Chemring’s dividend muddle

These are more encouraging times for Chemring, even if it appears the defence products firm is out of practice when it comes to paying a dividend.

Having passed on the full-year dividend last year and again in 2016 half-year results, Chemring told shareholders in January that it planned to resume payments with the award of 1.3p for the year to October 30.

However, this hasn't gone to plan after Chemring omitted to include a resolution seeking shareholder approval for the payment in its AGM papers.

All of which has meant that the company has now had to declare a one-off dividend of 1.3p in place of the proposed final dividend. This special payment won't require the support of shareholders and will still be paid on May 18.

The dividend muddle won't matter to shareholders, who have been cheered by a sharp upward correction in the company's share price in recent weeks.

With Donald Trump's spending plans boosting valuations across the global defence sector, shares in the flares and countermeasures firm touched £2 Friday from the 117p seen in early February.

The improvement also reflects self-help measures under Michael Flowers, who is Chemring's third chief executive in four years. Order intake for the first four months of the financial year is up to £127.4 million from £88.9 million, with revenues up to £145.6 million from £106.5 million the year previously.

There's been some help from the significant weakening of sterling and the fulfillment of contracts in the energetics systems division.

An £80 million rights issue at the start of last year has also meant the business is now able to focus on day-to-day matters rather than having to manage the debt pile created by the acquisitions of a previous management team. Underlying profits in the most recent financial year rose by 71.7% to £34 million.

While the company is heading in the right direction, Chemring has been less successful in coming up with a new directors' remuneration policy.

Following consultations with shareholders, the company said today that it no longer intended to seek shareholders' approval for the scheme at the AGM.

Chairman Carl-Peter Forster will now re-engage with shareholders in order to agree a policy that will retain and attract the right calibre of talent.

He said: "We have been actively engaging with shareholders regarding long-term incentives for some time and, while we received majority support for the proposed revised approach, the board believes that the right course of action now is to withdraw the resolutions and consider these plans further.

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