Group is committed to respecting human rights in the countries in which

we do business. Our Code of Conduct and other applicable policies under

the Operational Framework support our commitment to ensuring, as far







ethical standards and expectations, including in relation to human rights.



involved in slavery.

A statement of the Group’s compliance with the Modern Slavery Act 2015

can be found on the Group’s website at www.chemring.com.

We fully adhere to all relevant government guidelines designed to ensure



equipment, used for the purposes of terrorism, international repression



ETHICS AND BUSINESS CONDUCT continued

Chemring Group PLC Annual report and accounts 2022

FINANCIAL REVIEW

DELIVERING GROWTH, STRONG

CASH GENERATION AND

FUNDING INVESTMENT

“ Our focus in 2022 has been on adapting

to our customers’ needs in what has







inflationary cost pressures.”

NET DEBT



(2021: £26.6m)

ORDER BOOK

£651m

(2021: £501m)

Andrew Lewis

Chief Financial Officer













In the Sensors & Information sector, Roke revenue exceeded £100m for the

first time, and in what continues to be a buoyant market, order intake of £168m





In the US sensors business there has been a positive start to the full rate

production phase of the EMBD program. A customer procurement decision

is expected in 2023 on the low rate initial production (“LRIP”) phase of the

JBTDS and AVCAD programs. The shift in the US Government priorities

from counter-insurgency operations to equipping forces for potential peer



unexpected re-prioritisation of US DoD budgets. This impacted our

expected HMDS FY22 delivery order, which was not funded, and we are

currently working with the customer to appropriately plan for their expected

future requirements as we expect the program to move from production to

sustainment earlier than anticipated.





Group’s manufacturing infrastructure continues to be a key enabler to deliver

improved safety and operational excellence, resulting in Countermeasures &



commissioned in the second half of the year is expected to deliver its first

revenue in the first half of 2023. The market for precision engineered devices



these niche areas of our Countermeasures & Energetics sector.

GROUP FINANCIAL PERFORMANCE

In 2022 the Group successfully navigated a number of operational and

financial challenges: delays in the US DoD procurement process; labour

availability; various supply chain and inflationary pressures, in particular the



continue to work to mitigate their impact.

Foreign exchange translation has provided a tailwind to operating profit

compared to last year. While exchange rates have been volatile in the year,

the US dollar has strengthened with the average exchange rate to sterling









impact of the exchange rate movements on the key metrics at a Group and

sector level is shown in the table overleaf.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

FINANCIAL REVIEW continued

GROUP FINANCIAL PERFORMANCE CONTINUED

At constant currency As reported

2022 2022 2021

£m Change £m Change £m

Group

Order intake     431.0

Order book     500.8

Revenue     393.3

Underlying EBITDA     

Underlying operating profit     

Underlying basic earnings per share     16.9

Sensors & Information

Order intake     

Order book     113.6

Revenue     146.6

Underlying EBITDA     34.4

Underlying operating profit     31.6

Countermeasures & Energetics

Order intake     255.1

Order book     

Revenue     

Underlying EBITDA     56.1

Underlying operating profit     40.0





multi-year contracts which include an increasing element of “pass-through”

products and services which are included in revenue. Countermeasures &



received across the sector.

The impact of the Continuing Resolution in the US, and the continuation of

CV-19 related working restrictions slowed the process of doing business with

government departments, and as a result some orders were received later

than expected which will adversely impact phasing of FY23.



performance at Roke as well as steady growth in Countermeasures & Energetics.





planned investment in Roke operating margin was flat compared to 2021 with

the improved operational execution in Countermeasures & Energetics offset

by the discretionary operating expense investment in Roke Academy, Roke

Futures and Roke USA.

FY22FY21FY20FY19FY18

£64.0m

£57.5m

£54.7m

£44.0m

£31.0m

UNDERLYING OPERATING PROFIT (£m)

Total finance expense fell to £1.5m (2021: £1.6m) which resulted in an

underlying profit before tax of £62.5m (2021: £55.9m). The effective tax rate



basic earnings per share was 20.2p (2021: 16.9p).

Statutory operating profit was £53.3m (2021: £50.4m) and after statutory

finance expenses of £1.5m (2021: £1.6m), statutory profit before tax was









The non-underlying costs relate to the amortisation of acquired intangibles,

costs relating to acquisitions, loss on the movement in the fair value of

derivative financial instruments and the tax credit associated with these.

TA X



profit before tax of £62.5m (2021: £55.9m). The effective tax rate on



The reduction in rate is due to the recognition of a deferred tax asset in

respect of future US interest deductions of £4.3m. Looking forward into

2023 we expect the Group effective tax rate to return to the mid-teens



impact the annual current tax charge for seven months. From FY24 we will

see a full year effect and as such the Group effective tax rate is expected to





Chemring Group PLC Annual report and accounts 2022

EARNINGS PER SHARE

Underlying basic earnings per share was 20.2p (2021: 16.9p) and diluted





was 16.4p (2021: 14.4p).

FY22FY21FY20FY19FY18

19.7p

16.5p

14.8p

11.0p

6.7p

UNDERLYING DILUTED EPS (PENCE)

WORKING CAPITAL

Working capital was £93.9m (2021: £84.4m), an increase of £9.5m. At constant

currency, working capital would have been £81.9m. As a percentage of





challenges the Group invested in certain inventory items to mitigate the risk

of shortages on production and delivery to customers. We continued with

our focus on commercial contracting, inventory levels and cash management.



(2021: 18) demonstrate that working capital has been managed in a balanced

and sustainable manner.

GROUP FINANCIAL POSITION

NET DEBT AND CASH FLOW



representing a net debt to underlying EBITDA ratio of 0.09x (2021: 0.35x).

The financial health of the Group has continued to improve in a number of

aspects during the year. Disciplined working capital practices have been

maintained to reduce intra-period volatility. The Group is working to achieve

further improvements over the medium term.

FY22FY21FY20FY19FY18

109%

105%

110%

104%

89%

UNDERLYING CASH CONVERSION (%)

100%

Underlying operating activities generated cash of £90.1m (2021: £80.0m).





Group has a revolving credit facility of £150m which runs to December 2025



FY20FY21FY22

ept

Oct

WEEKLY NET DEBT (£m)

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

FINANCIAL REVIEW continued

DEBT FACILITIES

The Group’s principal debt facilities comprise a £150m revolving credit







borrowing facilities at the year end. The Group is subject to two key financial

covenants, which are tested quarterly. These covenants relate to the leverage

ratio between underlying EBITDA and net debt, and the interest cover ratio

between underlying EBITDA and finance costs. The calculation of these ratios

involves the translation of non-sterling denominated debt using average,

rather than closing, rates of exchange. The Group was in compliance with



RETIREMENT BENEFIT OBLIGATIONS

The surplus on the Group’s defined benefit pension schemes was £11.2m

Employee

Benefits. The surplus relates to the Chemring Group Staff Pension Scheme

(the “Scheme”), a UK defined benefit scheme whose assets are held in a

separately administered fund. The Scheme was closed to future accrual in

April 2012. The surplus as a percentage of scheme liabilities increased from



bond yield used as the discount rate for IAS 19. The resilience of the Scheme’s

investment strategy , which includes a liability driven investment hedge, was

demonstrated by the limited impact of increased interest rate and inflation

expectations. During the final quarter of the year the Scheme exited its





yields rose rapidly in September 2022. The Group also lent the Scheme £2m



was repaid in November 2022.

An updated triennial valuation was completed as at 6 April 2021 and showed

a technical provisions surplus of £3.8m, which represented a funding level of



recovery payments are required. The next actuarial valuation is due as at



CONTINGENT LIABILITIES

The Group is, from time to time, party to legal proceedings and claims, and



ordinary course of business.

In addition, one matter remained open at year end, being the incident that

occurred at the Group’s countermeasures site in Salisbury on 10 August 2018.

Full details are included in note 33.

CAPITAL EXPENDITURE

The Group continues to invest in the infrastructure of its facilities, with

particular focus on enhancing safety and operational performance. In the



The most significant investment being the Tennessee capacity expansion

programme to meet the expected demand for F-35 countermeasures, and



period. We still expect to generate revenue from the new Tennessee



RESEARCH AND DEVELOPMENT



is a key aspect of the Group’s strategy, and levels of internally funded R&D

are expected to be maintained as investment in product development

continues, particularly within Sensors & Information. An analysis of R&D

expenditure is set out below:

2022 2021

£m £m

Customer-funded R&D  51.4

Internally-funded R&D:

– expensed to the income statement  8.5

– capitalised  2.1

ALTERNATIVE PERFORMANCE MEASURES (“APMs”)

In the analysis of the Group’s financial performance and position, operating

results and cash flows, APMs are presented to provide readers with additional

information. The principal APMs presented are underlying measures of

earnings including underlying operating profit, underlying profit before tax,

underlying profit after tax, underlying EBITDA, underlying earnings per share,

underlying operating cash flow and underlying cash conversion. In addition,

EBITDA, net debt, underlying operating profit and revenue on a constant

currency basis are presented which are also considered to be non-IFRS

measures. These measures are consistent with information regularly reviewed







2022

£m

2021

£m

Growth



Revenue (as reported)  393.3 

Effect of using prior period

 

Revenue at constant currency  393.3 

Underlying operating profit (as reported)   

Effect of using prior period

 

Underlying operating profit

at constant currency   

Chemring Group PLC Annual report and accounts 2022



2022 2021

Underlying

Non-

underlying Statutory Underlying

Non-

underlying Statutory

Group:

EBITDA (£m)     (0.9) 

Operating profit (£m)      50.4

Profit before tax (£m)    55.9  48.8

Tax charge (£m)    (8.3) 1.0 

Profit after tax (£m)     (6.1) 41.5

Basic earnings per share (pence)    16.9 (2.2) 

Diluted earnings per share (pence)    16.5 (2.1) 14.4

Sectors:

Sensors & Information EBITDA (£m)    34.4 (1.6) 32.8

Sensors & Information operating profit (£m)    31.6  25.9

Countermeasures & Energetics EBITDA (£m)  —  56.1 — 56.1

Countermeasures & Energetics operating profit (£m)    40.0 (2.1) 

We present a measure of constant currency revenue and operating







The Group manages its finance costs and tax on a central or regional basis and

therefore the Board believes the use of underlying operating profit or EBITDA

is the best way of monitoring the performance of operating businesses.



of which, in management’s view, reflects how the business is managed and

measured on a day-to-day basis. Our APMs and KPIs are aligned to our

strategy and together are used to measure the performance of our business

and form the basis of the performance measures for remuneration. Adjusted

results exclude certain items because, if included, these items could distort

the understanding of our performance for the year and the comparability

between the periods.

Management considers non-underlying items to be:

- amortisation of acquired intangibles;

- discontinued operations;

- exceptional items, for example relating to acquisitions and disposals,

restructuring costs, impairment charges and legal costs;

- gains or losses on the movement in the fair value of derivative financial

instruments; and

- the tax impact of all of the above.

Our use of APMs is consistent with the prior year and we provide

comparatives alongside all current year figures. The directors believe that

these APMs improve the comparability of information between reporting

periods as well as reflect the key performance indicators used within the

business to measure performance. The term underlying is not defined under



companies. All profit and earnings per share figures in this strategic report

relate to underlying business performance (as defined above) unless

otherwise stated. Further details are provided in note 3.

The adjustments comprise:

- amortisation of acquired intangibles of £4.6m (2021: £6.2m);

- costs relating to acquisitions including deferred consideration treated as



- loss on the movement in the fair value of derivative financial instruments



- tax impact of adjustments of £1.3m credit (2021: £1.0m credit).

Andrew Lewis

Chief Financial Officer

13 December 2022

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

KEY ROLES AND RESPONSIBILITIES FOR THE GROUP’S RISK

MANAGEMENT STRATEGY

RISK MANAGEMENT

MANAGING RISK

We continue to manage key risks to ensure the



RISK MANAGEMENT ORGANISATION

The Board is responsible for determining the nature and extent of risks it is

willing to accept in delivering the Group’s strategy and running the Group’s

operations, and ensuring that risks are effectively managed across the Group.

The Board reviews the Group risk register on a regular basis and considers

whether the Risk Management Committee has appropriately identified the

principal risks to which the Group is exposed.

The Audit Committee is responsible for reviewing in detail the effectiveness

of the Group’s systems of internal control, including financial, operational and

compliance controls, and its risk management systems. The Audit Committee

also reviews the effectiveness of the Group’s internal audit arrangements.

The Risk Management Committee is responsible for overseeing the

implementation of the Group’s risk management framework and is also

responsible for identifying the principal risks to which the Group is exposed,

monitoring key mitigation plans and maintaining the Group risk register. The

Risk Management Committee also reviews the business unit risk registers on a

regular basis and considers input from the US Risk Management Committee,

which has been constituted to oversee risk within the US operations.

The current members of the Risk Management Committee are:

- Michael Ord (Group Chief Executive);

- Bill Currer (President, US);

- Sarah Ellard (Group Legal Director & Company Secretary);

- Andrew Lewis (Chief Financial Officer); and

- Steven Messam (Group HSE Director).

RISK MANAGEMENT POLICY AND FRAMEWORK

The Group’s risk management policy sets out the Group’s approach to risk

management, including its risk appetite; the framework for assessing, managing

and monitoring risk within the business; and the key roles and responsibilities

for the oversight and implementation of the Group’s risk management

systems and controls.

The Group’s risk management framework draws fundamentally from



day-to-day management of risk and maintenance of effective control

procedures at individual businesses. The “Second Line” comprises various



management level, which are designed to enhance and monitor the First Line.

The “Third Line” comprises the Group’s internal audit function, utilising an



APPROACH TO RISK MANAGEMENT

The management of each business is responsible for the identification,

management and reporting of local risks, in accordance with the Group’s risk

management framework. The management of each business is also

responsible for the maintenance of business risk registers and the

implementation of mitigation plans.

Each business is required to maintain a risk register identifying their key risks.

The risk registers include an analysis of the likelihood and impact of each risk,

before and after mitigation actions are taken to manage the risk, together

with details of the mitigation plans and progress against them. Each risk is



The business risk registers are updated locally on a quarterly basis and are

reviewed in detail by the Group Chief Executive, the Chief Financial Officer

and other members of the Executive Committee at quarterly business review

meetings with each of the businesses. The US Risk Management Committee



level risks and maintains a consolidated US risk register.

THE BOARD

- Overall responsibility for

risk management

- Defines the Group’s



AUDIT COMMITTEE

- Reviews the effectiveness of

the Group’s risk

management framework

and systems of



- Oversees the effectiveness

of the Group’s internal

audit arrangements

RISK MANAGEMENT

COMMITTEE

- Oversees the

implementation





- Monitors compliance





- Maintains the Group



BUSINESS MANAGEMENT

- Responsible for the

implementation of the

Group’s risk management

framework at the

operational level

- Maintains business unit risk

registers and provides input

to the Risk Management

Committee

- Responsible for compliance

with internal controls

Chemring Group PLC Annual report and accounts 2022

The Risk Management Committee meets quarterly and, utilising the input

from the business risk registers and the US risk register, identifies those

principal risks which are material to the Group as a whole. The Risk

Management Committee also considers corporate-level risks and emerging

risks, as referenced below. These risks are collated on the Group risk register,

together with details of the applicable mitigation plans and risk owners.

The Group has implemented an Operational Framework, incorporating a

broad range of policies and procedures which are required to be adopted by

all businesses. A half-yearly operational assurance process is a fundamental

part of the Operational Framework and provides an assessment of compliance

with the Operational Framework policies across the Group. The output of

the operational assurance process provides additional visibility on risks across

the Group and is utilised by the Risk Management Committee as a further

input to the Group risk register. The operational assurance process also

provides assurance to the Board that the Group’s internal systems and

controls are operating effectively.

The full Group risk register is reviewed by the Board on a half-yearly basis

and key individual risks are reviewed at every Board meeting.

KEY AREAS OF FOCUS DURING THE YEAR

During the past year, we have continued to enhance our risk management

systems, with specific focus in the following areas:

- Our HSE Management Framework has been updated and we





- We have further enhanced our HSE data collection and reporting through

our EcoOnline system.

- Additional IT and cyber-security standards have been implemented, and

members of the senior leadership team participated in a cyber incident

scenario planning workshop.

- We have improved our succession and talent management programmes



- We have established a new project focused on improving business

continuity management across the Group.

- Climate change risks have been considered as key risks to the future

operation of the Group.

- Our internal audit programme has continued to incorporate thematic

reviews in key risk areas.

Our risk management systems were reviewed by PwC in 2021 as part of



structures and processes were fit for purpose and a number of good practice

areas were identified. Their recommendations for further enhancements



introduction of an expanded five-by-five matrix for the assessment of the

potential impact and likelihood of individual risks on the Group risk register.

We have also introduced a target risk rating for each risk, and now separately

consider key mitigation controls and ongoing risk reduction actions. These

changes provide greater distinction between relative risks and have enabled

us to better facilitate the prioritisation of key mitigation actions.

PRINCIPAL RISKS

The current Group risk register comprises risks in seven key risk areas,

covering health, safety and environment risks, strategic risks, financial risks,

operational risks, people risks, legal and compliance risks, and reputational





The management of risks associated with CV-19 continued to be monitored

during the year. Whilst the Group’s operations have not been significantly

impacted by CV-19, we have continued to take all appropriate actions to

protect and safeguard our employees, and ensure continuity of our businesses.

EMERGING RISKS

The current UK Corporate Governance Code requires the Board to

undertake a robust assessment of the emerging risks that may impact the

Group in the future. This requirement has been reflected in the Group’s



Management Committee when compiling the Group risk register.

Emerging risks are identified through discussions with both external



customers and regulators, and through horizon scanning of future

developments in areas relevant to the Group’s business operations.

Certain emerging risks relating to future technological, regulatory and

macro-economic changes are reflected on the Group risk register and

mitigation plans implemented accordingly. However, other emerging risks





RISK REVIEW

The Board carries out an annual review of the effectiveness of the Group’s

systems of internal control and risk management systems. In understanding

this review, the Board considers:

- the operational and financial reports received from the executive

management throughout the year;

- the Group risk register and the mitigation actions being taken to manage

key risks;

- output from the operational assurance process; and

- internal audit reports and reports from the other assurance processes



The Board confirms that there is an ongoing process for identifying, evaluating

and managing the principal risks faced by the business, and that robust

systems of internal control and risk management were in place throughout

the year under review and have remained in place up to the date of approval

of these financial statements.

The Board acknowledges that the internal control systems can only provide



Group’s assets. The Board therefore continues to take steps to embed

internal control and risk management further into the operations of the

Group, and to address any areas for potential improvement which come



The Board carried out an assessment of the principal and emerging risks to

which the Group is exposed as part of its half-yearly review of the Group



adequately captured in the Group risk register and whether the requisite

progress had been made on the mitigation actions to address significant risks.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

PRINCIPAL RISKS AND UNCERTAINTIES

RISK MANAGEMENT IN ACTION

Details of the principal risks and uncertainties which could have a material

impact on the Group’s business model, strategy, future performance or

reputation are set out below. The principal risks are identified by the Risk

Management Committee based on the likelihood of occurrence and the

potential impact on the Group as a whole.

In addition to the risks disclosed below, the Risk Management Committee also

monitors and manages a wide range of other risks to which the Group may

be exposed.

OVERVIEW OF PRINCIPAL RISKS

The table below summarises the Group’s principal risks and uncertainties, and

identifies how each links to values and our strategic objectives, and whether

the trend in the risk profile from the Group’s perspective increased,

decreased or remained stable during the year.

Principal risk/uncertainty Our values

Strategic

objectives

Change in

risk profile

in the year

Occupational and

process safety

Environmental laws



Climate change

Market

Political

Contracts

Technology

Financial

Operational

People

Compliance



Cyber-security

RISK PROFILE AND HEAT MAP

The overall risk profile for the Group continued to improve during the year

and the Group risk register reflects the following changes to principal risks:

- Our understanding of the risks associated with occupational and



implementation of the Group’s three-year HSE strategy and an increased

focus on asset integrity, and shared learning and reporting of near misses

within our operations.

- Risks associated with environmental issues have increased with the

increased focus on the environmental impact of our businesses.

- Climate change risks and the potential impact of changed weather



Group risk register.

- Market-related risk has reduced, reflecting the increased focus on defence

spending as a result of the recent geopolitical and technology trends.

- People-related risk in relation to resourcing has continued to increase as



continuing to make it difficult to recruit and retain employees, and



- Financial risks have continued to reduce, reflecting the Group’s strong





- The inherent risk associated with cyber threats and system failures

continues to increase, acknowledging that the continuing changes in the

nature of cyber attacks and the increased sophistication of the methods

employed are an increasing risk for all businesses.

The heat map below illustrates the relative inherent and residual positioning



Low

Impact

Medium High

Low Medium

Likelihood

High

Target growing segments

Win market share

Grow our US business

Safety

Excellence

Innovation

Chemring Group PLC Annual report and accounts 2022



A. OCCUPATIONAL AND PROCESS SAFETY

Risk and potential impacts Mitigation actions/factors

The Group’s operations involve energetic

materials that by their nature have inherent



- Incidents may occur which could result in







- The Group may be exposed to financial loss,

regulatory action and potential liabilities for

workplace injuries and fatalities.

- Safety reinforced as a core value.

- Continued emphasis on the “Journey to Zero

Harm” and promotion of a culture which puts

safety first and encourages employees to take

personal responsibility for their actions.

- HSE Strategy and HSE Management System Framework

Standard fully implemented within the businesses.

- Robust major accident hazard analysis process

adopted across the Group.

- Asset integrity review completed using external

consultants at higher-hazard sites and new asset

integrity standard adopted.

- New Group-wide standard on management



- Incident investigation and crisis management

standards adopted.

- Process established for Group-wide review



- Occupational Health, Safety and Wellbeing



- “Spot it, Stop it, Share it” campaign instigated to increase

focus on near miss identification and reporting.

- Continued programme of capital investment in



Risk appetite: Low

Change during the year and outlook

Through the implementation of our major accident

hazard review process, together with increased

reporting and investigation of process upset

conditions, we continue to take further actions to

reduce the likelihood of a major energetic event. In

addition, we have strengthened our asset integrity

programmes and introduced an enhanced process

for sharing of learnings from significant incidents. We

continue to invest in new automated production

systems and improving process controls for our

legacy operations.

Our total recordable injury frequency rate has



but remains below our limit of 1.0. There were no

injuries sustained from energetic ignitions during



prior year.

We hope to see further improvements in process

safety in FY23 as we continue with our capital

investment programme.

Example key risk indicators  Link to strategy

- Total recordable injury frequency rate

- Number of process safety events

- Number of near miss reports

- Target growing segments

- Win market share



B. ENVIRONMENTAL LAWS AND REGULATIONS

Risk and potential impacts Mitigation actions/factors

The Group’s operations and ownership or use

of real property are subject to a number of

federal, state and local environmental laws and

regulations. At certain sites currently or

formerly owned or operated by the Group,

there is known or potential contamination for

which there is, or may be, a requirement to

remediate or provide resource restoration.

- The Group could incur substantial costs,

including remediation costs, resource

restoration costs, fines and penalties, or be

exposed to third party property damage or

personal injury claims, as a result of liabilities

associated with past practices or violations of

environmental laws or non-compliance with



- Monitoring programmes established at certain sites

and appropriate financial provisions held.

- Environmental liability insurance procured for

certain risks.

- Environmental consultants retained to



remediations.

- Sustainability and Environmental



Risk appetite: Low

Change during the year and outlook

The sale or closure of several sites during the



exposure to environmental risks. However, we retain

a financial liability for environmental remediation of

certain sites formerly owned by the Group, most

notably those occupied by the divested munitions

businesses in Belgium and Italy.

Environmental risks continue to increase with



environmental impact of all businesses. We have

implemented a more centralised approach to the

management of our environmental performance as

part of our ESG strategy, recognising that minimising

our environmental impact and addressing climate

change-related risks is becoming increasingly important.

Example key risk indicators  Link to strategy

- Carbon emissions

- Energy and water utilisation

- Volume of waste produced

- Number of environmental incidents

- Target growing segments



INHERENT RISK:

High LowMedium

TREND:

Increasing DecreasingStable

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

continued

C. CLIMATE CHANGE

Risk and potential impacts Mitigation actions/factors

The Group’s operations and delivery of our

strategy could be impacted by climate change

related risks, including those associated with

wildfires, severe weather events and new

climate-related requirements in relation to the

Group’s manufacturing processes and products.

- Wildfires and severe weather events could result

in harm to employees, the temporary shutdown

of facilities or other disruption to manufacturing

processes.

- The Group may be exposed to financial loss for

business interruption and/or increased expenditure

for adapting its production facilities and processes

to address climate change-related risks.

- Additional measures have been implemented,

such as cutting back grassland close to

manufacturing operations, to mitigate the risk of

wildfires.

- Drainage has been improved on certain sites to

mitigate the impact of potential flooding events.

- Carbon reduction plans and other environmental

performance targets have been established to

reduce the Group’s environmental impact.

- Close relationships are maintained with

customers, which should provide early insight

into new environmental requirements which



Risk appetite: Low

Change during the year and outlook

Sustainability Committee established which is

overseeing the identification and management



Carbon reduction plans established across



Example key risk indicators  Link to strategy

- Wildfires

- Severe weather events

- Technology

- Target growing segments





STRATEGIC RISKS

D. MARKET

Risk and potential impacts Mitigation actions/factors

Defence spending depends on a complex mix of

political considerations, budgetary constraints and

the requirements of the armed forces to address

specific threats and perform certain missions.

Overall defence spending may therefore be

subject to significant yearly fluctuations and there

may also be downward pressure on defence

budgets in certain key programme areas.

The Group’s profits and cash flows are

dependent, to a significant extent, on the timing



majority of the Group’s contracts are of a

relatively short duration and, with the exception

of framework contracts with key customers, do

not cover multi-year requirements.

- The Group’s financial performance may be

adversely impacted by lower defence spending

by its major customers, either generally or in

relation to certain programmes.

- Short-term trading and cash constraints may

impact on the Group’s ability to invest in

longer-term technologies and capabilities.

- Unmitigated delays in the receipt of orders or

cancellation of existing contracts could affect the

Group’s financial performance. If the Group’s

businesses are unable to continue trading

profitably during periods of lower order intake,

financial performance will deteriorate and assets

may be impaired.

- Continual assessment of alignment of planned

organic growth strategies and technology

roadmaps against government priorities for

future funding.

- Increased focus on the development of

commercial products and services.

- Focus on organisational development to ensure

the business is appropriately structured to meet

current and future needs, and to provide

resilience in difficult market conditions.

- Continued focus on order intake as a key

performance indicator.

- Pursuit of long-term, multi-year contracts



- Global business development initiatives

established in the Countermeasures & Energetics

and Sensors & Information segments.

- Increased collaboration between businesses

across the Group on establishing shared routes

to market.

Risk appetite: Low to moderate

Change during the year and outlook

Ongoing conflict in Eastern Europe is shaping the

threat environment, with a resurgence in demand

for classical kinematic capabilities, alongside the

growing information advantage and intelligence

requirements. However, economic pressures may

place defence spend under pressure.

Example key risk indicators  Link to strategy

- Defence budget cuts/changes

- Reductions in order intake

- Deterioration in profitability

- Target growing segments

- Win market share

- Grow our US business



PRINCIPAL RISKS AND UNCERTAINTIES continued

Chemring Group PLC Annual report and accounts 2022

STRATEGIC RISKS

E. POLITICAL

Risk and potential impacts Mitigation actions/factors

The Group is active in several countries that



instability. In addition, there is a significant risk



structure in certain non-NATO countries to which

the Group currently sells.

- The Group’s business in certain countries may

be adversely affected in a way that is material to

the Group’s financial position and the results of

its operations.

- Political changes could impact future defence

expenditure strategy and the Group’s ability



- Relationships maintained at political level





- Financing arrangements implemented, including

letters of credit and advance payments, for

contracts with high-risk customers.

- Political risks insurance procured in



- Continued focus on the development of

commercial business across the Group,

particularly in key home territories.

Risk appetite: Low to moderate

Change during the year and outlook

Political tensions across the world are increasing the

risk of disruption in our non-NATO markets.

We have continued to focus our business

development and sales and marketing activities



Example key risk indicators  Link to strategy

- Political changes

- Suspension/withdrawal of export licences

- Trade embargoes

- Reductions in order intake

- Target growing segments

- Win market share

- Grow our US business



F. CONTRACTS

Risk and potential impacts Mitigation actions/factors

The Group’s government contracts may be

terminated at any time and may contain other

unfavourable provisions.

The Group may need to commit resources in

advance of contracts becoming fully effective, to

ensure prompt fulfilment of orders or to enable

conditions precedent to be met.

- The Group may suffer financial loss if its

contracts are terminated by customers, or a

termination arising out of the Group’s default

may have an adverse effect on its ability to

re-compete for future contracts and orders.

- Unfavourable commercial contract terms may

adversely impact the Group’s working capital

position, particularly if the receipt of payments by

the Group is delayed.

- The Commercial Policy within the Operational

Framework requires central approval for certain

contractual risk exposures.

- Commercial and contract risk management

training programme implemented.

- Stage payments negotiated with customers

wherever possible, in order to improve working

capital management.

Risk appetite: Moderate

Change during the year and outlook

The implementation of the Operational



on commercial and contracting practices across the

Group, and is enabling us to manage contractual



Example key risk indicators  Link to strategy

- Number of contract claims/terminations

- Increase in working capital

- Delays in customer payments

- Number of bonds or guarantees called

- Target growing segments

- Win market share

- Grow our US business

INHERENT RISK:

High LowMedium

TREND:

Increasing DecreasingStable

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

PRINCIPAL RISKS AND UNCERTAINTIES continued

STRATEGIC RISKS continued

G. TECHNOLOGY

Risk and potential impacts Mitigation actions/factors



programmes due to issues with capability development,



The Group needs to continually add new products to its

current range, through innovation and continuing emphasis on

research and development. New product development may be

subject to delays, or may fail to achieve the requisite standards

to satisfy volume manufacturing requirements and the

production of products against high reliability and safety criteria

to meet customer specifications.

- Failure to obtain production contracts on major

development programmes may significantly impact the

future performance and value of individual businesses.

- Failure to complete planned product development and upgrades

successfully may have financial and reputational impacts, and may

result in obsolescence or loss of future business.

- Close relationships maintained with

customers on all key future

programmes.

- New Product Development Policy

and procedures adopted, to align



investment across the Group.

- Technology investments aligned



- Working groups established to



growth in certain key areas within

Countermeasures & Energetics and

Sensors & Information.

Risk appetite: Moderate

Change during the year and outlook

Innovation is one of our core values.

Progressing our technology-led key development

programmes will continue to be a significant area of

focus for the year ahead.



service activities. In 2022 we launched the Futures

business unit to focus on capturing the growing

opportunities for Roke’s capabilities in the



Chemring Sensors & Electronics Systems in the



technologies into prototype products which can



cheaper than existing systems.

Example key risk indicators  Link to strategy

- Reduction in R&D expenditure

- Delays in R&D programmes

- Delays in qualification of products

- Loss of production contracts

- 

- Target growing segments

- Win market share

- Grow our US business

H. FINANCIAL

Risk and potential impacts Mitigation actions/factors

The Group is exposed to a range of financial risks, both

externally driven, such as an unexpected movement in foreign

exchange rates or increased inflation, and specific to the Group.

Specific financial risks could arise out of a disruption to

operations; failure to deliver strategic objectives, including

planned investment; or customer-related events, including

defaults on the payment of debts.

As a result of a number of past events, the Group is exposed

to a number of contingent liabilities which may or may not

result in future cash outflows. (Further details are contained in

note 33 of the Group financial statements.)

The Group may also face an increased funding requirement

for its legacy UK defined benefit pension scheme.

- The Group may fail to comply with financing covenants and

be unable to meet debt repayments, leading to withdrawal

of funding or additional costs of maintaining funding.

- Operational results may be impacted by unexpected financial

losses or increased costs.

Further details of the financial risks to which the Group is

potentially exposed and the mitigating factors are set out in the

financial review and note 20 of the Group financial statements.

- Committed banking facilities in place

to December 2025.

- Regular monitoring of actual and

forecast financing covenants.

- Capital approval processes in place,

requiring Board approval for

significant projects.

- Hedging policy applied for significant

foreign transactions.

- Energy bought forward in the



escalating prices.

- Advance payments and letters



with a heightened payment risk.

- Close dialogue maintained with the

trustees of the pension scheme on

investment and funding matters.

Risk appetite: Moderate

Change during the year and outlook

The Group’s revolving credit facilities were extended

during the year to December 2025.

The year-end bank covenant of net debt: EBITDA was

0.14x, well within the covenant limit of 3.0x.

The Group’s businesses faced inflationary cost

increases during the year and higher energy prices.

These were largely mitigated but could have a further

impact in 2023.

At the year end, the legacy UK defined benefit pension

scheme was £11.2m in surplus (on an IAS 19 basis).



carried out as at April 2021 and confirmed that the

scheme was £3.8m in surplus at that date. No further

contributions will therefore be required before the next

valuation as at April 2024.

Example key risk indicators  Link to strategy

- Deterioration in bank covenants

- Increase in net debt

- Interest rate increases

- Foreign exchange rate movements

- Increase in bad debts

- Increase in inflation

- Target growing segments

- Win market share

- Grow our US business



Chemring Group PLC Annual report and accounts 202270

STRATEGIC RISKS

I. OPERATIONAL

Risk and potential impacts Mitigation actions/factors

The Group’s manufacturing activities may be

exposed to business continuity risks, arising from

plant failures, supplier interruptions, quality issues

or large scale employee absences.

Planned new facility developments may be delayed

as a result of operational issues.

- Interruptions to production and sales could result

in financial loss, reputational damage and loss of

future business.

- A delay in completing new manufacturing facilities

could constrain capacity and limit future



- Major accident hazard analysis process and upset

condition management standard implemented

across the Group.

- Key performance indicators adopted, to provide

better visibility on operational performance and

to facilitate early identification of potential

production and quality issues.

- Advance purchases made of raw materials where

potential supply chain constraints are identified.

- Business continuity plans established across



- Continued capital investment in legacy facilities to

improve safety and reliability.

- Asset integrity programme implemented.

- Detailed plans developed for all significant capital

investment projects and additional dedicated

resource employed to oversee key projects.

- CV-19 Playbook implemented and supply chains

being actively managed to minimise the impact of

CV-19-related disruption.

- Business interruption risks insured



Risk appetite: Low to moderate

Change during the year and outlook

A multi-year capital investment programme was

initiated in 2019. This is designed to mitigate a

number of operational risks through a plant

automation and modernisation programme







Commissioning of the new automated manufacturing

facilities in Tennessee has progressed in line with plan.

Capital investment projects progressed at our

facilities in Scotland and Norway, and further

projects are planned for 2023.

Example key risk indicators  Link to strategy

- Number of process safety events

- Reduction in right first time and on-time



- Increase in supplier-related delays

- Increase in quality issues and



- Reduction in capital expenditure

- Delays in commissioning of facilities

- Target growing segments

- Win market share

- Grow our US business

See also: Group Chief Executive’s review



INHERENT RISK:

High LowMedium

TREND:

Increasing DecreasingStable

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

PRINCIPAL RISKS AND UNCERTAINTIES continued

STRATEGIC RISKS continued

J. PEOPLE

Risk and potential impacts Mitigation actions/factors

There is a risk that the market for talent in key

areas of expertise becomes more challenging.

Allied to this there is a risk of loss of key personnel.

As the shape of the Group’s business changes and

with an increased focus in high technology areas,

the Group may fail to build and retain an

appropriate skill base to facilitate successful

competition in new markets and product areas.

Employees may not be fully engaged with the

Chemring journey, purpose, products, customers

and values.

- Failure to recruit sufficient suitably qualified

personnel in key areas of the business may



growth aspirations.

- Failure to build and retain key skills will lead to



and deliver new contracts.

- If key personnel are not fully engaged with the

business purpose, values and products, and are

not appropriately incentivised, the ability of the

Group to retain them will be compromised. This

could result in loss of management expertise and

knowledge, and the Group’s operations may

suffer as a consequence.

- Chemring values of Safety, Excellence and

Innovation established.

- Development framework implemented



management and leadership skills and behaviours

particularly amongst our line manager and

supervisor population.

- Ongoing review of capability requirements

against the business strategy.

- Increased focus on DE&I.

- Culture review completed, facilitating the

development of a framework to support the

evolution of the Chemring culture.

- Employment Voice real-time engagement tool

deployed across the Group.

- Talent framework and succession planning

process implemented.

- Incentive arrangements enhanced to encourage

collaboration and create a Group focus at



Risk appetite: Moderate

Change during the year and outlook

Resourcing challenges continued to increase during

the year, particularly in parts of the US where





Salary inflation impacted a number of our

businesses and one-off cost-of-living payments were

made to a number of employees across the Group.

We continued to make good progress on the

implementation of our development framework

during the year, with over 340 line managers and

supervisors having participated in a structured

development programme.

We also continue to focus on communications using

a wide range of formal and informal challenges, both



The deployment across the Group of Employee

Voice enables us to monitor employee sentiment on

a continuous basis and gives employees the ability to

provide feedback on changes as they occur.

Example key risk indicators  Link to strategy

- Diversity statistics

- Increase in employee turnover

- Number of unfilled vacancies

- Employee sentiment scores

- Target growing segments

- Win market share

- Grow our US business



Chemring Group PLC Annual report and accounts 202272

LEGAL AND COMPLIANCE RISKS

K. COMPLIANCE AND CORRUPTION

Risk and potential impacts Mitigation actions/factors

The Group operates in over 50 countries

worldwide, in a highly regulated environment, and

is subject to the applicable laws and regulations



ensure that all of its businesses, its employees



comply with all relevant legal and regulatory

obligations. The nature of the Group’s operations

could also expose it to government and regulatory

investigations relating to safety and the environment,

import-export controls, money laundering, false

accounting, and corruption or bribery.

The Group requires a significant number of permits,

licences and approvals to operate its business, which

may be subject to non-renewal or revocation.

- Non-compliance could result in administrative,

civil or criminal liabilities, and could expose the

Group to fines, penalties, suspension or

debarment, and reputational damage.

- Loss of key operating permits and approvals

could result in temporary or permanent site

closures, and loss of business.

- Ethics & Compliance Committee established to

oversee compliance across the Group.

- Operational Framework in place, mandating

compliance with a range of policies and

procedures covering a wide range of legal



- Half-yearly operational assurance process

established as part of the Operational Framework.

- Central legal and compliance function assists and

monitors all Group businesses, supported by

dedicated internal legal resource in the US.

- Code of Conduct stipulates the standards of

acceptable business conduct required from all

employees and third parties acting on the

Group’s behalf.

- Updated Bribery Act Compliance Manual

implemented, incorporating enhanced

anti-bribery policies and procedures.

- Policy adopted to manage risks associated with

sales to customers in higher-risk territories.

Risk appetite: Low

Change during the year and outlook

The Operational Framework and the associated

operational assurance process has fundamentally

changed the management of legal and compliance

risks across the Group.

Further progress was made during the year on fully

embedding our Group-wide online compliance

system – the Chemring Compliance Portal. The

system hosts our Operational Framework policies

and associated training material, and automates our

anti-bribery processes.

Example key risk indicators  Link to strategy

- Regulatory intervention and penalties

- Non-renewal/revocation of licences and permits

- Breaches of policies

- Non-completion of compliance training

- Increase in whistleblowing reports

- Target growing segments

- Win market share

See also: Ethics and business conduct



REPUTATIONAL RISKS

L. CYBER-SECURITY

Risk and potential impacts Mitigation actions/factors

Cyber-security and related risks are key emergent

areas of critical importance for all businesses,

particularly for those involved in the defence and

security sector. Threats can emanate from a wide

variety of sources and could target various

systems for a wide range of purposes, making

response particularly difficult.

The data and systems which need to be protected

include customer-classified or sensitive

information, commercially sensitive information,

employee-related data and safety-critical

manufacturing systems.

- The Group may suffer from critical systems

failures, or its intellectual property, or that of its

customers, may fall into the hands of third parties.

- In addition to business interruption and financial

loss, the Group may suffer reputational damage,

and its business of providing cyber-security services

to customers may be irreparably damaged.

- Threat assessment completed and an action



threats implemented.

- Security Committee established.

- Group-wide cyber-security standard adopted

based on the US DFARS “CMMC Level 2”

standard and a number of cyber-security

defence measures adopted, encompassing, as

appropriate to the nature of the threat and

sensitivity of data or systems being protected,

hardware, software, system, process or

people-based solutions.

- Where appropriate, government or commercial

accreditation of networks and systems obtained in

support of the overall cyber-security programme.

- IT and security systems review included within

the internal audit programme.

- Cyber incident scenario planning workshop held.

Risk appetite: Low

Change during the year and outlook

We have an ongoing programme to address IT and

cyber-security but the threats in this area continue

to evolve and we therefore need to ensure that our

security arrangements evolve appropriately



Good progress was made towards achieving CMMC

Level 2 compliance at a number of businesses during

the year.

Example key risk indicators  Link to strategy

- Number of “phish” emails reported

- Number of system attacks and failures

- Target growing segments

- Win market share

INHERENT RISK:

High LowMedium

TREND:

Increasing DecreasingStable

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 73

VIABILITY STATEMENT AND GOING CONCERN

In accordance with the UK Corporate Governance Code, the Board





GOING CONCERN

The Group’s business activities, key performance indicators, and principal

risks and uncertainties are set out within the strategic report on pages 1



The directors believe that the Group is well placed to manage its business

risks successfully, despite the current uncertain economic outlook. The

Group’s forecasts and projections, taking account of reasonably possible

changes in trading performance, show that the Group should be able to

operate within the level of its current committed facilities.

KEY FINANCIAL METRICS

2022 Covenant

Revolving credit facility and overdraft 

Undrawn committed borrowing facilities 

Leverage ratio  Less than 3x

Interest cover ratio  Greater than 4x

The revolving credit facility and overdraft run to December 2025 with two

“one-year” options to extend at the lenders’ discretion. The Group was in

compliance with the covenants throughout the year.

ASSESSMENT OF NEAR-TERM PROSPECTS

As part of a regular assessment of the Group’s working capital and financing

position, the directors have prepared a detailed bottom-up two-year trading

budget and cash flow forecast for the period through to October 2024. This

has allowed the directors to assess going concern for a period of at least 12

months after the date of approval of the financial statements. This is in

addition to the Group’s longer-term strategic planning process. In assessing



- 



- the impact of macro-economic factors, particularly inflationary pressures,

supply chain challenges, interest rates and foreign exchange rates;

- the status of the Group’s existing financial arrangements and associated

covenant requirements;

- progress made in developing and implementing cost reduction programmes

and operational improvements;

- the availability of mitigating actions should business activities fall behind

current expectations, including the deferral of discretionary overheads and

restricting cash flows; and

- the long-term nature of the Group’s business which, taken together with

the Group’s order book, provides a satisfactory level of confidence to the

Board in respect of trading.

SENSITIVITY ANALYSIS

Additional detailed sensitivity analysis has been performed on the forecasts to

consider the impact of severe, but plausible, reasonable worst case scenarios

on the covenant requirements. These scenarios, which sensitised the

forecasts for specific identified risks, modelled the reduction in anticipated

levels of underlying EBITDA and the associated increase in net debt. These

scenarios included significant delays to major contracts and considered the

principal risks and uncertainties discussed in the strategic report. These

sensitised scenarios show headroom on all covenant test dates for the

foreseeable future.

In addition to the above, the directors continue to monitor developments

with, and the potential impact of CV-19 in the short and medium term, and

are, in particular, focused on the key risks of delays by customers in testing

and acceptance of products, disruption to production capacity and the impact

of the current situation on the Group’s supply chain. The CV-19 outbreak is

not currently having any material impact in relation to these risks or any other

potential impacts; however, the directors are monitoring the situation closely.

CONFIRMATION OF GOING CONCERN

After consideration of the above, the directors have a reasonable expectation

that the Group and the Company will have sufficient funds to continue to

meet its liabilities as they fall due for at least 12 months from the date of

approval of the financial statements and therefore have prepared the financial

statements on a going concern basis.

LONG-TERM VIABILITY

ASSESSMENT OF LONG-TERM PROSPECTS

The directors have assessed the Group’s viability over a three-year period to

October 2025 based on the above assessment, combined with the Group’s

strategic planning process, which gives greater certainty over the forecasting

assumptions used. Based on this assessment, the directors have a reasonable

expectation that the Group will be able to continue in operation and meet all

its liabilities as they fall due up to October 2025.

The directors have chosen a three-year period to assess viability to reflect



arrangements. These range from multi-year contracts such as the US Programs



PRINCIPAL RISKS

In considering our viability statement we have considered the principal risks

and uncertainties discussed in the strategic report and assessed the impact.

The impact of CV-19 on viability is clearly a consideration for all companies



defence and national security industrial base in all territories in which we

operate. All our businesses remain open with business continuity plans

mobilised at every location.

SENSITIVITY ANALYSIS

Sensitivity analyses were run to model the financial and operational impact







economy and future government policy and spending, underperformance in

executing the Group’s strategy, failure to deliver operational improvements,

the impact of a potential climate-related risk causing business interruption and

material movements in foreign exchange rates.

Consideration was also given to the plausibility of the occurrence of other

individual events that in their own right could have a material impact on the

Group’s viability.

CONFIRMATION OF VIABILITY

Based on the consolidated financial impact of the sensitivity analyses and

associated mitigating internal controls and risk management actions that are

either now in place or could be implemented, the Board has been able to

conclude that the Group will be able to maintain sufficient bank facilities to

meet its funding needs over the three-year period and the Group’s forecasts



Chemring Group PLC Annual report and accounts 2022

NON-FINANCIAL INFORMATION STATEMENT

This section of the strategic report constitutes

the Group’s non-financial information statement

and addresses the requirements of sections

414CA and 414CB of the Companies Act 2006.

The non-financial information is included within



and is cross-referenced below.

Our Code of Conduct provides direction to our

employees on the standards of behaviour and business

conduct which we expect from them. It sits alongside our

Operational Framework, which incorporates a wide range

of policies and procedures to enable our businesses to

comply with their legal obligations and to operate in a

safe, consistent and accountable way.

REPORTING REQUIREMENT

RELEVANT POLICIES WHICH GOVERN

 WHERE TO READ MORE PAGE

ENVIRONMENTAL MATTERS - Group health, safety and environmental policy - Introduction to sustainability

- Environment

- TCFD report



EMPLOYEES - People policy

- Group health, safety and environmental policy

- Directors’ remuneration policy

- Whistleblowing policy

- Code of Conduct

- Stakeholder engagement

- Our people

- Health and safety

- Ethics and business conduct

- Directors’ remuneration report



SOCIAL AND COMMUNITY

MATTE RS

- Community investment policy

- Code of Conduct

- Our people

- Ethics and business conduct



RESPECT FOR HUMAN RIGHTS - Modern Slavery Act Statement

- People policy

- Supplier Code of Conduct

- Code of Conduct

- Our people

- Ethics and business conduct



ANTI-BRIBERY AND

CORRUPTION

- Anti-corruption policy

- Bribery Act Compliance Manual

- Policy on sales to customers located in



- Offset policy

- Code of Conduct

- Ethics and business conduct 

BUSINESS MODEL - What we do

- Investment case

- Business model

- Market overview

- Strategy

STAKEHOLDERS - Stakeholder engagement

- Corporate governance report

RISK MANAGEMENT - Risk management

- Principal risks and uncertainties

NON-FINANCIAL KEY

PERFORMANCE INDICATORS

- Key performance indicators

- Health and safety

- Environment

- Our people

READ OUR CODE OF CONDUCT

POLICY: CHEMRING.COM/

SUSTAINABILITY/ETHICS-AND-

BUSINESS-CONDUCT

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 

Chemring Group PLC Annual report and accounts 202276

CHAIRMAN’S INTRODUCTION TO GOVERNANCE

SUSTAINING A ROBUST



PURPOSE, VALUES AND CULTURE

The Board recognises its role in establishing the purpose and values









innovative technologies and products that detect and defeat ever-changing

























GOVERNANCE AND OPERATIONAL FRAMEWORK



























STRATEGY















businesses and ensuring that the requisite resources are allocated to the



ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

















“ Our Operational Framework and



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

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







- Board of directors

- Corporate governance report

- 

- 

- 

- 

UK CORPORATE GOVERNANCE CODE









Carl-Peter Forster



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 77

DIVERSITY













STAKEHOLDER ENGAGEMENT











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

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





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



BOARD EFFECTIVENESS











































BOARD EVALUATION











Carl-Peter Forster





























BOARD LEADERSHIP AND COMPANY PURPOSE



Culture







Conflicts of interest

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DIVISION OF RESPONSIBILITIES



Division of responsibilities



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COMPOSITION, SUCCESSION AND EVALUATION





Length of service

Evaluation





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

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AUDIT, RISK AND INTERNAL CONTROL





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

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

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REMUNERATION

Policies and practices

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112

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 

Chemring Group PLC Annual report and accounts 202278

BOARD OF DIRECTORS

EXPERIENCED LEADERSHIP

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International Group PLC* and the

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



















CARL-PETER FORSTER



MICHAEL ORD



ANDREW LEWIS



SARAH ELLARD

Group Legal Director



BOARD LENGTH OF SERVICE





BOARD LENGTH OF SERVICE





BOARD LENGTH OF SERVICE





BOARD LENGTH OF SERVICE





EXPERIENCE:

- 



- 



engineering sectors

- 



EXPERIENCE:

- 



- 

in both service and



EXPERIENCE:

- 

in the defence sector

- 

Director level

- Chartered Accountant

EXPERIENCE:

- 



- 

CHAIRMAN EXECUTIVE DIRECTORS

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 79

































































served in senior operational and







































Senior Independent Director at TT











also held senior financial positions at











She is also Chair of IOG plc* and a



















LAURIE BOWEN



ANDREW DAVIES

Senior Independent



STEPHEN KING



FIONA MACAULAY



BOARD LENGTH OF SERVICE





BOARD LENGTH OF SERVICE





BOARD LENGTH OF SERVICE





BOARD LENGTH OF SERVICE





EXPERIENCE:

- 



- 



EXPERIENCE:

- 



- 



EXPERIENCE:

- 





- Chartered Accountant

EXPERIENCE:

- 





- International and operational



Length of service















COMMITTEE MEMBERSHIP







Denotes Chair

NON-EXECUTIVE DIRECTORS

Chemring Group PLC Annual report and accounts 202280

CORPORATE GOVERNANCE REPORT



GOVERNANCE FRAMEWORK

The Board is responsible for ensuring leadership of the Group through effective













THE BOARD







THE CHIEF EXECUTIVE



EXECUTIVE COMMITTEE















RISK MANAGEMENT COMMITTEE











See page 64

(Risk management)

ETHICS & COMPLIANCE COMMITTEE











See page 57

(Ethics and business conduct)

SUSTAINABILITY COMMITTEE









See page 37

(Introduction to sustainability)

AUDIT COMMITTEE







See page 90

(Audit Committee report)

NOMINATION COMMITTEE







See page 94

(Nomination Committee report)

REMUNERATION COMMITTEE







See page 96

(Directors’ remuneration report)

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 81

HOW THE BOARD ESTABLISHES AND MONITORS CULTURE

 

SAFETY  

 



 

 

 

 

 



 





 





EMPLOYEES  Code of Conduct

 



 

 

 



 





 







 

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

 

 

 

 

 







 



 



 





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MANAGEMENT

 



 

 

 

 

 







 



 



PURPOSE











CULTURE AND VALUES



































Chemring Group PLC Annual report and accounts 202282

CORPORATE GOVERNANCE REPORT continued

 continued

BOARD ACTIVITIES IN 2022

 

 

 

 



 

 

 

the Group

 

acquisition of Geollect

 





 





 

 

 

 

 

 

 

 

dividend

 



 

 

on the businesses

 



 

 



 

 

 

 





 

succession plans

 

 

 



 



 

Group

 

 

 



 



 



 



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 83

HOW THE BOARD CONSIDERS STAKEHOLDERS IN ITS DECISION MAKING





- 

- 

- 

- 

- 

- 







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 

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 

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 

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Chemring Group PLC Annual report and accounts 202284

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

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- 



















































Further details on employee engagement more broadly



SHAREHOLDER ENGAGEMENT AND THE ANNUAL































































BOARD SITE VISITS

Site visits enable the Board to obtain a deeper understanding of the business







































LEADERSHIP OF THE US BUSINESSES AND THE US BOARD

































CORPORATE GOVERNANCE REPORT continued

 continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 85



COMPOSITION OF THE BOARD AND INDEPENDENCE





























TIME COMMITMENT OF DIRECTORS













APPROVAL OF DIRECTORS’ EXTERNAL APPOINTMENTS





















CONFLICTS OF INTEREST















- 

- 



- 



- 

EXPERIENCE OF THE BOARD









  

  

  

  

          

  

Governance 5



Chemring Group PLC Annual report and accounts 202286

BOARD ROLES AND RESPONSIBILITIES





 Responsible for the leadership of the Board and ensuring its overall effectiveness in directing the Group

 

 

 



 

 

 

 

 

 



 

 Oversees the finance functions across the Group

 Ensures effective financial controls and financial reporting processes are in place

 



 

 

 



 

agreed objectives

 

 

 

 

 



 

 

 

 

 

 

 

CORPORATE GOVERNANCE REPORT continued

 continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 87

BOARD MEETINGS AND ATTENDANCE













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  —  

  5(5)  

  5(5)  

  — — —

  5(5)  

  — — —

  5(5)  

  — — —







Board Audit    

    April   

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Chemring Group PLC Annual report and accounts 202288

BOARD APPOINTMENTS AND RE-ELECTION OF DIRECTORS



















DIVERSITY



















INDUCTION, TRAINING AND DEVELOPMENT



































INDEPENDENT ADVICE







PERFORMANCE EVALUATION











- 

- 

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- 

- 

- 

- 

- 

- 











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

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

















- 



- 



- 



- 

- 









CORPORATE GOVERNANCE REPORT continued



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 89



FINANCIAL AND BUSINESS REPORTING



















RISK MANAGEMENT AND INTERNAL CONTROL





















OPERATIONAL FRAMEWORK





provides an enhanced governance structure to enable us to operate in a















AUDIT





LONG-TERM VIABILITY STATEMENT







Chemring Group PLC Annual report and accounts 202290

INTRODUCTION























MEMBERSHIP OF THE AUDIT COMMITTEE





















AUDIT COMMITTEE REPORT

AUDIT COMMITTEE MEMBERS









Stephen King









 







 



 



 



non-audit services

 



 



 



OPERATION OF THE COMMITTEE











































STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 91















SIGNIFICANT ISSUES CONSIDERED BY THE COMMITTEE



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















THE COMMITTEE’S ACTIVITIES DURING THE YEAR

 





 







understandable

 Appropriateness and disclosure of





 



 



 





 



 

the Group

 





  

 Effectiveness and independence of the



 

auditor

 





 



  

 Effectiveness of the internal auditors and













FINANCIAL REPORTING











- 

- 

- 

- 

- 

- 

- 

Chemring Group PLC Annual report and accounts 202292

SIGNIFICANT ISSUES CONSIDERED BY THE COMMITTEE

 continued

















 



 



 



 







 



 

PROPOSED AUDIT AND CORPORATE GOVERNANCE REFORMS







































EXTERNAL AUDIT



















- 



- 



- 



- 

- the effectiveness of co-ordination of the individual business unit audits



- 



- 























































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AUDIT COMMITTEE REPORT continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 93

AUDITOR INDEPENDENCE

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

INTERNAL AUDIT





































- 

- 

- 

- 

- 



- 



- 















































Stephen King





Chemring Group PLC Annual report and accounts 202294

NOMINATION COMMITTEE REPORT

INTRODUCTION



























MEMBERSHIP OF THE COMMITTEE















 



 

 

 



OPERATION OF THE COMMITTEE





















BOARD COMPOSITION

























APPOINTMENTS TO THE BOARD











their valuable contribution to the Board and their roles as chair of the Audit













































NOMINATION COMMITTEE MEMBERS











Carl-Peter

Forster







STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 95

GENDER IDENTITY OR SEX OF THE BOARD AND EXECUTIVE MANAGEMENT





Percentage of

the Board



senior positions

on the Board



SID and Chair)





Percentage of



 5    

   0 1 

 — — — — —

ETHNIC BACKGROUND OF THE BOARD AND EXECUTIVE MANAGEMENT







Percentage of

the Board



senior positions

on the Board



SID and Chair)





Percentage of



  100   100

 — — — — —

 — — — — —

 — — — — —

 — — — — —

DIVERSITY, EQUITY AND INCLUSION





































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SUCCESSION PLANNING



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

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







Carl-Peter Forster





Chemring Group PLC Annual report and accounts 202296

DIRECTORS’ REMUNERATION REPORT



INTRODUCTION





- 



- 



- 

- 



- 













REMUNERATION COMMITTEE MEMBERS











MEMBERSHIP AND OPERATION OF THE





























Laurie Bowen







THE REMUNERATION COMMITTEE’S







SUMMARY OF MAJOR ACTIVITIES

AND DECISIONS OF THE COMMITTEE IN 2022

  



  Consideration of the 2021 annual bonus



 Approval of the 2022 annual bonus plan





 







 



 







 







 





PERFORMANCE FOR 2022 AND REMUNERATION OUTCOMES

















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

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



 



- PSP awards made on 22 March 2019 (subject, in part, to TSR performance over

the three-year period ended 21 March 2022):

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 97















- PSP awards made on 17 December 2019 (subject to performance over the three

years ended 31 October 2022):









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

























IMPLEMENTATION OF THE POLICY FOR 2023





















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













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





EMPLOYEE PAY AND STAKEHOLDER ENGAGEMENT





























































CONCLUSION











Laurie Bowen





Chemring Group PLC Annual report and accounts 202298

DIRECTORS’ REMUNERATION REPORT continued



2022 REMUNERATION YEAR IN SUMMARY

 

 

 

 

 

 

 

 

















 











EXECUTIVE DIRECTORS’ TOTAL PAY



ANNUAL BONUS PLAN OUTCOME





Total pay

£2,336k

£1,728k

£1,171k

Michael Ord

Andrew Lewis

Sarah Ellard

£0.0m £0.50m £1.0m £1.5m £2.0m £2.5m

Salary Annual bonus PSPPension and benefits

Total bonus

£764k150%

125%

£466k

£327k

Michael Ord

Andrew Lewis

Sarah Ellard

£0.0m £0.1m £0.2m £0.3m £0.4m £0.5m £0.8m£0.7m£0.6m

Target (% of salary) Maximum (% of salary)Actual (% of salary)

147%90%

122.5%75%

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 99

PERFORMANCE SHARE PLAN OUTCOME

















Sarah Ellard

          







Value of shares vesting

Accrued dividends

Chemring Group PLC Annual report and accounts 2022100

DIRECTORS’ REMUNERATION REPORT continued









DIRECTORS’ EMOLUMENTS (AUDITED)







fees





benefits



Pension

benefits



Total





Bonus

(cash and

deferred

shares)





PSP





Total





Total



Executives

 2022 514 21 51 586 764 986 1,750 2,336

2021  21      

 2022 379 20 76 475 466 787 1,252 1,728

2021  20      

Sarah Ellard 2022 265 20 53 338 327 506 833 1,171

2021  20 51     

Non-executives

 2022 205 — — 205 — — — 205

2021 200 — — 200 — — — 200



2022 71 — — 71 — — — 71

2021  — —  — — — 





2022 66 — — 66 — — — 66

2021  — —  — — — 





2022 66 — — 66 — — — 66

2021  — —  — — — 

 2022 56 — — 56 — — — 56

2021 55 — — 55 — — — 55

Total remuneration 2022 1,622 61 180 1,863 1,557 2,279 3,836 5,699

2021        



 

 



 

 















 





 



 



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 101

BASE SALARY AND BENEFITS PAID DURING THE YEAR (AUDITED)













Annual salary from

1 January 2022 to

31 October 2022

Michael Ord  £520,000

Andrew Lewis  £380,358

Sarah Ellard  £266,646



DETAILS OF VARIABLE PAY OPPORTUNITY IN THE YEAR







including inter alia





Weighting

(80% of overall bonus) 



 Target Actual







(continuing operations)

50% Threshold

Target

Stretch













 



(continuing operations)

50% Threshold

Target

Stretch













 







Strategic objective target Performance against targets



- 



- 

- 

- 



- 



Achieved in full.



- 

- 



- 

- 

- 

- 

- 





- 





- 









- 



- 



- 



- 

Energetics businesses to capture the opportunities resulting in



- 

- 



Achieved at 75% of maximum in light of the Roke USA sales

target not being achieved and delays in the AVCAD Program

of Record.

Chemring Group PLC Annual report and accounts 2022102

Strategic objective target Performance against targets



- 



- 

- 

- 









- 



- 





- 

Achieved at 75% of maximum in light of the Employee Voice

participation target not being met.



- 

- 

- 

- 



- 

- 



- 



- 





- 



- 



- 



Achieved in full.



- 



- 

- 



- 



- 



Achieved in full.















Bonus paid in

respect of

financial targets



Bonus paid in

respect of

strategic

objectives



Total bonus



Michael Ord    

Andrew Lewis    

Sarah Ellard    



 





DETAILS OF VARIABLE PAY OPPORTUNITY IN THE YEAR continued

 continued

DIRECTORS’ REMUNERATION REPORT continued

 continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 103







 Date of grant  

Michael Ord   

Andrew Lewis   

Sarah Ellard   



 



Vesting of March 2019 PSP awards











 Vesting date



at grant



vested



lapsed

Michael Ord    —

Andrew Lewis    —

Sarah Ellard    —





vested

Value of accrued

dividends



vested

Michael Ord   

Andrew Lewis   

Sarah Ellard   



 

Vesting of December 2019 PSP awards



 Threshold vesting 



































 Vesting date



at grant



to vest



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Michael Ord    —

Andrew Lewis    —

Sarah Ellard    —



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Value of accrued

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

to vest

Michael Ord   

Andrew Lewis   

Sarah Ellard   



 

Chemring Group PLC Annual report and accounts 2022104

DETAILS OF VARIABLE PAY OPPORTUNITY IN THE YEAR continued

 continued

PSP awards granted in the year



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Vesting



Michael Ord       









Andrew Lewis      

Sarah Ellard      







 

 

 

 

 



 



 

 

 

 

Upper quartile or above 



 

 

 

 

 





DIRECTORS’ REMUNERATION REPORT continued

 continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 105

PENSION (AUDITED)





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during year

(less members’

contributions)

£’000

Value of

benefit

for single

figure

£’000

Pension



Cash



Pension

£’000 p.a.

Cash

£’000

Michael Ord 51 — — — — — — — 51

Andrew Lewis  — — — — — — — 76

Sarah Ellard     24 72 461 — 53



 



 

 

 







PAYMENTS TO PAST DIRECTORS AND PAYMENTS FOR LOSS OF OFFICE



REMUNERATION IN THE WIDER WORKFORCE

































Chemring Group PLC Annual report and accounts 2022106

DIRECTORS’ SHAREHOLDINGS (AUDITED)



















of shares)

Value of









Guideline





conditions under the PSP

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

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options





Dec 2020



Dec 2021



Total at



2022

Michael Ord         

Andrew Lewis         

Sarah Ellard          

Carl-Peter Forster  — — — — — — — —

Laurie Bowen  — — — — — — — —

Andrew Davies — — — — — — — — —

Stephen King  — — — — — — — —

Fiona MacAulay — — — — — — — — —



 





OUTSTANDING PSP AWARDS (AUDITED)





2021



Date of

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

during



Lapsed

during



Vested

during





2022

Michael Ord

 — —  —  

 — — — 

 

 — — —   

—  — —   

949,085 255,555 — (421,568) 783,072

Andrew Lewis

 — —  —  

 — — — 

 

 — — —   

—  — —   

757,324 195,386 — (336,391) 616,319

Sarah Ellard

 — —  —  

 — — — 

 

 — — —   

—  — —   

499,666 136,973 — (216,361) 420,278



 

DIRECTORS’ REMUNERATION REPORT continued



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 107



 Director





Threshold

vesting



vesting















Sarah Ellard























Upper quartile



















Sarah Ellard























Upper quartile



















Sarah Ellard























Upper quartile





















OUTSTANDING DEFERRED BONUS SHARE AWARDS (AUDITED)





2021



Date of

vesting

Closing

share price on

date of grant (p)



during



Lapsed

during



Vested

during





2022

Michael Ord

 — — —   

 — — —   

—  — —   

172,322 83,481 — — 255,803

Andrew Lewis

 — — —   

 — — —   

—  — —   

110,002 51,060 — — 161,062

Sarah Ellard

 — — —   

 — — —   

—  — —   

70,752 35,795 — — 106,547

Chemring Group PLC Annual report and accounts 2022108

OUTSTANDING SHARESAVE OPTIONS (AUDITED)





2021





price



date



during



Lapsed

during



Vested

during





2022

Michael Ord

 — — —   



16,853 — — — 16,853

Andrew Lewis

 — — —  202p 



8,910 — — — 8,910

Sarah Ellard

 — — —  202p 



8,910 — — — 8,910

TOTAL SHAREHOLDER RETURN PERFORMANCE GRAPH











Chemring

TSE 250

TSE SmallCap

£350

£300

£250

£200

£150

£100

£50

£0

31 Oct 12 31 Oct 13 31 Oct 14 31 Oct 15 31 Oct 16 31 Oct 17 31 Oct 18 31 Oct 19 31 Oct 20 31 Oct 21 31 Oct 22

Source: Datastream (Thomson Reuters)

CHIEF EXECUTIVE’S REMUNERATION TABLE

























 





 

  2015     2020 2021 2022

          2,336

Annual bonus

          98%



        



 100%

DIRECTORS’ REMUNERATION REPORT continued

 continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 109

PERCENTAGE CHANGE IN THE DIRECTORS’ REMUNERATION





 2020 vs 2021 2021 vs 2022

 Benefits Annual bonus  Benefits Annual bonus  Benefits Annual bonus

         

         

Group Legal Director &

    

    

         

    

    

    



    

         

    



    

         



 

 



 

 

CHIEF EXECUTIVE’S PAY RATIO









- 



- 







 





50th percentile







2022    

2021    

2020    

 

 25th percentile 50th percentile  25th percentile 50th percentile 

2022      





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



Chemring Group PLC Annual report and accounts 2022110

RELATIVE IMPORTANCE OF SPEND ON PAY



2022

£m

2021

 

Staff costs 169.7  

Dividends 14.4  

Retained profits 87.2  





ADVISERS TO THE REMUNERATION COMMITTEE







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





SHAREHOLDER VOTING ON THE DIRECTORS’ REMUNERATION POLICY AT THE 2022 ANNUAL GENERAL MEETING

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DIRECTORS’ REMUNERATION REPORT

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KEY OBJECTIVES



- 



- 

> 

> 

> 



- 









DECISION MAKING PROCESS













CONSIDERATION OF CODE PROVISIONS IN DETERMINING POLICY





 



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

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

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





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

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

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





























































Chemring Group PLC Annual report and accounts 2022112

POLICY SUMMARY











  Operation  

Salary

- 





the role

- Provides an appropriate level of







- 



- 







- 







- 





- 











- 







Bonus

- 



- 



- 



receive dividend equivalents







- 





- Vesting of deferred shares is subject



“good leaver” scenarios) at the end



the bonus

- 





- Non-pensionable

- 

on vesting of deferred share





have been paid on the deferred

shares during the deferral period

- 

- 



- 













- 







- 



an underpin based on the





including inter alia levels of





- 

















- 





DIRECTORS’ REMUNERATION REPORT continued

 continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 113

Long-term

incentive plan

(performance

share plan

– “PSP”)

- 



strategic objectives of delivering





- 







- 







- 





- 







- 



in the plan rules during the



- 









- 















- 









- 









- 













- 





All-employee

share scheme

- 







Sharesave Plan

- 



- 





- 

Pension

- 



- Ongoing pension provision is in the







- 





closed to future accrual for the



- 



paid in lieu of occupational pension



- 



paid in lieu of occupational pension



- 















- 







- 

Other benefits

- 



and retention

- 





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

- 





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- 



- 



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

- 







- 

Chemring Group PLC Annual report and accounts 2022114

Minimum

shareholding

requirements

- 



- 















- 



to hold shares to the value of the











be assessed at the point of stepping





 

 

 

 



 



 





 



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COMMITTEE DISCRETIONS







- 

- 

- 

- 

- 



- 

- 















HOW THE EXECUTIVE DIRECTORS’ REMUNERATION POLICY RELATES TO THE WIDER GROUP





























Provision 

Contract dates 





Notice period 

Termination payments 







Chemring Group PLC Annual report and accounts 2022116

POLICY IN RESPECT OF THE CHAIRMAN AND NON-EXECUTIVE DIRECTORS

  Operation 





The Chairman’s

and non-

executive

directors’ fees



practice and set at a level that is

sufficient to attract and retain



- 









- 







- 

- 

incentive plans

- 



thereon

- 





-  - 

CHAIRMAN’S AND NON-EXECUTIVE DIRECTORS’ LETTERS OF APPOINTMENT











   

Carl-Peter Forster   

Laurie Bowen  1 August 2022 

Andrew Davies   

Stephen King   

Fiona MacAulay   

DIRECTORS’ REMUNERATION REPORT continued

 continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 117

APPLICATION OF THE REMUNERATION POLICY IN 2023





 

Salary - 

> 

> 

> 

- 







Benefits - 

Pension - 



Bonus - 



- 



>  

>  

>  

- 

> 





> 



> 

> 

> 



> 

> 

> 

> 

> 

- 











- 

inter alia

Chemring Group PLC Annual report and accounts 2022118

APPLICATION OF THE REMUNERATION POLICY IN 2023 continued

 continued

 

Performance

Share Plan

(“PSP”)

- 

- 





- 







 

 

 

- 



 

 

 

Upper quartile or above 

- 



 

 

 

 

 

- 









 

 



DIRECTORS’ REMUNERATION REPORT continued

 continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 119

APPLICATION OF THE REMUNERATION POLICY IN 2023 continued















Percentage

increase

  

  

  —

  —

Senior Independent Director fee  —

  —

APPROVAL OF THE DIRECTORS’ REMUNERATION REPORT



Signed on behalf of the Board

Laurie Bowen





Chemring Group PLC Annual report and accounts 2022120

DIRECTORS’ REPORT











- 

- 

- 

- 

- 

BUSINESS REVIEW















RESULTS AND DIVIDENDS

















DIRECTORS AND THEIR INTERESTS







































EMPLOYEES AND EMPLOYEE CONSULTATION





POLITICAL DONATIONS



CONTRACTUAL ARRANGEMENTS

















RESEARCH AND DEVELOPMENT





CHANGE OF CONTROL











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





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











Details of the rights attaching to shares are set out in the Articles of























































STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 121



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

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

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

























SUBSTANTIAL SHAREHOLDINGS













 

 

 

 

 

 

 

Aviva PLC and its subsidiaries 

 

 

Schroders Plc 

 

 

 

 

Prudential Plc 

 

 

 



 

EMPLOYEE SHARE SCHEMES AND PLANS





















































GOING CONCERN







Chemring Group PLC Annual report and accounts 2022122

ADDITIONAL INFORMATION, AS REQUIRED BY LISTING RULES

REQUIREMENT 9.8.4









- 

- 

- 

- 

- 

- 

- 

- 









None of the shareholders is considered to be a Controlling Shareholder (as





PROVISION OF INFORMATION TO THE AUDITOR

















AUDITOR







ANNUAL GENERAL MEETING







STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF



The directors are responsible for preparing the annual report and the Group















 Reduced

Disclosure Framework.











- 

- 



- 



- 





- 



- 



















































RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT





- 







- 



















Michael Ord Sarah Ellard

 

 

DIRECTORS’ REPORT continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 123

CONSOLIDATED INCOME STATEMENT

For the year ended 31 October 2022

2022 2021

Non- Non-

Underlying underlying Underlying underlying

performance items

To t a l performance items

Total

Note £m £m £m £m £m £m

Continuing operations

Revenue 1,2 442.8 — 442.8 393.3 — 393.3

Operating profit 2,4 64.0 (10.7) 53.3 57.5 (7.1) 50.4

Finance expense 6 (1.5) — (1.5) (1.6) — (1.6)

Profit before tax 62.5 (10.7) 51.8 55.9 (7.1) 48.8

Taxation 7 (5.7) 1.3 (4.4) (8.3) 1.0 (7.3)

Profit after tax 56.8 (9.4) 47.4 47.6 (6.1) 41.5

Earnings per ordinary share

Basic 9 20.2p 16.9p 16.9p 14.7p

Diluted 9 19.7p 16.4p 16.5p 14.4p

1. Further information about non-underlying items is set out in note 3.

Chemring Group PLC Annual report and accounts 2022124



For the year ended 31 October 2022

2022 2021

Note £m £m

Profit after tax attributable to equity holders of the parent as reported 47.4 41.5

Items that will not be reclassified subsequently to profit and loss

Remeasurement of the defined benefit pension schemes 29 (2.3) 6.2

Movement on deferred tax relating to pension schemes 23 0.8 (2.2)

(1.5) 4.0

Items that may be reclassified subsequently to profit and loss

Exchange differences on translation of foreign operations 35.0 (8.3)

Tax on exchange differences on translation of foreign operations (0.4) 0.1

34.6 (8.2)

Total comprehensive income attributable to equity holders of the parent 80.5 37.3

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 125

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 October 2022

Share Special

Share premium capital Translation Retained

capital account reserve reserve earnings * Total

£m £m £m £m £m £m

At 1 November 2021 2.8 307.1 12.9 (27.1) 57.1 352.8

Profit after tax — — — — 47.4 47.4

Other comprehensive income/(loss) — — — 35.0 (2.3) 32.7

Tax relating to components of other comprehensive income/(loss) — — — (0.4) 0.8 0.4

Total comprehensive income — — — 34.6 45.9 80.5

Ordinary shares issued — 0.6 — — — 0.6

Share-based payments (net of settlement) — — — — 5.6 5.6

Dividends paid — — — — (14.4) (14.4)

Purchase of shares by employee share ownership plan trust — — — — (7.0) (7.0)

At 31 October 2022 2.8 307.7 12.9 7.5 87.2 418.1

Share Special

Share premium capital Revaluation Translation Retained Own

capital account reserve reserve reserve earnings shares Total

£m £m £m £m £m £m £m £m

At 1 November 2020 2.8 306.7 12.9 1.0 (18.9) 28.0 (2.9) 329.6

Profit after tax — — — — — 41.5 — 41.5

Other comprehensive (loss)/income — — — — (8.3) 6.2 — (2.1)

Tax relating to components of other

comprehensive (loss)/income — — — — 0.1 (2.2) — (2.1)

Total comprehensive income — — — — (8.2) 45.5 — 37.3

Ordinary shares issued — 0.4 — — — — — 0.4

Share-based payments (net of settlement) — — — — — 4.5 — 4.5

Dividends paid — — — — — (11.9) — (11.9)

Purchase of shares by employee share

ownership plan trust — — — — — (7.1) — (7.1)

Transactions in own shares — — — — — (2.9) 2.9 —

Transfer between reserves — — — (0.1) — 0.1 — —

At 31 October 2021 2.8 307.1 12.9 0.9 (27.1) 56.2 — 352.8

* Retained earnings as at 1 November 2021 includes £0 .9m that was previously classified as a revaluation reserve. This balance has been amalgamated into the retained earnings

balance from 1 November 2021 on the basis that it is immaterial.

Chemring Group PLC Annual report and accounts 2022126

2022 2021

Note £m £m £m £m

Non-current assets

Goodwill 10 118.1 108.7

Development costs 11 34.6 30.0

Other intangible assets 11 11.4 14.1

Property, plant and equipment 12 231.3 198.7

Retirement benefit surplus 29 11.2 13.7

Deferred tax 23 32.3 18.2

438.9 383.4

Current assets

Inventories 14 99.6 80.7

Trade and other receivables 15 61.1 60.6

Cash and cash equivalents 16 19.8 5.8

Derivative financial instruments 21 0.7 1.0

181.2 148.1

Total assets 620.1 531.5

Current liabilities

Borrowings 17 — (0.4)

Lease liabilities 18 (1.8) (1.4)

Trade and other payables 19 (98.2) (85.7)

Provisions 22 (1.6) (2.6)

Current tax (7.9) (12.0)

Derivative financial instruments 21 (4.2) (0.4)

(113.7) (102.5)

Non-current liabilities

Borrowings 17,32 (20.9) (28.1)

Lease liabilities 18 (4.2) (2.4)

Provisions 22 (16.8) (14.9)

Deferred tax 23 (45.2) (30.7)

Derivative financial instruments 21 (1.1) —

Preference shares 17,24 (0.1) (0.1)

(88.3) (76.2)

Total liabilities (202.0) (178.7)

Net assets 418.1 352.8

Equity

Share capital 24 2.8 2.8

Share premium account 25 307.7 307.1

Special capital reserve 25 12.9 12.9

Revaluation reserve 25 — 0.9

Translation reserve 25 7.5 (27.1)

Retained earnings 87.2 56.2

Total equity 418.1 352.8

These financial statements of Chemring Group PLC (registered number 86662) were approved and authorised for issue by the Board of directors on



Signed on behalf of the Board

Michael Ord Andrew Lewis

Director Director

CONSOLIDATED BALANCE SHEET

As at 31 October 2022

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 127

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 October 2022

2022 2021

Note £m £m

Cash flows from operating activities

Cash generated from continuing underlying operations 30 90.1 80.0

Cash impact of continuing non-underlying items (1.1) (1.3)

Cash impact of discontinued non-underlying items — (0.4)

Cash flows from operating activities 89.0 78.3

Tax paid (8.5) (2.6)

Net cash inflow from operating activities 80.5 75.7

Cash flows from investing activities

Purchases of intangible assets (3.0) (2.2)

Purchases of property, plant and equipment (31.5) (28.0)

Acquisition of subsidiary net of cash acquired 28 — (5.1)

Proceeds on disposal of subsidiary — 0.4

Short-term funding to defined benefit pension scheme 34 (2.0) —

Proceeds on disposal of property, plant and equipment 6.0 —

Net cash outflow from investing activities (30.5) (34.9)

Cash flows from financing activities

Dividends paid 8 (14.4) (11.9)

Purchase of own shares (7.0) (7.1)

Net proceeds for transactions in own shares 0.1 0.4

Finance expense paid (1.3) (2.6)

Capitalised facility fees paid — (1.1)

Drawdown of borrowings 30.0 29.2

Repayments of borrowings (41.0) (55.7)

Payment of lease liabilities (2.2) (1.6)

Net cash outflow from financing activities (35.8) (50.4)

Increase/(decrease) in cash and cash equivalents 31 14.2 (9.6)

Cash and cash equivalents at beginning of year (including bank overdraft) 5.4 14.7

Effect of foreign exchange rate changes 0.2 0.3

Cash and cash equivalents at end of year (including bank overdraft) 16,32 19.8 5.4

Chemring Group PLC Annual report and accounts 2022128

1. REVENUE

All of the Group’s revenue is derived from the sale of goods and the provision of services. The following table provides an analysis of the Group’s revenue



Sensors Countermeasures

& Information & Energetics 2022

£m £m £m

UK 100.3 51.5 151.8

US 54.9 166.8 221.7

Europe 5.7 48.8 54.5

Asia Pacific 1.2 10.4 11.6

Rest of the world 0.2 3.0 3.2

162.3 280.5 442.8

Sensors Countermeasures

& Information & Energetics 2021

£m £m £m

UK 75.7 44.4 120.1

US 62.9 137.3 200.2

Europe 5.1 48.6 53.7

Asia Pacific 2.1 13.7 15.8

Rest of the world 0.8 2.7 3.5

146.6 246.7 393.3

The directors consider that the only countries that are significant in accordance with IFRS 8 Operating Segments are the US and the UK.



Sensors Countermeasures

& Information & Energetics 2022

£m £m £m

Goods 53.1 274.3 327.4

Services 109.2 6.2 115.4

162.3 280.5 442.8

Sensors Countermeasures

& Information & Energetics 2021

£m £m £m

Goods 56.4 242.8 299.2

Services 90.2 3.9 94.1

146.6 246.7 393.3

All revenues recognised arose from contracts with customers.





2. BUSINESS SEGMENTS

IFRS 8 Operating Segments 

reviewed by the Group Chief Executive and the Board to allocate resources to the segments and to assess their performance. For management purposes,







Sensors & Information Provision of consulting and technology services to solve security-critical issues. Development and manufacture of electronic

countermeasures, chemical and biological threat detection equipment and explosive hazard detection (“EHD”) equipment.

Countermeasures



Development and manufacture of expendable countermeasures for air and sea platforms, cartridge/propellant actuated devices,

pyrotechnic devices for satellite launch and deployment, missile components, propellants, separation sub-systems, actuators and

energetic materials.

NOTES TO THE GROUP FINANCIAL STATEMENTS

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 129

2. BUSINESS SEGMENTS continued



Sensors Countermeasures

& Information & Energetics Unallocated* To t a l

Year ended 31 October 2022 £m £m £m £m

Revenue 162.3 280.5 — 442.8

Segment result before depreciation, amortisation and non-underlying items 33.0 64.2 (14.9) 82.3

Depreciation (3.0) (15.1) — (18.1)

Amortisation — (0.2) — (0.2)

Segmental underlying operating profit 30.0 48.9 (14.9) 64.0

Amortisation of acquired intangibles (note 3) (2.5) (2.1) — (4.6)

Non-underlying items (note 3) (1.2) — (4.9) (6.1)

Impact of non-underlying items on profit before tax (note 3) (3.7) (2.1) (4.9) (10.7)

Segmental operating profit 26.3 46.8 (19.8) 53.3

Finance expense (1.5) (1.5)

Profit before tax (21.3) 51.8

Ta x (4.4) (4.4)

Profit for the year (25.7) 47.4

Sensors Countermeasures

& Information & Energetics Unallocated* Total

Year ended 31 October 2021 £m £m £m £m

Revenue 146.6 246.7 — 393.3

Segment result before depreciation, amortisation and non-underlying items 34.4 56.1 (14.1) 76.4

Depreciation (2.7) (15.5) — (18.2)

Amortisation (0.1) (0.6) — (0.7)

Segmental underlying operating profit 31.6 40.0 (14.1) 57.5

Amortisation of acquired intangibles (note 3) (4.1) (2.1) — (6.2)

Non-underlying items (note 3) (1.6) — 0.7 (0.9)

Impact of non-underlying items on profit before tax (note 3) (5.7) (2.1) 0.7 (7.1)

Segmental operating profit 25.9 37.9 (13.4) 50.4

Finance expense (1.6) (1.6)

Profit before tax (15.0) 48.8

Ta x (7.3) (7.3)

Profit for the year (22.3) 41.5

* Unallocated items are specific corporate level costs that cannot be allocated to a business segment.

Assets and liabilities by segment are not reported to the Group Chief Executive on a monthly basis; therefore they are not used as a key decision making tool



2022 2021

Non-current assets by location £m £m

UK 149.4 143.4

US 211.5 178.1

Norway 18.0 12.4

Australia 16.5 17.6

395.4 351.5

INFORMATION ON MAJOR CUSTOMERS



Group’s business segments. This was the only individual customer where direct sales accounted for more than 10% of Group revenue for the year.

Chemring Group PLC Annual report and accounts 2022130

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

3. ALTERNATIVE PERFORMANCE MEASURES

In accordance with our accounting policy we have presented the following reconciliation of Alternative Performance Measures used throughout this report to



2022 2021

Non-underlying items and non-underlying measures £m £m

(Loss)/gain on the movement in the fair value of derivative financial instruments (note 21) (4.1) 0.7

Acquisition expenses (note 28) (2.0) (1.6)

Impact of non-underlying items on EBITDA (6.1) (0.9)

Amortisation of acquired intangibles arising from business combinations (note 11) (4.6) (6.2)

Impact of non-underlying items on profit before tax (10.7) (7.1)

Tax impact of non-underlying items 1.3 1.0

Impact of non-underlying items on profit after tax (9.4) (6.1)

Underlying profit after tax 56.8 47.6

Statutory profit after tax 47.4 41.5

The Alternative Performance Measures (“APMs”) used may not be comparable across companies. The impact of non-underlying items on statutory basic and

diluted EPS, as well as a reconciliation to the IFRS equivalent, is presented in note 9. The impact of non-underlying items on cash generated from operating

activities, as well as a reconciliation to the IFRS equivalent, is presented in note 30. The cash impact of non-underlying items includes the impact of exceptional

items from prior years where the income statement and cash flow timings differ.

AMORTISATION OF ACQUIRED INTANGIBLES



arising from business combinations is associated with acquisition accounting under IFRS 3 Business Combinations. IFRS requires intangibles to be recognised on

acquisition that would not have been capitalised had the business grown organically under Chemring’s ownership. As such, these costs are not reflective of the



rather than organically developed, have been excluded from the underlying measures.

DERIVATIVE FINANCIAL INSTRUMENTS



underlying earnings to ensure the recognition of the gain or loss on the derivative matches the timing of the underlying transaction.

ACQUISITION EXPENSES



on continued employment of the former owners of Cubica, which has been accounted for as equity-settled share-based payments under IFRS 2 Share-based

Payments. We have classified this cost as a non-underlying item as it is a non-recurring cost relating to an acquisition. See note 28 for further details. The



year. The acquisition expenses are not reflective of the underlying costs of the Group and therefore, in order to provide an explanation of results that is not



TA X



NET DEBT

A reconciliation and analysis of net debt is presented in notes 31 and 32.

EBITDA



2022 2021

£m £m

Operating profit 53.3 50.4

Amortisation arising from business combinations (note 11) 4.6 6.2

Amortisation of development costs (note 11) 0.1 0.6

Amortisation of patents and licences (note 11) 0.1 0.1

Depreciation of property, plant and equipment (note 12) 18.1 18.2

EBITDA 76.2 75.5

Non-underlying items 6.1 0.9

Underlying EBITDA 82.3 76.4

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 131

3. ALTERNATIVE PERFORMANCE MEASURES continued

CONSTANT CURRENCY REVENUE AND OPERATING PROFIT

In our financial review we present a measure of constant currency revenue and operating profit. This is calculated by translating our results for the year ended 31

October 2022 at the average exchange rates for the comparative year ended 31 October 2021.

4. OPERATING PROFIT



2022 2021

£m £m

Research and development costs – internally-funded 7.5 8.5

Amortisation – arising from business combinations 4.6 6.2

– development costs 0.1 0.6

– patents and licences 0.1 0.1

Depreciation of property, plant and equipment – owned assets 16.5 16.8

– leased assets 1.6 1.4

Impairment of development costs 2.2 —

(Profit)/loss on disposal of non-current assets (1.9) 0.1

Government grant amortisation — (0.5)

Foreign exchange losses/(gains) 2.0 (0.8)

Staff costs (note 5) 169.7 146.0

Cost of inventories recognised as an expense 144.3 128.0

The remaining items within operating profit predominantly relate to general and administrative expenses and production overheads, and includes £4.8m of other

income.



2022 2021

Auditor’s remuneration £m £m



– the audit of the Company’s annual accounts 0.4 0.3

– the audit of the Company’s subsidiaries, pursuant to legislation 0.7 0.7

1.1 1.0

Other services

Audit-related assurance services 0.1 0.1

1.2 1.1



Audit Committee is set out in the Audit Committee report on pages 90 to 93, and includes an explanation of how auditor objectivity and independence is

safeguarded when non-audit services are provided by the auditor. No services were provided by the auditor pursuant to contingent fee arrangements.

5. STAFF COSTS



2022 2021

Number Number

Direct 1,435 1,381

Indirect 899 905

2,334 2,286



2022 2021

£m £m

Wages and salaries 141.8 121.4

Social security costs 14.2 12.9

Other pension costs 7.3 6.0

Share-based payment charge 6.4 5.7

Staff costs 169.7 146.0



equity-settled share-based payments. These amounts are included in non-underlying costs, see notes 3 and 27 for details.

Chemring Group PLC Annual report and accounts 2022132

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

6. FINANCE EXPENSE

2022 2021

£m £m

Bank overdraft and loan interest 1.6 1.3

Amortisation of debt finance costs 0.3 0.6

Interest cost on retirement benefit obligations (note 29) 0.1 0.1

Lease liability interest 0.1 0.1

2.1 2.1

Amount capitalised (0.6) (0.5)

Finance expense 1.5 1.6

The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s





7. TAXATION

2022 2021

£m £m

Current tax charge – current year 5.0 7.2

Current tax credit – prior year (1.7) (1.9)

Deferred tax charge – current year (note 23) 0.7 1.2

Deferred tax charge – prior year (note 23) 0.4 0.8

Tax charge 4.4 7.3







2022 2021

£m £m

Profit before tax 51.8 48.8

 9.8 9.3

Expenses not deductible for tax purposes 0.1 —

Changes in tax rates — 1.7

Tax losses/future interest deductions not previously recognised (4.6) (4.4)

Release of tax risk provision (1.7) —

Prior period adjustments (1.3) (1.1)

Overseas profits taxed at rates different to the UK standard rate 2.1 1.8

Tax charge 4.4 7.3













The UK Finance Bill 2021 was published on 11 March 2021 and substantively enacted on 24 May 2021. The bill provides for an increase in the rate of corporation

tax from 19% to 25% with effect from 1 April 2023. UK deferred tax balances were recalculated in accordance with these rate changes during the year ended 31

October 2021.

FACTORS AFFECTING THE TAX CHARGE IN FUTURE YEARS



from the implementation of the OECD’s BEPS actions and European Commission initiatives such as the proposed tax and financial reporting directive or as a

consequence of state aid investigations, future corporate acquisitions and disposals and any restructuring of our business.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 133

8. DIVIDENDS

2022 2021

£m £m

Dividends paid on ordinary shares of 1p each

Final dividend of 3.2p per share for the year ended 31 October 2021 (2.6p per share for the year ended 31 October 2020) 9.1 7.4

Interim dividend of 1.9p per share for the year ended 31 October 2022 (1.6p per share for the year ended 31 October 2021) 5.3 4.5

Total dividends 14.4 11.9

Subject to approval at the Annual General Meeting, the final dividend of 3.8p per ordinary share will be paid on 14 April 2023 to all shareholders registered at



per ordinary share. As the final dividend is subject to approval by the shareholders at the Annual General Meeting, it has not been included as a liability in the

financial statements for the year ended 31 October 2022.



and 31 October 2022.

9. EARNINGS PER ORDINARY SHARE







2022 2021

Ordinary

Number Number

millions millions

Weighted average number of shares used to calculate basic earnings per share 280.5 281.6

Additional shares issuable other than at fair value in respect of options outstanding 7.7 6.4

Weighted average number of shares used to calculate diluted earnings per share 288.2 288.0



2022 2021

Basic EPS Diluted EPS Basic EPS Diluted EPS

£m (Pence) (Pence) £m (Pence) (Pence)

Underlying profit after tax 56.8 20.2 19.7 47.6 16.9 16.5

Non-underlying items (note 3) (9.4) (6.1)

Total profit after tax 47.4 16.9 16.4 41.5 14.7 14.4

10. GOODWILL

£m

Cost

At 1 November 2020 187.8

Acquisitions through business combinations (note 28) 3.1

Foreign exchange adjustments (6.4)

At 31 October 2021 184.5

Foreign exchange adjustments 20.4

At 31 October 2022 204.9

Accumulated impairment losses

At 1 November 2020 (79.3)

Foreign exchange adjustments 3.5

At 31 October 2021 (75.8)

Foreign exchange adjustments (11.0)

At 31 October 2022 (86.8)

Carrying amount

At 31 October 2022 118.1

At 31 October 2021 108.7

Chemring Group PLC Annual report and accounts 2022134

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

10. GOODWILL continued

Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units (“CGUs”) that are expected to benefit from that business

combination, being the individual operating companies within the operating segment descriptions on page 128.

The Group tests goodwill at least annually for impairment. Tests are conducted more frequently if there are indications that goodwill might be impaired.



individually estimated for each CGU and include the discount rates and expected changes to cash flows during the period for which management has detailed

plans, which are underpinned by the winning and execution of key contracts. Based on our assessment, there is no reasonable possible change in a key

assumption which would result in the impairment of goodwill.

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to each of the



specific to each of the CGUs to account for differences in currency risk, country risk and other factors affecting specific CGUs, have been used to discount



Expected changes to cash flows during the period for which management has detailed plans relate to revenue forecasts, expected contract outcomes and

forecast operating margins in each of the operating companies based on our Board-approved five-year plan which considered past experience and our

understanding of customer budgets and priorities. The relative value ascribed to each varies between CGUs as the budgets are built up from the underlying

operating companies within each CGU.



rates are based on management’s view of industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of

future changes.





2022 2021 2022 2021

% % £m £m

Roke Manor Research Limited 11.2 11.7 31.5 31.5

Chemring Energetics UK Limited 10.2 9.7 14.6 14.6

Chemring Sensors & Electronic Systems, Inc. 10.5 10.6 40.8 34.3

Chemring Energetic Devices, Inc. 10.5 10.6 18.0 15.2

Other 13.2 13.1

118.1 108.7

The goodwill arising from the acquisition of the Cubica Group of £3.1m during the year ended 31 October 2021 was allocated to the Roke Manor Research

Limited CGU as it will form part of this operating company going forward (see note 29 for further details).



Following a detailed review, no impairment losses were recognised in the years ended 31 October 2022 and 31 October 2021 for continuing operations.

Stress testing was performed on the forecasts to consider the impact of reasonably possible worst case scenarios over the forecast period, including a 1%

increase in discount rate, a 1% reduction in long-term growth rate, a 10% fall in the forecast cash flows or a $0.10 weakening in the sterling to US dollar

exchange rate. Even under any of these circumstances, no CGUs would require an impairment against goodwill.

There are no reasonably possible changes in assumptions that would require an impairment against goodwill.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 135

11. DEVELOPMENT COSTS AND OTHER INTANGIBLE ASSETS

Acquired

Development Acquired customer Patents and

costs technology relationships licences To t a l

£m £m £m £m £m

Cost

At 1 November 2020 55.9 93.8 48.6 0.6 143.0

Acquisitions through business combinations (note 28) — 2.5 2.1 — 4.6

Additions 2.1 — — 0.1 0.1

Disposals (0.5) — — (0.1) (0.1)

Foreign exchange adjustments (1.9) (4.8) (1.9) (0.1) (6.8)

At 31 October 2021 55.6 91.5 48.8 0.5 140.8

Additions 2.5 0.4 — — 0.4

Disposals (0.4) — — (0.3) (0.3)

Foreign exchange adjustments 6.2 15.2 6.2 0.3 21.7

At 31 October 2022 63.9 107.1 55.0 0.5 162.6

Amortisation

At 1 November 2020 (26.1) (86.8) (39.3) (0.3) (126.4)

Charge (0.6) (3.8) (2.4) (0.1) (6.3)

Disposals 0.5 — — 0.1 0.1

Foreign exchange adjustments 0.6 4.4 1.4 0.1 5.9

At 31 October 2021 (25.6) (86.2) (40.3) (0.2) (126.7)

Charge (0.1) (2.0) (2.6) (0.1) (4.7)

Impairment (2.2) — — — —

Disposals 0.3 — — 0.3 0.3

Foreign exchange adjustments (1.7) (14.8) (5.1) (0.2) (20.1)

At 31 October 2022 (29.3) (103.0) (48.0) (0.2) (151.2)

Carrying amount

At 31 October 2022 34.6 4.1 7.0 0.3 11.4

At 31 October 2021 30.0 5.3 8.5 0.3 14.1





lives, estimated to be between three and ten years, with the remaining amortisation periods for these assets ranging up to ten years.



by reference to future estimated cash flows, discounted at an appropriate rate to present value, or by reference to the amount that would have been paid in an

arm’s length transaction between two knowledgeable and willing parties. Other intangible assets are recognised at cost and are amortised over their estimated

useful economic lives, which are set out in the accounting policies section.





are one year, two years and nine years respectively.







Chemring Group PLC Annual report and accounts 2022136

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

12. PROPERTY, PLANT AND EQUIPMENT

Right-of-use Right-of-use

Land and Plant and land and plant and

buildings equipment buildings equipment Total

£m £m £m £m £m

Cost or valuation

At 31 October 2020 126.6 142.4 5.7 0.6 275.3

Reclassification 0.6 (0.6) — — —

Additions 7.4 19.2 0.3 — 26.9

Disposals (0.3) (10.1) (0.2) — (10.6)

Foreign exchange adjustments (3.1) (3.1) (0.3) 0.1 (6.4)

At 31 October 2021 131.2 147.8 5.5 0.7 285.2

Reclassification 0.2 (0.3) — — (0.1)

Additions 9.2 25.6 3.7 — 38.5

Disposals (5.7) (3.7) (0.2) — (9.6)

Foreign exchange adjustments 10.4 13.4 1.1 — 24.9

At 31 October 2022 145.3 182.8 10.1 0.7 338.9

Depreciation

At 31 October 2020 (19.3) (60.5) (1.4) (0.1) (81.3)

Charge (3.4) (13.4) (1.3) (0.1) (18.2)

Disposals 0.3 10.0 0.2 — 10.5

Foreign exchange adjustments 0.6 1.8 0.1 — 2.5

At 31 October 2021 (21.8) (62.1) (2.4) (0.2) (86.5)

Reclassification 0.3 (0.2) — — 0.1

Charge (3.5) (13.0) (1.4) (0.2) (18.1)

Disposals 2.5 3.1 — — 5.6

Foreign exchange adjustments (2.4) (5.7) (0.6) — (8.7)

At 31 October 2022 (24.9) (77.9) (4.4) (0.4) (107.6)

Carrying amount

At 31 October 2022 120.4 104.9 5.7 0.3 231.3

At 31 October 2021 109.4 85.7 3.1 0.5 198.7











of depreciated replacement cost for two pyrotechnic sites and on open market for the remainder, which represent Level 2 measurements in the fair value hierarchy.

2022 2021

£m £m

30 September 1997 depreciated replacement cost 4.0 4.0

Freehold at cost 141.3 127.2

Cost of land and buildings as at 31 October 145.3 131.2



2022 2021

£m £m

Cost 144.5 130.4

Accumulated depreciation (25.2) (21.9)

Historical cost value 119.3 108.5

All other tangible fixed assets are stated at historical cost.







STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 137

13. SUBSIDIARY UNDERTAKINGS

All subsidiary undertakings have been reflected in these financial statements. The subsidiary undertakings held at 31 October 2022, which have a single class



otherwise stated.

Country of incorporation

(or registration) and operation Operating segment

Subsidiary undertaking

Chemring Australia Pty Limited Australia Countermeasures & Energetics

B.D.L. Systems Limited England Dormant

Chemring Countermeasures Limited* England Countermeasures & Energetics

Chemring Energetics Limited* England Dormant

Chemring Europe Limited* England Dormant

Chemring Finance Europe Limited England Dormant

Chemring Investments Limited England Dormant

Chemring North America Unlimited England Dormant

Chemring Prime Contracts Limited* England Dormant

Chemring Technology Solutions Limited England Countermeasures & Energetics

CHG Overseas Investments Limited* England Dormant

CHG Overseas Limited* England Holding company

Cubica Technology Limited* England Sensors & Information

Greys Exports Limited England Dormant

Parkway No 10 Limited England Dormant

Q6 Holdings Limited* England Dormant

Richmond EEI Limited England Dormant

Richmond Electronics & Engineering Limited England Dormant

Roke Manor Research Limited* England Sensors & Information

Vigil AI Limited** England Sensors & Information

Chemring Nobel AS Norway Countermeasures & Energetics

Chemring Energetics UK Limited* Scotland Countermeasures & Energetics

Alloy Surfaces Company, Inc. US Countermeasures & Energetics

ASC Realty LLC US Property holding company

Chemring Energetic Devices, Inc. US Countermeasures & Energetics

Chemring North America Group, Inc. US Holding company

CHG Flares, Inc. US Holding company

CHG Group, Inc. US Holding company

Kilgore Flares Company LLC US Countermeasures & Energetics

Chemring Sensors & Electronic Systems, Inc. US Sensors & Information

Roke USA, Inc. US Sensors & Information

Tactical Systems and Ordnance, Inc. US Non-trading

* Shares directly held by Chemring Group PLC.

** 80% indirectly owned by Chemring Group PLC (see note 29).

CHG Overseas Limited, Cubica Technology Limited and Chemring Technology Solutions Limited are exempt from the requirement to file audited accounts for



Chemring Group PLC Annual report and accounts 2022138

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

14. INVENTORIES

2022 2021

£m £m

Raw materials 48.1 36.6

Work in progress 38.8 27.2

Finished goods 12.7 16.9

99.6 80.7



as a write down of inventories to net realisable value. See note 4 for details of cost of inventories recognised as an expense.

15. TRADE AND OTHER RECEIVABLES

2022 2021

£m £m

Trade receivables 33.8 41.2

Allowance for doubtful debts (0.5) (0.3)

33.3 40.9

Advance payments to suppliers 1.7 0.5

Other receivables 8.5 3.7

Prepayments 6.2 5.5

Accrued income 11.4 10.0

61.1 60.6

All amounts shown above are due within one year.





Given the Group’s customer base, expected credit losses are typically not material; however, the Group’s policy is to provide in full for trade receivables

outstanding for more than 120 days beyond agreed terms, unless there are facts and circumstances that support recoverability. As at 31 October 2022,



The directors consider that the carrying amount of trade and other receivables approximates to their fair values.



half was billed in the month after the reporting date. The remainder relates to the completion of performance obligations which will be billed at the next

contractual milestone, which is expected within the next year.





development expenditure credits receivable.

16. CASH AND CASH EQUIVALENTS

Bank balances and cash comprise cash held by the Group and short-term deposits with an original maturity of three months or less. The carrying amount





cash commitments.

17. BORROWINGS

2022 2021

£m £m

Within current liabilities

Bank overdrafts — 0.4

Borrowings due within one year — 0.4

Within non-current liabilities

Bank borrowings 20.9 28.1

Preference shares 0.1 0.1

Borrowings due after more than one year 21.0 28.2

Total borrowings 21.0 28.6

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 139

17. BORROWINGS continued



2022 2021

£m £m

Sterling 0.1 0.1

US dollar 20.9 28.5

21.0 28.6



2022 2021

% %

Bank overdrafts 2.3 1.0

UK bank loans – Sterling denominated 2.3 —

– US dollar denominated 1.4 1.9



2022 2021

Bank Bank

loans and Preference loans and Preference

overdrafts shares To t a l overdrafts shares Total

£m £m £m £m £m £m



– within one year — — — 0.4 — 0.4



– within one to two years — — — — — —

– within two to five years 20.9 — 20.9 28.1 — 28.1

– after five years — 0.1 0.1 — 0.1 0.1

20.9 0.1 21.0 28.1 0.1 28.2

Total borrowings 20.9 0.1 21.0 28.5 0.1 28.6

The Group’s principal debt facilities comprised a £150m revolving credit facility and a US$10m overdraft. These were established in July 2021 with a syndicate of



year were secured.

There have been no breaches of the terms of the loan agreements during the current or prior year.

The Group has the following undrawn borrowing facilities available, in respect of which all conditions precedent have been met. Interest costs under these

facilities are charged at floating rates.

2022 2021

£m £m

Undrawn borrowing facilities 136.7 128.1

The Group is subject to two key financial covenants, which are tested quarterly. These covenants relate to the leverage ratio between “underlying EBITDA” and

net debt, and the interest cover ratio between underlying EBITDA and finance costs. The calculation of these ratios involves the translation of non-sterling

denominated debt using average, rather than closing, rates of exchange and includes liabilities on foreign exchange forward contracts within its definition of net

debt. Therefore the leverage ratio of 0.14 times differs to the ratio of 0.09 times that is disclosed elsewhere in the annual report and accounts, which is calculated

using the closing rates of exchange and does not include liabilities on foreign exchange forward contracts within its definition of net debt. The Group was in

compliance with the covenants throughout the year. The year-end leverage ratio was 0.14 times (covenant limit of 3 times) and the year-end interest cover ratio

was 57 times (covenant floor of 4 times).

18. LEASES

The carrying amount, additions and depreciation charge for right-of-use assets by class of underlying asset is included in note 12.







low-value leases.

Chemring Group PLC Annual report and accounts 2022140

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

18. LEASES continued



2022 2021

£m £m



– within one year 1.8 1.4



– within one to two years 0.8 1.6

– within two to five years 1.4 1.0

– more than five years 2.1 —

4.3 2.6

Impact of discounting (0.1) (0.2)

Lease liabilities included in balance sheet as at 31 October 6.0 3.8

19. TRADE AND OTHER PAYABLES

2022 2021

£m £m

Within current liabilities

Trade payables 14.7 13.1

Other payables 28.5 29.0

Interest payable 0.1 —

Other tax and social security 6.8 4.7

Advance receipts from customers 26.6 17.1

Accruals 17.6 17.3

Deferred income 3.9 4.5

98.2 85.7



Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.

Advance receipts from customers represent the obligation to transfer goods or services to a customer for which consideration has been received. The amount



of advanced receipts from customers at 31 October 2022, £26.6m is relevant to goods and services that will be delivered and provided within a year. No revenue

was recognised in 2022 from performance obligations satisfied in previous years.





20. FINANCIAL RISK MANAGEMENT

The Group uses financial instruments to manage financial risk wherever it is appropriate to do so. The main risks addressed by financial instruments are liquidity

risk, foreign currency risk, interest rate risk and credit risk. The Group’s policies in respect of the management of these risks, which remained unchanged

throughout the year, are set out below.

(A) CREDIT RISK



principally from the Group’s receivables from customers.



loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history



government agencies with which the Group has long-term business relationships. The Group’s principal customers are government defence departments, such as

the US DoD and the UK Ministry of Defence (“UK MOD”), US and UK defence prime contractors, such as BAE Systems and General Dynamics, and distributors

of products for their onward sale to end users.

The majority of revenue in 2022 related to the US DoD, the UK MOD and the US and UK defence prime contractors, which consistently pay within terms and

are deemed low credit risk as a result. For all other customers the Group’s policy is to trade under a letter of credit. If there is any doubt over recoverability, the

Group’s policy is to provide in full for trade receivables outstanding for more than 120 days beyond agreed terms. The balances which might be affected by credit

risk are trade receivables and cash and cash equivalents.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 141

20. FINANCIAL RISK MANAGEMENT continued

(B) CAPITAL MANAGEMENT

The Group manages its capital to ensure that all entities in the Group will be able to continue as a going concern while meeting the returns to stakeholders.



equivalents (note 16) and a revolving credit facility (“RCF”) (note 17). The Group seeks to manage its capital through an appropriate mix of these items.









i. Liquidity risk management

Liquidity risk is the risk that the Group does not have sufficient financial resources to meet its obligations as they fall due. The Group manages liquidity risk by

maintaining adequate reserves and by continually monitoring forecast and actual cash flows. The Group’s policy is to maintain continuity of funding through

available cash and cash equivalents and the RCF.

ii. Foreign currency risk management

The Group’s presentational currency is sterling. The Group is subject to exposure on the translation of the assets of foreign subsidiaries, whose functional

currencies differ from the Group. The Group’s primary balance sheet translation exposures are to the US dollar, Australian dollar and Norwegian krone.



differences are taken to reserves. US dollar borrowings held by the Group are treated as a net investment hedge against the US dollar assets of the Group.

The Group faces currency exposures arising from the translation of profits earned in foreign currency. These exposures are not hedged. Exposures also arise

from foreign currency denominated trading transactions undertaken by subsidiaries deemed transactional exposures. The Group’s policy is to hedge transactional

exposures above £250,000 in the banking market on a one-to-one basis using forward contracts. Below £250,000, the exposures are netted across subsidiaries

and any surplus or deficit hedged in the banking market using spot or forward contracts. The Group’s policy is that there is no speculative trading in financial

instruments. During the year ended 31 October 2022, there were no options or structured derivatives utilised.

iii. Interest rate risk management

The Group finances its operations through a combination of retained profits and bank borrowings. The UK borrowings are denominated in sterling



IFRS 9 FINANCIAL INSTRUMENTS

Chemring Group PLC is not a financial institution and does not have any complex financial instruments. The Group does not apply hedge accounting to

derivatives and the Group’s customers are generally governments that are considered creditworthy and pay consistently within agreed payment terms.

2022 2021

Carrying value Fair value Carrying value Fair value

£m £m £m £m

Assets carried at amortised cost

Trade receivables 33.3 33.3 40.9 40.9

Cash and cash equivalents 19.8 19.8 5.8 5.8

Assets carried at fair value

Derivative financial instruments 0.7 0.7 1.0 1.0

Liabilities carried at fair value

Derivative financial instruments (5.3) (5.3) (0.4) (0.4)

Liabilities carried at amortised cost

Trade payables (14.7) (14.7) (13.1) (13.1)

Other payables (28.5) (28.5) (29.0) (29.0)

Interest payable (0.1) (0.1) — —

Borrowings (21.0) (21.0) (28.6) (28.6)



(a) prepayments made/advances received (right to receive future goods or services, not cash or a financial asset);

(b) tax receivables and payables and similar items (statutory rights and obligations, not contractual); or

Chemring Group PLC Annual report and accounts 2022142

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

21. FINANCIAL INSTRUMENTS



2022 2021

£m £m

Included in current assets 0.7 1.0

Included in current liabilities (4.2) (0.4)

(3.5) 0.6

Included in non-current liabilities (1.1) —

Forward foreign exchange contracts (4.6) 0.6



The table below details the remaining contractual maturities of the Group’s derivative financial instruments and loans at the reporting date. The amounts are

gross and undiscounted and include interest payments estimated based on the conditions existing at the reporting date.

2022 2021

Derivative Loans and Derivative Loans and

instruments overdrafts Tot a l instruments overdrafts Total

£m £m £m £m £m £m



– within one year (3.5) (0.3) (3.8) 0.6 (0.7) (0.1)

– within one to two years (1.1) (0.3) (1.4) — (0.3) (0.3)

– within two to five years — (21.3) (21.3) — (28.4) (28.4)

(4.6) (21.9) (26.5) 0.6 (29.4) (28.8)

A maturity analysis of the contracted cash outflows on lease liabilities is provided in note 18.

FAIR VALUE HIERARCHY

IFRS 7 Financial Instruments: Disclosures requires companies that carry financial instruments at fair value in the balance sheet to disclose their level of hierarchy,

determining into which category those financial instruments fall under the fair value hierarchy.



- Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

- Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly



- Level 3 – inputs for the asset or liability that are not based on observable market data (i.e. as unobservable inputs).



2022 2021

Carrying Carrying

Fair value amount Fair value amount Fair value

hierarchy £m £m £m £m

Held at fair value

Derivative financial instruments – assets Level 2 0.7 0.7 1.0 1.0

Derivative financial instruments – liabilities Level 2 (5.3) (5.3) (0.4) (0.4)

(4.6) (4.6) 0.6 0.6

The fair value of derivative financial instruments is estimated by discounting the future contracted cash flow, using readily available market data.

SENSITIVITY ANALYSIS



For the year ended 31 October 2022 a 10 cent strengthening in the US dollar exchange rate would have increased reported net debt by approximately £1.9m



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 143

21. FINANCIAL INSTRUMENTS continued

SENSITIVITY ANALYSIS continued



considers a 10 cent strengthening or weakening of US dollars against sterling as a reasonably possible change in foreign exchange rates. The other functional

currencies used in the Group (Norwegian krone and Australian dollars) are not significant enough to have a material impact on the Group results in the event



+10 cents –10 cents

US dollar impact US dollar impact

2022 2021 2022 2021

Continuing operations £m £m £m £m

Revenue (14.2) (14.2) 20.6 15.8

Underlying operating profit (0.8) (2.4) 1.0 2.8

Interest — — — —

Underlying profit before tax (0.8) (2.4) 1.0 2.8

As at 31 October 2022, 78% of the Group’s gross debt was at a fixed rate of 1.37% and the remainder was at floating rates. The Group monitors its exposure

to movements in interest rates, having regard to prevailing market conditions, and considers the use of interest rate swaps on an ongoing basis to manage this

exposure. The Group has not entered into any interest rate swaps as of 31 October 2022.





22. PROVISIONS

Legal Environmental Disposal

provision provision provision Total

£m £m £m £m

At 31 October 2021 5.6 3.0 8.9 17.5

Transfer from trade and other payables — 0.3 — 0.3

Transfer (1.8) — 1.8 —

Foreign exchange adjustments — 0.7 0.4 1.1

Paid (0.3) (0.1) (0.1) (0.5)

At 31 October 2022 3.5 3.9 11.0 18.4



2022 2021

£m £m

Included in current liabilities 1.6 2.6

Included in non-current liabilities 16.8 14.9

18.4 17.5



outcomes and timing of cash outflows, dependent on the outcome of court proceedings. Further details of the Group’s contingent liabilities are set out in note 33.

The environmental provision is held in respect of potential liabilities, associated with the Group’s facility in Chicago, US. The range of possible outcomes is

between £1.4m and £9.1m. There are uncertainties regarding the timing of cash outflows, dependent on the outcome of regulatory proceedings.

The disposal provision relates to estimated liabilities faced by the Group in respect of the disposal of its European Munitions businesses in 2014 and its

commoditised energetics businesses in Derby and Florida in 2019 and 2020 respectively, under the terms of their respective sale agreements. The range of

possible outcomes is between £nil and £25.7m, and the risk of economic outflow relating to these reduces with the passage of time. These are expected to



Provisions are subject to uncertainty in respect of the outcome of future events. Legal provisions will be utilised based on the outcome of cases and the level of

costs incurred defending the Group’s position. Environmental provisions will be utilised based on the outcome of further environmental studies and remediation

work. Disposal provisions will be utilised based on the outcome of certain events which are specified in sale and purchase agreements. It is not possible to

estimate more accurately the expected timing of any resulting outflows of economic benefits.

Chemring Group PLC Annual report and accounts 2022144

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

23. DEFERRED TAX



Accelerated

tax US interest Tax Acquired

depreciation Pensions deductions losses intangibles Other Total

£m £m £m £m £m £m £m

At 1 November 2020 (8.6) (1.5) — 9.2 (7.9) 1.6 (7.2)

(Charge)/credit to income (3.2) — 4.0 (3.3) 1.8 (1.3) (2.0)

Credit/(charge) to other comprehensive income 0.2 (2.2) (0.2) (0.2) 0.2 — (2.2)

Recognised on acquisition — — — — (1.1) — (1.1)

Transfers (7.8) — — (0.1) — 7.9 —

At 31 October 2021 (19.4) (3.7) 3.8 5.6 (7.0) 8.2 (12.5)

(Charge)/credit to income (11.5) — 3.5 6.3 (0.6) 1.2 (1.1)

(Charge)/credit to other comprehensive income (2.2) 0.8 0.8 1.0 (0.7) 1.0 0.7

Transfers 0.1 — — — (0.1) — —

At 31 October 2022 (33.0) (2.9) 8.1 12.9 (8.4) 10.4 (12.9)

Analysed as:

Deferred tax assets 0.3 — 8.1 12.9 — 11.0 32.3

Deferred tax liabilities (33.3) (2.9) — — (8.4) (0.6) (45.2)

At 31 October 2022 (33.0) (2.9) 8.1 12.9 (8.4) 10.4 (12.9)

Deferred tax assets 0.4 — 3.8 5.6 — 8.4 18.2

Deferred tax liabilities (19.8) (3.7) — — (7.0) (0.2) (30.7)

At 31 October 2021 (19.4) (3.7) 3.8 5.6 (7.0) 8.2 (12.5)

Certain deferred tax assets and liabilities have been offset in accordance with the Group’s accounting policy. Deferred tax balances after offset are analysed on

the balance sheet as per the table above.



The UK Finance Bill 2021 was published on 11 March 2021 and substantively enacted on 24 May 2021. The bill provides for an increase in the rate of corporation

tax from 19% to 25% with effect from 1 April 2023. UK deferred tax balances have been calculated in accordance with these rate changes.









streams. The aforementioned gross interest deductions are available indefinitely with no fixed expiry date, while the gross tax losses and gross capital losses

expire in 2031 and 2026 respectively.

The Group has not recognised any deferred tax liability on temporary differences relating to potentially taxable unremitted earnings of overseas subsidiaries



During the year ended 31 October 2021 £7.9m of deferred tax liabilities relating to development costs were reclassified to accelerated tax depreciation via the

transfers line.

24. SHARE CAPITAL

2022 2021

£m £m

Issued and fully paid

 2.8 2.8



The Company’s share capital also includes 62,500 7% cumulative preference shares of £1 each, which are all issued and fully paid up, and are classified





other classes of shares, the sum of £1 per share together with any arrears of dividends.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 145

25. RESERVES

The share premium account, the special capital reserve and the revaluation reserve are not distributable.

The special capital reserve was created as part of a capital reduction scheme involving the cancellation of the share premium account which was approved



The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations and







were distributed following the vesting of awards under the deferred bonus and PSP schemes. The total number of ordinary shares held by the ESOP at



Group dividends (note 8) are payable out of the parent company retained earnings as disclosed in the parent company financial statements. This provides cover

over the declared final dividend of 3.8p per ordinary share for the year ended 31 October 2022.

26. OWN SHARES

2022 2021

£m £m

At 1 November 2021 — 2.9

Transactions — (2.9)

At 31 October 2022 — —

The own shares reserve represents the cost of shares in the Company purchased in the market and held by the Group to satisfy awards under the Group’s







27. SHARE-BASED PAYMENTS

The Group operates share-based compensation arrangements to provide incentives to the Group’s senior management and eligible employees.





Details of the four schemes which operated during the year are set out below.

THE CHEMRING GROUP PERFORMANCE SHARE PLAN 2016 (THE “2016 PSP”)

Under the 2016 PSP, conditional awards of ordinary shares are made at nil cost to employees. Awards ordinarily vest on the third anniversary of the award date.

2016 PSP

Number of conditional shares

2022 2021

Outstanding at the beginning of the year 6,218,961 6,185,176

Awarded 2,386,342 1,791,635

Vested (2,374,231) (1,358,817)

Lapsed (243,743) (399,033)

Outstanding at the end of the year 5,987,329 6,218,961

Subject to vesting at the end of the year — —



Number of

ordinary Vesting price Date when

shares per share awards due

Date of award under award Pence to vest

17 December 2019 2,027,806 nil 17 December 2022

16 December 2020 1,658,830 nil 16 December 2023

15 December 2021 2,300,693 nil 15 December 2024

The Group has applied a discount to the share-based payments, to reflect the anticipated achievement of the stipulated targets for each 2016 PSP award based

on the predicted figures within the Group’s financial projections and the expected number of leavers over the life of the awards.

Chemring Group PLC Annual report and accounts 2022146

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

27. SHARE-BASED PAYMENTS continued

THE CHEMRING GROUP PERFORMANCE SHARE PLAN 2016 (THE “2016 PSP”) continued





Date awarded

15 December 16 December 17 December

2021 2020 2019

Share price at valuation 284p 300p 210p

Exercise price nil nil nil

Risk-free rate 0.5% 0.5% 0.5%

Expected volatility 29.1% 29.1% 29.1%

Fair value 232.9p 246.4p 172.5p





grant date.

THE CHEMRING GROUP 2008 AND 2018 UK SHARESAVE PLAN (THE “UK SHARESAVE PLAN”)

Options were granted during the year on 1 September 2022.

2022 2021

Weighted Weighted

average average

Number exercise Number exercise

of share price of share price

options Pence options Pence

Outstanding at the beginning of the year 1,770,380 197.4 1,773,742 177.7

Granted 664,054 264.0 481,085 240.0

Exercised (362,049) 153.4 (299,581) 158.1

Lapsed (194,040) 198.3 (184,866) 183.0

Outstanding at the end of the year 1,878,345 229.3 1,770,380 197.4

Subject to exercise at the end of the year 5,056 178.0 22,243 178.0



Number

of ordinary Exercise price

shares under per share Dates between which

Date of award award Pence options may be exercised

27 July 2017 2,432 148.0 1 October 2022–31 March 2023

30 July 2018 46,847 178.0 1 October 2023–31 March 2024

29 July 2019 76,196 154.0 1 October 2022–31 March 2023

29 July 2019 26,881 154.0 1 October 2024–31 March 2025

30 July 2020 541,211 202.0 1 October 2023–31 March 2024

30 July 2020 83,162 202.0 1 October 2025–31 March 2026

26 July 2021 361,185 240.0 1 October 2024–31 March 2025

26 July 2021 73,025 240.0 1 October 2026–31 March 2027

1 September 2022 553,821 264.0 1 October 2025–31 March 2026

1 September 2022 108,529 264.0 1 October 2027–31 March 2028





The fair values of the share options in the UK Sharesave Plan are based on the difference between the exercise price and the share price on the grant date of



STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 147

27. SHARE-BASED PAYMENTS continued

DEFERRED BONUS SHARE AWARDS



anniversary of the award date.

Number of deferred shares

2022 2021

Outstanding at the beginning of the year 766,171 615,365

Awarded 456,232 351,832

Vested (225,621) (132,919)

Lapsed (59,727) (68,107)

Outstanding at the end of the year 937,055 766,171

Subject to vesting at the end of the year — —



Number of

ordinary Share price Vesting price Date when

shares at valuation per share awards are due

Date of award under award Pence Pence to vest

16 December 2019 205,576 210p nil 16 December 2022

15 December 2020 156,431 300p nil 15 December 2022

15 December 2020 147,500 300p nil 15 December 2023

14 December 2021 231,491 284p nil 14 December 2023

14 December 2021 170,336 284p nil 15 December 2024

The fair value of the deferred bonus share awards is based on the share price on the grant date of the award. The weighted average fair value of awards made



of the awards.

DEFERRED SHARES RELATED TO ACQUISITION

Deferred consideration in relation to the acquisition of the “Cubica Group” of up to £2.0m has been accounted for as equity-settled share-based payments

under IFRS 2. See note 28 for further detailed disclosure.



of 307p. The first tranche will vest on the second anniversary of completion, 2 June 2023, and the second tranche will vest on the third anniversary of completion,

2 June 2024, subject to continued employment with Chemring Group PLC.







the prior year was 307p.

28. ACQUISITION OF SUBSIDIARY

ACQUISITIONS IN THE PRIOR YEAR ENDED 31 OCTOBER 2021

Acquisition of the Cubica Group

On 2 June 2021, Chemring Group PLC acquired 100% of the issued shares in Cubica Technology Limited (“Cubica”) and Q6 Holdings Limited (“Q6”), collectively

the “Cubica Group”. The Cubica Group specialises in machine learning, data fusion and autonomous systems. The acquisition has strong synergies to Roke and

will expand the Group’s existing capabilities and product offerings.

The acquisition has been completed for an initial cash consideration of £7.0m, funded from Chemring’s existing bank facilities. Further deferred consideration







post-acquisition expenses and accounted for as equity-settled share-based payments under IFRS 2. See note 3 for further details.



Since acquisition to 31 October 2021, the Cubica Group contributed revenue of £0.6m and an operating profit of £0.3m to the Group’s results. If the acquisition

had occurred on 1 November 2020, we estimate that its revenue would have been £1.4m, and operating profit for the year would have been £0.8m. In determining

these amounts, we have assumed that the fair value adjustments, determined provisionally, that arose on the date of acquisition would have been the same if the

acquisition had occurred on 1 November 2020.

Chemring Group PLC Annual report and accounts 2022148

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

28. ACQUISITION OF SUBSIDIARY continued

ACQUISITIONS IN THE PRIOR YEAR ENDED 31 OCTOBER 2021 continued



£m

Cash paid 7.0

Total purchase consideration 7.0

Less cash acquired (1.9)

Net cash outflow 5.1



Fair value

£m

Cash and cash equivalents 1.9

Trade and other receivables 0.4

Trade and other payables (1.4)

Current tax (0.5)

 2.1

 2.5

Deferred tax liability (1.1)

Net identifiable assets 3.9

 —

 3.1

Net assets acquired 7.0

The net assets recognised in the 31 October 2021 annual report were based on a provisional assessment of their fair value. The Group stated that if new

information were obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition and identifies



The Group has not identified any such information that therefore no changes were required to the accounting for the acquisition.



subsidiary. None of the goodwill is expected to be deductible for tax purposes.

The fair value of the trade receivables amounted to £0.3m. The gross amount of trade receivables were £0.3m and the full contractual amounts were collected.

Q6 owns 80% of the issued shares of Vigil AI Limited (“Vigil AI”), which has technology providing state-of-the-art solutions to enable online platforms to detect

imagery relating to child sexual exploitation globally. The Group has chosen to measure the non-controlling interests at the proportionate share of the value of

net identifiable assets acquired. See page 159 for further detail.

29. RETIREMENT BENEFIT OBLIGATIONS

In the UK, the Group operates a defined benefit scheme (the “Chemring Group Staff Pension Scheme”). The Group’s other UK and overseas pension



benefit pension scheme that was closed in October 2022 and the liability transferred to an insurance company. The net deficit of the Chemring Nobel Scheme as

at 31 October 2021 was £nil and as such was immaterial for disclosure in the prior year comparisons.

The Chemring Group Staff Pension Scheme is a funded scheme and the assets of the scheme are held in a separate trustee administered fund. The scheme was

closed to future accrual on 6 April 2012. A full actuarial valuation for the Scheme as at 6 April 2021 has been prepared and updated to 31 October 2022, using

the projected unit credit method. The main assumptions for the scheme are detailed below. The surplus of the Chemring Group Staff Pension Scheme was



Under the funding plan agreed with the trustees following the 2021 actuarial valuation, no further deficit recovery payments are required. The Company and the

trustees monitor funding levels annually, and a new funding plan is agreed with the trustees every three years, based on actuarial valuations. The next actuarial

valuation is due as at 6 April 2024 at which point funding requirements will be reassessed.

The trust deed provides for an unconditional right to a return of surplus assets in the event of a plan wind-up. The trustees are given no rights to unilaterally wind up

or augment the benefits due to members of the scheme. Based on these rights, any net surplus in the UK scheme is recognised in full.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 149

29. RETIREMENT BENEFIT OBLIGATIONS continued



Defined benefit obligations Defined benefit asset Net defined benefit asset

2022 2021 2022 2021 2022 2021

£m £m £m £m £m £m

At 1 November (90.9) (91.3) 104.6 98.9 13.7 7.6

Included in profit or loss

Administrative expenses — — (0.3) (0.3) (0.3) (0.3)

Net interest (cost)/credit (1.6) (1.5) 1.8 1.7 0.2 0.2

(1.6) (1.5) 1.5 1.4 (0.1) (0.1)

Included in other comprehensive income





– demographic and financial assumptions 29.9 (2.4) — — 29.9 (2.4)

– experience adjustment (1.8) 0.9 — — (1.8) 0.9

– return on plan assets excluding interest income — — (30.4) 7.7 (30.4) 7.7

28.1 (1.5) (30.4) 7.7 (2.3) 6.2

Other

Settlements 0.9 — (1.0) — (0.1) —

Net benefits paid out 3.3 3.4 (3.3) (3.4) — —

At 31 October (60.2) (90.9) 71.4 104.6 11.2 13.7



drawing benefits from the scheme and the balance were deferred members. The duration of the liability is long, with pension payments expected to be made





2022 2021 2022 2021

£m £m % %

Equities — 18.4 — 17.6

Liability driven investment 25.3 24.7 35.4 23.6

Diversified alternatives 26.9 27.3 37.6 26.1

Multi-asset credit 7.8 23.3 10.9 22.3

Assets held by insurance company 1.1 1.5 1.5 1.4

Cash 10.3 9.4 14.6 9.0

71.4 104.6 100.0 100.0

Liability driven investments, diversified alternatives and multi-asset credit assets are either pooled or unpooled investment vehicles. Unpooled investment vehicles

which are not quoted on active markets, have been valued at the latest available bid price or single price provided by the pooled investment manager. Where

funds are valued weekly the value is taken as at the week ending immediately before or after the year end date. Shares in other pooled arrangements have been

valued at the latest available net assets value, determined in accordance with fair value principles, provided by the pooled investment manager.

The scheme’s assets are invested in accordance with the statement of investment principles after taking professional advice from the scheme’s investment advisers.

The investment strategy is to split the assets into a growth portfolio of diversified assets and a matching portfolio of leveraged liability driven pooled funds.

The scheme’s liability matching portfolio is invested in leveraged pooled liability driven investment (“LDI”) funds and a liquidity fund. The trustees target an

interest rate and inflation hedge ratio of around 100% (based on the scheme’s technical provisions funding basis).

As at 31 October 2022, the Group loaned £2.0m to the Chemring Group Staff Pension Scheme representing a short-term loan to fund margin calls on liability

driven investments. This is included in the cash amount above and was repaid in November 2022.



2022 2021

% %

Discount rate 4.9 1.8

Inflation – RPI 3.1 3.4

– CPI 2.7 2.7

Chemring Group PLC Annual report and accounts 2022150

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

29. RETIREMENT BENEFIT OBLIGATIONS continued

In determining defined benefit obligations, the Group uses mortality assumptions which are based on published mortality tables. For the Chemring Group Staff Pension





2022 2021

Future pensioners – male 88.2 88.6

– female 90.4 90.6

Current pensioners – male 87.4 87.7

– female 89.0 89.2

While the vaccination programme has significantly reduced the number of deaths directly attributable to CV-19, the impact of the pandemic on future mortality

rates remains uncertain. At this stage the Group has assumed CV-19 will have no lasting impact on mortality rates and that life expectancies will return to

pre-pandemic expectations. We will continue to monitor and assess this at future reporting dates.

The most significant assumptions in the pension valuation are the discount rate applied to the liabilities, the inflation rate to be applied to pension payments



scheme would change by approximately £0.8m. A change in the rate of inflation by 0.1% is predicted to change the deficit by approximately £0.4m and a 10%

change to the mortality assumption would change the deficit by approximately £1.7m. The principal risks to the scheme are that the investments do not perform

as well as expected, the discount rate continues to rise driven by higher market interest rates, short-term movements in inflation, and the rate of improvement in

mortality assumed is insufficient and life expectancies continue to rise.



30. CASH GENERATED FROM OPERATING ACTIVITIES

2022 2021

Notes £m £m

Operating profit from continuing operations 53.3 50.4

Amortisation of development costs 11 0.1 0.6

Amortisation of intangible assets arising from business combinations 11 4.6 6.2

Amortisation of patents and licences 11 0.1 0.1

Impairment of development costs 2.2 —

(Profit)/loss on disposal of non-current assets (1.9) 0.1

Depreciation of property, plant and equipment 12 18.1 18.2

Non-cash movement of non-underlying items 6.1 0.9

Share-based payment expense 27 6.4 5.3

Operating cash flows before movements in working capital 89.0 81.8

(Increase)/decrease in inventories (6.4) 7.9

Decrease in trade and other receivables 4.5 0.9

Increase/(decrease) in trade and other payables 2.9 (10.3)

Increase/(decrease) in provisions 0.1 (0.3)

Operating cash flow from continuing underlying operations 90.1 80.0

Discontinued operations

Cash impact of non-underlying items from discontinued operations — (0.4)

Net cash outflow from discontinued operating activities — (0.4)

Net cash inflow from discontinued investing activities — 0.4

Net cash inflow from discontinued operations — —

31. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

2022 2021

£m £m

Increase/(decrease) in cash and cash equivalents 14.2 (9.6)

Decrease in debt and lease financing due to cash flows 13.2 29.2

Decrease in net debt resulting from cash flows 27.4 19.6

Effect of foreign exchange rate changes (4.2) 2.7

New leases entered into, lease interest and other non-cash movements (3.5) (0.1)

Amortisation of debt finance costs (0.3) (0.6)

Movement in net debt 19.4 21.6

Net debt at the beginning of the year (26.6) (48.2)

Net debt at the end of the year (7.2) (26.6)

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 151

32. ANALYSIS OF NET DEBT

At At

1 November Non-cash Exchange 31 October

2021 Cash flows changes rate effects 2022

£m £m £m £m £m

Cash and cash equivalents (including bank overdraft) 5.4 14.2 — 0.2 19.8

Debt due after one year (28.1) 11.0 (0.3) (3.5) (20.9)

Preference shares (0.1) — — — (0.1)

(22.8) 25.2 (0.3) (3.3) (1.2)

Lease liabilities (3.8) 2.2 (3.5) (0.9) (6.0)

(26.6) 27.4 (3.8) (4.2) (7.2)



item in the above table.

33. CONTINGENT LIABILITIES



course of business.

COUNTERMEASURES UK INCIDENT

On 10 August 2018 an incident occurred at our countermeasures facility in Salisbury. The Group responded immediately to support those who were injured,

and maintains appropriate employers’ liability insurance that we expect will provide full compensation in due course. We continue to fully support the Health

and Safety Executive (“HSE”) as it undertakes its investigation. Whilst provisions have been recorded for costs that have been identified (included within “legal

provisions”), it is possible that additional uninsured costs and, depending on the outcome of the HSE investigation, financial penalties may be incurred. At this

stage these costs are not anticipated to be material in the context of the Group’s financial statements.

34. RELATED PARTY TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Transactions with the Group’s pension schemes are disclosed in note 29. As at 31 October 2022, £2.0m was due from the Chemring Group Staff Pension

Scheme representing a short-term loan to fund margin calls on liability driven investments which was repaid in November 2022. The amount receivable has



REMUNERATION OF KEY MANAGEMENT PERSONNEL

The directors of the Company had no material transactions with the Company during the year, other than in connection with their service agreements.



trends. The remuneration of the non-executive directors is determined by the Board, having regard to the practice of other companies and the particular

demands of the Group.

For the purposes of remuneration disclosure, key management personnel includes only the directors and excludes the other senior business managers and

members of the Executive Committee. Further information on the remuneration of individual directors is provided in the audited part of the directors’

remuneration report on pages 96 to 119.



2022 2021

£m £m

Short-term employee benefits 3.2 2.8

Post-employment benefits 0.2 0.2

Share-based payment benefits 2.4 1.7

Total remuneration of key management personnel 5.8 4.7

Chemring Group PLC Annual report and accounts 2022152

NOTES TO THE GROUP FINANCIAL STATEMENTS continued

35. EVENTS SINCE THE END OF THE YEAR

(A) ACQUISITION OF GEOLLECT

On 7 December 2022, Chemring Group PLC acquired 100% of the issued shares in Geollect Limited (“Geollect”). Geollect is an international provider of

geospatial intelligence consultancy and subscription services. The acquisition has strong synergies to Roke and will expand the Group’s existing capabilities and

product offerings.

The acquisition has been completed for an initial cash consideration of £7.3m, funded from Chemring’s existing bank facilities. Further deferred consideration



second and third anniversary of completion.

Given the close proximity of the completion date of the transaction and the date of issuing the financial statements, the Group had not yet completed the

accounting for the acquisition. The financial effects of this transaction have not been recognised at 31 October 2022. The operating results and assets and

liabilities of the acquired company will be consolidated from 7 December 2022.





Costs in relation to this acquisition for the year ended 31 October 2022 have been classified as non-underlying costs in the statement of profit or loss and are

included within the acquisition costs of £2.0m, see note 3.

A full provisional fair value exercise, completed in accordance with IFRS 3, is expected to be available for the Group’s interim financial statements to 30 April 2023.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 153

PARENT COMPANY BALANCE SHEET

As at 31 October 2022

2022 2021

Note £m £m £m £m

Non-current assets

Property, plant and equipment 1 0.2 0.2

Investments in subsidiaries 2 766.6 786.6

Amounts owed by subsidiary undertakings 3 10.7 69.2

Retirement benefit surplus 12 5.8 7.2

Deferred tax 11 0.8 —

784.1 863.2

Current assets

Trade and other receivables 3 23.2 5.1

Cash and cash equivalents — —

23.2 5.1

Total assets 807.3 868.3

Current liabilities

Trade and other payables 4 (30.7) (11.1)

(30.7) (11.1)

Non-current liabilities

Borrowings 5 (21.8) (42.5)

Trade and other payables 4 (1.1) —

Provisions 7 (8.2) (7.1)

Deferred tax 11 — (0.9)

Preference shares 8 (0.1) (0.1)

(31.2) (50.6)

Total liabilities (61.9) (61.7)

Net assets 745.4 806.6

Equity

Share capital 9 2.8 2.8

Share premium account 307.7 307.1

Special capital reserve 12.9 12.9

Retained earnings 422.0 483.8

Total equity 745.4 806.6

PROFIT ATTRIBUTABLE TO SHAREHOLDERS

In accordance with the concession granted under section 408 of the Companies Act 2006, the profit and loss account of Chemring Group PLC has not been

presented separately in these financial statements. There is no material difference between the results disclosed and the results on an unmodified historical cost



These financial statements of Chemring Group PLC (registered number 86662) were approved and authorised for issue by the Board of directors on



Signed on behalf of the Board

Michael Ord Andrew Lewis

Director Director

Chemring Group PLC Annual report and accounts 2022154



For the year ended 31 October 2022

2022 2021

£m £m

(Loss)/profit after tax attributable to equity holders of the parent as reported (45.1) 24.6

Items that will not be reclassified subsequently to profit and loss

Remeasurement of the defined benefit pension scheme, net of deferred tax (0.9) 2.1

Total comprehensive (loss)/income attributable to the equity holders of the parent (46.0) 26.7

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

For the year ended 31 October 2022

Share Special

premium capital Retained

Share capital account reserve earnings Total

£m £m £m £m £m

At 1 November 2021 2.8 307.1 12.9 483.8 806.6

Loss after tax — — — (45.1) (45.1)

Other comprehensive loss — — — (0.9) (0.9)

Total comprehensive loss — — — (46.0) (46.0)

Ordinary shares issued — 0.6 — — 0.6

Share-based payments (net of settlement) — — — 5.6 5.6

Dividends paid — — — (14.4) (14.4)

Purchase of shares by employee share ownership plan trust — — — (7.0) (7.0)

At 31 October 2022 2.8 307.7 12.9 422.0 745.4

Share Special

premium capital Retained

Share capital account reserve earnings Own shares Total

£m £m £m £m £m £m

At 1 November 2020 2.8 306.7 12.9 474.3 (2.9) 793.8

Profit after tax — — — 24.6 — 24.6

Other comprehensive income — — — 2.1 — 2.1

Total comprehensive income — — — 26.7 — 26.7

Ordinary shares issued — 0.4 — — — 0.4

Share-based payments (net of settlement) — — — 4.7 — 4.7

Dividends paid — — — (11.9) — (11.9)

Purchase of shares by employee share ownership plan trust — — — (7.1) — (7.1)

Transactions in own shares — — — (2.9) 2.9 —

At 31 October 2021 2.8 307.1 12.9 483.8 — 806.6

The auditor’s remuneration for audit and other services is disclosed in note 4 to the Group financial statements.

A final dividend of 3.8p per ordinary share has been proposed. See note 8 to the Group financial statements.





Included within retained earnings is the Company’s own shares held by the Group’s Employee Share Ownership Plan Trust (“ESOP”); see note 25 of the Group

financial statements for details.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 155



1. PROPERTY, PLANT AND EQUIPMENT

Detailed disclosure of property, plant and equipment was not considered necessary due to its immaterial value. The Company had no capital commitments as at

31 October 2022 or 31 October 2021.

2. INVESTMENTS IN SUBSIDIARIES

Shares in

subsidiary

undertakings

£m

Cost

At 31 October 2021 851.1

Additions 51.7

At 31 October 2022 902.8

Impairment

At 31 October 2021 (64.5)

Impairment (71.7)

At 31 October 2022 (136.2)

Carrying amount

At 31 October 2022 766.6

At 31 October 2021 786.6

Investment values are allocated to their respective legal entities. Where the investment value relates to an intermediate holding company, the subsidiaries of that

holding company are used to support the carrying value.

During the year ended 31 October 2022, the additions of £51.7m represent a capital contribution to CHG Overseas Limited.

During the year ended 31 October 2021, Chemring Group PLC acquired the Cubica Group for a cost of investment of £7.0m. See note 28 of the Group financial



and £115.0m respectively.

The Company tests investments at least annually for impairment. Tests are conducted more frequently if there are indications that investments might be impaired.

The recoverable amounts of the CGUs are determined from value-in-use calculations. The key assumptions for the value-in-use calculations have been individually

estimated for each CGU and are detailed in note 10 of the Group financial statements.

During the year ended 31 October 2022, the Company concluded that the carrying value relating to CHG Overseas Limited was higher than its recoverable

amount and therefore an impairment charge of £71.7m was recorded. The recoverable amount for CHG Overseas Limited was calculated using discount rates

that have been adjusted for a premium specific to each of the CGUs to account for differences in currency risk, country risk and other factors affecting specific





Stress testing was performed on the forecasts to consider the impact of reasonably possible worst case scenarios over the forecast period, including a 1%

reduction in long-term growth rate, a 10% fall in the forecast cash flows or a $0.10 weakening in the GBP to US dollar exchange rate. A 1% increase in discount

rate is the most sensitive assumption and would result in an additional impairment of £94.8m in CHG Overseas Limited being required. A $0.10 weakening in the

GBP to US dollar exchange rate is the least sensitive assumption and would result in an additional impairment of £37.1m in CHG Overseas Limited being

required. In determining the value in use, we have allocated central costs necessary to generate the underlying cash flows however there is judgement in this

allocation. Had we increased the allocation by 10%, this would have resulted in an additional impairment of £10.4m in CHG Overseas Limited being required.

Details of the Group undertakings at 31 October 2022 are set out in note 13 to the Group financial statements. The Company has given a parental guarantee

under section 479A of the Companies Act 2006 to certain subsidiary undertakings, details of which are also set out in note 13 to the Group financial statements.

The directors consider that the carrying value of the investments does not exceed their fair value.

Chemring Group PLC Annual report and accounts 2022156

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS continued

3. TRADE AND OTHER RECEIVABLES

2022 2021

£m £m

Within current assets

Amounts owed by subsidiary undertakings 19.7 3.4

Derivative financial instruments (note 21 to the Group financial statements) 0.7 1.0

Prepayments and accrued income 0.8 0.7

Other debtor 2.0 —

23.2 5.1

Within non-current assets

Amounts owed by subsidiary undertakings 10.7 69.2

10.7 69.2

The directors consider that the carrying value of the trade and other receivables approximates to their fair value.

Interest on amounts owed by subsidiary undertakings is charged between 0% and 8.5%. No interest is charged on trade and other receivables from the date



As at 31 October 2022, Chemring Group PLC loaned £2.0m to the Chemring Group Staff Pension Scheme to fund margin calls on liability driven investments,

this is a related party transaction for further details refer to note 34. This short-term loan is included in Other debtors above and was repaid in November 2022.

4. TRADE AND OTHER PAYABLES

2022 2021

£m £m

Within current liabilities

Derivative financial instruments (note 21 to the Group financial statements) 4.1 0.4

Trade payables 0.5 0.2

Amounts owed to subsidiary undertakings 19.2 2.0

Other payables 6.8 8.2

Other tax and social security — 0.3

Accruals and deferred income 0.1 —

30.7 11.1

Within non-current liabilities

Derivative financial instruments (note 21) 1.1 —

31.8 11.1



Interest on amounts owed to subsidiary undertakings attracts interest rates between 0% and 2%. No interest is payable on trade payables from the date of

invoice to payment.

5. BORROWINGS

2022 2021

£m £m

Borrowings due after more than one year

Bank borrowings – US dollar denominated 20.9 28.0

Bank borrowings – sterling denominated 0.9 14.5

Total borrowings 21.8 42.5



2022 2021

£m £m



– less than one year — —

– within one to two years — —

– within two to five years 21.8 42.5

21.8 42.5

The interest incurred on the above borrowings is detailed within notes 6 and 17 to the Group financial statements. Sterling denominated borrowings relate to

stand-alone Company bank overdraft which carries interest at 1.2%.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 157

6. LEASES





7. PROVISIONS

Total

£m

At 31 October 2021 7.1

Provided 1.6

Paid (0.5)

At 31 October 2022 8.2

It is not possible to estimate more accurately the expected timing of any resulting outflows of economic benefits. Total provisions include legal provisions, which

represent the estimated legal costs relating to ongoing investigations, and disposal provisions, which relate to estimated liabilities faced by the Company in respect

of the disposal of its commoditised energetics businesses under the terms of their respective sale agreements. See note 22 to the Group financial statements for

further details.

8. PREFERENCE SHARES

2022 2021

£m £m

Cumulative preference shares (62,500 shares of £1 each) 0.1 0.1

The cumulative preference shares carry an entitlement to a dividend at the rate of 7p per share per annum, payable in equal instalments on 30 April and 31

October each year. Holders of the preference shares have the right on a winding-up to receive, in priority to any other classes of shares, the sum of £1 per share

together with any arrears of dividends.

9. SHARE CAPITAL

2022 2021

£m £m

Issued, allotted and fully paid

 2.8 2.8

The preference shares are presented as a liability and accordingly are excluded from called-up share capital in the balance sheet.

SHARE-BASED INCENTIVE SCHEMES

Full details of the schemes are set out in note 27 to the Group financial statements.

10. OWN SHARES

2022 2021

£m £m

At the beginning of the year — 2.9

Transactions — (2.9)

At the end of the year — —

The own shares reserve represents the cost of shares in the Company purchased in the market and held by the Group to satisfy awards under the Group’s







11. DEFERRED TAX

2022 2021

£m £m

At the beginning of the year (0.9) (0.8)

Credit to income statement 1.2 1.0

Credit/(charge) to other comprehensive income 0.5 (1.1)

Deferred tax asset/(liability) at the end of the year 0.8 (0.9)

The amount provided represents:

Pension (2.0) (2.5)

Other temporary differences 2.8 1.6

0.8 (0.9)





Chemring Group PLC Annual report and accounts 2022158

12. PENSIONS



Total

£m

At 31 October 2020, retirement benefit surplus 4.1

Contributions —

Other finance costs (0.1)

Actuarial movements 3.2

At 31 October 2021, retirement benefit surplus 7.2

Contributions —

Other finance costs (0.1)

Actuarial movements (1.3)

At 31 October 2022, retirement benefit surplus 5.8

Further details are set out in note 29 to the Group financial statements.

13. STAFF COSTS

2022 2021

Number Number

Average monthly number of total employees (including executive directors) 34 31



2022 2021

£m £m

Wages and salaries 5.0 6.5

Social security costs 1.0 0.9

Other pension costs 0.6 0.6

Share-based payment 4.2 2.9

10.8 10.9

Disclosures in respect of directors’ emoluments can be found in the directors’ remuneration report on pages 96 to 119.

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 159

ACCOUNTING POLICIES

1. GENERAL INFORMATION

Chemring Group PLC is a company incorporated in England and Wales under

registration number 86662. The address of the registered office is Roke Manor,

Old Salisbury Lane, Romsey, Hampshire, SO51 0ZN. The nature of the

Group’s operations and its principal activities are set out in note 2 of the

Group financial statements and in the directors’ report on pages 120 to 122.

These financial statements are the consolidated financial statements of

Chemring Group PLC and its subsidiaries (the “Group”).

Chemring Group PLC and the companies in which it directly and indirectly

owns investments are separate and distinct entities. In this publication of the

annual report and accounts, the collective expressions “Chemring” and “the

Group” may be used for convenience where reference is made in general to

those companies. Likewise, the words “we”, “us”, “our” and “ourselves” are

used in some places to refer to the subsidiaries of the Group in general. These

expressions are also used where no useful purpose is served by identifying any

particular company or companies.

The financial statements are presented in pounds sterling, being the currency

of the primary economic environment in which the Group operates, and

rounded to the nearest £0.1m. Foreign operations are included in accordance

with the foreign currencies accounting policy.

GOING CONCERN

The directors have, at the time of approving the financial statements, a reasonable

expectation that the Group and the Company have adequate resources to

continue to adopt the going concern basis of accounting in preparing these

financial statements. Further detail is contained in the statement on going

concern on page 74 which forms part of these financial statements.

2. ADOPTION OF NEW AND REVISED STANDARDS

The following standards, amendments and interpretations have been issued





i) There were no IFRS Interpretations Committee (“IFRIC”) interpretations,

amendments to existing standards and new standards adopted in the year

ended 31 October 2022 that have materially impacted the reported

results or the financial position.

ii) The following IFRIC interpretations, amendments to existing standards





> Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment

to IFRS 16 Leases); and

> Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9,

IAS 39, IFRS 7, IFRS 4 and IFRS 16).

iii) At the date of authorisation of this announcement, the following

standards and interpretations that are potentially relevant to the Group

and which have not yet been applied in these reported results were in

issue but not yet effective (and in some cases had not yet been adopted



EFFECTIVE FOR PERIODS BEGINNING ON OR AFTER 1 JANUARY 2022

> Reference to the Conceptual Framework (Amendments to IFRS 3);

> Property, Plant and Equipment – Proceeds before Intended Use

(Amendments to IAS 16);

> Onerous Contracts – Cost of Fulfilling a Contract (Amendments to



> Annual Improvements to IFRS Standards 2018–2020.

EFFECTIVE FOR PERIODS BEGINNING ON OR AFTER 1 JANUARY 2023

> IFRS 17 Insurance Contracts;

> Classification of Liabilities as Current or Non-Current (Amendments



> Disclosure of Accounting Policies (Amendments to IAS 1 and



> Definition of Accounting Estimates (Amendments to IAS 8); and

> Deferred Tax related to Assets and Liabilities arising from a



The directors do not expect the adoption of these standards and interpretations

will have a material impact on the results of the Group in future periods.

3. GROUP ACCOUNTING POLICIES

BASIS OF PREPARATION

These financial statements have been prepared in accordance with UK-adopted

international accounting standards (“UK-adopted IFRS”) in conformity with the

requirements of the Companies Act 2006.

The financial statements are prepared under the historical cost convention,

except as described below under the heading of “Derivative financial instruments”.

The accounting policies adopted have been applied consistently throughout

the current and previous year.

BASIS OF CONSOLIDATION



its subsidiaries. Subsidiaries are entities controlled by the Group. The Group

“controls” an entity when it is exposed to, or has rights to, variable returns

from its involvement with the entity and has the ability to affect those returns

through its power over the entity. The financial statements of subsidiaries are





The Company considers that it has the power to govern the financial and

operating policies of the US entities falling within the Special Security

Agreement and these entities have therefore been consolidated in these

financial statements.

The Company and all of its subsidiaries make up their financial statements



are eliminated on consolidation.

Non-controlling interest





entity’s net identifiable assets. This decision is made on an acquisition-by-acquisition

basis. For non-controlling interests that the Group holds, the Group elected



acquired net identifiable assets.



owns 80% of the issued shares of Vigil AI Limited. Disclosure of the minority

interest on the face of the primary statements has not been included as this



comprehensive income and equity attributable to minority interests were



Chemring Group PLC Annual report and accounts 2022160

3. GROUP ACCOUNTING POLICIES continued

REVENUE RECOGNITION

Chemring is organised into two sectors, Sensors & Information and

Countermeasures & Energetics.



whole lifecycle of its products and services, these are generally awarded by its

customers as individual contracts for the different stages rather than being large,

complex, long-term framework agreements requiring extensive consideration

of price allocation and performance obligations. As a result we are less





Whilst as a Group we aim to develop products which can be sold on to

multiple end users and markets, in some instances the nature of products and

services are unique to a customer and may not have an alternative use at the

point of production. In such cases, where an enforceable right to payment

exists, revenue will be recognised over time.

From time to time we enter into contracts for “customer-funded R&D” where

Chemring provides a service towards the development of a technology for a

customer resulting in revenue. In certain instances, Chemring partly funds the



Contracts

The majority of the Group’s revenue arises from the manufacture and

shipment of goods.

Sales contracts are reviewed for performance obligations but the



typically based on Incoterms. Certain contracts may also require customer

acceptance testing. Once the relevant delivery obligation has been met and, as



The timing of payment from customers is generally aligned to revenue

recognition, though on certain contracts advance receipts are received as

disclosed in note 19. This also applies to sales where there are no goods

shipped but a deliverable is completed at a certain point in time, such as the

issue of a report where there is no enforceable right to payment for work in

progress.

In a smaller number of cases, revenue also arises from milestone contracts that

contain multiple performance obligations. Often these contracts are already

divided into milestones for payment purposes, but judgement is required when

assessing the way the contract is divided up to ensure that each element is a

separate and valid performance obligation. If they are not, the relevant revenue

amount is allocated across the other obligations as appropriate. In some cases

milestones are achieved in one period but not billed until the next period,

leading to a timing difference with the recognition of revenue in advance of

customer billing. In this instance accrued income is recognised as described in

note 15. There are no contracts with a significant financing component.

At the start of the contract, the total transaction price is estimated as



exchange for transferring the promised goods and services to the customer,

excluding sales taxes. This is based on the agreed contract price, with no

material claims and incentive payment terms, and therefore significant

judgement to determine the transaction price is not required. Typically our

contracts do not have any material variable consideration and no significant

judgement has been required around the extent to which this ought to be

recognised. The total transaction price is allocated to the performance

obligations identified in the contract in proportion to their relative stand-alone

selling prices, where stand-alone selling prices are typically estimated based on

expected costs plus contract margin.

The Group provides warranties to its customers to give them assurance that

its products and services will function in line with agreed-upon specifications.



separate performance obligations.



customer has bought the goods but has not yet taken physical possession. This

usually arises when the customer has limited storage space or there have been

delays in their own production schedule. For such revenue to be recognised

the bill and hold arrangement must be substantive and the relevant goods

must be clearly identified as belonging to the customer and ready for immediate

shipment at the customer’s request. These categories of sales are common

across all segments.

Qualifying costs to obtain a contract are not material across the Group.

Sale of goods

Revenue from the sale of goods is recognised when all of the following



- the Group has identified a sales contract with a customer;

- the performance obligations within this contract have been identified;

- the transaction price has been determined;

- this transaction price has been allocated to the performance obligations in

the contract; and

- 

Performance obligations are satisfied when the customer gains control of

promised goods or services from the contract. Customers do not typically

gain a right of return of goods.

Rendering of services

Revenue from a contract to provide services, including customer-funded

research and development, is recognised by reference to the stage of

completion of the contract. Stage of completion is typically estimated by



or completion of relevant milestones where this faithfully depicts the transfer

of control of the goods and services to the customer and does not significantly

differ from using the proportion of contract costs incurred basis.



Information segment, arises from time and materials contracts, where revenue

is typically accrued and billed in the following month based on work



Principal versus agent assessment

The Group enters into certain arrangements which involve a consortium of

service providers. The Group acts as a “Prime” contractor in certain contracts

with customers and utilises sub-contractors to undertake the work. Under

these contracts the Group is considered to be primarily responsible for

fulfilling the service to the customer. The Group performs a technical

assessment of the work before it is delivered to the customer and is

responsible for quality and performance of the sub-contractor. As such the

Group is considered to be the principal to the arrangement with the customer

and includes sub-contractor costs within revenue. However, where the Group

is merely acting as an agent of a sub-contractor then no revenue is recognised

in respect of sub-contractor costs.

All consortium arrangements are assessed by the Group to determine if it is

the principal or agent considering who is responsible for fulfilling the performance

obligation, who bears inventory risk and who has price discretion.

ACCOUNTING POLICIES continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 161

3. GROUP ACCOUNTING POLICIES continued

ACQUISITIONS AND DISPOSALS





contingent liabilities of subsidiary undertakings that meet the IFRS 3 (Revised)

Business Combinations recognition criteria are measured at the fair value at the



- deferred tax assets or liabilities, and liabilities or assets relating to employee

benefit arrangements, are recognised and measured in accordance with IAS

12 Income Taxes and IAS 19 (Revised) Employee Benefits respectively;

- 



IFRS 2 Share-based Payments; and

- assets (or disposal groups) that are classified as held for sale, in accordance

with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, are

measured in accordance with that standard.

Where cost exceeds fair value of the net assets acquired, the difference



Where the fair value of the net assets exceeds the cost, the difference



subsidiary undertakings are changed where necessary to be consistent with

those of the Group.

If the initial accounting for a business combination is incomplete by the end of

the reporting period in which the combination occurs, the Group reports

provisional amounts for the items for which the accounting is incomplete.

Those provisional amounts are adjusted during the measurement period (see

below), or additional assets or liabilities recognised, to reflect new information

obtained about facts and circumstances that existed as at the acquisition date

that, if known, would have affected the amounts recognised as at that date.

The measurement period runs from the date of acquisition to the date the

Group obtains complete information about facts and circumstances that

existed as at the acquisition date, subject to a maximum period of one year.

In accordance with IFRS 3 (Revised) Business Combinations, acquisition and

disposal-related items are recognised through the income statement.

Acquisition and disposal-related items refer to credits and costs associated

with the acquisition and disposal of businesses, together with the costs of

aborted bids and the establishment of joint ventures.

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

When the Group makes a decision to exit a significant business unit or separate

major line of business, the associated operations and cash flows are classified

as discontinued operations in the financial statements, in accordance with the

provisions of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

These discontinued operations may represent components of the Group that

have already been disposed of or are classified as held for sale.

Non-current assets and disposal groups classified as held for sale are measured

at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their

carrying amount will be recovered through a sales transaction rather than

continuing use. This condition is regarded as met only when the sale is highly

probable and the asset or disposal group is available for immediate sale in its

present condition. Management must be committed to the sale which should

be expected to qualify as a completed sale within one year from the date of

classification.

INTANGIBLE ASSETS – GOODWILL

The purchased goodwill of the Group is regarded as having an indefinite

Impairment of Assets,







ACQUIRED INTANGIBLES

The Group recognises, separately from goodwill, intangible assets that are

separable or arise from contractual or other legal rights and whose fair value can

be measured reliably. These intangible assets are amortised at rates calculated

to write down their cost or valuation to their estimated residual values by



- technology – average of ten years

- customer relationships – average of ten years

DEVELOPMENT COSTS

Development costs that qualify as intangible assets are capitalised as incurred

and, once the relevant intangible asset is ready for use, are amortised on a

straight-line basis over their estimated useful lives, averaging ten years





annually or when a trigger is identified.

PATENTS AND LICENCES

Patents and licences are measured initially at purchase cost and are amortised

on a straight-line basis over their estimated useful lives, averaging seven years



PROPERTY, PLANT AND EQUIPMENT

Other than historically revalued land and buildings, property, plant and

equipment is held at cost less accumulated depreciation and any recognised

impairment loss. Borrowing costs on significant capital expenditure projects

are capitalised and allocated to the cost of the project.

No depreciation is provided on freehold land. On other assets, depreciation



estimated residual values by equal instalments over their estimated useful



- freehold buildings – up to fifty years

- leasehold buildings – the period of the lease

- plant and equipment – up to ten years

IMPAIRMENT OF NON-CURRENT ASSETS

Assets that have indefinite lives are allocated to the Group’s cash-generating

units and tested for impairment at least annually. Assets that are subject



changes in circumstances indicate that the carrying value may not be

recoverable. To the extent that the carrying value exceeds the recoverable

amount, an impairment loss is recorded for the difference as an expense in





For the purpose of impairment testing, assets are grouped at the lowest levels

for which there are separately identifiable cash flows.

INVENTORIES

Inventories are recorded at the lower of cost and net realisable value. Cost

represents materials, direct labour, other direct costs and related overheads,

and is determined using a weighted average cost basis. Net realisable value is

based on estimated selling price, less further costs expected to be incurred to

completion and disposal.

Provision is made for slow-moving, obsolete and defective items



BORROWING COSTS

Borrowing costs directly attributable to the acquisition, construction











All other borrowing costs are recognised in the income statement in the

period in which they are incurred.

Chemring Group PLC Annual report and accounts 2022162

3. GROUP ACCOUNTING POLICIES continued

GOVERNMENT GRANTS

Government grants are not recognised until there is reasonable assurance that

the Group will comply with the conditions attaching to them and that the

grants will be received.

Government grants for staff retraining costs are recognised as income over

the periods necessary to match them with the related costs and are deducted

in reporting the related expense.



deferred income and released to the income statement over the expected

useful economic lives of the assets concerned.

TA X

The tax expense represents the sum of current tax and deferred tax.

Current tax is based on taxable profit for the year. Taxable profit differs from

profit as reported in the income statement because it excludes items of

income or expense that are taxable or deductible in other years, and it

excludes items of income or expense that are never taxable or deductible.

The Group’s liability for current tax is calculated using tax rates that have been

enacted or substantively enacted at the balance sheet date.

Deferred tax represents amounts expected to be payable or recoverable on

differences between the carrying amounts of assets and liabilities



computation of taxable profit, and is accounted for using the balance sheet

liability method. Deferred tax liabilities are generally recognised for all taxable

temporary differences, and deferred tax assets are recognised to the extent

that it is probable taxable profits will be available in the future against which

deductible temporary differences can be utilised. Such assets and liabilities are

not recognised if the temporary difference arises from goodwill or from the

initial recognition (other than in a business combination) of other assets and



accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising

on investments in subsidiaries and associates, and interests in joint ventures,

except where the Group is able to control the reversal of the temporary



the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet

date and reduced to the extent that it is no longer probable that sufficient

taxable profits will be available to allow all or part of the asset to be

recovered. Deferred tax is calculated at the tax rates that are expected to

apply in the period when the liability is settled or the asset is realised.

Deferred tax is charged or credited in the income statement, except where it

relates to items charged or credited directly to equity, in which case the

deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable

right to set off current tax assets against current tax liabilities, when they relate

to income taxed by the same tax authority, and when the Group intends to

settle its current tax assets and liabilities on a net basis.

SPECIAL CAPITAL RESERVE

The special capital reserve was created as part of a capital reduction scheme

involving the cancellation of the share premium account which was approved

by the Court in 1986, in accordance with the requirements of the Companies

Act 1985.

FOREIGN CURRENCIES

The individual financial statements of each Group company are presented in its

functional currency, being the currency of the primary economic environment

in which it operates. For the purpose of these Group financial statements, the

results and financial position of each Group company are expressed in pounds

sterling, which is the functional currency of the Company, and the

presentation currency for these financial statements.

In preparing the financial statements of each Group company, transactions in

foreign currencies, being currencies other than the entity’s functional currency,

are recorded at the rates of exchange prevailing on the dates of the

transactions. At each balance sheet date, monetary assets and liabilities that

are denominated in foreign currencies are retranslated at the rates prevailing

on the balance sheet date. Non-monetary items carried at fair value that are

denominated in foreign currencies are translated at the rates prevailing at the

date when the fair value was determined.

Non-monetary items that are measured in terms of historical cost in a foreign

currency are not retranslated.

Exchange differences arising on the settlement of monetary items and on





In order to hedge its exposure to certain foreign exchange risks, the Group

enters into forward foreign exchange contracts which are accounted for as

derivative financial instruments (see below for details of the Group’s

accounting policies in respect of such derivative financial instruments).

For the purpose of presenting these financial statements, the assets and

liabilities of the Group’s foreign operations are translated at exchange rates

prevailing on the balance sheet date. Income and expense items are translated

at the average exchange rates for the period.

Goodwill and fair value adjustments arising on the acquisition of a foreign

entity are treated as assets and liabilities of the foreign entity and translated at

the closing rate.

FINANCIAL INSTRUMENTS

Financial assets and liabilities are recognised in the Group’s balance sheet when

the Group becomes a party to the contractual provisions of the instrument.

FINANCIAL ASSETS

Trade receivables

Trade receivables do not carry any interest and are stated at their fair value

and amortised cost as reduced by appropriate allowances for expected



Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits,







FINANCIAL LIABILITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

Financial liabilities

Financial liabilities and equity instruments are classified according to the

substance of the contractual arrangements entered into.

Bank borrowings

Interest bearing bank loans and overdrafts are recorded at the proceeds

received, net of direct issue costs. Finance charges, including premiums payable

on settlement or redemption, and direct issue costs are accounted for on an

accruals basis in the income statement using the effective interest method, and

are added to the carrying amount of the instrument to the extent that they

are not settled in the period in which they arise.

ACCOUNTING POLICIES continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 163

3. GROUP ACCOUNTING POLICIES continued

FINANCIAL LIABILITIES AND DERIVATIVE FINANCIAL INSTRUMENTS

continued

Trade payables

Trade payables are not interest bearing and are stated at their fair value and

amortised cost.

Derivative financial instruments

The Group’s activities expose it to the financial risks of foreign currency

transactions, and it uses forward foreign exchange contracts to hedge its

exposure to these transactional risks. The Group does not use derivative

financial instruments for speculative purposes.

Derivative financial instruments are recognised at fair value on the date the

derivative contract is entered into and are revalued to fair value at each

balance sheet date. The fair values of derivative financial instruments are

calculated by external valuers.

The Group does not apply hedge accounting for derivative financial

instruments, with changes in the fair value of derivatives being recognised in

the income statement immediately.

Hedges of net investments in foreign operations

Any gain or loss on the hedging instrument relating to the effective portion of

the hedge is recognised in the statement of comprehensive income and

accumulated in the translation reserve. The gain or loss relating to the

ineffective portion is recognised immediately in the income statement.

RETIREMENT BENEFIT COSTS

Payments to defined contribution retirement benefit schemes are charged as

an administrative expense in the period to which they relate. For defined

benefit schemes, the cost of providing benefits is determined using the

projected unit credit method, with actuarial valuations being carried out at

each balance sheet date. Remeasurement of the defined benefit pension

scheme, which comprise actuarial gains and losses, the return on plan assets

(excluding interest) and the effect of the asset ceiling (if any, excluding interest),

are recognised in the statement of comprehensive income in full in the period

in which they occur.

The Group determines the net interest income on the net defined benefit

asset for the period by applying the discount rate used to measure the defined

benefit obligation at the beginning of the annual period to the then-net defined

benefit asset, taking into account any changes in the net defined benefit asset

during the year as a result of contributions and benefit payments. Net interest

income and other expenses related to defined benefit plans are recognised in

profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the

resulting change in benefit that relates to past service or the gain or loss on

curtailment is recognised immediately in profit or loss.

The retirement benefit obligation recognised in the balance sheet represents

the present value of the defined benefit obligation as reduced by the fair value

of scheme assets. Any asset resulting from this calculation is limited to past

service cost, plus the present value of available refunds and reductions in

future contributions to the scheme.

LEASED ASSETS

At the lease commencement date (i.e. the date the underlying asset is available

for use), the Group recognises a right-of-use asset and a lease liability on the

balance sheet.

The lease liability is initially measured at the present value of future lease

payments, discounted using the Group’s incremental borrowing rate. The

right-of-use asset is initially measured at cost, comprising the initial value of the

lease liability, any lease payments made before commencement of the lease,

any initial direct costs and any restoration costs. The asset is recorded as

property, plant and equipment, and is depreciated over the shorter of its

estimated useful economic life and the lease term on a straight-line basis.

The finance cost is charged to the income statement over the lease term to

produce a constant periodic rate of interest on the lease liability. The lease

payment is allocated between repayment of the lease liability and finance cost.

The Group has elected to account for short-term leases and leases of

low-value assets using the practical expedients. Instead of recognising a

right-of-use asset and lease liability, the payments in relation to these are

recognised as an expense in the income statement on a straight-line basis over

the lease term.

SHARE-BASED COMPENSATION

The Group operates equity-settled share-based compensation schemes.

For grants made under the Group’s share-based compensation schemes, the

fair value of an award is measured at the date of grant and reflects any

market-based vesting conditions. Non-market-based vesting conditions are

excluded from the fair value of the award. At the date of grant, the Company

estimates the number of awards expected to vest as a result of non-market-

based vesting conditions, and the fair value of this estimated number of awards

is recognised as an expense in the income statement on a straight-line basis

over the vesting period. At each balance sheet date, the impact of any revision

to vesting estimates is recognised in the income statement over the vesting

period. Proceeds received, net of any directly attributable transaction costs,



PROVISIONS

Provisions are recognised when the Group has a present obligation,



Group will be required to settle that obligation, and a reliable estimate can be



the best estimate of the consideration required to settle the present obligation

at the balance sheet date, taking into account the risks and uncertainties

surrounding the obligation. Where a provision is measured using the estimated

cash flows to settle the present obligation, its carrying amount is the present

value of those cash flows. The Group uses the “expected value” or “most likely

outcome” method on a case-by-case bases to estimate the value of provisions.

When some or all of the economic benefits required to settle a provision are

expected to be recovered from a third party, a receivable is recognised as an

asset if it is virtually certain that reimbursement will be received and the

amount of the receivable can be measured reliably.

Environmental provisions

Where the Group is liable for decontamination work or the restoration of

sites to their original condition, an estimate is made of the costs needed to

complete these works, discounted back to present values, relying upon

independent third party valuers where appropriate.

Restructuring provisions

A restructuring provision is recognised when the Group has developed a

detailed formal plan for the restructuring and has raised a valid expectation in

those affected that it will carry out the restructuring by starting to implement



measurement of a restructuring provision includes only the direct

expenditures arising from the restructuring and not those associated with the

ongoing activities of the entity.

Warranty provisions



goods legislation are recognised at the date of sale of the relevant products,



Group’s obligations.

Disposal provisions



of discontinued operations and other disposed entities under the terms of

their respective sale agreements.

Chemring Group PLC Annual report and accounts 2022164

3. GROUP ACCOUNTING POLICIES continued

CONTINGENT LIABILITIES

The Group exercises judgement in recognising exposures to contingent

liabilities related to pending litigation or other outstanding claims subject to

negotiated settlement, mediation, arbitration or government regulation, as well

as other contingent liabilities. Judgement may be necessary in assessing the

likelihood that a pending claim will succeed, or a liability will arise, and/or to

quantify the possible range of the financial settlement.

ALTERNATIVE PERFORMANCE MEASURES

In the analysis of the Group’s financial performance and position, operating

results and cash flows, APMs are presented to provide readers with additional

information. The principal APMs presented are underlying measures of

earnings including underlying operating profit, underlying profit before tax,

underlying profit after tax, underlying EBITDA, underlying earnings per share

and underlying operating cash flow. In addition, EBITDA, net debt and

constant currency metrics are presented which are also considered non-IFRS

measures. These measures are consistent with information regularly reviewed

by management to run the business, including planning, budgeting and

reporting purposes and for its internal assessment of the operational



The directors believe that the use of these APMs assists in providing additional

information on the underlying trends, performance and position of the Group.

APMs are used to improve the comparability of information between

reporting periods by adjusting for items that are non-recurring or otherwise



- amortisation of acquired intangibles;

- material exceptional items, for example relating to acquisitions and disposals,

business restructuring costs and legal costs;

- gains or losses on the movement in the fair value of derivative financial

instruments; and

- the tax impact of all of the above.

The Group’s use of APMs is consistent and we provide comparatives alongside

all current period figures.

Further detail on the APMs presented within these financial statements,

including a reconciliation to the IFRS equivalent, is presented in note 3.

EXCEPTIONAL ITEMS

Exceptional items are excluded from management’s assessment of profit

because by their size or nature they need to be separately disclosed to

properly understand the Group’s underlying quality of earnings. They are

typically gains or losses arising from events that are not considered part of the

core operations of the business. These items are excluded to reflect

performance in a consistent manner and are in line with how the business is

managed and measured on a day-to-day basis.

POST-BALANCE SHEET EVENTS

In accordance with IAS 10 Events after the Reporting Period, the Group





4. CHEMRING GROUP PLC – PARENT COMPANY



FRS 101 REDUCED DISCLOSURE FRAMEWORK

The financial statements have been prepared in accordance with UK

accounting standards and applicable law, including FRS 101 Reduced Disclosure

Framework.

The Company operates a defined benefit scheme including employees of other

Group companies (a Group plan). Following FRS 101, the scheme assets and

liabilities have been allocated across the Group companies using a method that

management considers to be the most appropriate, based on scheme

membership, in accordance with the Group’s internal policy.

The following exemptions from the requirements of IFRS have been applied in



- share-based payments;

- financial instruments;

- fair value measurements;

- IFRS 16 Leases (paragraphs 52 and 58);

- presentation of comparative information in respect of certain assets;

- IFRSs issued but not yet effective;

- related party transactions;

- assumptions and sensitivities for impairment review; and

- cash flow.

Investment in Group undertakings

Investments are stated at cost less any provision for impairment in value.

Critical accounting judgements and sources of estimation uncertainty

There are no critical accounting judgements for the Company. The other



Investments in subsidiaries impairment

Determining whether investments in subsidiaries are impaired requires an

estimation of the value-in-use of the legal entities to which the investments

relate. Where the investment value relates to an intermediate holding

company, the subsidiaries of that holding company are used to support the

carrying value. The value-in-use calculation requires the entity to estimate the

future cash flows expected to arise from the legal entity, and to determine a

suitable discount rate in order to calculate present value (see note 10). In

reviewing the carrying value of investments in subsidiaries, the Board has

considered the separate plans and cash flows of these businesses consistent

with the requirements of IAS 36 Impairment of Assets. The plans and cash

flows of these businesses reflect current and anticipated conditions in the

defence industry. The total investments in subsidiaries is set out in note 2 of

the parent company financial statements, which shows a carrying value of

£766.6m at 31 October 2022.

5. ACCOUNTING JUDGEMENTS AND SOURCES OF



When applying the Group’s accounting policies, management must make

judgements, assumptions and estimates concerning the future that affect the

carrying amounts of assets and liabilities at the balance sheet date and the

amounts of revenue and expenses recognised during the period. Such

judgements, assumptions and estimates are based upon factors including

historical experience, the observance of trends in the industries in which the

Group operates, and information available from the Group’s customers and

other external sources.

ACCOUNTING JUDGEMENTS

Revenue recognition

Following IFRS 15 Revenue from Contracts with Customers, the Group recognises

revenue on the basis of the satisfaction of performance obligations.

Management has to consider whether performance obligations should be

recognised at a single point in time, which is generally the case for the sale of

products by the Group, or over a period of time, which is more common for

certain service contracts.

In making its judgement about obligations that are satisfied at a point in time,

management has to consider at what point control has passed to the

customer, allowing revenue to be recognised. This is typically determined

through a consideration of customer acceptance testing, stage of completion,

contract terms and delivery arrangements.

KEY SOURCES OF ESTIMATION UNCERTAINTY

There are no key sources of estimation uncertainty at the balance sheet date

that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year.

ACCOUNTING POLICIES continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 165

5. ACCOUNTING JUDGEMENTS AND SOURCES OF

 continued

OTHER NON-SIGNIFICANT AREAS THAT INCLUDE A DEGREE



While these areas do not present a significant risk resulting in a material



Provisions

The Group holds provisions where appropriate in respect of future economic



respect of the outcome of future events. Estimates, judgements and

assumptions are based on factors including historical experience, the

observance of trends in the industries in which the Group operates, and

information available from the Group’s customers and other external sources.

Actual outflows of economic benefit may not occur as anticipated, and

estimates may prove to be incorrect, leading to further charges or releases of

provisions as circumstances change. The provisions held by the Group as at 31

October 2022 are set out in note 22.

Goodwill impairment

Determining whether goodwill is impaired requires an estimation of the

value-in-use of the cash-generating units to which goodwill has been allocated.

The value-in-use calculation requires the entity to estimate the future cash

flows expected to arise from the cash-generating unit, and to determine a

suitable discount rate in order to calculate present value (see note 10). In

reviewing the carrying value of goodwill of the Group’s businesses, the Board

has considered the separate plans and cash flows of these businesses

consistent with the requirements of IAS 36 Impairment of Assets. The plans and

cash flows of these businesses reflect current and anticipated conditions in the

defence industry. The total goodwill intangible asset is set out in note 10,

which shows a carrying value of £118.1m at 31 October 2022.

Capitalised development costs impairment

IAS 38 Intangible Assets requires that development costs, arising from the

application of research findings or other technical knowledge to a plan or

design of a new substantially improved product, are capitalised, subject to

certain criteria being met. Determining the future cash flows generated by the

products in development requires estimates which may differ from the actual

outcome. In particular, this can depend on the estimation applied to future

milestone events to secure long-term positions on production contracts, for

example Programs of Record for the US DoD. The total capitalised

development intangible asset is set out in note 11, which shows a carrying

value of £34.6m at 31 October 2022. Included in this balance are individually

material balances relating to Joint Biological Tactical Detection System (£9.7m),

Next Generation Chemical Detector (£16.5m) and Perceive (£5.6m).

Taxation

The Group operates in a number of countries around the world. Uncertainties

exist in relation to the interpretation of complex tax legislation, changes in tax

laws and the amount and timing of future taxable income. In some jurisdictions



could necessitate future adjustments to taxable income and expense already

recorded. At the year-end date, tax liabilities and assets are based on

management’s best judgements around the application of the tax regulations

and management’s estimate of the future amounts that will be settled.

The Group’s operating model involves the cross-border supply of goods into

end markets. There is a risk that different tax authorities could seek to assess





At 31 October 2022 there was a provision of £3.5m in respect of uncertain

tax positions. Due to the uncertainties noted above, there is a risk that the

Group’s judgements are challenged, resulting in a different tax payable or

recoverable from the amounts provided. Management estimates that the



Deferred tax assets on tax losses and US interest deductions

The category of deferred tax asset which contains significant estimation

uncertainty and which requires management judgement in assessing its

recoverability relates to US interest limitations and tax losses carried forward

(see note 23).

Applicable accounting standards permit the recognition of deferred tax assets



available, or to the extent that the existing taxable temporary differences, of

an appropriate type, reverse in an appropriate period to utilise the tax losses

carried forward. The assessment of future taxable profits involves significant

estimation uncertainty, principally relating to an assessment of management’s

projections of future taxable income based on business plans and ongoing tax

planning strategies. These projections include assumptions about the future

strategy of the Group, the economic and regulatory environment in which the

Group operates, future tax legislation and customer behaviour, amongst other

variables.

Defined benefit pension scheme

Estimation is required in the determination of the discount rate and inflation

assumptions underpinning the valuation of the liabilities of the Group’s defined

benefit pension scheme. There is a range of possible values for each of the

actuarial assumptions and small changes in assumptions may have a significant





CLIMATE CHANGE

In preparing the financial statements, we have considered the impact of climate

change. As our climate risks (discussed earlier in the annual report) identified

predominantly manifest in business interruption, the main areas effected from

a financial perspective have been our impairment and going concern and

viability assessments where we have ensured that these potential risks have

been appropriately considered in forecast cash flows used.

Chemring Group PLC Annual report and accounts 2022166

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CHEMRING GROUP PLC

1 OUR OPINION IS UNMODIFIED

We have audited the financial statements of Chemring Group PLC



consolidated income statement, consolidated statement of comprehensive

income, consolidated statement of changes in equity, consolidated balance

sheet, consolidated cash flow statement, parent company balance sheet,

parent company statement of comprehensive income, parent company

statement of changes in equity, and the related notes, including the





- the financial statements give a true and fair view of the state of the Group’s

and of the parent Company’s affairs as at 31 October 2022 and of the

Group’s profit for the year then ended;

- the Group financial statements have been properly prepared in accordance

with UK-adopted international accounting standards;

- the parent Company financial statements have been properly prepared in

accordance with UK accounting standards, including FRS 101 Reduced

Disclosure Framework; and

- the financial statements have been prepared in accordance with the

requirements of the Companies Act 2006.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing

(UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below.

We believe that the audit evidence we have obtained is a sufficient and

appropriate basis for our opinion. Our audit opinion is consistent with our report

to the audit committee.

We were first appointed as auditor by the directors on 23 March 2018. The

period of total uninterrupted engagement is for the five financial years ended



remain independent of the Group in accordance with, UK ethical requirements

including the FRC Ethical Standard as applied to listed public interest entities.



Overview

Materiality: Group financial statements as a whole 



non-underlying items

Coverage 

continuing operations only

Key audit matters vs 2021

Recurring risks Recoverability of parent company’s investments in subsidiaries 

New Recoverability of goodwill 

2 KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL

MISSTATEMENT

Key audit matters are those matters that, in our professional judgement, were

of most significance in the audit of the financial statements and include the

most significant assessed risks of material misstatement (whether or not due



overall audit strategy; the allocation of resources in the audit; and directing the

efforts of the engagement team. We summarise below the key audit matters,

in decreasing order of audit significance, in arriving at our audit opinion above,

together with our key audit procedures to address those matters and our

findings from those procedures in order that the parent Company’s members,

as a body, may better understand the process by which we arrived at our

audit opinion. These matters were addressed, and our findings are based on

procedures undertaken, in the context of, and solely for the purpose of,



thereon, and consequently are incidental to that opinion, and we do not

provide a separate opinion on these matters.

RECOVERABILITY OF GOODWILL



Refer to page 91 (Audit Committee report), page 161 (accounting policy) and

pages 133 and 134 (financial disclosures).

THE RISK

Forecast based assessment

A history of business combinations results in significant Group goodwill. We

determined that the forecast future cash flows used in calculating the value in

use of each CGU involves a degree of estimation uncertainty, with a potential

range of reasonable outcomes greater than our materiality for the financial

statements as a whole, and possibly many times that amount. The estimated

recoverable amount of the Group is subjective due to inherent uncertainty

involved in forecasting and discounting future cash flows for CGUs.

Our response

We performed the tests below rather than seeking to rely on any of the

Group’s controls because the nature of the balance is such that we would

expect to obtain audit evidence primarily through the detailed procedures



- 

accuracy of the cash flows, forecasting and building comparable variations



the valuation;

- 





- 



available analysts’ reports and peer comparison using input from our own

valuation experts;

- 

of reasonable downward changes to the assumptions noted above;

- 

to the aggregate of the Group’s market capitalisation and the fair value of the

net debt to assess the reasonableness of those cash flows; and

- 

the estimation uncertainty related to the impairment assessment reflect the

risks inherent in the valuation of goodwill.

Our findings

We found the Group’s conclusion that there is no impairment of Group

goodwill to be balanced.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 167

2 KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL

MISSTATEMENT continued

RECOVERABILITY OF PARENT COMPANY’S INVESTMENTS IN

SUBSIDIARIES



Refer to page 91 (Audit Committee report), page 164 (accounting policy) and

page 155 (financial disclosures).

THE RISK

Forecast based assessment

The carrying amount of the parent Company’s investments in subsidiaries are

significant and at risk of irrecoverability due to changes in product demand and

forecast cash flows. The estimated recoverable amount of these balances is

subjective due to the inherent uncertainty involved in forecasting and

discounting future cash flows.

The effect of these matters is that, as part of our risk assessment, we

determined that the recoverable amount of the cost of investment in

subsidiaries has a high degree of estimation uncertainty, with a potential range

of reasonable outcomes greater than our materiality for the financial

statements as a whole, and possibly many times that amount. Note 2 to the

parent Company financial statements disclose the sensitivity estimated by the

parent Company.

Our response

We performed the tests below rather than seeking to rely on any of the

Group’s controls because the nature of the balance is such that we would

expect to obtain audit evidence primarily through the detailed procedures as



accuracy of the cash flows, forecasting and building comparable variations

the valuation;



business understanding;

available analysts’ reports and peer comparison using input from our own

valuation specialists;

- 



- 

investments with the expected value of the business based on the Group’s

market capitalisation and the fair value of the net debt; and

- 

disclosures about the estimation uncertainty related to the impairment

assessment reflect the risks inherent in the recoverability of the parent

Company’s investments in subsidiaries.

Our findings

We found the balance of the parent Company’s investments in subsidiaries and



conclusion that there is no impairment of its investments in subsidiaries to be

balanced).

We continue to perform procedures over revenue recognition from provision

of services over time. However, following our risk assessment procedures in

the current year, we have not assessed this as one of the most significant risks

in our current year audit and, therefore, it is not separately identified in our

report this year.

3 OUR APPLICATION OF MATERIALITY AND AN OVERVIEW



Materiality for the Group financial statements as a whole was set at £3.0m



Group profit before tax, normalised to exclude non-underlying items as

disclosed in note 3 to the group financial statements, of which it represents



Materiality for the parent Company financial statements as a whole was set





In line with our audit methodology, our procedures on individual account

balances and disclosures were performed to a lower threshold of performance

materiality, so as to reduce to an acceptable level the risk that individually

immaterial misstatements in individual account balances add up to a material

amount across the financial statements as a whole.







this percentage in our determination of performance materiality because we

did not identify any factors indicating an elevated level of risk.

We agreed to report to the Audit Committee any corrected or uncorrected



identified misstatements that warranted reporting on qualitative grounds.



related to reclassification.

Of the Group’s fourteen reporting components, we subjected seven





financially significant enough to require a full scope audit for Group purposes,

but did present specific individual risks that needed to be addressed. We

conducted reviews of financial information (including enquiry) at a further



coverage over the Group’s results.

Chemring Group PLC Annual report and accounts 2022168











87%



89%









Group materiality

NORMALISED PROFIT BEFORE TAX

£62.5m (2021: £55.9m)

GROUP MATERIALITY

£3.0m (2021: £2.75m)

£3.0m

Whole financial statements



£150k

Misstatements reported to

the Audit Committee



£2.25m

Whole financial statements

performance materiality



£1.9m

Range of materiality at 10

components (£0.9m–£1.8m)





Full scope for Group audit

purposes 2022



procedures 2022

Residual components 2022

 Full scope for Group audit

purposes 2021



procedures 2021

Residual components 2021

GROUP REVENUE

TOTAL PROFITS AND LOSSES

THAT MADE UP GROUP PROFIT

BEFORE TA X

GROUP TOTAL ASSETS

85%



3 OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE

SCOPE OF OUR AUDIT continued

The components within the scope of our work accounted for the percentages

illustrated opposite.









of any of total Group revenue, total profits and losses that made up Group

profit before tax or total Group assets. For these residual components,



assessment that there were no significant risks of material misstatement



The Group team instructed component auditors as to the significant areas to

be covered, including the relevant risks detailed above and the information to

be reported back. The Group team approved the component materialities,









Company, was performed by the Group team. The Group team performed

procedures on the items excluded from normalised Group profit before tax.





conference meetings were also held with these component auditors and all

others that were not physically visited. At these visits and meetings, the

findings reported to the Group team were discussed in more detail, and any

further work required by the Group team was then performed by the

component auditor.

We were able to rely upon the Group’s internal control over financial

reporting in several areas of our audit, where our controls testing supported

this approach, which enabled us to reduce the scope of our substantive





4 THE IMPACT OF CLIMATE CHANGE ON OUR AUDIT

In planning our audit, we considered the potential impacts of climate







THE CONTEXT OF CLIMATE CHANGE FOR THE GROUP

Climate change impacts the Group in a variety of ways including the impact









The Group’s exposure to climate change is primarily through the acquisition



end products. As part of our audit we have made enquiries of management



Group’s financial statements and the Group’s preparedness for this.

The Group emits greenhouse gases directly from energy used in its production

operations. As explained on page 42 of the Group’s annual report, the Group

announced updated targets to reduce scope 1 and 2 carbon emissions to

become carbon neutral by 2030 and then working towards being a net zero

organisation by 2050.

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CHEMRING GROUP PLC continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 169

4 THE IMPACT OF CLIMATE CHANGE ON OUR AUDIT continued

THE GROUP’S ASSESSMENT OF ACCOUNTING CONSEQUENCES

IFRS requires the Group’s financial reporting to be based, amongst other

things, on the Group’s best estimate of assumptions that are reasonable and

supportable as at the date of reporting. Those assumptions may not align with

the ways in which the global economy, society and government policies will

need to change to meet the relevant targets.

The Group has set carbon emission targets and estimated the incremental

capital and operational expenditure required to deliver those targets.



economic lives of its existing property, plant and equipment, and this does



The Group has provided more detail on how they have considered





OUR AUDIT RESPONSE

Risk assessment procedures

As part of our risk assessment procedures, we made enquiries, with the

assistance of our sustainability specialists, of key members of management.

Our enquiries focused on understanding the Group’s climate related strategy

and identifying those areas where climate change could have a potential

material impact on the financial statements. We did not identify the impact



the Group’s operations and knowledge gained of its impact on significant

accounting estimates and judgements during our risk assessment procedures

and testing.

Audit procedures in relation to Key Audit Matters

We did not consider the impact of climate change to be significant to our audit

response for the Key Audit Matters relating to recoverability of goodwill and

the parent Company’s investments in subsidiaries.

Other audit procedures

During the course of our audit, we carried out the following additional



- we considered the Group’s processes around climate change related

disclosures in the Annual Report and read the disclosures in the Strategic

Report and Directors’ Report and considered its consistency with the

financial statements and our audit knowledge; and

- we assessed the appropriateness of climate-related financial disclosures,

including TCFD recommended disclosures.

The audit procedures were performed principally by the Group engagement

team with the support of our sustainability specialists.

5 GOING CONCERN

The directors have prepared the financial statements on the going concern

basis as they do not intend to liquidate the Group or the parent Company or

to cease their operations, and as they have concluded that the Group’s and the

parent Company’s financial position means that this is realistic. They have also

concluded that there are no material uncertainties that could have cast

significant doubt over their ability to continue as a going concern for at least



concern period”).

We used our knowledge of the Group, its industry, and the general economic

environment to identify the inherent risks to its business model and analysed

how those risks might affect the Group’s and parent Company’s financial

resources or ability to continue operations over the going concern period. The

risks that we considered most likely to adversely affect the Group’s and parent

Company’s available financial resources, EBITDA and net debt, and therefore



- delays to significant revenue contracts;

- manufacturing facilities safety incidents; and

- the potential outcome of the provisions and contingent liabilities related to

regulatory investigations.

We considered whether these risks could plausibly affect the liquidity or

covenant compliance in the going concern period by assessing the directors’

sensitivities over the level of available financial resources and covenant

thresholds indicated by the Group’s financial forecasts taking account of

severe, but plausible adverse effects that could arise from these risks

individually and collectively.

We also assessed completeness of the going concern disclosure.



- we consider that the directors’ use of the going concern basis of accounting

in the preparation of the financial statements is appropriate;

- we have not identified, and concur with the directors’ assessment that there

is not, a material uncertainty related to events or conditions that, individually

or collectively, may cast significant doubt on the Group’s or parent

Company’s ability to continue as a going concern for the going concern

period;

- we have nothing material to add or draw attention to in relation to the

directors’ statement in note 1 to the accounting policies note on the use of

the going concern basis of accounting with no material uncertainties that may

cast significant doubt over the Group and parent Company’s use of that

basis for the going concern period, and we found the going concern



- the related statement under the Listing Rules set out on page 74 is materially

consistent with the financial statements and our audit knowledge.

However, as we cannot predict all future events or conditions and as

subsequent events may result in outcomes that are inconsistent with

judgements that were reasonable at the time they were made, the above

conclusions are not a guarantee that the Group or the parent Company will

continue in operation.

6 FRAUD AND BREACHES OF LAWS AND REGULATIONS –



IDENTIFYING AND RESPONDING TO RISKS OF MATERIAL

MISSTATEMENT DUE TO FRAUD

To identify risks of material misstatement due to fraud (“fraud risks”) we

assessed events or conditions that could indicate an incentive or pressure to

commit fraud or provide an opportunity to commit fraud. Our risk assessment



- Enquiring of directors and internal audit and inspection of policy

documentation as to the Group’s high-level policies and procedures to

prevent and detect fraud, including the internal audit function, and the

Group’s channel for “whistleblowing”, as well as whether they have

knowledge of any actual, suspected or alleged fraud;

- Reading Board, Audit Committee, Executive Committee, Remuneration

Committee and Risk Committee meeting minutes;

- Considering remuneration incentive schemes and performance





- Using analytical procedures to identify any unusual or unexpected

relationships; and

- Using our own forensic specialists to assist us in identifying fraud risks based

on discussions of the circumstances of the Group and parent Company.

We communicated identified fraud risks throughout the audit team and

remained alert to any indications of fraud throughout the audit. This included

communication from the Group audit team to full scope component audit

teams of relevant fraud risks identified at the Group level and request to







Chemring Group PLC Annual report and accounts 2022170

6 FRAUD AND BREACHES OF LAWS AND REGULATIONS –

 continued

IDENTIFYING AND RESPONDING TO RISKS OF MATERIAL

MISSTATEMENT DUE TO FRAUD continued

As required by auditing standards and taking into account possible pressures to

meet profit targets, we perform procedures to address the risk of management

override of control, in particular the risk that Group and component

management may be in a position to make inappropriate accounting entries,

and the risk of bias in accounting estimates and judgements such as provisions

and pension assumptions. On this audit, we do not believe there is a fraud risk

related to revenue recognition because there are no complexities or significant

areas of estimation within the revenue recognition.

We did not identify any additional fraud risks.



- Identifying journal entries and other adjustments to test for all full scope

components based on risk criteria and comparing the identified entries



accounts; and

- Assessing whether the judgements made in making significant accounting

estimates are indicative of a potential bias.

IDENTIFYING AND RESPONDING TO RISKS OF MATERIAL

MISSTATEMENT DUE TO NON-COMPLIANCE WITH LAWS



We identified areas of laws and regulations that could reasonably be expected

to have a material effect on the financial statements from our general

commercial and sector experience, through discussion with the directors



and legal correspondence and discussed with the directors the policies and

procedures regarding compliance with laws and regulations.

As the Group is regulated, our assessment of risks involved gaining an

understanding of the control environment including the entity’s procedures for

complying with regulatory requirements.

We communicated identified laws and regulations throughout our team and

remained alert to any indications of non-compliance throughout the audit.

This included communication from the Group audit team to component audit

teams of relevant laws and regulations identified at the Group level, and a

request for component auditors to report to the Group team any instances



misstatement at Group level.

The potential effect of these laws and regulations on the financial statements

varies considerably.

Firstly, the Group is subject to laws and regulations that directly affect the

financial statements including financial reporting legislation (including related

companies legislation), distributable profits legislation, taxation legislation



laws and regulations as part of our procedures on the related financial

statement items.

Secondly, the Group is subject to many other laws and regulations where the

consequences of non-compliance could have a material effect on amounts or

disclosures in the financial statements, for instance through the imposition of

fines or litigation. We identified the following areas as those most likely to have



anti-bribery and corruption, recognising the regulated nature of the Group’s

activities and its legal form. Auditing standards limit the required audit

procedures to identify non-compliance with these laws and regulations to

enquiry of the directors and inspection of regulatory and legal correspondence,

if any. Therefore if a breach of operational regulations is not disclosed to us or

evident from relevant correspondence, an audit will not detect that breach.

For the Health and Safety Executive matter discussed in note 33, we assessed

disclosures against our understanding from legal correspondence, including

discussions held with the lawyers as well as inspection of relevant documentation.

CONTEXT OF THE ABILITY OF THE AUDIT TO DETECT FRAUD



Owing to the inherent limitations of an audit, there is an unavoidable risk



statements, even though we have properly planned and performed our audit

in accordance with auditing standards. For example, the further removed

non-compliance with laws and regulations is from the events and transactions

reflected in the financial statements, the less likely the inherently limited

procedures required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection



misrepresentations, or the override of internal controls. Our audit procedures

are designed to detect material misstatement. We are not responsible for

preventing non-compliance or fraud and cannot be expected to detect

non-compliance with all laws and regulations.

7 WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION

IN THE ANNUAL REPORT

The directors are responsible for the other information presented in the

Annual Report together with the financial statements. Our opinion on the

financial statements does not cover the other information and, accordingly,



form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider

whether, based on our financial statements audit work, the information therein

is materially misstated or inconsistent with the financial statements or our

audit knowledge. Based solely on that work we have not identified material

misstatements in the other information.

STRATEGIC REPORT AND DIRECTORS’ REPORT



- we have not identified material misstatements in the strategic report and the

directors’ report;

- in our opinion the information given in those reports for the financial year is

consistent with the financial statements; and

- in our opinion those reports have been prepared in accordance with the

Companies Act 2006.

DIRECTORS’ REMUNERATION REPORT

In our opinion the part of the Directors’ Remuneration Report to be audited

has been properly prepared in accordance with the Companies Act 2006.

DISCLOSURES OF EMERGING AND PRINCIPAL RISKS AND LONGER-

TERM VIABILITY

We are required to perform procedures to identify whether there is a

material inconsistency between the directors’ disclosures in respect of

emerging and principal risks and the viability statement, and the financial

statements and our audit knowledge.

Based on those procedures, we have nothing material to add or draw



- the directors’ confirmation, on page 65, that they have carried out a robust

assessment of the emerging and principal risks facing the Group, including

those that would threaten its business model, future performance, solvency

and liquidity;

- the principal risks disclosures describing these risks and how emerging risks

are identified, and explaining how they are being managed and mitigated; and

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CHEMRING GROUP PLC continued

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS

Chemring Group PLC Annual report and accounts 2022 171

7 WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION

IN THE ANNUAL REPORT continued

DISCLOSURES OF EMERGING AND PRINCIPAL RISKS AND LONGER-

TERM VIABILITY continued

- the directors’ explanation in the viability statement of how they have

assessed the prospects of the Group, over what period they have done so

and why they considered that period to be appropriate, and their statement

as to whether they have a reasonable expectation that the Group will be

able to continue in operation and meet its liabilities as they fall due over the

period of their assessment, including any related disclosures drawing

attention to any necessary qualifications or assumptions.

We are also required to review the viability statement, set out on page 74

under the Listing Rules. Based on the above procedures, we have concluded

that the above disclosures are materially consistent with the financial

statements and our audit knowledge.

Our work is limited to assessing these matters in the context of only the

knowledge acquired during our financial statements audit. As we cannot

predict all future events or conditions and as subsequent events may result





statements is not a guarantee as to the Group’s and parent Company’s

longer-term viability.

CORPORATE GOVERNANCE DISCLOSURES

We are required to perform procedures to identify whether there is a

material inconsistency between the directors’ corporate governance

disclosures and the financial statements and our audit knowledge.

Based on those procedures, we have concluded that each of the following is



- the directors’ statement that they consider that the annual report and

financial statements taken as a whole is fair, balanced and understandable,

and provides the information necessary for shareholders to assess the

Group’s position and performance, business model and strategy;

- the section of the annual report describing the work of the Audit

Committee, including the significant issues that the Audit Committee

considered in relation to the financial statements, and how these issues



- the section of the annual report that describes the review of the

effectiveness of the Group’s risk management and internal control systems.

We are required to review the part of the Corporate Governance Report

relating to the Group’s compliance with the provisions of the UK Corporate

Governance Code specified by the Listing Rules for our review. We have

nothing to report in this respect.

8 WE HAVE NOTHING TO REPORT ON THE OTHER MATTERS



Under the Companies Act 2006, we are required to report to you if, in



- adequate accounting records have not been kept by the parent Company,





- the parent Company financial statements and the part of the Directors’

Remuneration Report to be audited are not in agreement with the

accounting records and returns; or

- certain disclosures of directors’ remuneration specified by law are not



- we have not received all the information and explanations we require for



We have nothing to report in these respects.

9 RESPECTIVE RESPONSIBILITIES

DIRECTORS’ RESPONSIBILITIES

As explained more fully in their statement set out on page 122, the directors



satisfied that they give a true and fair view; such internal control as they

determine is necessary to enable the preparation of financial statements that

are free from material misstatement, whether due to fraud or error; assessing

the Group and parent Company’s ability to continue as a going concern,

disclosing, as applicable, matters related to going concern; and using the going

concern basis of accounting unless they either intend to liquidate the Group or

the parent Company or to cease operations, or have no realistic alternative

but to do so.

AUDITOR’S RESPONSIBILITIES

Our objectives are to obtain reasonable assurance about whether the financial

statements as a whole are free from material misstatement, whether due to

fraud or error, and to issue our opinion in an auditor’s report. Reasonable

assurance is a high level of assurance, but does not guarantee that an audit

conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in aggregate, they could reasonably be

expected to influence the economic decisions of users taken on the basis of

the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at

www.frc.org.uk/auditorsresponsibilities.

The Company is required to include these financial statements in an annual

financial report prepared using the single electronic reporting format specified

in the TD ESEF Regulation. This auditor’s report provides no assurance over

whether the annual financial report has been prepared in accordance with



10 THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE



This report is made solely to the Company’s members, as a body, in

accordance with Chapter 3 of Part 16 of the Companies Act 2006 and the

terms of our engagement by the Company. Our audit work has been

undertaken so that we might state to the Company’s members those matters

we are required to state to them in an auditor’s report, and the further

matters we are required to state to them in accordance with the terms agreed

with the Company, and for no other purpose. To the fullest extent permitted

by law, we do not accept or assume responsibility to anyone other than the

Company and the Company’s members, as a body, for our audit work, for this

report, or for the opinions we have formed.

Andrew Campbell-Orde (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

Gateway House

Tollgate

Chandlers Ford

Southampton

SO53 3TG

13 December 2022

Chemring Group PLC Annual report and accounts 2022172

FIVE-YEAR RECORD

For the year ended 31 October 2022

2022 2021 2020 2019 2018

£m £m £m £m £m

Revenue 442.8 393.3 402.5 335.2 297.4

Underlying operating profit 64.0 57.5 54.7 44.0 31.0

Non-underlying items (10.7) (7.1) (8.4) (12.7) (46.9)

Operating profit/(loss) 53.3 50.4 46.3 31.3 (15.9)

Finance expense (1.5) (1.6) (3.0) (4.6) (6.1)

Profit/(loss) before taxation 51.8 48.8 43.3 26.7 (22.0)

Taxation (4.4) (7.3) (8.6) (3.6) (18.8)

Profit/(loss) for the year from continuing operations 47.4 41.5 34.7 23.1 (40.8)

(Loss)/profit after tax from discontinued operations — — — (1.2) (65.0)

Profit/(loss) attributable to equity shareholders 47.4 41.5 34.7 21.9 (105.8)

Intangible assets and property, plant and equipment 395.4 351.5 348.9 329.9 318.9

Working capital 93.9 84.4 85.1 90.5 83.7

Provisions (18.4) (17.5) (19.0) (17.2) (20.7)

Retirement benefit surplus 11.2 13.7 7.6 9.6 7.5

Net current and deferred tax liabilities (20.8) (24.5) (16.3) (8.5) (11.1)

Net debt (7.2) (26.6) (48.2) (75.7) (81.8)

Other (36.0) (28.2) (28.5) (22.8) (2.3)

Net assets employed 418.1 352.8 329.6 305.8 294.2



Ordinary share capital 2.8 2.8 2.8 2.8 2.8

Reserves attributable to equity shareholders 307.7 350.0 326.8 303.0 291.4

Total equity 310.5 352.8 329.6 305.8 294.2

Basic underlying earnings per ordinary share (continuing operations) 20.2p 16.9p 15.1p 11.2p 6.9p

Diluted underlying earnings per ordinary share (continuing operations) 19.7p 16.5p 14.8p 11.0p 6.7p

Basic earnings/(loss) per ordinary share (continuing operations) 16.9p 14.7p 12.3p 8.2p (14.6)p

Diluted earnings/(loss) per ordinary share (continuing operations) 16.4p 14.4p 12.0p 8.1p (14.6)p

Dividend per share 5.7p 4.8p 3.9p 3.6p 3.3p

STRATEGIC REPORT GOVERNANCE OTHER INFORMATION

Chemring Group PLC Annual report and accounts 2022 173

CBP016288

Chemring’s commitment to environmental issues is reflected in this Annual Report,

which has been printed on Galerie Satin, an FSC

certified material. This document

was printed by Park Communications using its environmental print technology, which

minimises the impact of printing on the environment, with 99% of dry waste diverted

from landfill. Both the printer and the paper mill are registered to ISO 14001.

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Website: www.chemring.com

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Chemring Group PLC’s 2022 annual report and accounts and the notice for the Annual General Meeting can also be viewed and downloaded at

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CHEMRING GROUP PLC ANNUAL REPORT AND ACCOUNTS 2022

CHEMRING GROUP PLC

Roke Manor

Old Salisbury Lane

Romsey

Hampshire SO51 0ZN

United Kingdom

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CHEMRING GROUP PLC ANNUAL REPORT AND ACCOUNTS 2022