Chemring (CHG) shareholders who backed the defence group’s emergency rights issue in February got their reward today as it announced the start of a delayed £40 million Middle East ammunition contract.
The company’s shares leaped 8%, or 11p, to 140p as the group said advanced payment had been received and production at its ordnance division had begun.
‘Initial revenue will be recognised in Q2 FY16 [second quarter of the 2016 financial year] and as previously advised, this multi-year contract is expected to provide a significant contribution to FY16,’ it said in a stock exchange statement.
In January Chemring revealed delays to the order were part of a string of contract setbacks that had slashed underlying profits in 2015 to £19.8 million from £30.3 million.
The group, which has suffered from government defence spending cuts, proceeded with a rights issue it had flagged up in October, raising £80.8 million to repay its debts.
The shares have fallen 25% this year and are down a third over one year but after today's rally the company is valued at £391 million. Leading investors include Alex Wright, the Citywire AAA-rated manager of Fidelity Special Situations, which holds 4.1%; Ben Whitmore, the AA-rated manager of Jupiter UK Special Situations, which owns 4.7%; and Philip Matthews, manager of Schroder UK Alpha Plus, according to Thomson Reuters data.
Otherwise it was a quiet day on the UK stock market. Although the FTSE 100 snapped out of a two-day losing streak to gain 0.7%, or 44.5 points, to 6,190 the index remains stuck in the 200 point range it has traded in for the past month.
Mediclinic International (MDCM) led the FTSE 100 with a 2.7% gain to 922.5p following the South African healthcare group’s trading update on Friday, its first since completing the reverse takeover of London-listed Al Noor Hospitals in February.
Mondi (MNDI) fell 2% after Russia’s Federal Antimonopoly Service announced it was investigating the company’s pricing of offset paper. Mondi said it had not received notification from the regulator.
Healthcare stocks rose 1.24% on average with AstraZeneca (AZN) up 1.5% or 60p to £39.95.
Rio Tinto (RIO) rose 2.4% or 46p to £19.89 with Reuters reporting a supportive rise in iron ore prices in Asia as a factor.
The ‘mid cap’ FTSE 250 index added 0.3% to 16,896 with Stagecoach Group (SGC) motoring 7% higher to 268p.
Brewin Dolphin jumped 5% to 272p after N+1 Singer upgraded the wealth manager to ‘buy’ from ‘hold’.
The FTSE Small Cap index inched just three points higher to 4,529.
Sepura (SEPU), the manufacturer of digital mobile radios, slumped 30% or 60p to 138p after warning profits would be lower than expected this year, between 16 million and 20 million euros.