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10 May 24. Space offers new frontier for Filtronic.

A deal with Elon Musk’s SpaceX could reignite the company’s fortunes.

Filtronic’s (FTC) announcement of a strategic agreement with Elon Musk’s SpaceX late last month drove a one-day share price pop of almost 50 per cent. This is understandable. Working with the world’s most advanced space technology company is a coup, but some investors with longer memories will remain unimpressed. Filtronic has been here before, enjoying a stellar rise on the back of the dotcom boom before experiencing an equally rapid descent.

The communications equipment specialist was founded by a former electrical engineering lecturer at the University of Leeds, David Rhodes, in the late 1970s. It initially made components for the RAF’s Tornado aircraft and used an Aim listing in 1994 to grow via acquisitions. By 2000, it had become one of the UK’s most successful university spin-outs, with revenues of over £200mn and a market cap in the billions.

But it had ‘bet the farm’ on wireless network technology, in the words of current chief executive Richard Gibbs, and this market collapsed during a lull between the rollouts of 3G and 4G technology.

So, too, did the company’s share price. Over a 20-month period, Filtronic’s shares lost 99 per cent of their value. A dramatic downsizing ensued, and on many measures, the company remains a shadow of its former self. Turnover last year was just £16.3mn, and even after its recent run-up, its market cap has only just topped £100m.

It is much more focused, though. Having got out of businesses that Gibbs says became “commoditised”, such as the production of telecoms antennas, it is now concentrated on four end markets – aerospace and defence, critical communications, telecoms infrastructure and space. Its engineers have skills that are hard to replicate, designing and manufacturing filters, transceivers and amplifiers of very low radio frequencies (RFs).

“We know where we can excel, and that’s in the non-trendy, hard-to-do analogue bit of engineering where it’s not just applying ones and zeros,” Gibbs said. “It’s accumulated knowledge of how to design very low frequencies and filter out any frequencies you don’t want.”

These skill sets are not widely held, as few universities still train RF engineers, Gibbs said. Their rarity can be vouched for by the fact that SpaceX – a company not known for its love of working with external suppliers – is partnering with it.

This came about because Filtronic had worked with other tech companies such as Meta (US:META) and Alphabet (US:GOOG) on their low-earth orbit projects, which they later abandoned. Some of the engineers on those projects now work at SpaceX and knew Filtronic could build the kit they needed to send signals to and from Starlink satellites to ground stations.

The SpaceX deal

SpaceX placed its first £2.3m order for Filtronic’s E-band solid state power amplifiers (SSPAs) last year, although confidentiality agreements were in place then. As other deals followed, and Filtronic became a critical supplier, SpaceX formalised the relationship.

It has done this through an agreement that grants it warrants for up to 10 per cent of Filtronic’s shares. Half of these will vest once SpaceX has bought $37m (£30m) worth of E-band SSPAs, and the other half will once a similar size of orders is placed for amplifiers operating at other frequencies.

“We’ll get to 5 per cent fairly quickly,” Gibbs asserted, given that SpaceX has just placed its fifth order for E-band SSPAs worth $19.7m. These will be delivered in Filtronic’s next financial year, which begins in June. The other 5 per cent will vest once equipment for other frequencies is manufactured, which could take around 12-18 months.

House broker Cavendish believes this deal will mark a step change in the company’s fortunes. It is forecasting revenue growth of 50 per cent this year to £24.5mn, and a similar magnitude next year to £36m. Adjusted operating profit is estimated to rise from £237,000 last year to £3.4m this year and £6.6m next.

Filtronic’s shares have doubled in value since the start of this year and have risen four-fold over the past 12 months. They now trade at 38 times Cavendish’s forecast earnings of 1.3p a share, but this falls to 19 times based on next year’s estimate of 2.7p. (Source: Investors Chronicle)

 

10 May 24. Fincantieri to acquire UAS, Leonardo’s torpedo and sonar production line. Fincantieri will acquire Leonardo’s Underwater Armaments Systems business line for as much as €415m by early 2025.

Fincantieri will acquire Leonardo’s Underwater Armament Systems (UAS) torpedo and sonar business line in a deal that could reach €415m ($447m) by its conclusion, expected to be finalised at the beginning of 2025.

Fincantieri will acquire Leonardo’s torpedo production technologies as well as its underwater acoustic technologies, with Fincantieri intending to use the new property to grow its underwater sector, focusing on new military applications, as well as solutions for underwater civil infrastructure.

In 2023, the UAS line of business generated revenues for Leonardo of approximately €160m ($172m) and an EBITDA of € 34m ($37m). UAS also includes a 50% participation in GEIE EuroTorp established with Naval Group and Thales, which makes the MU90 light torpedo.

As part of its strategic rationale for the transaction, Fincantieri estimates the target underwater market to have a €100bn cumulative value between 2024-28, with a 15% compounded annual growth rate.

In a statement on the acquisition, Fincantieri has said that the underwater domain holds strategic importance in the Mediterranean Sea, as an area of dense critical infrastructure. Fincatieri also recognised the strength of growth in the intelligence, surveillance and reconnaissance sector as necessitating a ‘dedicated industrial focus’.

Chief executive officer of Fincantieri Pierroberto Folgiero expressed satisfaction with the deal, adding that the acquisition is a milestone in the company’s equity plans and underwater strategy for the next industrial cycle. “Underwater technological autonomy and global executive capabilities, in this new geopolitical and industrial scenario, will be the distinguishing factors that will allow Fincantieri to fully exploit Fincantieri’s potential in the interest of the Group’s industrial and financial stakeholders.”

Bottom of Form

The value of the acquisition is €300m as fixed enterprise value, with a variable component that has a maximum value of €115m based on growth assumptions for 2024. Amongst other measures, Fincantieri has suggested a reverse stock split as part of its plans to finance the acquisition.

Leonardo CEO and MG Roberto Cingolani stated: “The disposal of the Underwater Armaments Systems is part of the plan of rationalising Leonardo’s business portfolio. The initiative gives further emphasis to the cooperation between Leonardo and Fincantieri, within the framework aimed at achieving more effective defence and global competitiveness.”

UAS was originally a subsidiary known as Whitehead Alenia Sistemi Subacquei S.p.A., specialising in the construction of submarine defence systems, such as torpedos, countermeasures, and sonar systems, until Whitehead merged with Leonardo S.p.A in 2016 and came to be known as the UAS business line.  (Source: naval-technology.com)

 

09 May 24. MDA Space (TSX: MDA), a trusted space mission partner to the rapidly expanding global space industry, today announced its financial results for the first quarter ended March 31, 2024.

• Q1 2024 Highlights
• Record backlog of $3.3bn at quarter end, up 169% YoY
• Healthy top line growth with revenues of $209.1m, up 3.6% YoY
• Solid profitability with adjusted EBITDA of $42.0m and adjusted EBITDA margin of 20.1%
• Adjusted net income of $18.1 m and adjusted diluted earnings per share of $0.15
• Rebranded to MDA Space as we continue to lead in a new area of space innovation
• Reaffirmed 2024 full-year financial outlook

“We are off to a solid start in 2024. In Q1, the MDA Space team delivered another quarter of strong performance as we continued to convert our backlog and deliver on our customer commitments,” said Mike Greenley, Chief Executive Officer of MDA Space. “We also grew our book of business in Q1 and secured a number of awards including a contract to deliver the fleet of MQ-9B SkyGuardian Remotely Piloted Aircraft Systems for the Canadian Armed Forces. And subsequent to quarter end, we received a $250m contract extension from the Canadian Space Agency to continue supporting robotics operations on the International Space Station until its planned retirement in 2030. Last quarter, we also announced our rebranding to MDA Space, a natural brand evolution that further positions us to lead in a new area of space innovation. In addition, as part of our strategy to commercialize and productize our world-leading technology to meet changing market needs, we unveiled two new product brands. MDA AURORATM is our new software-defined digital satellite product line that positions us to capitalize on the market transition from analog to digital satellite technology, and MDA SKYMAKERTM is a full suite of scalable and modular space robotics and services that enables us to offer the world’s most flight-proven capabilities to any mission or application in an efficient, adaptable and highly accessible kit. We are energized by the momentum we are seeing in our business and end markets. With our backlog at a record level, the MDA Space team is laser focused on execution and delivering another successful year for customers, shareholders and our team.”

Q1 2024 HIGHLIGHTS

• Backlog of $3.3bn at quarter end continued to build and was up 169% compared to Q1 2023. The increase in backlog is driven by new order bookings including the $2.1bn Telesat Lightspeed LEO constellation award announced in 2023.
• Revenues of $209.1m in Q1 2024 were up 3.6% year over year driven by execution on our backlog and strong contributions from the Robotics & Space Operations business.
• Adjusted EBITDA of $42.0m in Q1 2024 compared to $48.9m in Q1 2023, representing a decrease of $6.9m (or 14.1%) year over year. Adjusted EBITDA margin of 20.1% in Q1 2024 is consistent with the Company’s full year margin guidance of 19-20% and compares to adjusted EBITDA margin of 24.2% reported in Q1 2023. The year over year change was largely in line with the variance in gross margin over the same period driven by evolving program mix.
• Q1 adjusted net income was $18.1m compared with $26.5m for Q1 2023, representing a decrease of $8.4m (or 31.7%) year over year driven by the aforementioned gross profit variance. Adjusted diluted earnings per share of $0.15 in Q1 2024 compared to $0.22 in Q1 2023.
• Operating cash flow was an inflow of $24.7m in Q1 2024 compared with $45.8m in Q1 2023. The year over year decrease in operating cash flow was primarily driven by higher working capital requirements in Q1 2024 versus the same period last year.
• At quarter end, net debt to adjusted EBITDA ratio was 2.6x driven by investment in our growth initiatives.

2024 FINANCIAL OUTLOOK

As a trusted mission partner and leading global space technology provider, we are leveraging our capabilities and expertise to execute on targeted growth strategies across our end markets and business areas. Our strategic initiatives, which span across our three businesses, include investing in next generation space technology and services, expanding our presence in high growth markets and geographies, scaling and expanding skills, talent and operations to meet current and future market demand and leveraging strategic M&A to complement organic growth. We continue to make good progress against our long term strategic plan.

MDA is well positioned to capitalize on strong customer demand and robust market activity given our diverse and proven technology offerings. Our growth pipeline is significant and underpinned by existing and new programs and our book of business is healthy. We see activities ramping up in line with our expectations, and are encouraged by the team’s solid execution.

For fiscal 2024, we reaffirm the previous outlook provided in our Q4 2023 earnings release and continue to expect full year revenues to be $950 – $1,050m, representing robust growth of approximately 25% at the mid-point of guidance compared to 2023 levels. We expect revenue growth to accelerate in the second half of 2024 as we ramp up work volumes on a number of programs. We continue to expect full year adjusted EBITDA to be $190 – $210m, representing approximately 19% – 20% adjusted EBITDA margin. We reaffirm our expectations that capital expenditures will be $210 – $230 m in 2024, comprising primarily of growth investments to support CHORUS and the previously outlined growth initiatives across our three business areas.

For Q2 2024, we expect revenues to be $215 – $225m as we continue to execute on our backlog. (Source: PR Newswire)

 

09 May 24. BAE Systems continues to benefit from higher defence spending. BAE Systems (BA.) has said the recent passing of a $95bn supplemental aid package by the US government for Ukraine and the UK government’s renewed commitment to spend 2.5 per cent of GDP on defence “should build further positive momentum” in terms of its order intake.

The defence contractor highlighted a series of recent contract wins in a trading update, including more than $1bn-worth of orders from the US army for multi-purpose vehicles and self-propelled howitzers and a $650mn deal with Denmark to upgrade and maintain a fleet of CV90 tanks.

Full-year guidance remains unchanged, with the company expected to deliver double-digit increases in sales and underlying operating profit, and to generate free cash flow of at least £1.3bn – even after stepping up spending on capex and research.

A £1.5bn buyback programme that began in 2022 is now 90 per cent complete, and the company will soon kick off a second £1.5bn round that was approved by its board last year.

The question for investors is whether buybacks now represent the most efficient use of cash, given the 130 per cent increase in the company’s share price since the war in Ukraine began. On some measures, BAE Systems’ valuation already looks quite full – its shares trade at 20 times forecast earnings, compared with a five-year average of 13 times. Its dividend yield has fallen from its five-year average of 3.6 per cent to just 2.2 per cent. It was clearly undervalued in the past, though, and the growth in orders shows no signs of slowing. Consensus forecasts show earnings picking up, meaning analysts expect the price/earnings (PE) ratio to fall to 18 times next year and 16 times in 2026.

Last IC view: Hold, 1,217p, 21 Feb 2024. (Source: Investors Chronicle)

 

09 May 24. BAE Systems plc will hold its Annual General Meeting today at 9.30 a.m.  At the meeting, Chair, Cressida Hogg, and Chief Executive, Charles Woodburn, will comment on the performance of the Group in 2023, as detailed in the Preliminary Results Announcement published on 21 February 2024. Additionally, BAE Systems plc provides the following update on trading in the year to date.

Charles Woodburn, BAE Systems Chief Executive, said:  “Trading so far this year has been in line with expectations. Operational performance continues to be strong and our backlog and programme incumbencies underscore our confidence in our long-term value-creating model.  We’re continuing to deliver on mission critical requirements for our customers, and progress our long-term strategic programmes within the elevated threat environment. We have commenced the integration of our new Space & Mission Systems business in the US following the closing of the Ball Aerospace acquisition in February. Our global presence and diverse portfolio of products and services provide high visibility for top-line growth, margin expansion and cash generation in the coming years.”

Guidance

The Group’s full year 2024 guidance is unchanged from that contained in the Preliminary Results Announcement published on 21 February 2024.

• Sales +10% to +12% (2023: £25,284m)
• Underlying EBIT +11% to +13% (2023: £2,682m)
• Underlying EPS  +6% to +8% (2023: 63.2p)
• 2024 Free Cash Flow (FCF) >£1.3bn
• Cumulative FCF 2024-2026  >£5bn
• Guidance is provided on the basis of an exchange rate of $1.24:£1 for the year
• Sensitivity to EPS is around 1.3 pence for every 5 cent movement

Increasing exposure to major defence growth markets

The Australian Government’s selection of BAE Systems and ASC Pty Ltd to build Australia’s new fleet of nuclear powered submarines is the latest significant development in the AUKUS trilateral security pact between the United States, the United Kingdom and Australia.

Under the AUKUS agreement, Australia and the UK will operate a common submarine of the future, incorporating technology from all three nations, based on the UK’s next generation design, which BAE Systems is leading.  In 2023, we received c.£4bn of order intake to enable the UK programme to transition into the detailed design phase and commence procurement of long-lead items and supporting infrastructure.

BAE Systems and ASC Pty Ltd will now combine their complementary skills, expertise and capabilities under a collaborative arrangement in Australia, ultimately leading to the establishment of an incorporated Joint Venture.

With our global presence and wide portfolio of high-end technologies and services, any further expansion of the current AUKUS programme would enhance our long-term opportunity pipeline.

Order Intake

Defence spending is high across our sectors and key markets. The recent passing of the US supplemental aid package to Ukraine and the commitment by the UK Government to spend 2.5% of GDP by 2030 should build further positive momentum.

Notable awards received to date include:

• Armored Multi-Purpose Vehicles – $754m award for a second full rate production order
• CV90 Denmark – awards for upgrades and maintenance services collectively amounting to over $650m.
• M109 Self-Propelled Howitzers – up to $318m for technical and sustainment support
• Amphibious Combat Vehicles – awards received collectively over $200m
• Geospatial-Intelligence Enterprise Modelling Services – Electronic Systems announced an IDIQ contract worth up to $182m from the US National Geospatial-Intelligence Agency
• GeoXO Atmospheric Composition Instrument – $365m contract from NASA for the National Oceanic and Atmospheric Administration for Space & Mission Systems to develop and build a new instrument to monitor global air quality
• MBDA domestic and export awards
• The UK MoD has awarded BAE Systems a contract to maintain and repair gifted L119 Light Guns in Ukraine.

Space & Mission Systems integration

We completed the acquisition of Ball Aerospace on 16 February and renamed the business Space & Mission Systems. The integration programme is underway and the business has had a good start to the year, securing a number of key contracts. There were successful launches of multiple satellites with BAE Systems-built instruments: MethaneSAT will provide reliable scientific data about the sources and scale of methane emissions globally to help drive reductions in the future; and the Weather System Follow-on – Microwave (WSF-M) satellite will bridge critical gaps in current space-based environmental monitoring capabilities for the US Space Force.

Evolving the business for long-term growth

In support of our growth outlook and to help meet our customer aspirations, we are investing in our people, facilities and technology. In 2024, in the UK, our ambition is to hire a record 2,700 new apprentices, graduates and undergraduates.

Self-funded R&D is expected to rise with investments in high technology areas such as electronic warfare, autonomy, laser directed weapons, counter UAS, synthetic training, electrification applications and space solutions.

Capital expenditure is expected to rise compared to 2023, with capital expenditure focused on maritime, munitions and our Swedish combat vehicle production capacity and capabilities. These investments are all included within our rolling 3-year cash guidance.

Capital Distributions

The 2023 final dividend of 18.5 pence per share will be paid, subject to shareholder approval, on 3 June 2024.

We have completed over 90% of the three-year share buyback programme of up to £1.5bn, which commenced in July 2022.

In addition, in August 2023, the Board approved a further share buyback programme of up to £1.5bn which is expected to commence after completion of the current programme and conclude within three years of its commencement.

2024 Interim results

BAE Systems will announce its interim results for the half year ending 30 June 2024 on 1 August 2024.

 

08 May 24. VSE Corporation Announces First Quarter 2024 Results.

VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a leading provider of aftermarket distribution and repair services, announced today results for the first quarter 2024.

FIRST QUARTER 2024 RESULTS(1)

(As compared to the First Quarter 2023)

• Total Revenues of $241.5m increased 28.1%
• GAAP Net Income of $12.1m increased 49.0%
• GAAP EPS (Diluted) of $0.76 increased 20.6%
• Adjusted EBITDA(2) of $32.3m increased 36.7%
• Adjusted Net Income(2) of $13.9m increased 50.2%
• Adjusted EPS (Diluted)(2) of $0.87 increased 22.5%

1 From continuing operations

2 Non-GAAP measure. See additional information at the end of this release regarding non-GAAP financial measures

MANAGEMENT COMMENTARY

“We completed the first quarter of 2024 with record financial results,” said John Cuomo, President and CEO of VSE Corporation. “Our Aviation segment reported 43% revenue growth and record Adjusted EBITDA margins of 17% in the quarter. The Aviation segment’s robust results were supported by strong execution on recently awarded distribution and MRO agreements, the introduction of new product and service capabilities, the launch of a newly acquired OEM licensed manufacturing program, and contributions from the Desser Aerospace acquisition. Our Fleet segment continued to diversify its customer base, driving strong growth in commercial and e-commerce customers, offset by a near-term decrease in maintenance activity within the United States Postal Service.”

Mr. Cuomo continued, “As previously communicated, our 2024 focus is program implementation and execution. This involves the expansion of a recently announced agreement with Pratt & Whitney Canada to support Europe, Middle East, and Africa (“EMEA”), the launch of the newly acquired OEM licensed manufacturing program, and the integration of newly acquired businesses. As we embark on this transformation and with our continued focus on aviation aftermarket expansion, I am confident in our team’s ability to execute these strategic initiatives while continuing to drive above-market revenue growth and improved profitability.”

STRATEGIC UPDATE

• TURBINE CONTROLS ACQUISITION: On April 24, 2024, VSE completed the acquisition of Turbine Controls, Inc. (“TCI”), a leading provider of aftermarket maintenance, repair and overhaul (“MRO”) support services for complex engine components, as well as engine and airframe accessories. VSE acquired TCI for a total consideration of approximately $120 m, comprising $110 m in cash and $10m of common shares of the Company, subject to working capital adjustments. TCI expands VSE’s OEM-authorized repair capabilities and increases VSE’s exposure to the commercial aviation market. In early May, the TCI team accepted a key supplier award from Collins Aerospace, exemplifying TCI’s commitment to excellence and program execution.
• AVIATION NEW PROGRAM EXECUTION AND ACQUISITION UPDATE:

o The launch of the Pratt & Whitney Canada EMEA program, announced in the fourth quarter of 2023, remains on track with the opening of a new distribution facility in Hamburg, Germany, and the initial shipments to customers in the first quarter.

o The Honeywell Fuel Controls program, announced in the fourth quarter of 2023, is outpacing early expectations, contributing to margin growth in the first quarter. The expansion of the Aviation segment’s Kansas facility, the future center of excellence for the fuel control program, is on track to be operational by the end of this year.

o During the first quarter, VSE Aviation expanded and renewed an OEM engine accessory part distribution agreement for 10-years, valued at approximately $175m over the life of the program.

o The integration of Desser Aerospace is in process and remains on track to be completed over the next twelve-months, and is expected to drive revenue growth and margin expansion.

• FEDERAL AND DEFENSE DIVESTITURE AND CORPORATE RESTRUCTURING: In February 2024, VSE completed the sale of substantially all of its Federal and Defense segment (“FDS”) operating assets. The FDS sale was completed for a total cash consideration of $44.0m, subject to post-closing adjustments. In the first quarter of 2024, we recognized an $18.7m loss, net of tax, related to the FDS separation, which includes a non-cash loss on the FDS Sale, other FDS impairment, and loss from FDS operations and other one-time transaction expenses. As previously disclosed, the Company expects to recognize additional restructuring charges ranging from $15 to $18m related to certain corporate restructuring initiatives as we complete all transition work by the end of 2024.

FIRST QUARTER SEGMENT RESULTS

Aviation segment revenue increased 43% year-over-year to a record $162.4 m in the first quarter of 2024. The year-over-year revenue improvement was attributable to strong program execution of new and existing distribution awards, increased MRO activity, and contributions from recent acquisitions. On an organic basis, revenue increased approximately 20%, as compared to the prior-year period. Aviation distribution and repair revenue increased 38% and 58%, respectively, in the first quarter of 2024, versus the prior-year period. The Aviation segment reported operating income of $22.3m in the first quarter, compared to $15.7 m in the same period of 2023. Segment Adjusted EBITDA increased by 46% in the first quarter to $27.7m, versus $18.9m in the prior-year period. Adjusted EBITDA margin was 17.0%, an increase of approximately 30 basis points versus the prior-year period, driven primarily by favorable price and product mix, along with strong MRO revenue growth.

Fleet segment revenue increased 5% year-over-year to $79.2m in the first quarter of 2024. Revenue from commercial customers increased 37% on a year-over-year basis, driven by growth in e-commerce fulfillment and commercial fleet sales. Commercial revenue represented 56% of total Fleet segment revenue in the period. Revenue from the United States Postal Service (“USPS”) declined approximately 19% on a year-over-year basis. This revenue decline was primarily driven by USPS’ transition to a new Fleet Management Information System, which is expected to be completed in the third quarter of 2024, resulting in a temporary reduction in maintenance related activity and parts usage. The Fleet segment reported operating income of $6.6m in the first quarter, compared to $5.9m in the same period of 2023. Segment Adjusted EBITDA decreased 7%year-over-year to $7.5m, and Adjusted EBITDA margin declined approximately 130 basis points to 9.5%, primarily driven by customer and product mix.

FINANCIAL RESOURCES AND LIQUIDITY

As of March 31, 2024, the Company had $175m in cash and unused commitment availability under its $350m revolving credit facility maturing in 2026. As of March 31, 2024, VSE had a total net debt outstanding of $471m. Pro forma net leverage was approximately 3.7 times EBITDA as of the end of the first quarter.

Following the acquisition of TCI in April 2024, VSE’s pro forma net leverage ratio is expected to be approximately 4.1 times. Pro forma net leverage is expected to be below 4 times by year-end, driven by free cash flow generation in the second-half of the year.

GUIDANCE

VSE is increasing its full-year 2024 revenue growth and Adjusted EBITDA margin guidance for its Aviation segment. The guidance is as follows:

• Aviation segment full-year 2024 revenue guidance range is increasing from 24% to 28% to 34% to 38% growth, as compared to the prior year, to reflect both current business performance and current year contributions from the recent TCI acquisition.
• Aviation segment full-year 2024 Adjusted EBITDA margin guidance range is increasing from 15% to 16% to 15.5% to 16.5%.

VSE is revising its full-year 2024 revenue growth and Adjusted EBITDA margin guidance for its Fleet segment. The new guidance is as follows:

• Fleet segment full-year 2024 revenue guidance range is decreasing from 13% to 17% to a 0% to 5%, as compared to the prior year. The USPS has decided to migrate all of their vehicle maintenance facilities to a new Fleet Management Information System (“FMIS”) in 2024, which is resulting in a temporary decline in the number of transactions processed at converted facilities. To date, the USPS has migrated one-third of their facilities to this new system and expects to convert the remaining facilities by the end of the third quarter of 2024. As a result, the Company expects USPS revenue to decline 30% to 35% for the full year 2024, offset by an approximate 40% increase in commercial revenue. The USPS recovery following this temporary decline is anticipated to begin in the fourth quarter of 2024.
• Fleet segment full-year 2024 Adjusted EBITDA margin guidance is 6% to 8%, driven by lower USPS sales volume and an increased mix of commercial customers. (Source: BUSINESS WIRE)

 

08 May 24. BlackSky Reports First Quarter 2024 Results.

Q1 Total Revenue Increases 32% Over Prior Year Period

Company Wins $30m in New Contracts and Renewal Agreements

BlackSky Technology Inc. (“BlackSky” or the “Company”) (NYSE: BKSY) announced results for the first quarter ended March 31, 2024.

First Quarter Financial Highlights:

• Revenue of $24.2m, up 32% from the prior year quarter
• Imagery & software analytical services revenue grew 13% over the prior year quarter
• Cost of sales, as a percent of revenue, related to imagery & software analytical services improved to 19% from 23% in the prior year quarter

“Strong execution combined with growing global demand for our space-based intelligence solutions drove a 32% increase in first quarter revenues versus the prior year period,” said Brian E. O’Toole, BlackSky CEO. “We continue to demonstrate strong operating leverage progressing toward sustainable long-term profitable growth. During the first quarter we secured a number of new contracts and renewals agreements totaling $30 m, from both U.S. and international government customers. These contract wins demonstrate how BlackSky’s advanced capabilities are relied upon every day for critical decision making. We’re seeing strong and growing demand for our Gen-3 imaging and analytic capabilities, which we plan to start launching this year.”

Recent Highlights

• Won a $24m contract with the Air Force Research Laboratory for moving target engagement services combining BlackSky’s data with multiple government ISR and other commercial data sources
• Awarded a multi-million dollar contract with a defense and intelligence customer to provide BlackSky’s advanced space-based intelligence capabilities
• Company closed over 10 six-figure contracts and renewal agreements
• Continued significant progress on Gen-3 satellites toward a planned launch later this year
• Secured a $20m commercial bank line that provides BlackSky with additional financial flexibility to fund growth initiatives and general corporate purposes

Financial Results

Revenues

Total revenue for the first quarter of 2024 was $24.2m, up $5.8m, or 32%, from the first quarter of 2023. Imagery and software analytical services revenue was $17.8 m in the first quarter of 2024, up 13% over the prior year period, primarily driven by incremental customer orders for BlackSky’s imagery services. Professional and engineering services revenue was $6.4m in the first quarter of 2024, up 143% over the prior year period. The significant year-over-year increase was primarily related to new customer wins and the execution step up of multiple major international contracts. Professional and engineering services contracts are milestone-based contracts that may have quarter-over-quarter revenue variability, in contrast to the imagery and software analytical services, which are typically recurring subscription-based revenues.

Cost of Sales(1)

Cost of sales as a percent of revenue improved to 29% for the first quarter of 2024, compared to 35% in the first quarter of 2023. Imagery and software analytical service costs as a percent of revenue improved to 19% in the first quarter of 2024, compared to 23% in the first quarter of 2023. The year-over-year improvement in imagery and software analytical service costs was primarily driven by greater volumes of revenue that inherently have a low fixed-cost structure as a percent of revenue.

(1) Cost of sales is defined as imagery and software analytical services costs and professional and engineering services cost, less depreciation and amortization expense.

Operating Expenses

Operating expenses for the first quarter of 2024 were $30.5m, which included $3.1m of non-cash stock-based compensation expense and $11.2m in depreciation and amortization expenses. Operating expenses for the first quarter of 2023 were $28.8m, which included $2.7m in non-cash stock-based compensation expense and $9.7m in depreciation and amortization expenses. Excluding the non-cash stock-based compensation and depreciation and amortization expenses from both years, cash operating expenses for the first quarter of 2024 were $16.2m, compared to cash operating expenses of $16.4m for the first quarter of 2023. The year-over-year decrease of $0.2m, or 1%, was primarily driven by reductions in general corporate costs, which more than offset investments in our go-to-market initiatives.

Net Loss

Net loss for the first quarter of 2024 was $15.8m, compared to a net loss of $17.3m in the first quarter of 2023.

Adjusted EBITDA(2)

Adjusted EBITDA for the first quarter of 2024 was $1.4m, compared to an Adjusted EBITDA loss of $4.1m in the first quarter of 2023. The $5.5m year-over-year improvement was primarily driven by strong operating leverage achieved through higher revenues, improvement in gross margins, and reductions in cash operating expenses.

(2) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below and reconciliation table at the end of this press release.

Balance Sheet & Capital Expenditures

As of March 31, 2024, cash and cash equivalents, restricted cash, and short-term investments totaled $35.8m. Subsequent to the end of the quarter, the Company entered into a commercial bank line of $20m bringing total liquidity to $55.8m on a pro forma basis. In addition, a few major customer contracts include interim milestones for which revenue and costs have been recognized but have not yet been billed. Therefore, the Company anticipates receiving approximately $24m in payments from these contracts over the next 12 months, which would further enhance liquidity. Capital expenditures for the first quarter of 2024 were $14.6m.

2024 Outlook

The Company maintains its outlook for full year 2024 revenue of between $102m and $118m, and full year 2024 Adjusted EBITDA of between $8m and $16m. In addition, the Company maintains its expectations for full year 2024 capital expenditures of between $55m and $65m, primarily driven by investments in the Gen-3 satellites. (Source: BUSINESS WIRE)

 

07 May 24. Up to 300 defence companies debanked by high street lenders. Banks have shut the accounts of hundreds of defence companies amid fears that lenders’ internal ethics policies are putting national security at risk.

Santander and Lloyds closed 300 accounts belonging to “public administration and defence” companies last year alone, according to correspondence with MPs on the Treasury Select Committee.

Other major lenders did not provide a breakdown, suggesting the actual figure could be far higher.

Although some of the accounts may have been shut for other reasons such as a prolonged period of inactivity, senior industry executives also told MPs that they were concerned about the ethical implications of working with arms companies.

The disclosure triggered a backlash from defence experts and MPs.

Writing for The Telegraph, the Treasury Committee chairman and Conservative MP Dame Harriett Baldwin said: “We cannot have organisations in this country systematically debanking legitimate firms or industries because their board turns its nose up at their line of work. If their work is legal then they should be able to access a bank account.”

She added: “Banks’ shareholders demanding environmental, social and governance policies may inadvertently be putting national security at risk. This cannot go on.”

Tobias Ellwood, a former chairman of the Commons defence committee, said “well-intentioned” standards risked putting Britain’s defence capabilities into “jeopardy”.

He said: “To prevent ESG guidelines from bogging down defense procurement, standards must be tailored to the unique requirements of the industry while being clarified for ease of compliance. Let’s not allow well-intentioned ESG standards to jeopardise our defence capabilities in a dangerous world – it’s time to get this sorted.”

In a report on so-called debanking, compiled after NatWest’s closure of an account belonging to Nigel Farage triggered a national scandal, the committee found that lenders frequently rejected companies working in “undesirable” industries such as defence, pawnbroking and gambling.

Research feeding into the report earlier this year revealed that 140,000 companies had been debanked, typically with little or no notice.

At least 4,214 such instances were attributed to “risk appetite” – despite there being no consistent definition across the industry of what that meant, according to the research.

Banks also said they had closed accounts over money laundering concerns or inactivity.

Ms Baldwin highlighted businesses operating in defence as an area of particular concern, after Santander admitted to closing 280 accounts belonging to businesses it categorised as “public administration and defence: compulsory social security”.

Lloyds, meanwhile, closed 20 such accounts in sectors classed as “public administration and defence” and “aerospace and defence”.

Ms Baldwin also referred in her comment piece to evidence from Handelsbanken, a Swedish bank with more than 160 UK branches, which suggested that the industry was reluctant to work with businesses responsible for supplying the Armed Forces.

She said: “The boss of Handelsbanken couldn’t tell us if they’d give an account to BAE Systems – despite the company being one of the biggest suppliers to the Ministry of Defence.

“How on earth have we got to the position where a company working to preserve our national security can’t be assured of access to a bank account?”

The Treasury Committee report warned that damaging financial regulation and inadequate support from lenders was holding small businesses back from innovating and growing, ultimately harming the economy.

It urged the financial watchdog to force banks to be more transparent about why decisions to close bank accounts have been taken.

The research comes as small businesses increasingly struggle to access finance.

The report highlighted that the approval rate for SME applications for bank loans has tumbled from 80pc in 2018 to 50pc in 2023.

Ms Baldwin warned in her op-ed that lenders referring to risk appetite as a reason to not provide services to a firm was unsatisfactory.

She said: “There can be good reasons for closing or denying accounts for businesses, including signs of money laundering or prolonged inactivity, but we found there were still thousands of accounts being closed under the disconcertingly vague justification of ‘risk appetite’.”

The committee also said that the industry-funded Business Banking Resolution Service is failing its task to resolve disputes adequately, leaving debanked firms with little hope of being heard.

The body has settled only 58 cases while costing more than £40m to operate, according to the report.

The Treasury Committee said it agreed it should be closed down.

One of an MP’s most important responsibilities is to champion the small businesses in their patch.

I certainly take every opportunity to shout about the smaller firms in my West Worcestershire constituency.

From the fantastically successful tree-growing business Frank P Matthews to the emerging corridor of cyber technology startups, small and medium-sized businesses in my part of the world offer so much to our economy.

But there is no getting away from how tough the pandemic and energy crisis have been for those running small businesses. Critical government support has been delivered but they need to know that their banks will also support them through such a challenging period.

Our Treasury Committee asked smaller businesses up and down the country to tell us about their experiences with lenders, and I was taken aback by what we were told.

One particular issue we heard about, I’m sure in no small part thanks to the campaigning of this very newspaper, was debanking.

During our investigation, we found more than 140,000 small business accounts were closed in the last year alone – with many firms being given little or no notice before they were debanked.

There can be good reasons for closing or denying accounts for businesses, including signs of money laundering or prolonged inactivity, but we found there were still thousands of accounts being closed under the disconcertingly vague justification of ‘risk appetite’.

Representatives from the pawnbroking industry told the committee more than half of the companies in their sector couldn’t get a bank account.

Even more disturbing was when the boss of Handelsbanken couldn’t tell us if they would give an account to BAE Systems – despite the company being one of the biggest suppliers to the Ministry of Defence.

How on earth have we got to the position where a company working to preserve our national security can’t be assured of access to a bank account? Banks’ shareholders demanding environmental, social and governance policies may inadvertently be putting national security at risk. This cannot go on.

It is wrong that banks in this country can systematically debank legitimate firms or industries because their board turns its nose up at their line of work.

If their work is legal then they should be able to access a bank account. Most lenders couldn’t even tell us exactly what had been considered before the accounts were closed. Something has to change, which is why we have asked the Financial Conduct Authority to force banks to send it their debanking data – including the reason for each account closure.

Following the revelations uncovered by our inquiry, we have received assurances from the Government that they will be legislating to crack down on unfair debanking. We keenly await the opportunity to scrutinise this urgent work when it is presented to Parliament. (Source: Daily Telegraph)

 

07 May 24. Italy’s Leonardo Q1 orders, revenues rise on strong electronics, helicopters. Italy’s defence and aerospace group Leonardo (LDOF.MI), reported on Tuesday rising orders and revenue in the first quarter of 2024, both pushed by the state-controlled group’s electronics and helicopter sectors.

“We are fully focused on the execution of the industrial plan. The consolidation of the core defence business progresses very well thanks to the acceleration of the digitalisation processes, creating new revenue streams and generating cost efficiencies,” chief executive Roberto Cingolani said in a statement.

New orders rose 14.9% year-on-year in the first three months to 5.75bn euros ($6.19 bn) pro forma, or net of the full consolidation of the Telespazio joint venture, with France’s Thales (TCFP.PA), from 2024.

Revenue rose 15.3% to 3.66bn euros pro forma, driven by higher volumes in the electronics business. ($1 = 0.9284 euros) ($1 = 0.9282 euros) (Source: Google/Reuters)

 

07 May 24. Precision Aerospace Holdings, LLC Acquires Owens Machine and Tool Company. Dallas-based Precision Aerospace Holdings LLC (Precision), a leading manufacturer of precision machined aerospace and defense components, has acquired Owens Machine and Tool Company (Owens). Precision was formed through the partnership of two Dallas-based private investment firms, CIC Partners (CIC) and Juniper Capital Management (Juniper).

Owens produces complex, multifaceted parts, tooling and prototypes utilizing multi-axis machine tools and best-in-class cutting tools. It was established in 1986 to develop and sell complex machine components, primarily to the aerospace and defense industries. Owens is located in Lewisville, Texas and specializes in CNC machining of titanium and nickel alloys.

“We are thrilled to add Owens to Precision’s growing platform,” said Pete Stegmaier, Precision’s CEO. “The Owens team has deep experience that expands our broad capabilities to provide world-class service to aerospace and defense industries. We expect to continue their exciting growth trajectory.”

The transaction marks Precision’s second acquisition in less than 10 months. In June 2023, Precision acquired Decatur Machine Services, Inc. located in Decatur, Texas. The new additions build on the success of the previous two acquisitions of Applegate EDM, LLC and Icon Machine Co. in 2022. Precision now owns four companies in the Dallas-Fort Worth metroplex with a total of 110 employees. All businesses are AS9100 and ITAR certified.

“We have built an impressive platform in North Texas centered on operational excellence and a commitment to best-in-class customer performance marks,” said Bayard Friedman, Precision board chairman and managing director with CIC Partners. “These fundamental attributes will allow us to continue to scale the Precision platform and be a key supplier to a growing list of major defense programs.”

Precision will continue to aggressively target investment opportunities in North Texas and surrounding states.

“We are extremely proud of the operating companies we have assembled under the Precision platform,” said Bryan Grabowsky, co-founder and managing partner at Juniper. “The enhanced capabilities and product offerings as well as the strong operational leadership we have added with Owens will be instrumental as we continue to build on opportunities to be a value-added supplier to leading defense and aerospace companies.”

Terms of the deal were not disclosed.

Baker Botts L.L.P. represented Precision in connection with the transaction.

About Precision Aerospace

Precision Aerospace is a privately held aerospace manufacturing business focused on hard metal and tight tolerance product manufacturing for the defense and space end markets. For more information, please visit https://precisionaeroholdings.com.

About Juniper Capital Management

Juniper Capital Management is a Dallas-based private equity firm focused on investing in manufacturing, industrials, business services, and residential services companies. Juniper’s primary strategy involves supporting smaller-scale businesses (EBITDA <$8M), a space that institutional private equity has traditionally overlooked; the firm strives to create value through the investment teams’ hands-on operating experience and deep understanding of the challenges faced by business owners as they approach the next phase of growth. Juniper seeks to continue the legacies of family/founder-owned companies, partnering with management to institutionalize replicable processes, implement data-driven systems, and expand the team in preparation for scale. For additional information, please visit https://junipercapmgt.com.

About CIC Partners

CIC Partners is a middle-market private equity firm that invests in growth-oriented companies primarily in the food, restaurant, industrial, and energy industries. CIC manages the personal capital of its investment team, operating partners and strategic investors and seeks to partner with owner-operators, founders and management teams. CIC looks for opportunities where it can leverage the collective experience of its investment team and its operating partners, who are successful CEOs and entrepreneurs, to guide, support and add value to portfolio companies. Based in Dallas, Texas, the firm has been generating wealth in private equity investing for its investors and management teams for over 30 years. For additional information, please visit www.cicpartners.com.

(Source: BUSINESS WIRE)

 

07 May 24. Godspeed Capital-Backed Special Aerospace Services (SAS) Acquires Quintron Systems. Godspeed Capital Management LP (“Godspeed”), a lower middle market Defense & Government services, solutions, and technology focused private equity firm, today announced the acquisition of Quintron Systems (“Quintron”) by SAS, its recently-launched space engineering, defense, and communications technology solutions platform. The transaction marks the second addition to the growing SAS platform, following its recent acquisition of Willbrook, and reinforces SAS’ position in the space and defense markets, adding capabilities in communications systems technology for NASA, defense and commercial space clients. Concurrent with the transaction, Dominick Barry, President of Quintron Systems, will be promoted to Chief Operating Officer of the SAS platform.

Founded in 1970, and based in Santa Maria, California, Quintron provides innovative, secure communications technology solutions tailored for the space and defense markets. Quintron brings longstanding customer relationships well aligned with SAS’ strategic growth objectives specifically with NASA and select commercial space customers who rely on Quintron’s sophisticated Voice-over-IP (VoIP) communications technology to ensure integrated and uninterrupted communications in support of mission critical space launch operations.

“We are pleased to welcome Quintron to the SAS family,” said Heather Bulk, CEO of SAS. “Quintron’s strong reputation for innovation and customer satisfaction complements our values and enhances SAS’ capabilities in critical secure communications technology, enabling us to offer an even wider range of solutions to our clients in the space and defense markets.”

“Becoming part of SAS is a significant milestone for Quintron. This partnership will allow us to leverage SAS’ resources and expertise to accelerate our growth and expand our reach with existing and new customers,” remarked Mr. Barry. “We are excited to work with the SAS team to continue providing exceptional products and services to our customers and explore new opportunities together.”

Latham & Watkins LLP served as legal adviser to Godspeed Capital. The McLean Group LLC served as exclusive financial advisor to Quintron.

About Quintron Systems

Quintron Systems, founded in 1970, is a trusted provider of communications technology solutions for aerospace, defense, and critical infrastructure. Based in Santa Maria, California, Quintron is known for its reliable, secure, and innovative communication systems. The company’s products and services are used by government agencies, military organizations, and commercial clients worldwide. To learn more about Quintron, please visit: www.quintron.com.

About Special Aerospace Services

Special Aerospace Services is an industry leader in spaceflight engineering and hardware with facilities in California, Colorado and Alabama. Special Aerospace Services offers a full-cycle solution portfolio that includes tactical engineering support in Spaceflight Safety™, propulsion, avionics, systems, safety, and launch site integration, as well as rapid prototyping, manufacturing, and procurement of mission-critical aerospace hardware systems for clients such as NASA, the U.S. Department of Defense, and the commercial spaceflight sector. Special Aerospace Services’ team is committed to furthering humankind’s dreams and endeavors in space and keep the dream of space exploration alive for future generations. To learn more about SAS, please visit: www.specialaerospaceservices.com.

About Godspeed Capital Partners

Godspeed Capital is a lower middle-market Defense & Government services, solutions, and technology focused private equity firm investing alongside forward-thinking management teams that seek an experienced and innovative investment partner with unique sector expertise, operational insight, and flexible capital for growth. While a typical investment will involve companies generating approximately $3 m to $30 m of EBITDA, Godspeed Capital has significant support to complete larger transactions through strategic co-invest relationships. The firm focuses on control buyouts, buy-and-builds, corporate carve-outs, and special situations. For more information, please visit the Godspeed Capital website at www.godspeedcm.com. (Source: BUSINESS WIRE)

 

06 May 24. SRT Marine pushes out year-end as it bids for new system contracts. Maritime surveillance and navigation technology specialist SRT Marine Systems announced a change to its financial reporting dates on Friday, in a bid to safeguard its ability to bid for pending new system contracts.

The AIM-traded firm said it had resolved to extend its financial year-end from 31 March to 30 June, adding three months to the current financial year.

It said it planned to publish audited final results for the extended period by October, with subsequent financial reports to follow a revised schedule, with unaudited interim results for the six months ended 31 December due by 31 March, and audited final results for the 12 months ended 30 June by 31 December each calendar year.

The board said the decision to extend the financial year-end stemmed from the need to meet minimum financial ratio criteria in a specific jurisdiction to bid and contract for new projects.

Concerns arose due to the potential delay in completing existing system project deliveries, expected in March, primarily attributed to government processes and paperwork, compounded by the annual Ramadan and EID periods.

Such delays could impact financial ratios, which SRT said jeopardised its ability to pursue new projects, prompting the board to mitigate the risk.

In December, SRT successfully completed a £10.5m equity cash raise, bolstering its balance sheet and ensuring financial stability.

The company said it was awaiting government agencies in three countries to finalise processes for executing initial revenue milestones on projects valued at $220m.

Despite the paperwork completion concerns, SRT reported significant progress in all system project opportunities over the past three months, with increasing visibility and confidence in timelines.

Notably, the firm released and was implementing an enhanced version of its ‘GeoVS’ maritime surveillance system, featuring improvements in functionality and performance, including faster data processing and enhanced analytics capabilities.

On the operational front, SRT reported a solid performance in its transceivers business, maintaining gross profit margins following the normalisation of supply chain and market conditions post-Covid.

The DAS subdivision showed promise with a growing pipeline of opportunities, while the NEXUS marine voice and communications system was progressing through testing and validation stages, with initial field trials underway.

Looking ahead, SRT maintained its revenue expectations for the extended 15-month period ending 30 June, consistent with previous projections for the 12 months ending 31 March.

“Our recent £10.5m fundraise has placed us in a strong cash position where we can confidently make these decisions and maximise our market opportunities,” said chief executive officer Simon Tucker.

“The decision to move our financial year end date mitigates the risk that a few weeks delay on paperwork could exclude us from some significant new contract opportunities.” (Source: Sharecast)

 

06 May 24. Cuashub.com said today that Axon (Nasdaq: AXON), the global public safety technology leader, announced today it has entered into a definitive agreement to acquire Dedrone, a global leader in airspace security. Axon’s mission to Protect Life finds a powerful ally in Dedrone, whose innovative technologies provide immense value to public safety and national security entities worldwide by protecting against increasing drone threats and advancing the use of Drones as First Responders (DFR). Ultimately, upon completion of the acquisition, Dedrone will strengthen Axon’s ability to help customers safeguard their communities, improve response to critical incidents, and protect even more lives in more places.

“By combining Axon’s 30-year legacy of innovation with Dedrone’s cutting-edge airspace security solutions, we aim to revolutionize public safety once again,” said Axon Founder and CEO Rick Smith. “Together, we will accelerate our efforts in creating a more advanced end-to-end drone solution that enables the good drones to fly and helps ensure the bad ones don’t.” Dedrone Chief Executive Officer Aaditya Devarakonda said: “Dedrone’s growing impact across industries such as federal governments, utilities and critical infrastructure, event venues, airports, correctional facilities, and other enterprises, coupled with Axon’s powerful ecosystem of connected devices and software, will put us at the forefront of ensuring not only the safety of our communities but also the security of nations around the world.”

The transaction is subject to customary closing conditions and is expected to close in the second half of 2024. The terms of the transaction were not disclosed. Axon was advised by Sullivan & Cromwell LLP and Morgan, Lewis & Bockius LLP, and Dedrone was advised by Tidal Partners and Wilmer Cutler Pickering Hale and Dorr LLP in connection with the transaction.

https://cuashub.com/en/content/axon-agrees-to-acquire-dedrone/?_hsenc=p2ANqtz–00RycuD9kjpMjSdiKgJIeqPAhq4zZdWxh6iBAPEf2PHGNVb-qwon2rLtIQq_fNRoH4POpbyK0-AqlrFnxL6LlRVua8mW2Brwdnw1lLDdoLSiG_nU&_hsmi=305957767#utm_campaign=C-UAS%20Hub%20General&utm_medium=email&utm_content=305957767&utm_source=hs_email (Source: https://cuashub.com/)

 

07 May 24. HENSOLDT continues positive business development in the first quarter of 2024 and benefits from strong order intake.

• Order intake grows by 91.8% year over year to EUR 665 m with major orders in the Sensors segment
• Revenue on track at EUR 329m
• Order backlog at record high of EUR 5,879m (+6.3%)
• Adjusted EBITDA margin increases significantly year over year to 10.2% (+ 1.2 pp)
• Acquisition of ESG successfully completed
• Guidance for the 2024 financial year confirmed in all relevant key performance indicators

The HENSOLDT Group (“HENSOLDT”) started the 2024 financial year with a positive business development. In the first quarter of 2024, the company almost doubled its order intake to EUR 665m compared to the same period of the previous year (Q1 2023: EUR 347m). HENSOLDT particularly benefited from major orders in the Sensors segment, such as the German air defence system for close- and short-range protection (LVS NNbS) ordered in January and additional orders for the TRML-4D radar. As a result, the order backlog reached a record high of EUR 5,879 m in the first three months of 2024 (+6.3% compared to the year end of 2023).

Revenue was slightly below the previous year’s level at EUR 329m (Q1 2023: EUR 338m). In addition to an exceptionally strong comparative quarter in the previous year, this was due to a decrease of the pass-through business (revenue with a low value-added share). At the same time, HENSOLDT further improved its profitability and increased the adjusted EBITDA by 10.7% year over year to EUR 33m (Q1 2023: EUR 30m). With a positive project mix and more efficient cost management, the adjusted EBITDA margin increased from 9.0% to 10.2%.

Adjusted free cash flow improved from EUR -137m to EUR -81m year over year, mainly driven by higher cash inflows from customer contracts. In addition, cash flow reflected investments in working capital.

Oliver Dörre took over management responsibility as CEO of the HENSOLDT Group with effect from 1 April 2024. With this step, the company fully focuses on operational excellence and seamlessly continues the successful business performance of recent years. Commenting on the presentation of the financial results, Oliver Dörre, CEO of the HENSOLDT Group, said: “The global security environment has become even more complex and volatile in recent months. This has further intensified the demands on modern security and defence solutions and confirmed the need for our innovative sensor solutions, for example in the field of air defence. If we want to stand up to an aggressor like Russia, we need both when it comes to weapon systems: quality and quantity. Our Operational Excellence program is aimed at both: we are continuously expanding our production capabilities and investing in digital product innovation and innovative solutions. Iran’s massive attack on Israel and the horrific images from Ukraine show that air strikes by drones and missiles are part of the spectrum of modern warfare. That is why the European Skyshield Initiative (ESSI) – to which we are contributing our TRML-4D mid-range radar – is so important.”

Christian Ladurner, CFO of the HENSOLDT Group, says: “In the first quarter of 2024, HENSOLDT successfully continued its growth trajectory. With an order backlog at a record high, we are ideally positioned and have very good visibility on our business development. We were able to further increase our profitability in the first three months of 2024. Thereby, we are benefiting from improved operational processes and efficient cost management. Starting in the second quarter, we also expect the first positive effects from the consolidation of the successful ESG acquisition. This will be an important driver for our revenues and order development. We are therefore optimistic for the fiscal year 2024 and confirm our outlook for all relevant key performance indicators.”

Continued strong performance of core business

HENSOLDT’s core business in the Sensors segment once again improved significantly year over year with major orders and a strong order intake in the first three months of 2024. Order intake and order backlog increased by 190.5% and 7.5% respectively compared to the previous year. Almost all divisions benefited from the German air defence system for close- and short-range protection (LVS NNbS) ordered by Bundeswehr.

HENSOLDT also benefited from the LVS NNbS project in the Optronics segment and further increased its order backlog (+3.2% compared to the year end 2023).

The increase in the order backlog to EUR 880m was primarily achieved in the Radar & Naval Solutions and Optronics & Land Solutions divisions.

Acquisition of ESG successfully completed

In the first quarter of 2024, HENSOLDT continued the acquisition process with ESG Elektroniksystem- und Logistik-GmbH and successfully completed it with effect from 2 April 2024. A comprehensive post-merger integration project was launched immediately after the closing and, in addition to the operational integration of ESG into HENSOLDT, will also systematically drive the planned revenue and cost synergies. The acquisition adds strong design and system integration capabilities to HENSOLDT’s product and solutions business and creates a national champion in defence electronics. Positive effects of the acquisition on HENSOLDT’s order and revenue development are expected as of beginning of the second quarter.

 

06 May 24. inTEST Reports $29.8m in Revenue for First Quarter 2024.

• Sequentially first quarter revenue increased 7%, or $1.9m, including $1.4m in revenue from the Alfamation acquisition
• Compared with the prior-year period, overall sales declined while the acquisition and growth from diversified markets, specifically industrial and defense/aerospace, helped to offset the weakness in semiconductor sales
• Earnings per diluted share was $0.05 while adjusted earnings per diluted share1 was $0.10
• Generated $2.1m in cash from operations in the quarter; cash at March 31, 2024 was $27.3m and reflects the $19m in cash used for the Alfamation acquisition
• Adjusting full year revenue expectation to $140m to $150m which represents 18% growth over 2023 at the mid-point of the range

inTEST Corporation (NYSE American: INTT), a global supplier of innovative test and process technology solutions for use in manufacturing and testing in key target markets which include automotive/EV, defense/aerospace, industrial, life sciences, security, and semiconductor (“semi”), today announced financial results for the quarter ended March 31, 2024. Results include Alfamation S.p.A. (“acquisition” or “Alfamation”) from the date of acquisition which was March 12, 2024.

Nick Grant, President and CEO, commented, “Our first quarter results continue to reflect the tempered semiconductor market conditions we saw exiting 2023. While down year-over-year, sequentially sales were up although margins were impacted by the timing of the acquisition, the mix in sales, and higher professional fees. On the order front and outlook, we saw a sudden shift in order trends as a number of opportunities which we had expected late in the quarter were either delayed or reduced in size. It appears that capacity build in the semiconductor industry in conjunction with slower demand has stalled some customers’ investments in new capital projects, specifically in front-end semi. While our pipeline across all markets remains healthy, the rate of opportunity conversion to orders over the last few quarters has been slowing. Given the unexpected lower rate of orders in the quarter we are moderating our full year outlook.”

He added, “Nonetheless, we have a record backlog of $55.5 m that measurably benefited from the $22.8m in backlog from Alfamation. This backlog provides us further confidence in our expectations for the acquisition. Importantly, we remain highly encouraged with our long-term outlook. We are continuing to build inTEST into a global leader of test and process technologies by introducing new products, innovating to create solutions for our customers’ toughest challenges and being application experts in the industries we serve. We expect key target markets to continue to benefit from ongoing macro tailwinds such as reshoring/near shoring, automation, electronification and digitization, productivity enhancements and rebuilding of domestic defense capabilities. Our acquisition pipeline also remains active. Although near term visibility is limited, we expect to continue to deliver growth in 2024 aided by the acquisition of Alfamation.”

1 Adjusted earnings per diluted share is a non-GAAP financial measure. Further information can be found under “Non-GAAP Financial Measures.” See also the reconciliations of GAAP financial measures to non-GAAP financial measures that accompany this press release.

First Quarter 2024 Review (see revenue by market and by segments in accompanying tables)

Compared with the prior-year period, first quarter revenue was down $2.1m and was impacted by $2.7m lower sales to the semi market. This was partially offset by the $1.4m contribution in revenue from the acquisition, primarily in automotive/EV, as well as an increase of $1.1m to the industrial market, and a 14%, or $0.4m, increase in sales to the defense/aerospace market. Sequentially, revenue increased by $1.9m as a result of semi revenue growing 39%, defense/aerospace sales increasing 34% and the acquisition offsetting declines in auto/EV.

Gross margin was 43.8% in the first quarter, a 340-basis point contraction compared with the prior-year period primarily due to the timing of the acquisition, volume and product mix. Due to the stub period of ownership and timing of revenue and costs, the acquisition was dilutive to gross margin by 100 basis points. Operating expenses increased primarily because of $350,000 of incremental expenses gained from the acquisition, $650,000 of incremental corporate development expenses and approximately $200,000 in higher professional fees associated with reporting of 2023 financials and Sarbanes-Oxley Act compliance. These costs were somewhat offset by lower selling costs and expense management.

With the benefit of other income in the quarter of $0.4m, net earnings were $0.7m, or $0.05 per diluted share. Adjusted net earnings (Non-GAAP) 2 were $1.2m, or $0.10 adjusted EPS (Non-GAAP) 2.

Balance Sheet and Cash Flow Review

Cash and cash equivalents (including restricted cash) at the end of the first quarter of 2024 were $27.3m, down from $45.3m at the end of December 31, 2023 as a result of approximately $19m in cash used for the acquisition. During the quarter, the Company generated $2.1m in cash from operations. Capital expenditures were $0.3m in the first quarter of 2024, similar to the prior-year period.

At quarter end, total debt was $20.4m which includes approximately $9.4m assumed with the acquisition. The Company repaid approximately $1m in debt in the quarter. At March 31, 2024, the Company had $30 m available under its delayed draw term loan facility and no borrowings under the $10 m revolving credit facility. On May 2, 2024, the Company extended the maturity of its delayed draw term loan and revolving credit facility to May 2, 2031. In addition, the allowed window to draw on the term loan was extended to May 2, 2026.

2 Adjusted net earnings, adjusted EPS, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP financial measures. Further information can be found under “Non-GAAP Financial Measures.” See also the reconciliations of GAAP financial measures to non-GAAP financial measures that accompany this press release

First quarter orders of $22.8m, including $1.8m in orders related to the acquisition, declined 26% over the prior-year period. The decline reflects an $8.1m, or 44%, decline in orders from the semi market. Life sciences and industrial markets declined $2.3m combined due to the timing of orders received. Approximately $5m in expected orders were delayed or reduced by customers at the end of the quarter.

Sequentially, orders declined 17.2%. Growth in demand in automotive/EV and back-end semi partially offset sequential declines in front-end semi, life sciences and other markets. The sequential decline in orders for the defense/aerospace and industrial markets were largely the result of tough comparators.

Backlog at March 31, 2024, was $55.5m and included $22.8m of backlog associated with the acquisition. Approximately 45% of the backlog is expected to ship beyond the second quarter of 2024.

Second Quarter and Full Year 2024 Outlook

Revenue for the second quarter of 2024 is expected to be in the range of $34m to $36m with gross margin in the range of approximately 44% to 45%.

Second quarter 2024 operating expenses, including amortization, are expected to run at approximately $14.5m to $15m, and reflect annual merit increases. Intangible asset amortization is expected to be approximately $1.5m pre-tax, or approximately $1.2m after tax. Interest expense is expected to be approximately $195,000 for the quarter.

Based on weighted average shares of 12.3m, second quarter 2024 EPS is expected to be in the range of $0.00 to $0.06, while adjusted EPS (Non-GAAP) (1) is expected to be in the range of $0.10 to $0.16. (Source: BUSINESS WIRE)

 

07 May 24. Defence spending drives Solid State to record results.

Ongoing robust demand from military and security markets is proving a boon for this value-added electronics group

• $5.1m Internet of Things (IoT) contract
• Guidance for record annual results

Redditch-based value-added electronics group Solid State (SOLI: 1,390p) is set to report record annual results in early July and is continuing to win significant new orders, too.

Analysts at Cavendish predict pre-tax profits will increase by 38 per cent to £15mn on 30 per cent higher revenue of £164m in the 12 months to 31 March 2024. On this basis, expect 25 per cent growth in earnings per share (EPS) to 101p, or 17 per cent higher than analysts were forecasting at the interim results (‘Solid State continues to profit from the defence spending boom’, 5 December 2023).

The outperformance reflects the earlier-than-expected shipment of communication equipment to a Nato defence customer. Strong demand from both the defence and security segments has been key to the exceptionally strong showing from the group’s systems business, which is expected to increase annual revenue by 80 per cent to more than £100m.

However, other areas of the business are performing well, too, as highlighted by this week’s contract win. Solid State is supplying an IoT technology solution to a US customer that enables smart billing, intelligent stock control and management through an industrial router and cloud-based services for smart vending machines. The contract demonstrates how the group is internationalising sales by exporting its UK expertise into the US market.

Moreover, having adjusted forecasts for the new financial year to reflect the early delivery of the Nato order, analysts at Cavendish see their pre-tax profit estimate of £10mn as increasingly well underwritten and offering potential for upgrades as the year progresses. I agree and see scope for earnings-accretive acquisitions, too.

Trading on an enterprise valuation to operating profit multiple of 9.7 for 2024 and 13.9 for 2025, I maintain the 1,700p target I set when I first suggested buying the shares at 1,300p (Alpha Research: An overlooked share to benefit from rising defence spending’, 20 July 2023). Buy. (Source: Investors Chronicle)

 

07 May 24. Airbus has finalised the acquisition of U.S.-based Aerovel and its unmanned aerial system (UAS), Flexrotor, in a move to strengthen its portfolio of tactical unmanned solutions. Flexrotor is a small tactical unmanned aerial system designed for intelligence, surveillance, target acquisition and reconnaissance (ISTAR) missions at sea and over land.

“We see more and more armed forces and parapublic agencies around the world looking to investigate how unmanned aerial systems can strengthen their intelligence and surveillance capabilities. The Flexrotor, as a vertical takeoff and landing UAS, fits into our strategy to expand our UAS offerings. Together with the VSR700, we will continue to develop manned-unmanned teaming to offer our customers the enhanced and expanded mission capabilities that they require to monitor and safeguard their communities and critical infrastructure, while preserving essential assets such as helicopters,” said Mathilde Royer, Head of Strategy and Sustainability at Airbus Helicopters.

The Flexrotor, a modern Vertical Takeoff and Landing (VTOL) Unmanned Aircraft with a maximum launch weight of 25 kg (55 lbs), has been designed for ISTAR missions for more than 12-14 hours in a typical operational configuration. It can integrate different types of payloads including an electro-optical system and advanced sensors to suit customers’ unique mission needs. With the ability to autonomously launch and recover from either land or sea requiring only a 3.7 by 3.7 m (12 by 12 ft.) area, the Flexrotor is ideal for expeditionary missions requiring minimal footprint. Through the support of the US Department of Defense (DoD), and contracted deployment in a variety of maritime security exercises, the Flexrotor is a mission-proven, force multiplier for operations in harsh, high-threat, GPS-denied environments. The Flexrotor is also being operated for parapublic missions such as forest fire surveillance (providing firefighters with critical images day or night) and can address other demanding mission needs, including ice navigation (helping guide naval vessels through ice in the Arctic ocean), law enforcement, and border patrol.

Aerovel currently employs more than 30 people and presents a significant growth trajectory. It will continue to design and manufacture the Flexrotor in Bingen, Washington in an existing and mature UAS ecosystem.

 

06 May 24. BWX Technologies Reports First Quarter 2024 Results.

• 1Q24 revenues of $604.0m
• 1Q24 net income of $68.5m, adjusted EBITDA(1) of $115.2m
• 1Q24 diluted GAAP EPS of $0.75, non-GAAP(1) EPS of $0.76
• Announced expansion of Cambridge manufacturing plant; enhancing capabilities to serve the global CANDU and Small Modular Reactor markets
• Reaffirms 2024 non-GAAP EPS(1) guidance of $3.05-$3.20

BWX Technologies, Inc. (NYSE: BWXT) (“BWXT”, “we”, “us” or the “Company”) reported first quarter 2024 results. A reconciliation of non-GAAP results are detailed in Exhibit 1.

“We started 2024 with solid operating results in each of our business segments, both financially and strategically,” said Rex. D. Geveden, president and chief executive officer. “We continued to see good organic revenue growth across our business in the first quarter with profitability tracking well given the significant onboarding of new team members and the programs we are executing to address our customers’ expanding missions.”

“BWXT’s strong employee base, technical expertise and unmatched infrastructure position us well to benefit from the increased use of nuclear technologies across global security, clean energy and medical markets,” said Geveden. “Our recent announcement to expand capacity at our Cambridge manufacturing facility not only enhances our position in the global CANDU large reactor and advanced small reactor markets, but also highlights the robust growth opportunities we see in commercial nuclear power as our customers seek to extend the life of existing power generation capacity and add new capacity with clean baseload power.”

“We are reaffirming our 2024 financial guidance and remain focused on operational excellence, innovation and providing our customers with nuclear technologies as we drive toward achieving the medium-term financial targets we provided at our recent Investor Day,” continued Geveden.

Revenues

First quarter revenue increased in both operating segments. The Government Operations increase was driven by higher naval nuclear component production, microreactors and special materials processing, which was partially offset by lower long-lead material procurement. The Commercial Operations increase was driven by higher revenue associated with commercial nuclear field services as well as higher medical sales, which was partially offset by lower fuel handling and components volume.

Operating Income and Adjusted EBITDA(1)

First quarter operating income increased, driven by higher operating income in Commercial Operations and lower corporate expense that was partially offset by lower operating income in Government Operations. The Government Operations decrease was due to the increase in staffing levels and associated training and related inefficiencies, as well as mix due to higher microreactors revenue. The Commercial Operations increase was due to improved margin in medical, but partially offset by a less favorable product mix in commercial nuclear. Additionally, corporate expense was lower, mainly due to the timing of healthcare related costs.

First quarter adjusted EBITDA(1) increased for the reasons noted above.

EPS

First quarter GAAP EPS increased due to higher operating income, higher other income, lower interest expense and a lower effective tax rate compared to first quarter 2023. Non-GAAP EPS(1) increased driven by the items noted above.

Cash Flows

First quarter operating cash flow increased due to higher net income and improved working capital management. Capital expenditures were slightly higher due to capital expenditures related to the timing of select growth investments.

Dividend

BWXT paid $22.4m, or $0.24 per common share, to shareholders in the first quarter of 2024. On May 2, 2024, the BWXT Board of Directors declared a quarterly cash dividend of $0.24 per common share payable on June 6, 2024, to shareholders of record on May 17, 2024. (Source: BUSINESS WIRE)

 

06 May 24. Axon raises full-year revenue forecast on strong demand for its software products. Axon Enterprise (AXON.O), raised its full-year core profit and revenue forecast Monday, banking on strong demand for its software products and recently launched TASER 10 policing device. The company now expects full-year 2024 revenue to be between $1.94bn and $1.99bn, compared with its previous forecast of $1.88bn to $1.94bn. Axon is the leading maker of police body cameras in the U.S. and supplies drones to law enforcement agencies in North America, Europe and Australia. It expects adjusted core profit in the range of $430m to $445m, up from its previous forecast range of $410m to $430m. Axon also announced that it would acquire drone defense firm Dedrone. However, it did not disclose a deal value. The transaction would increase Axon’s total addressable market size by $14bn, is expected to close in the second half of 2024. The company reported revenue of $461m in the first quarter, up 34% year-on-year and above analysts’ estimates of $441.6m. (Source: Reuters)

 

06 May 24. Wozniak’s space firm, Privateer, buys Orbital Insight, raises $56.5m. Apple (AAPL.O), cofounder Steve Wozniak’s space data startup, Privateer, has raised $56.5m and also acquired the analytics firm Orbital Insight, a merger that will add mapping and intelligence services to Privateer’s space data offerings, Privateer’s CEO told Reuters.

Privateer, founded in 2021 to help satellite operators navigate in Earth’s increasingly crowded orbit, closed its Series A funding round in April, led by space-focused venture capital firm Aero X Ventures with other investors including Luxe Capital, Boca, Starburst, and the Winklevoss twins. The news is expected to be announced later on Monday.

Orbital’s TerraScope Earth observation platform, designed to be a vast search engine based on recently captured satellite imagery from other companies, will combine with Privateer’s satellite-tracking software.

The new funding allowed Privateer to close a deal to buy Palo Alto-based Orbital Insight on April 14, Privateer’s CEO, Alex Fielding, said. Orbital, which fuses various sources of data such as cell phone location and satellite imagery as its intelligence offerings to customers, had been backed by Sequoia and Google Ventures.

Fielding declined to disclose the value of the combined entity or the price of Orbital Insight.

Privateer’s acquisition will expand its offerings after revenue prospects in the space situational awareness (SSA) market were limited, Fielding said. SSA is a nascent corner of the space industry akin to air traffic control, but for satellites in space. Such services are deemed crucial for satellite navigation given there are no international norms to control a soaring amount of space traffic.

“It’s not really a market, it’s actually a bunch of companies that have been providing a stopgap for the fact that the government hasn’t provided a service for space traffic management,” Fielding said in an interview last week.

Privateer is offering its SSA services to satellite imagery companies to help them task targets on Earth and maneuver their satellites around space junk in exchange for the hordes of satellite imagery ordered by their customers that could make for a near real-time mapping and intelligence service.

That imagery will funnel into a new platform that Fielding expects to release publicly in the next six months or so.

“You take the image once, you should be able to sell it a m times, for a fraction of the acquisition price,” Fielding said, referring to the satellite imagery companies with whom Privateer is working to integrate their data. (Source: Reuters)

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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Sponsored by SPX CommTech (TCI & ECS)

 

www.tcibr.com

 

www.enterprisecontrol.co.uk

 

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03 May 24.  HII’s revenues reached $2.8bn in Q1 FY24, showing a 4.9% increase from $2.6bn reported in Q1 of last year.

Huntington Ingalls Industries (HII) has reported net earnings of $153m in the first quarter (Q1) of fiscal year 2024 (FY24), up by 18.6% from $129m in Q1 FY2023.

For the quarter ended on 31 March 2024, the company’s diluted earnings per share was $3.87, compared to $3.23 in the previous year’s Q1.

Revenues for HII in Q1 FY24 reached $2.8bn, showing a 4.9% increase from $2.6bn reported in the Q1 of last year.

The Mission Technologies segment was a significant contributor to the company’s overall revenue growth.

This segment saw a 20.2% rise in revenue to $750m in Q1 FY24 from $624m in Q1 FY23, largely attributed to heightened activities in command, control, computers, communications, cyber, intelligence, surveillance, and reconnaissance, electronic warfare, cyber, and space.

HII’s Ingalls Shipbuilding segment experienced a revenue growth of 13.5% to $655m in Q1 FY24 from $577m in the corresponding quarter of FY23.

However, the Newport News Shipbuilding segment saw a decrease in revenues, down 4.8% to $1.4bn in Q1 FY24 from $1.5bn in the Q1 of 2023.

Operating income for Q1 FY24 stood at $154m with an operating margin of 5.5%, compared to $141m and 5.3% in the same quarter of the previous year.

The company’s cash flow indicated more significant expenditures, with net cash used in operating activities reaching $202m and a free cash flow of negative $274m.

New contract awards for HII in the Q1 of 2024 totalled $3.1bn, contributing to a substantial backlog of approximately $48.4bn as of 31 March 2024.

Looking ahead to the full year 2024, HII anticipates Mission Technologies revenue to be in the range of $2.7bn to $2.75bn and Shipbuilding Revenue to be between $8.8bn and $9.1bn.

HII president and CEO Chris Kastner said: “The first quarter was a good start to the year.

Strong growth in Mission Technologies and stable shipbuilding progress provide a solid foundation for the balance of 2024 and beyond.”

(Source: army-technology.com)

 

03 May 24. Rheinmetall suggests European arms consortium with eye on global role.

• Summary
• Companies
• European consortium could better compete with US rivals
• Rheinmetall order book seen reaching 60 bln euros by year end
• CEO says German defence fund needs an extra 30 bln euros

Rheinmetall (RHMG.DE), opens new tab floated the idea of a European arms consortium to better compete with U.S. rivals as the German defence group set out its global ambitions in a booming industry.

The company, a major beneficiary of rising defence spending since Russia’s full-scale invasion of Ukraine in 2022, is forecasting record revenue of more than 10bn euros ($11bn) this year and its order book to reach 60bn euros.

“We want to become a worldwide player and we can currently do that on our own thanks to our good cash flow,” CEO Armin Papperger told a gathering of the WPV business reporters association in Duesseldorf late on Thursday.

He said Rheinmetall would look to push on with its own acquisitions in the United States, but also suggested creating a “large consortium” of European defence companies.

“I believe that it would make sense to found a European system house that has a turnover of around 30, 35bn (euros) so that we can compete with the Americans, that is definitely possible,” Papperger said.

He said other major players in Europe included Leonardo (LDOF.MI), opens new tab, which has a significantly lower market capitalisation than Rheinmetall, and KNDS from France, but gave no indication of any talks to create a possible consortium.

Papperger added there were currently no discussions between Rheinmetall and Germany’s Thyssenkrupp (TKAG.DE), opens new tab, which has been scouting for investment into its navy division.

(Source: Reuters)

 

03 May 24. Allen Control Systems Raises $12m Seed Capital to Build Counter-Drone Robotic Gun Systems. Allen Control Systems (ACS), a defense technology company, has announced it has raised $12mi in seed capital led by Craft Ventures with participation from Forum Ventures and Rally Ventures. ACS is developing counter-drone robotic gun systems.

Low cost, lethal, and increasingly autonomous drones are being deployed in large numbers by enemy forces around the world. Radio jamming can stop many off-the-shelf commercial drones, but autonomous military drones are designed to continue their missions even when their radios are jammed. The only way to disable military drones is to physically damage them but up until now, that required expensive missiles. ACS is developing novel technology capable of neutralizing large numbers of lethal drones at a much lower cost than any solution available today.

‍ACS was founded by CEO Steven Simoni, CTO Luke Allen, and COO Mike Wior. Simoni and Allen are former U.S. Navy nuclear engineers who met in the service. Both were instrumentation and control systems engineers for Navy nuclear reactors. Their backgrounds span robotics, computer vision, machine learning, electrical engineering, mechanical engineering and computer science. After serving in the Navy, Simoni and Allen founded Bbot, a software and robotics restaurant technology startup, where they met Mike Wior, CEO and co-founder of Omnivore, a restaurant POS transaction system. Simoni and Allen’s company was acquired by DoorDash in 2022, and Wior’s company was acquired by Olo in the same year.

“We are at a military disadvantage with our biggest rival. ACS was created to neutralize the threat of Chinese drone manufacturing dominance,” said Simoni. “DJI, the Shenzhen-based manufacturer, commands over 70% of the world’s drone market and makes a new drone every few seconds. With respect to drones, any serious dual-use mandate from our Government is about 20 years too late.”

“ACS’s products are designed with an assumption that military drones will be numerous and will be hardened against radio jamming and other long-range non-kinetic attempts at stopping them,” said Allen. “But drones can’t carry sufficient armour to stop a bullet. The downside of bullets is that aiming a gun with sufficient precision to hit a small drone is almost impossible. We understand how hard that problem is, and we believe we’re well-positioned to solve it.”

The company’s Bullfrog autonomous M240 gun turret system (using 7.62mm ammunition) is reportedly able to detect, identify and neutralise enemy unmanned aerial vehicles using kinetic impact via machine gun rounds in defensive moving and static locations.

The system operates on 24V DC power for easier integration into common NATO vehicles and can operate in autonomous and semi-autonomous modes with a fully passive detection system.

Bullfrog can also reportedly handle accurate detection based on millions of training images, as well as possible networking into existing air-defense and force-protection operating systems. (Source: UAS VISION/Defence Connect)

 

02 May 24. Government assistance to Denel totalled R9bn in five years. Beleaguered State-owned defence and technology conglomerate Denel benefitted to the tune of R9bn from National Treasury (NT) over the past five years at the same time as it recorded personnel losses of just on 60%. The R9bn in bailouts was, according to the reply to a Parliamentary question posed by Democratic Alliance (DA) member of the Public Enterprises Portfolio Committee (PEPV), Farhat Essack, one of six made to State-owned Enterprises (SOEs). Denel, according to the response attributed to outgoing Public Enterprises Minister Pravin Gordhan and Department of Public Enterprises (DPE) Acting Director General Jacky Molisane, did not pay out any dividends in the five-year period starting May 2019.

By way of explanation for government’s financial commitment to SOEs, Essack was informed “all entities were affected by state capture” with five impacts named. They are listed as financial and liquidity positions, increased operating costs, skills “eroded”, boards “compromised” and there was “a technical impact on operational performance”.

2019 was the starting point for another DA Denel question to Gordhan. This one was from Mimmy Gondwe, shadow public enterprises minister, asking about personnel numbers.

She was told personnel strength in 2019 was 3 968. By the end of the 2023/24 financial year it stood at 1 655 – a loss of just on 60% – prompting at least one Armscor pensioner to ask whether the Denel salary bill decreased accordingly.

Other SOEs Essack asked about included the national airline – SAA – which he was told did not receive bailouts. The response to Essack’s question has it that it was “capital invested” to the tune of over R31bn between 2019/2020 and 2023/24, with the funds going to working capital, bridging finance, settling legacy debts and restructuring, among others.

Only Alexkor and SAFCOL (SA Forestry Company Limited) were not financially assisted by government in the last five years. Eskom received R234.6 bn and Transnet R11.6bn (made up of a R5.8bn “equity injection”, R2.9 bn to “accelerate” locomotive rehabilitation and a similar amount to cover losses incurred in the April 2022 KwaZulu-Natal floods) during the specified timeframe. (Source: https://www.defenceweb.co.za/)

 

01 May 24. Altair Acquires Research in Flight, Forging a New Path for Aerodynamic Analysis. Altair (Nasdaq: ALTR) a global leader in computational intelligence, announced it has acquired Research in Flight, maker of FlightStream®, which provides computational fluid dynamics (CFD) software with a large footprint in the aerospace and defense sector and a growing presence in marine, energy, turbomachinery, and automotive applications. FlightStream® is a user-friendly, yet powerful flow solver that bridges the gap between high-fidelity CFD simulations and the needs of engineers and designers. Its exceptionally fast computational speeds and low hardware footprint, coupled with a streamlined user interface and robust aerodynamic solver, make it an invaluable tool for early-stage rapid design iterations and in-depth aerodynamic studies for aerospace and defense applications and beyond. FlightStream® can capture subsonic to supersonic flows, including compressible effects and a unique surface vorticity capability. It leverages the strengths of panel method flow solvers and enhances them with modern computational techniques to provide a fast solver capable of handling complex aerodynamic phenomena.

“Our growth in the aerospace, defense, and surrounding industries has accelerated in recent years through our best-in-class computational intelligence solutions,” said James R. Scapa, founder and chief executive officer, Altair. “The integration of FlightStream® into our portfolio will enhance our offering with its specialized, modern, and efficient approach to meet the increasingly complex customer demands in these industries, including the urban air mobility and eVTOL sectors.”

FlightStream® allows for the rapid analysis of unconventional aircraft using a unique surface vorticity, flow-separation, and viscous analysis capability for both powered and unpowered configurations. It is augmented with integral boundary layer modeling, enabling users to capture viscous effects with a level of detail that is uncommon in traditional panel method applications. This integration facilitates a more comprehensive analysis of aerodynamic performance, providing insights that are crucial for design optimization.

“We are proud to be a standard tool in the aircraft designer’s toolbox,” said Vivek Ahuja, co-founder, Research in Flight. “Joining Altair will allow us to scale and reach countless engineers seeking best-in-class, powerful, and specialized tools for faster design iterations.”

In addition to Ahuja, Research in Flight was co-founded by Roy Hartfield who has dedicated more than 30 years to the study of aerodynamics, propulsion, statistical analysis of air vehicles, and aircraft research. Hartfield is an aerospace engineering professor at the Samuel Ginn College of Engineering at Auburn University.

FlightStream® is a United States Air Force network-approved software and is also used at NASA Ames and Langley Research Centers, as well as by the U.S. Army. It will be integrated into the Altair® HyperWorks® design and simulation platform and be available via Altair Units. (Source: PR Newswire)

 

02 May 24. Magellan Aerospace Corporation Announces Financial Results.

Magellan Aerospace Corporation (“Magellan” or the “Corporation”) released its financial results for the first quarter of 2024. All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as follows:

1. Overview

A summary of Magellan’s business and significant updates

Magellan is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries, controlled entity and joint venture, Magellan designs, engineers and manufactures aeroengine and aerostructure components for aerospace markets, including advanced products for defence and space markets, and complementary specialty products. The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services.

Magellan operates substantially all of its activities in one reportable segment, Aerospace, which is viewed as one segment by the chief operating decision-makers for the purpose of resource allocations, assessing performance and strategic planning. The Aerospace segment includes the design, development, manufacture, repair and overhaul, and sale of systems and components for defence and civil aviation.

The Industry and the Supply Chain

Though global air travel has seen signs of recovery with both domestic and international revenue passenger kilometers, on a combined basis, approaching pre-COVID 19 pandemic levels, Magellan’s financial results and operations continue to be influenced by overhanging impacts from the pandemic. These impacts include customer build rate adjustments (and the impact on production scheduling), higher input prices for goods and services, limited availability of products, disruptions to supply chains and labour shortages. Magellan continues to manage these impacts and strives to mitigate their effect on Magellan’s operations, supply chain, and most importantly the health and safety of its employees.

In the first three months of 2024, 65.1% of revenues were derived from commercial markets while 34.9% of revenues related to defence markets.

Business Update

On February 28, 2024, Magellan announced an agreement between Magellan Aerospace (UK) Limited and Airbus to continue to supply major structural wing components for Airbus’ single aisle family of aircraft. The high-strength, lightweight components will be delivered from Magellan’s leading-edge long bed machining centre in our Wrexham facility from January 2024. The agreement focuses on the production of precision-machined wing spars for use on the A320 family of aircraft. Wing spars are large, machined components that provide support and strength to the wing structure. Magellan will expand its industry-leading long bed machining capability at the Wrexham facility to ensure continued delivery of quality products that meet the expectations of the customer.

For additional information, please refer to the “Management’s Discussion and Analysis” section of the Corporation’s 2023 Annual Report available on www.sedarplus.ca.

2. Results of Operations

A discussion of Magellan’s operating results for the first quarter ended March 31, 2024

The Corporation reported revenue in the first quarter of 2024 of $235.2m, an $11.8m or 5.3% increase from the first quarter of 2023 revenue of $223.4m. Gross profit and net income for the first quarter of 2024 were $23.8m and $6.3m, respectively, in comparison to gross profit of $22.3m and net income of $3.9m for the first quarter of 2023.

Consolidated Revenue

Revenues in Canada decreased 6.3% in the first quarter of 2024 compared to the corresponding period in 2023, primarily due to reduced revenues in the defence and space product portfolio.

Revenues in the United States increased by 20.5% in the first quarter of 2024 compared to the first quarter of 2023, mainly due to volume increases for fighter and wide body aircraft, higher casting product revenues and favourable foreign exchange impacts due to the strengthening of the United States dollar relative to the Canadian dollar.

European revenues in the first quarter of 2024 increased 9.4% compared to the corresponding period in 2023 primarily driven by volume increases for wide body aircraft, and favourable foreign exchange impacts as the United States dollar strengthened relative to the British pound.

Gross Profit

Administrative and general expenses as a percentage of revenues of 6.1% for the first quarter of 2024 were lower on a nominal basis than the same period of 2023. Administrative and general expenses decreased $0.1 m or 0.8% to $14.2 m in the first quarter of 2024 compared to $14.3 m in the first quarter of 2023 mainly due to decreases in pension and professional services expenses, offset in part by increases in technology related expenses.

Restructuring

Other for the first quarter of 2024 included a $0.7m foreign exchange gain compared to a $1.2m foreign exchange loss in the first quarter of the prior year. The movements in balances denominated in foreign currencies and the fluctuations of the foreign exchange rates impact the net foreign exchange gain or loss recorded in a quarter.

Other for the first quarter of 2024 also includes a $0.2 m settlement gain relating to the settlement of various pension obligations in conjunction with the purchase of group annuity contracts related to the Corporation’s defined benefit pension plans.

Interest Expense

Total interest expense of $1.3m in the first quarter of 2024 increased by $0.5m compared to the first quarter of 2023, mainly due to higher interest on bank indebtedness and long-term debt as a result of increased interest rates and higher principal amounts borrowed in the quarter as compared to the prior year.

Provision for Income Taxes

Income tax expense for the three months ended March 31, 2024 was $2.9m, representing an effective income tax rate of 31.3% compared to 31.8% for the same period of 2023. The change in effective tax rate and current and deferred income tax expenses year over year was primarily due to the change in mix of income and loss across the different jurisdictions in which the Corporation operates and the reversal of temporary differences.

3. Selected Quarterly Financial Information

Revenues and net income in the quarter were impacted by the movements of the Canadian dollar relative to the United States dollar and British pound, when the Corporation translates its foreign operations to Canadian dollars. Further, the movements in the United States dollar relative to the British pound impact the Corporation’s United States dollar exposures in its European operations. During the periods reported, the average quarterly exchange rate of the United States dollar relative to the Canadian dollar fluctuated between a high of 1.3619 in the fourth quarter of 2023 and a low of 1.2663 in the second quarter of 2022. The average quarterly exchange rate of the British pound relative to the Canadian dollar reached a high of 1.7103 in the first quarter of 2024 and hit a low of 1.5350 in the third quarter of 2022. The average quarterly exchange rate of the British pound relative to the United States dollar reached a high of 1.2680 in the first quarter of 2024 and hit a low of 1.1747 in the fourth quarter of 2022.

Revenue for the first quarter of 2024 of $235.2m was higher than that in the first quarter of 2023. The average quarterly exchange rate of the United States dollar relative to the Canadian dollar in the first quarter of 2024 was 1.3488 versus 1.3518 in the same period of 2023. The average quarterly exchange rate of the British pound relative to the Canadian dollar moved from 1.6429 in the first quarter of 2023 to 1.7103 during the current quarter. The average quarterly exchange rate of the British pound relative to the United States dollar increased from 1.2154 in the first quarter of 2023 to 1.2680 in the current quarter.

The Corporation’s results through-out fiscal 2022 and 2023 were negatively impacted by the continued effects of the COVID-19 pandemic via reduced volumes and supply chain disruptions. The decrease in profitability in the fourth quarter of 2022 was mainly the result of the effect of inflation in materials, supplies, utilities and labour; and supply chain disruptions which impacted production of goods resulting in production system inefficiencies and lower absorption of manufacturing supplies. These impacts, although not as significant, continued to impact the results in 2023. Compared to the second quarter of 2022, the Corporation has seen modest, albeit uneven, growth in quarterly revenues as global air travel continues to recover to pre COVID-19 levels.

4. Reconciliation of Net Income to EBITDA and Adjusted EBITDA

A description and reconciliation of certain non-IFRS measures used by management

In addition to the primary measures of earnings and earnings per share (basic and diluted) in accordance with IFRS, the Corporation includes EBITDA (net income before interest, income taxes and depreciation and amortization) and Adjusted EBITDA (net income before interest, income taxes, depreciation and amortization, goodwill impairment and restructuring) in this news release. The Corporation has provided this measure because it believes this information is used by certain investors to assess financial performance and that EBITDA and Adjusted EBITDA are useful supplemental measures as they provide an indication of the results generated by the Corporation’s principal business activities prior to consideration of how these activities are financed and how the results are taxed in the various jurisdictions. Each component of this measure is calculated in accordance with IFRS, but EBITDA and Adjusted EBITDA are not recognized measures under IFRS, and the Corporation’s method of calculation may not be comparable with that of other companies. Accordingly, EBITDA and Adjusted EBITDA should not be used as alternatives to net income as determined in accordance with IFRS or as alternatives to cash provided by or used in operations.

5. Liquidity and Capital Resources

A discussion of Magellan’s cash flow, liquidity, credit facilities and other disclosures

The Corporation’s liquidity needs can be met through a variety of sources including cash on hand, cash provided by operations, short-term borrowings from its credit facility and accounts receivable securitization program, and long-term debt and equity capacity. Principal uses of cash are for operational requirements, capital expenditures, common share repurchases and dividend payments. Based on current funds available and expected cash flow from operating activities, management believes that the Corporation has sufficient funds available to meet its liquidity requirements at any point in time. However, if cash from operating activities is lower than expected or capital projects exceed current estimates, or if the Corporation incurs major unanticipated expenses, it may be required to seek additional capital in the form of debt or equity or a combination of both.

For the three months ended March 31, 2024, operating activities provided $19.8m of cash compared to $18.4m used in the first quarter of 2023. Changes in non-cash working capital items provided cash of $2.3m, $34.4m higher when compared to the usage of $32.2m in the prior year. This increase is largely attributable to decreases in accounts receivables from timing of customer payments, increases in contract liabilities due to timing of customer deposits offset in part by increases in contract assets and inventories, and decreases in accounts payable, accrued liabilities and provisions primarily driven by timing of material purchases and supplier payments.

Dividends

During the first quarter of 2024, the Corporation declared and paid a quarterly cash dividend of $0.025 per common share representing an aggregating dividend payment of $1.4m.

Subsequent to March 31, 2024, the Corporation announced that its Board of Directors had declared a quarterly cash dividend on its common shares of $0.025 per common share. The dividend will be payable on June 28, 2024 to shareholders of record at the close of business on June 14, 2024. The Board of Directors of the Corporation continues to review its dividends on a quarterly basis to ensure that the dividend declared balances the return of capital to shareholders while maintaining adequate financial flexibility and funds available for growth initiatives.

Normal Course Issuer Bid

On May 25, 2023, the Corporation’s application to extend its normal course issuer bid (“2023 NCIB”) was approved, which allows the Corporation to purchase up to 2,868,106 common shares between May 27, 2023 and May 26, 2024. During the first quarter of 2024, the Corporation purchased 49,456 common shares for cancellation at a volume weighted average price of $7.76 per common share at a cost of $0.4m.

Outstanding Share Information

The authorized capital of the Corporation consists of an unlimited number of preference shares, issuable in series, and an unlimited number of common shares. As at April 30, 2024, 57,163,773 common shares were outstanding and no preference shares were outstanding.

6. Risk Factors

A summary of risks and uncertainties facing Magellan

The Corporation manages a number of risks in each of its businesses in order to achieve an acceptable level of risk without hindering the ability to maximize returns. Management has procedures to help identify and manage significant operational and financial risks.

For more information in relation to the risks inherent in Magellan’s business, reference is made to the information under “Risk Factors” in the Corporation’s Management’s Discussion and Analysis for the year ended December 31, 2023 and to the information under “Risks Inherent in Magellan’s Business” in the Corporation’s Annual Information Form for the year ended December 31, 2023, which have been filed with SEDAR at www.sedarplus.ca.

7. Outlook

The outlook for Magellan’s business in 2024

Airbus delivered 142 aircraft in Q1 2024, received net orders of 170 aircraft and closed the quarter with an order backlog of 8,626 aircraft. Comparatively, Boeing delivered 83 aircraft, received net orders of 125 aircraft and closed the quarter with an order backlog of 6,259 aircraft.

Airbus’ A320 program build rate is currently at 56 aircraft per month, is planned to reach 62 aircraft per month by the end of 2024 and then 75 aircraft per month by 2026. The A330 build rate is currently at 3.3 aircraft per month with plans to go to 4 aircraft per month in Q3 2024, while the A350 is at 6 aircraft per month with plans to go to 10 aircraft per month in 2026. The A220 build rate is at 7.5 aircraft per month and is planned at 14 aircraft per month in 2026.

When the 737MAX door plug incident occurred, Boeing was transitioning 737 aircraft production from 31 to 38 aircraft per month. The FAA has capped the rate at 38 aircraft, although media reports suggest actual build rates in Q1 2024 were significantly lower. Boeing have stated that they are maintaining the supply chain at 38 aircraft per month. There were no deliveries of the 777 in Q1 2024 due to a shortage of engines. The engine manufacturer, General Electric, is coordinating engine production and delivery schedules with Boeing and airline customers. Boeing’s 767 production continues at a rate of 3 aircraft per month, while the 787 build rate is transitioning to 5 aircraft per month.

Both Boeing and Airbus have healthy aircraft order backlogs, which reflect the strong market demand for new commercial aircraft.

In the defence market, US Congress passed the FY 2024 budget, which provides funding of USD $43.6bn for aircraft procurement, including a USD $3bn boost over the original request. Programs benefiting are Boeing’s P8 Maritime Patrol aircraft and CH47 Chinook helicopter, Sikorsky’s H-60 helicopter, Bell-Boeing’s V22 Tiltrotor aircraft and Lockheed’s C130J Tactical Transport aircraft. Boeing also secured a production contract from the US Navy for a final F/A-18E/F Super Hornet fighter buy. This order will allow Boeing to extend F/A-18 production into 2027, which is two years beyond the previously announced 2025 production end.

Pratt & Whitney received full funding for its Engine Core Upgrade program, which is to provide capability enhancements for its F135 engine and which ends a long-running debate over the future of the F-35 propulsion with an entirely new engine. This budget also includes funding for further development of a sixth-generation fighter under the US Air Force (“USAF”) program known as Next Generation Air Dominance (“NGAD”).

The downside of this budget revealed USAF plans to purchase fewer total Boeing F-15EXs, and slow the pace of Lockheed Martin F-35 and Boeing T-7A trainer acquisitions. According to the USAF, “this budget request sustains the modernization momentum of operational imperatives while taking a measured risk in the near term.” Funds are re-directed towards the USAF’s sixth-generation fighter development initiative and the associated effort to build autonomous combat fighters.

(Source: Google/https://www.morningstar.com/)

 

02 May 24. Melrose Industries PLC (“Melrose”) announces the following trading update for the quarter from 1 January to 31 March 2024 (“the Period”).  All numbers are calculated at constant currency.

Revenue was up 8% on the same period in 2023 with Engines showing strong progress, up 21%, and Structures flat, as expected. Ongoing restructuring projects and business improvement actions are progressing well.  As a result, adjusted operating profit is up substantially on the prior year, in line with our expectations and recently upgraded guidance.   Our end markets continue to be positive with strong demand and increasing backlogs in both civil and defence, and favourable Engines aftermarket dynamics.

Engines

The strong performance in Engines was driven by aftermarket with our RRSPs and repair activities growing above the divisional average.  Engine OE volumes continue to increase, albeit they are still constrained by industry-wide supply chain issues.  Given the higher profitability of aftermarket, the resulting business mix is generating strong margins, in line with previous guidance.

Structures

The flat reported revenue in Structures, as expected, reflects the planned exit of non-core work and destocking by a major customer as highlighted at our full year results.  The division is making encouraging progress from business improvement actions, with the majority of benefits expected in the second half and into 2025.  These improvements include the recent agreement to transfer the St. Louis site to our customer, Boeing Co., as part of our planned defence portfolio reshaping.

OutlookThe Group’s full year guidance is unchanged, with an expected 33% year-on-year increase in adjusted operating profit to £560m at the midpoint (pre-PLC costs), modestly second half weighted as previously indicated.

Peter Dilnot, Chief Executive Officer of Melrose said: “We have had a strong start to the year with a particularly good performance from our Engines division.  We expect this momentum to continue throughout the year.  Longer term, the Group is well positioned to deliver ongoing growth and margin expansion supported by positive end markets and excellent business improvement momentum. We are confident about unlocking significant further potential in the years ahead.”

 

01 May 24. Curtiss-Wright Corporation (NYSE: CW) reports financial results for the first quarter ended March 31, 2024.

First Quarter 2024 Highlights:

• Reported sales of $713m, up 13%, operating income of $100 m, up 27%, operating margin of 14.0%, and diluted earnings per share (EPS) of $1.99;
• Adjusted operating income of $100m, up 23%;
• Adjusted operating margin of 14.0%, up 110 basis points;
• Adjusted diluted EPS of $1.99, up 30%; and
• New orders of $901m, up 26%, reflected a book-to-bill that exceeded 1.25x driven by strong demand within our Aerospace & Defense (A&D) markets.

Raised Full-Year 2024 Financial Guidance:

• Sales increased to new range of 5% to 7% growth (previously 4% to 6%) and continues to reflect growth in all A&D and Commercial end markets;
• Operating income increased to new range of 5% to 8% growth (previously 4% to 7%);
• Maintained operating margin range of 17.4% to 17.6%, up 0 to 20 basis points compared with the prior year;
• Diluted EPS increased to new range of $10.10 to $10.40, up 8% to 11% (previously $10.00 to $10.30, up 7% to 10%); and
• Maintained free cash flow range of $415 to $435m, which continues to reflect nearly 110% FCF conversion.

“Curtiss-Wright delivered strong first quarter 2024 results, exceeding our overall expectations, highlighted by significant growth in sales and operating income, continued operating margin expansion, and diluted EPS of $1.99, which increased 30% year-over-year,” said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation. “Our results included a very strong performance in the Defense Electronics segment, which was partially offset by reduced profitability in the Naval & Power segment, principally related to a naval contract adjustment that impacted both the first quarter and full-year outlook for this segment.”

“Based upon our strong overall start to the year and the continued strength in our order book, we have increased our full-year 2024 sales, operating income and diluted EPS guidance as we continue to successfully execute on our Pivot to Growth strategy. We now expect to deliver total sales growth of 5% to 7%, including the contribution from our recent commercial nuclear acquisition of WSC, Inc., continued operating margin expansion while increasing R&D investments, and diluted EPS growth of 8% to 11%, while we maintain our outlook for strong free cash flow conversion well in excess of 100%. We look forward to discussing our alignment with the favorable secular growth trends driving our end markets and our new long-term financial targets at our upcoming investor day on May 21st.”

First Quarter 2024 Operating Results

• Sales of $713m, up $82m, or 13% compared with the prior year;
• Total A&D market sales increased 20%, while total Commercial market sales were essentially flat;
• In our A&D markets, we experienced higher sales in the defense markets principally driven by continued strong demand for our defense electronics products, as well as strong growth in OEM sales in the commercial aerospace market;
• In our Commercial markets, we experienced solid growth in the power & process markets, while sales in the general industrial market declined modestly; and
• Adjusted operating income of $100m increased 23%, while Adjusted operating margin increased 110 basis points to 14.0%, principally driven by favorable overhead absorption and mix on higher revenues in the Defense Electronics segment, partially offset by an unfavorable naval contract adjustment in the Naval & Power segment.

First Quarter 2024 Segment Performance

Aerospace & Industrial

• Sales of $219m, up $17m, or 8%;
• Strong revenue growth in the commercial aerospace market reflected higher OEM sales of actuation and sensors products, as well as surface treatment services, on narrowbody and widebody platforms;
• Higher sales in the aerospace defense market reflected increased actuation development on various fighter jet programs;
• General industrial market revenues declined modestly, as the benefit of new product introductions supporting the electrification of vehicles was more than offset by reduced sales of industrial vehicle products on off-highway vehicle platforms, and lower sales of industrial automation and services; and
• Operating income was $27m, up 3% from the prior year, while operating margin decreased 60 basis points to 12.5%, as favorable absorption on higher sales was offset by unfavorable mix and the timing of development programs.

Defense Electronics

• Sale of $212m, up $50m, or 31%;
• Higher revenue in the aerospace defense market was principally driven by increased sales of our embedded computing equipment on various fighter jet, unmanned aerial vehicle and helicopter programs;
• Strong revenue growth in the ground defense market reflected the robust demand and higher sales of tactical battlefield communications equipment;
• Higher commercial aerospace market revenue reflected increased OEM sales of avionics and electronics on various platforms; and
• Operating income was $48m, up 106% from the prior year, while operating margin increased 830 basis points to 22.7%, mainly reflecting improved absorption and mix on higher revenues.

Naval & Power

• Sales of $282m, up $16m, or 6%;
• Higher revenue in the aerospace defense market was primarily driven by increased sales of our arresting systems equipment supporting various domestic and international customers;
• Naval defense market revenue increases principally reflected higher revenues on the Columbia-class submarine, partially offset by timing of revenues on the Virginia-class submarine and CVN-80 aircraft carrier programs;
• Higher power & process market revenues mainly reflected increased commercial nuclear aftermarket sales supporting the maintenance of operating reactors in the U.S. and Canada; and
• Adjusted operating income was $35m, down 13% from the prior year, while adjusted operating margin decreased 280 basis points to 12.5%, as favorable absorption on higher revenues was more than offset by an unfavorable naval contract adjustment.

Free Cash Flow

• Reported free cash flow of ($58)m increased $45m, primarily due to higher cash earnings and the timing of tax payments, as well as a $10m legal settlement payment made in the prior year;
• Adjusted free cash flow of ($58)m increased $35m;
• Capital expenditures increased $1m compared with the prior year period, primarily due to higher growth investments in the Defense Electronics segment.

New Orders and Backlog

• New orders of $901m increased 26% compared with the prior year and generated an overall book-to-bill that exceeded 1.25x, principally driven by strong demand for defense electronics and naval defense products within our A&D markets; and
• Backlog of $3.1bn, up 7% from December 31, 2023, reflects higher demand in both our A&D and Commercial markets.

Share Repurchase and Dividends

• During the first quarter, the Company repurchased 52,612 shares of its common stock for approximately $12m; and
• The Company declared a quarterly dividend of $0.20 a share.

 

01 May 24. Materion Corporation Reports First Quarter 2024 Financial Results. Materion Corporation (NYSE: MTRN) today reported first quarter 2024 financial results and provided an update to 2024 earnings guidance.

Financial Summary

• Net sales were $385.3m; value-added sales1 were $257.8m
• Net income was $13.4m, or $0.64 per share, diluted, and adjusted earnings of $0.96 per share
• Full year adjusted earnings outlook updated to $5.60-$6.20 per share, a 5% increase year over year at the midpoint

FIRST QUARTER 2024 RESULTS

Net sales for the quarter were $385.3m, compared to $442.5m in the prior year period. Value-added sales were $257.8m for the quarter, down 14% from the prior year primarily due to continued semiconductor and industrial market weakness combined with some temporary operational challenges. This year-over-year decline was partially offset by strength in the space & defense markets.

Operating profit for the quarter was $22.2 m and net income was $13.4m, or $0.64 per diluted share, compared to operating profit of $36.9m and net income of $25.6m, or $1.23 per share, in the prior year period.

Excluding special items2, adjusted EBITDA3 was $45.2m in the quarter or 17.5% of value-added sales, compared to $53.4m or 17.9% of value-added sales in the prior year period. This decline was driven by lower volume, partially offset by the benefit of cost improvement initiatives, resulting in comparable margins year on year.

Adjusted net income was $20.1m excluding acquisition amortization, or $0.96 per diluted share, compared to $1.34 per share in the prior year period.

“Temporary operational challenges and softer market demand led to results falling short of our expectations for the first time in several quarters,” Materion President & CEO Jugal Vijayvargiya said. “I am proud of our team for mobilizing quickly to mitigate the impact to the quarter and deliver strong margins comparable to last year. The actions taken are also driving structural improvements that will deliver even more value as key markets recover.”

“As we manage through the current environment to drive another year of record results, we remain sharply focused on executing our strategy, delivering on our organic outgrowth initiatives and investing in new capacity and capabilities that will drive long term value for our stakeholders.”

OUTLOOK

Despite a weaker than anticipated first quarter, we expect to deliver another year of record results as we execute our organic and operational excellence initiatives. Since the beginning of the year, the outlook for the commercial aerospace and electric vehicle end-markets has softened and we expect some inventory correction from our precision clad strip customer in the second half. In addition, we expect higher interest expense with the current rate projections. While we expect to mitigate much of the impact of these items through targeted cost reduction initiatives and performance, we are adjusting our outlook to $5.60 to $6.20 for the full year 2024 adjusted earnings per share, an increase of 5% from prior year at the midpoint.

FOOTNOTES

1 Value-added sales deducts the impact of pass-through metals from net sales

2 Details of the special items can be found in Attachments 4 through 8

3 EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization

ABOUT MATERION

Materion Corporation is a global leader in advanced materials solutions for high-performance industries including semiconductor, industrial, aerospace & defense, energy and automotive. With nearly 100 years of expertise in specialty engineered alloy systems, inorganic chemicals and powders, precious and non-precious metals, beryllium and beryllium composites, and precision filters and optical coatings, Materion partners with customers to enable breakthrough solutions that move the world forward. Headquartered in Mayfield Heights, Ohio, the company employs more than 3,500 talented people worldwide, serving customers in more than 60 countries. (Source: BUSINESS WIRE)

 

01 May 24. Knowles Reports Q1 2024 Financial Results and Provides Outlook for Q2 2024. Knowles Corporation (NYSE: KN) (“Knowles” the “Company”), a leading global supplier of high performance components and solutions, including capacitors and radio frequency (“RF”) filters, advanced medtech microphones and balanced armature speakers, and MEMS microphones for the consumer electronics market, today announced results for the quarter ended March 31, 2024.

“All three segments delivered year over year double digit revenue growth in the first quarter of 2024 and Non-GAAP Diluted Earnings per Share was at the high end of our guided range. I am pleased to report that net cash from operating activities of $17 m exceeded the high end of our guidance,” commented Jeffrey Niew, President and CEO of Knowles. “We have started the year with solid financial results driven by strong execution across all our businesses despite the continued heightened levels of inventory in a number of our end markets.”

Mr. Niew continued, “As we look to the second quarter of 2024, we expect to see sequential revenues and earnings growth and another quarter of strong cash generation. Throughout 2024 we will continue to progress in transitioning our company’s portfolio to higher value markets and products to drive shareholder value.”

Financial Highlights

Q2 2024 GAAP results are expected to include approximately $0.06 per share in stock-based compensation expense, $0.05 per share in intangibles amortization expense, and $0.03 per share in integration and production transfer costs related to the acquisition of Cornell Dubilier that are excluded from non-GAAP results.

About Knowles

Knowles is a market leader and global provider of high performance capacitors and radio frequency (“RF”) filtering products, and advanced micro-acoustic microphones and balanced armature speakers, audio solutions, serving the medtech, defense, consumer electronics, electric vehicle, industrial, and communications markets. Knowles’ focus on the customer, combined with unique technology, proprietary manufacturing techniques, and global operational expertise, enables us to deliver innovative solutions across multiple applications. Founded in 1946 and headquartered in Itasca, Illinois, Knowles is a global organization with employees in over a dozen countries. The Company continues to invest in high value solutions to diversify its revenue and increase exposure to high growth markets. For more information, visit knowles.com. (Source: BUSINESS WIRE)

 

01 May 24. Leonid Capital Partners Expands Space Portfolio, Provides $20m+ Term Loan to ABL Space Systems. Leonid Capital Partners (“Leonid”), a leading investment firm focused on high-growth technology companies working in the national security industry, today announced it is providing a new $20m+ term loan to ABL Space Systems (“ABL”).

ABL makes satellite launch vehicles. The RS1 launch vehicle serves satellite missions including tactically responsive launch, high energy orbits and constellation deployment. Mobility is a key differentiator. The unique GS0 ground system is modular and transportable, enabling ABL to rapidly build launch sites around the world. The company is based in Los Angeles and backed by top-tier institutional investors.

“Our business is growing rapidly and this term loan will enable us to continue to make the investments necessary to expand our infrastructure and capacity to execute on current and future contracts,” said Harry O’Hanley, CEO of ABL Space Systems. “We’re thrilled to partner with Leonid, as they deeply understand our industry and recognize the immense value of developing and strengthening space launch capabilities.”

“ABL Space Systems is doing groundbreaking work to increase domestic launch resiliency and build out ‘responsive launch’ capabilities for the Department of Defense,” said James Parker, Co-Founder of Leonid Capital Partners. “Their dedication to developing mobile and adaptable launch solutions is truly amazing. We’re honored to play a part in helping them achieve their mission.”

The deal is the latest of several financing arrangements Leonid has made this year with companies working within the space industry and further demonstrates the firm’s commitment to empowering scientists, engineers, and innovators with the capital required to develop impactful technologies in support of the national security mission.

Founded in 2019, Leonid is a specialized credit provider for businesses that contract with the federal government for highly technical engagements in fields such as software, biotech, and engineering. Leonid’s loans support a wide variety of contract types (including PoRs, OTAs, SBIR/STTR, and others) designed by the U.S. federal government to encourage research, service, and product solutions for critical areas of need.

About Leonid Capital Partners

Leonid Capital Partners is a leading investment firm focused on identifying and supporting high-growth technology companies that work in the national security arena. The firm leverages its deep government and technical expertise to provide its portfolio companies with the flexible resources they need to grow their business.

(Source: BUSINESS WIRE)

 

01 May 24. Leonardo DRS Announces Financial Results for First Quarter 2024.

• Revenue: $688m, up 21% year-over-year
• Net Earnings: $29m, up 142% year-over-year
• Adjusted EBITDA: $70m, up 43% year-over-year
• Diluted EPS: $0.11, up 120% year-over-year
• Adjusted Diluted EPS: $0.14, up 100% year-over-year
• Bookings: $815m (book-to-bill ratio of 1.2x)
• Backlog: $7.8bn, up 84% year-over-year
• Confirms solid 2024 guidance

Leonardo DRS, Inc. (Nasdaq: DRS), a leading provider of advanced defense technologies, today reported financial results for the first quarter 2024, which ended March 31, 2024.

CEO Commentary

“Leonardo DRS delivered exceptional first quarter 2024 results, highlighted by solid bookings, robust double-digit organic growth, significant profit growth and margin expansion. This incredible start to the year continues to demonstrate the strength of our portfolio and is foundational to the confidence we have in our ability to deliver on our growth and margin expansion commitments. I am pleased with how our team continues to build on our market-leading positions by executing with excellence for our customers and driving innovation to help solve complex mission requirements,” said Bill Lynn, Chairman and CEO of Leonardo DRS.

Summary Financial Results

Revenue growth was entirely organic and accelerated to 21% for the first quarter compared to last year.

Solid momentum from our naval power, ground systems integration, advanced infrared sensing and naval network computing programs drove the robust revenue growth in Q1.

Higher volume was the key driver for the significant year-over-year adjusted EBITDA growth and margin expansion in the quarter.

Quarterly net earnings, adjusted net earnings, diluted EPS and adjusted diluted EPS were all higher primarily as a result of strong operational performance but also benefited slightly from tailwinds on non-operational items, namely lower net interest expense and a lower effective tax rate.

Cash Flow and Balance Sheet

Net cash flow used in operating activities was $265m for the first quarter. The company’s free cash flow use was $275m in the quarter. The use of operating and free cash flows were largely consistent with the historical patterns of the business but showed year-over-year improvement on both metrics.

At quarter end, the balance sheet had $160m of cash and $211m of outstanding borrowings under the company’s credit facility, which provides the company with sufficient financial capacity to deploy capital for growth, while maintaining a healthy balance sheet.

The company received $815 m in new funded awards during the quarter. Robust bookings were driven by increased international demand in infrared sensing, tactical radars and air defense systems support as well as domestic awards for naval network computing and electric power and propulsion technologies. At quarter end, backlog stood at a record of $7.8bn, representing an 84% increase year-over-year.

ASC bookings continued to pace well ahead of expectations with demand most evident for advanced infrared sensing, naval and ground network computing and tactical radar technologies. Revenue growth on advanced infrared sensing and naval network computing programs were the primary drivers for the year-over-year increase in the segment. Higher volume drove the adjusted EBITDA growth; however, margin was flat in the quarter due to less favorable program mix.

Integrated Mission Systems (“IMS”) Segment

Healthy contribution from ground systems integration and electric power and propulsion efforts drove IMS bookings in the quarter. Strong execution across the segment was responsible for the robust revenue growth in the quarter. Improved program profitability, namely from Columbia Class and higher volume propelled the increases in adjusted EBITDA and adjusted EBITDA margin in the quarter.

2024 Guidance

Leonardo DRS confirms its 2024 guidance as specified in the table below:

The company does not provide a reconciliation of forward-looking adjusted EBITDA and adjusted diluted EPS, due to the inherent difficulty in forecasting and quantifying the adjustments that are necessary to calculate such non-GAAP measures without unreasonable effort. Material changes to any one of these items could have a significant effect on future GAAP results. (Source: BUSINESS WIRE)

 

30 Apr 24. MTU Aero Engines’ Q1 profit rises on Eurofighter orders despite turbofan woes. German engine manufacturer MTU Aero Engines (MTXGn.DE), reported higher first-quarter earnings on Tuesday, boosted by orders from the joint European Eurofighter jet project while its turbofan engines recall campaign remained on track.

Adjusted operating profit increased by 3% to 218m euros ($233.09m) and sales grew 8% to 1.67 bn euros in the first three months of the year, both in line with LSEG’s mean estimate.

The Airbus (AIR.PA), and Boeing (BA.N), supplier’s results beat expectations even as it continues to suffer from the consequences of an expensive recall campaign.

Last year, it had to recall up to 3,000 geared turbofan engines from its partner Pratt & Whitney (RTX.N), for an inspection due to a potentially defective turbine disc, costing the German firm about 1 bn euros.

MTU’s military sales jumped by a fifth, reaching 124m euros in the January-March period thanks to increased purchases of the EJ200 engine for the Eurofighter project.  (Source: Reuters)

 

30 Apr 24. SES to buy Intelsat, further shrinking SATCOM gene pool. Space industry analyst Todd Harrison said the $3.1bn purchase is latest in a “shakeup” in the satellite communications landscape following the proliferation of LEO birds.

The planned $3.1bn purchase of US satellite communications behemoth Intelsat by Luxembourg-based SES will bring together two of the largest operators of geosynchronous Earth orbit (GEO) satellite communications networks — as traditional players scramble to shore up market share in the face of stiff competition from mega-constellations in lower orbits.

“I think we are seeing more waves from the shakeup in the commercial SATCOM market due to Starlink and OneWeb with their lower costs and higher capacity LEO [low Earth orbit] broadband services. The traditional incumbents are being challenged in a major way for the first time in a long time,” said Todd Harrison, a space industry expert and senior fellow at the American Enterprise Institute.

For example, in 2021 Viasat announced its planned buy of UK SATCOM operator Inmarsat, which was concluded in May 2023. France’s traditional telecom giant Eutelsat in September 2023 finalized its 2022 bid for UK operator OneWeb and the latter company’s LEO constellation of more than 600 satellites.

“And we should expect more disruptions to this market in the next couple of years as Amazon begins deploying its Kuiper constellation,” Harrison added.

In announcing its acquisition of Intelsat, which is headquartered here in Washington, D.C., SES CEO Adel Al-Saleh today called the deal a “transformational agreement.”

“In a fast-moving and competitive satellite communication industry, this transaction expands our multi-orbit space network, spectrum portfolio, ground infrastructure around the world, go-to-market capabilities, managed service solutions, and financial profile,” he said.

Intelsat CEO David Wajsgras added: “By combining our financial strength and world-class team with that of SES, we create a more competitive, growth-oriented solutions provider in an industry going through disruptive change.”

Both SES and Intelsat supply SATCOM bandwidth and/or services to the Defense Department through various contract vehicles.

SES, through its US arm SES Space & Defense, last November inked a five-year agreement with the Defense Information Systems Agency (DISA) to provide US armed forces with access to its O3b mPower broadband constellation in medium Earth orbit (MEO) as managed service. Under the soup-to-nuts, subscription-style deal worth up to $270m, the military services can get connectivity, terminals, support and even training.

Intelsat last September was one of two satellite firms tapped by the US Army for its Satellite Communications (SATCOM) as a Managed Service (SaaMS) pilot, intended to “inform decisions on the Army’s potential use of commercially leased SATCOM services.” DISA also served as the contracting agency.

SES currently has a fleet of 20 first-generation O3b satellites, six new mPower birds in MEO, plus another 50 or so in GEO.

Intelsat has a fleet of 55 satellites in GEO, but it also has a set of partnerships with LEO operators that allowed it to garner one of the now-20 companies competing under a Space Force indefinite delivery/indefinite quantity (ID/IQ) contract for services from large so-called proliferated-LEO, or p-LEO, constellations. The Proliferated Low Earth Orbit (PLEO) Satellite-Based Services ID/IQ vehicle allows vendors to compete for up to $900 m in task orders via Space Systems Command’s SATCOM marketplace.

The combined company, once approved by financial overseers, will be headquartered in Luxembourg but maintain its US operations.

(Source: Defense News Early Bird/Breaking Defense.com)

 

30 Apr 24. Leidos lifts 2024 forecasts on defense demand. U.S. defense company Leidos Holdings (LDOS.N), lifted its annual profit and revenue forecasts on Tuesday, banking on strong weapons demand and increased defense spending amid growing geopolitical tensions.

Defense companies are seeing robust demand for weapons from the United States and its allies following Russia’s invasion of Ukraine, conflict in the Middle East and rising tensions in the South China Sea.

Leidos, engaged in hypersonic weapons development, among others, expects its adjusted full-year profit per share to be between $8.40 and $8.80, compared with its previous forecast range of $7.50 to $7.90.

The Reston, Virginia-based company, which counts the U.S. Department of Defense as its primary customer, also lifted its 2024 revenue forecast range to $16bn to $16.4bn, versus $15.7bn to $16.1bn projected in January.

Leidos’ adjusted profit for the first quarter was at $2.29 per share, compared with $1.47 per share a year ago. Its quarterly revenue jumped 7.4% to $3.98bn. (Source: Google/Reuters)

 

30 Apr 24. Mirion Announces First Quarter 2024 Financial Results and Reaffirms Full Year Guidance.

• Revenues for the first quarter increased 5.8% to $192.6m, compared to $182.1m in the same period in 2023.
• Net loss was $26.5m in the first quarter, compared to a net loss of $42.9m in the same period last year. Adjusted EBITDA was $39.5m, a 7.9% increase from $36.6m in the same period last year.
• Income from operations margin was (2.5)% in the first quarter, compared to (7.5)% in the same period last year. Adjusted EBITDA margin was 20.5% in the first quarter, compared to 20.1% in the same period last year.
• GAAP net loss per share for the first quarter was $0.13, compared to $0.22 in the first quarter of 2023. Adjusted earnings per share for the quarter was $0.06, in-line with the same period last year.
• The company reaffirmed full year 2024 guidance and continues to expect revenue growth of 5% to 7%, adjusted EBITDA of $193m to $203m, and adjusted EPS of $0.37-$0.42.

Mirion (“we” or the “company”) (NYSE: MIR), a global provider of radiation detection, measurement, analysis and monitoring solutions to the medical, nuclear, defense, and research end markets, today announced results for the first quarter ended March 31, 2024.

“The first quarter was a solid start for Mirion in 2024,” stated Thomas Logan, Mirion’s Chief Executive Officer. “Revenue growth was in-line with our expectations, led by a strong quarter from our Technologies segment. I am pleased with the Adjusted EBITDA margin expansion we delivered compared to the same period last year and believe we are well-positioned heading into the rest of 2024. Engagement remains strong across our end markets and I am particularly excited by the macro trends taking shape in nuclear power and cancer care.”

Reaffirmed 2024 Outlook

“We are reaffirming our 2024 financial outlook today,” continued Mr. Logan. “I am encouraged by the commercial and operational momentum across the business and believe that we have the right strategy in place to deliver against our expectations.”

Mirion is reaffirming its guidance for the fiscal year and 12-month period ending December 31, 2024:

• Revenue growth of 5% – 7%

o Organic revenue growth of 4% – 6%

• Medical +MSD organic
• Technologies +MSD organic

o Inorganic revenue growth of approximately 1%, primarily as a result of the ec2 acquisition

o Minimal impact from foreign exchange rates

• Adjusted EBITDA of $193m – $203m
• Adjusted EPS of $0.37 – $0.42
• Adjusted free cash flow of $65m – $85m

The guidance for organic revenue growth excludes the impact of foreign exchange rates as well as mergers, acquisitions and divestitures.

Other modeling and guidance assumptions include the following:

• Depreciation of approximately $33 m for the year
• Net interest expense of approximately $55m (approximately $52m of cash interest)
• Effective tax rate between 26% and 28%
• Capital expenditures of approximately $40m
• Cash taxes of approximately $35m
• Approximately 204m shares of Class A common stock outstanding (excludes 7.3m shares of Class B common stock, 18.7m public warrants (which were called for redemption on April 18, 2024), 8.5m private placement warrants, 18.8m founder shares, subject to vesting, 2.2m restricted stock units, 1.2m performance stock units and a further 34.3m shares reserved for future equity awards (subject to annual automatic increases)) (all numbers as of March 31, 2024)
• Euro to U.S. Dollar foreign exchange conversion rate of 1.08
• Cash non-operating expenses of approximately $9m
• Stock-based compensation of approximately $11m. (Source: BUSINESS WIRE)

 

30 Apr 24. Godspeed Capital-Backed Special Aerospace Services (SAS) Acquires Willbrook Solutions. Godspeed Capital Management LP (“Godspeed”), a lower middle market Defense & Government services, solutions, and technology focused private equity firm, today announced the acquisition of Willbrook Solutions, Inc. (“Willbrook”) by SAS, its recently-launched space engineering, defense, and communications technology solutions platform. The transaction marks the first addition to the growing SAS platform, expanding its capabilities in the missile defense industry.

Founded in 2006, and based in Huntsville, Alabama, Willbrook is an innovative analytical solutions provider to the Missile Defense Agency (“MDA”), Defense Intelligence Agency (“DIA”), NASA, Department of Defense (“DoD”), and commercial space customers. Willbrook’s dedicated team of 75 highly skilled and cleared industry professionals brings expertise and capabilities to bear across critical programs at the MDA and other agencies including in support of ground and space-based missile defense, offensive and defensive missile systems analysis, modeling and simulation, and data analysis.

“We are thrilled to be partnering with the talented and experienced team at Willbrook and look forward to leveraging their strategic relationships and capabilities in the missile defense market and community to add significant breadth and depth to the SAS platform and portfolio,” said Heather Bulk, CEO of SAS. “We look forward to working closely with Willbrook’s senior leadership team to further expand our relationship with the MDA and other key customers.”

“On behalf of our dedicated and experienced employees at Willbrook, we are excited to become part of the larger strategically positioned SAS platform,” remarked Kendell Phillips, President of Willbrook. “We look forward to leveraging our strong engineering, analytical capabilities and expertise across critical missile defense programs while supporting strategic customers and pursuing organic growth opportunities in conjunction with SAS.”

About Willbrook Solutions

Willbrook Solutions, founded in 2006 in Huntsville, AL, by Kendell and Bonita Phillips, is an innovative analytical solutions provider to the Missile Defense Agency (“MDA”), the Defense Intelligence Agency (“DIA”), NASA, the Department of Defense (“DoD”), and Commercial Space Customers. Willbrook’s dedicated team of industry professionals has expertise across several programs in the MDA including Ground and Space-based Missile Defense, Offensive and Defensive Missile Systems Analysis, Modeling and Simulation, and Data Analysis. Willbrook has long tenured relationships with its key customers at the MDA and the Missile and Space Intelligence Center within DIA. To learn more about Willbrook, please visit: www.willbrook.com.

About Special Aerospace Services

Special Aerospace Services is an industry leader in spaceflight engineering and hardware with facilities in Colorado and Alabama. Special Aerospace Services offers a full-cycle solution portfolio that includes tactical engineering support in Spaceflight Safety™, propulsion, avionics, systems, safety, and launch site integration, as well as rapid prototyping, manufacturing, and procurement of mission-critical aerospace hardware systems for clients such as NASA, the U.S. Department of Defense, and the commercial spaceflight sector. Special Aerospace Services’ team is committed to furthering humankind’s dreams and endeavors in space and keep the dream of space exploration alive for future generations. To learn more about SAS, please visit: www.specialaerospaceservices.com.

About Godspeed Capital Partners

Godspeed Capital is a lower middle-market Defense & Government services, solutions, and technology focused private equity firm investing alongside forward-thinking management teams that seek an experienced and innovative investment partner with unique sector expertise, operational insight, and flexible capital for growth. While a typical investment will involve companies generating approximately $3m to $30m of EBITDA, Godspeed Capital has significant support to complete larger transactions through strategic co-invest relationships. The firm focuses on control buyouts, buy-and-builds, corporate carve-outs, and special situations. For more information, please visit the Godspeed Capital website at www.godspeedcm.com. (Source: BUSINESS WIRE)

 

30 Apr 24. Satelles, Inc., has been acquired by Iridium Communications (Iridium). Houlihan Lokey served as the exclusive financial advisor to Satelles. The transaction closed on April 1, 2024.

Headquartered in Reston, Virginia, with offices in Redwood City and Folsom, California, as well as Longmont, Colorado, Satelles was acquired by Iridium, instantly making the company the leader in delivering highly secure satellite-based time and location services that complement and protect GPS and other GNSS-reliant systems. The service, now known as Iridium® Satellite Time and Location (STL), is an easy-to-adopt, highly secure solution that increases the efficiency and reliability of timing systems for digital infrastructure, such as 5G base stations, data centers, and other critical infrastructure, and protects against GNSS vulnerabilities. The STL service utilizes the stronger broadcast paging channels of the Iridium satellite constellation to deliver precise timing information, which provides truly global, secure time and location signals that are 1,000 times more powerful than GNSS constellations. The service is resilient to regional GNSS outages, works inside buildings, and is being used today to secure digital infrastructure for financial markets, governments, and major corporations.

Iridium is the only mobile voice and data satellite communications network that spans the entire globe. Iridium enables connections between people, organizations, and assets to and from anywhere—in real time. Together with its ecosystem of partner companies, Iridium delivers an innovative and rich portfolio of reliable solutions for markets that require truly global communications. STL now forms the core of a new positioning, navigation, and timing (PNT) business line of Iridium, led by former Satelles CEO Dr. Michael O’Connor.

Iridium is assuming all rights to the Satelles patent portfolio and anticipates Iridium STL services to generate more than $100 m in service revenue per year, by 2030, and additional revenue from equipment and engineering. A long-standing investor in Satelles, Iridium had an ownership stake of around 20% from three previous investments in the company.

If you would like more information about Houlihan Lokey or have questions regarding the firm’s role in this transaction, please contact one of the team members listed below.

 

29 Apr 24. CASE (“the Company”), a provider of high-end software development and cloud engineering services to the U.S. intelligence community and private industry, announced today that it has merged with CyberKinetics, a specialist provider of cloud-based services and cyber solutions to the national security community’s most discerning customers. Financial terms of the private transaction were not disclosed.

Founded in 2018 and headquartered in Herndon, Virginia, CyberKinetics’ leadership has more than two decades of experience providing innovative and secure IT solutions, including cybersecurity engineering, DevOps, data engineering, cloud migration, and infrastructure planning, to the national security community. CyberKinetics’ integrated approach to technology prides itself on ease of use, ease of maintenance, and layered security that meets the most demanding requirements. The CyberKinetics management team will remain with the combined organization.

“CyberKinetics’ team of highly skilled app developers, data scientists and engineers understand the unique challenges that come with migrating to and designing for the secure cloud in the national security sector,” said Paul Farmer, CEO, CASE. “Their addition catapults us into our next phase of growth and will enable us to meet our customers’ mission-critical challenges head on. This acquisition also provides the scale necessary to pursue larger contracts and provide additional opportunities for our employees.”

“We are very excited to become a part of CASE, as we share a heritage of excellence and innovation, a focus on developing great talent, and an unwavering commitment to high standards,” said Brandon Lally, former CEO of CyberKinetics, and Chief Customer Officer at CASE. “I look forward to leveraging our combined resources to provide differentiated solutions to new and existing government and private clients.”

CASE is a portfolio company of AE Industrial Partners, a private equity firm that specializes in national security, aerospace, and industrial services.

“The future of national security is increasingly dependent on nimble and flexible companies such as CyberKinetics, that can innovate quickly and support the intelligence community with their most difficult missions,” said Jeff Hart, Partner at AE Industrial Partners. “This transaction brings together two outstanding, experienced leadership teams with strong synergies, committed to a common goal of solving our nation’s hardest national security problems with next generation solutions and capabilities.”

Maynard Nexsen served as legal advisor on the transaction.

About CASE:

CASE is a founder-owned, leading provider of mission-critical technology services to the U.S. Government’s most discerning and difficult to penetrate customers in the Intelligence Community and the Department of Defense. CASE delivers a broad range of next generation IT capabilities in cloud, cyber and software development to solve its customers’ most pressing and important national security challenges. Specifically, CASE provides classified, high-end services that are in constant and increasing demand, including secure cloud architecture and analytics, software development and automation, systems engineering and integration.

About CyberKinetics:

CyberKinetics specializes in cloud-based services and solutions for federal agencies and commercial clients with compliance mandates. CyberKinetics brings an integrated approach to the technology solutions it delivers and prides itself on their ease of use, ease of maintenance, and layered security that meets the most demanding requirements.

About AE Industrial Partners:

AE Industrial Partners is a private investment firm with $6.2 bn of assets under management focused on highly-specialized markets including National Security, Aerospace, and Industrial Services. AE Industrial Partners has completed more than 130 investments in market-leading companies that benefit from its deep industry knowledge, operating experience, and network of relationships across the sectors where the firm invests. With a commitment to driving value creation in partnership with the management teams of its portfolio companies, AE Industrial Partners primarily invests across private equity, venture capital (AEI HorizonX), and aerospace leasing. For more information, please visit www.aeroequity.com. (Source: BUSINESS WIRE)

 

30 Apr 24. KBR Announces First Quarter Fiscal 2024 Financial Results.

KBR, Inc. (NYSE: KBR) today announced its first quarter fiscal 2024 financial results.

“KBR’s extraordinary team has yet again surpassed expectations, delivering outstanding first-quarter results,” said Stuart Bradie, KBR’s President and CEO. “Our team’s unwavering commitment to our customers has led to year-over-year increases across all key financial metrics, particularly in Adjusted EBITDA2 and operating cash flow. Bookings during the quarter were well-aligned with our end markets across energy security, national defense, human performance, and sustainability.”

New Business Awards

Backlog and options as of March 29, 2024 totaled $20.8bn. Delivered 1.1x trailing-twelve-months (TTM) book-to-bill1 as of March 29, 2024. Awarded $1.9bn of bookings and options in the quarter.

Sustainable Technology Solutions (STS) delivered 0.9x TTM book-to-bill1 as of March 29, 2024, including awards and achievements in the quarter as follows:

• KBR’s Purifier™ ammonia technology selected by Wuhuan Engineering Co. Ltd. for the expansion of El Nasr Company for Intermediate Chemicals’ 1,200 metric tonnes per day ammonia plant in Egypt.
• Selected by First State Hydrogen, Inc. to provide engineering services to study the feasibility of developing a clean hydrogen production facility through electrolysis powered by renewable energy. The study is part of First State Hydrogen’s vision to provide clean hydrogen for Delaware and the U.S. mid-Atlantic and help the region meet its sustainability goals.
• Signed an alliance agreement with GeoLith SAS to offer its advanced Direct Lithium Extraction technology, Li-Capt®. This technology enables zero-emission lithium extraction from untapped sources like geothermal and oil well brines.
• Awarded a project management contract by Sonangol for the design and construction oversight of a new 200,000 barrels per day refinery in Lobito, Angola – one of the most significant and sustainable energy infrastructure projects in the region.
• Secured a five-year asset condition monitoring program contract from Rabigh Refining & Petrochemical Company to deploy predictive maintenance services at its plant in Rabigh, Saudi Arabia.

Government Solutions (GS) delivered 1.2x TTM book-to-bill1 as of March 29, 2024, including awards and achievements in the quarter as follows:

• Awarded new contracts estimated at more than $450m to provide systems engineering, acquisition support, phenomenology expertise and data science, as well as applied research, communications security   infrastructure, operations and maintenance support to the U.S. Government.
• Awarded a new subcontract with Bering Straits Information Technologies in support of the U.S. Air Force Air Combat Command to provide human performance optimization services at various military bases around the world. This contract expands upon KBR’s more than 50 years of commitment to the wider health and human performance market within NASA and the Department of Defense.
• Won a new one-year task order with three one-year options on the Seaport NxG IDIQ contract to assist with project execution for the Naval Information Warfare Center Atlantic, supporting the Defense Health Agency’s cybersecurity services and risk management framework initiatives.
• Selected to provide specialized IT services that will equip the Royal Australian Navy with a more modern and cyber worthy Fleet Information Environment.
• Awarded a three-year contract, with a two year-option period, to deliver Heavy Equipment Transporter (HET) capability on behalf of the British Army.
• Awarded option years for LOGCAP V to support activity in NORTHCOM and EUCOM.

Financial Highlights for the Three Months Ended March 29, 2024

• Revenue of $1.8bn, up 7% on a year-over-year-basis
• Net income attributable to KBR of $93m; Adjusted EBITDA2 of $207m, up 14% on a year-over-year basis (11.4% Adjusted EBITDA2 margin)
• Diluted EPS of $0.69; Adjusted EPS2 of $0.77, up 15% on a year-over-year basis
• Operating cash flows of $91m
• Bookings and options of $1.9bn during the quarter with 1.1x TTM book-to-bill1

Commentary on the Three Months Ended March 29, 2024

Revenues were $1.8bn, up 7% compared to 1Q’23, primarily due to growth across Sustainable Technology Solutions; and within Government Solutions, new and on-contract growth across International, Defense & Intel, and Science and Space, partially offset by contraction in Readiness & Sustainment due to Ukraine funding delays.

Net income attributable to KBR was $93m, up $7m compared to 1Q’23, due to higher gross profit, equity in earnings of unconsolidated affiliates and gain on disposition of assets and investments, partially offset by higher interest expense and other non-operating expense.

Adjusted EBITDA2 was $207m, up 14% compared to 1Q’23, with Adjusted EBITDA2 margins of 11.4%, up 70 bps year-over-year.

Diluted earnings per share was $0.69, up 23% compared to 1Q’23, due to the increase in Net income attributable to KBR noted above and the decrease in diluted weighted average common shares outstanding. Adjusted earnings per share2 was $0.77, up 15% compared to 1Q’23, due to the increase in Net income attributable to KBR noted above and the decrease in adjusted weighted average common shares outstanding.

Operating cash flows were $91m, up 160% compared to 1Q’23, primarily due to strong collections across the business.

Capital returned to shareholders totaled $79m during the quarter, consisting of $61m in share repurchases, inclusive of $50m of open market repurchases and $11m of repurchases to satisfy requirements of equity compensation plans, and $18m in regular dividends.

 

30 Apr 24. Patria’s net sales and order stock grew significantly in the first quarter, success in vehicle programmes continues.

The first quarter of 2024

• Patria Group’s net sales for the first quarter was EUR 172.1m (EUR 149.4m in the comparison period) and operating profit was EUR 5.2m (EUR 3.6m).
• Equity ratio was 40.4% (43.8%) and net gearing 78.1% (50.7%).
• The third year of Patria’s Horizon 2025 strategy commenced according to expectations. Patria’s net sales and the development of order stock are at a good level. Profitability is at the expected level.
• The development of customer-centricity, operational efficiency and productivity and new ways of working continued in the first quarter according to Patria’s Horizon 2025 strategy. The focus of the development has been on Patria’s Operations unit, responsible for company’s production and supply chains, and Portfolio unit, responsible for Patria’s products and services and their development. Patria’s renewed operating model came into force on 1 January, 2024.
• Patria’s success in 6×6 and 8×8 vehicle programmes has continued, which supports the development of other business operations and Group’s internationalization.
• In the beginning of the year it was announced that Patria will deliver flight inspection system installation and modification packages to Fintraffic and STC for Finnish Aviation Academy Embraer Phenom aircrafts.
• Signed in January 2024, the strategic partnership agreement between Patria and the Finnish Defence Forces was updated. With the agreement, the ongoing cooperation will deepen, the quality assurance and material management procedures were specified, and the partnership management structures were updated.
• Patria published two agreements in February 2024 on supplying Patria ARIS electronic intelligence systems (ELINT) to European NATO member countries. With the agreements, customers will have access to the latest version of a high-performance signal intelligence system, tailored to the needs of these countries.
• Several events related to the Common Armoured Vehicle System (CAVS) programme took place in the first quarter:

o In January 2024 it was announced that The Finnish Defence Forces purchased 40 Patria 6×6 armoured vehicles more by redeeming the additional purchase option related to the agreement signed in June 2023.

o In February Patria, DSL (part of KNDS group) and FFG announced that they are teaming up to offer the German design, production, and sustainment of variants of Patria’s 6×6 armoured personnel carrier, which could replace the German FUCHS-fleet.

o In March the Swedish Defence Procurement Agency (FMV) signed a contract to buy 321 Patria 6×6 vehicles. The contract has a value of around 470 m euros and is one of the largest ever in Sweden for Patria.

o In March Patria signed a contract with Kongsberg Defence & Aerospace (‘Kongsberg’) for the delivery of PROTECTOR remote weapon stations to more than 300 Sweden’s and Finland’s Patria 6×6 vehicles within the CAVS programme.

• It was announced in March that Patria and Lockheed Martin signed their second Memorandum of Agreement (MoA) for direct work within Finland´s F-35 industrial participation programme. This MoA provides the contractual framework for the stand-up and qualification of a landing gear doors production line at Patria’s Halli facility in Jämsä, Finland. The production line will deliver landing gear doors for the F-35 global fleet.
• Kicked off in early 2024, Patria-led eALLIANCE programme, partly funded by Business Finland, will amplify collaboration with the Finnish civilian and defence sector companies. The aim is to develop disruptive digital capabilities for enhanced data sharing and prosessing as well as building a holistic metaverse.

Outlook for the rest of the year

Patria continues to strengthen its operational efficiency and productivity and seeks profitable growth in line with its Horizon 2025 strategy in the third year of the strategy period. Patria’s reliable and cost-effective lifecycle support services and top-notch products have a key role also in the future in maintaining required performance of customer fleets in all conditions.

Following Finland’s decision in December 2021 to acquire F-35 fighter jets, negotiations concerning industrial participation of the selected aircraft will continue also in 2024. Preparations to kick off the production are under way, and the resourcing needs are being analysed and the relevant recruiting will commence.

The multinational joint CAVS programme of the Patria 6×6 vehicle is proceeding as planned. The serial production of the Finnish and Latvian vehicles is ongoing and the first batch of vehicles to Sweden has been delivered. Germany has officially joined the programme by signing the Technical Arrangement. The joint programme has raised interest and is open also for other countries to join by mutual consent of the participating countries.

In 2023, Patria and Japan Steel Works Ltd. signed a relating license agreement on manufacturing Patria AMV XP 8×8 vehicles in Japan and the preparations for kicking off manufacturing are ongoing.

The impact of long-term development of the current geopolitical situation, general economic uncertainty, inflation and increasing costs for the rest of the year are difficult to evaluate reliably. At the same time Patria’s delivery capability is expected to stay at a good level. The outlook for net sales and profitability for the rest of the year remains strong. In the mid and long term, Patria and the defence industry in general are likely to see an increase in demand as defence spends are increasing in the majority of European countries.

 

30 Apr 24. Defence demand pushes Thales orders and sales higher in Q1. France’s Thales (TCFP.PA), reported strong first-quarter orders and sales led by its defence business as global tensions spur demand for air defences, but predicted growth would stabilise in the second half as it reaffirmed forecasts for the year.

Europe’s largest defence electronics company said orders jumped 46% to 5.037bn euros ($5.4bn), buoyed by a third tranche of Rafale fighters for Indonesia, for which it makes the radar, and an air surveillance system for an unnamed Middle East nation.

Revenues rose by an underlying 7.9% to 4.421bn euros, in part due to a favourable basis of comparison in defence and security which grew 13%.

“In the second half, (growth) will doubtless normalise,” Chief Financial Officer Pascal Bouchiat told reporters.

On average, analysts were expecting quarterly orders of 3.65 bn euros and sales of 4.357bn, according to a company-compiled survey.

For the full year, Thales is projecting like-for-like sales growth of between 4% and 6% to reach 19.7-20.1bn euros, as well as orders coming in at a level exceeding sales.

Orders in the first quarter were also lifted by the second tranche of a contract signed last year for the production of 400 Franco-Italian ASTER surface-to-air missiles.

France last month announced a package of aid for Ukraine including a new batch of Aster 30 surface-to-air missiles for the SAMP/T system provided to Kyiv. The Aster 30 can intercept warplanes, drones and cruise missile within a range of 120 km.

France has urged the MBDA-led consortium that developed the missiles, of which Thales owns a third, to speed up production to help Ukraine and has indicated it will use its powers to force suppliers to put military needs before civil contracts.

Thales makes the “autodirectors,” an infra-red or electro-magnetic system that guides and then detonates the missiles.

Production of such systems relies on the availability of circuit boards from specialist French suppliers, amid wider global shortages of basic electronic components.

“That can be a limiting factor,” Bouchiat said, adding that disruption in the broader aerospace supply chain was “not completely resolved”.

($1 = 0.9343 euros) (Source: Reuters)

 

28 Apr 24. The French government has proposed buying key assets of Atos, the heavily indebted technology company, because Paris wants to keep them in national hands. The state wants to purchase three strategic parts of Atos: super calculators for quantum computing, which are used by the French army for the country’s nuclear weapons programme; secure communications tech also utilised by the military; and certain cyber security assets. Amid concerns in Paris that foreign investors, including hedge funds, could gain control of Atos in an upcoming restructuring of its €3.9bn debt load, finance minister Bruno Le Maire said on Sunday that the state had sent a non-binding letter of intent to the French company about purchasing the assets. “There are sovereign assets in Atos that must stay within the exclusive control of France,” Le Maire told news channel LCI. “We have signalled our interest in acquiring all the strategic assets of Atos.” The government’s letter of intent was made via the APE, an agency that manages the French state’s stakes in companies including utility EDF and telecoms group Orange. Atos, chaired by former UniCredit boss Jean Pierre Mustier, declined to comment. The French government stayed out of much of the turmoil at Atos, as the company churned through several chief executives and made several strategic U-turns in the past three years. Recommended Atos SE Saving Atos: Jean-Pierre Mustier handed one of France’s messiest rescue missions But as Atos’ financial position worsened, the state in early April announced it would provide a €50mn short term loan and create a “golden share” system for the company’s sensitive assets, which would allow ministers to block any acquisitions they did not approve of. The assets the government was proposing to buy generated about €900mn in annual revenues and employed 4,000 people, an economy ministry official said. That represents less than 10 per cent of Atos’s 2023 sales, and 4 per cent of the total workforce.

The French government’s proposal was not a forced nationalisation, the economic ministry official said. The state was seeking to engage in negotiations with Atos ahead of potentially making a firm offer by June, they added. Le Maire said the government would seek to rally French industrial groups to join its bid in a consortium. “We will see what other players might want to participate — it will only be French groups in strategic sectors such as defence or aerospace,” Le Maire said. Dassault Aviation, the French maker of Rafale fighter jets, has previously expressed interest in some of Atos’ assets, according to people briefed on the situation. Thales, the French defence electronics group, would be another potential participant for the state to enlist. Thales declined to comment, while Dassault did not respond. Atos has had various failed talks with individuals and companies interested in buying some of its assets, as the group has sought to raise cash to reduce its debt load. They include Czech bnaire Daniel Křetínský and Airbus. Atos has asked for proposals by Friday from top shareholders and creditors with the goal of cutting its debt by at least €2.4bn. It may need €1.2bn in new equity and debt. (Source: Google/FT.com)

 

26 Apr 24. Boeing has agreed to buy a St. Louis-area facility from GKN Aerospace that supplies critical parts for the Boeing F-15 and F/A-18 fighter jets, a lifeline for the aerospace giant’s fighter production that also ends contentious litigation between the two parties.

The transaction would see GKN’s F-15 and F/A-18 operations immediately transition to Boeing, according to a Boeing press release. Additionally, Boeing has agreed to hire 550 GKN employees, the bulk of GKN’s workforce at the site located in the St. Louis suburb of Hazelwood, Mo.

“Boeing is growing across the region with a healthy backlog of current programs while also seeking future opportunities,” Steve Parker, senior vice president & chief operating officer of Boeing Defense, Space & Security, said in the release. “This agreement allows us to not only deliver for our customers, but also gives the highly skilled GKN workforce the opportunity to bring their immense talents to bear in support of the warfighter and the St. Louis defense and aerospace industry. This is a win-win-win for those employees, Boeing, and the broader St. Louis community.”

GKN and its parent company, the British firm Melrose Industries, previously planned to shutter the Hazelwood facility by the end of the year, citing profitability woes. Boeing responded with a lawsuit in December 2022, arguing that GKN was violating an agreement to supply parts for the F-15 and F/A-18, according to the St. Louis Post-Dispatch.

The agreement to buy the factory would end litigation between the two parties, according to a Boeing spokesperson. The spokesperson also told Breaking Defense that the facility employed roughly 600 people, some of whom retired or opted to seek work outside Boeing. While GKN supplies many of Boeing’s competitors in the defense world, the Hazelwood plant is a “Boeing only supplier” that supports F-15 and F/A-18, which will remain the focus of operations there, the spokesperson said.

The Hazelwood factory’s closure could have threatened Boeing’s fighter programs, which are based in the St. Louis area. The F-15EX — Boeing’s newest variant of the F-15 fighter equipped with a modernized radar and new electronic warfare suite, among other features — is a key product for the company’s international business, particularly for customers like Israel that could buy up to 50 in a potential multibn-dollar deal with the US. And, following a recent agreement with the US Navy, Boeing’s F/A-18 Super Hornet line will now be extended until 2027.

In a brief statement, GKN said that “Last year, the companies began discussing the potential to return the site to Boeing to avoid closure of the facility. A deal has now been completed and the site has returned to Boeing ownership. The sale secures the future of the facility for the employees and we wish everyone at St. Louis very well for the future.”

The factory’s acquisition by Boeing actually brings it back under the planemaker’s ownership, as Boeing had spun off the facility to GKN in 2001. It’s also the second time in recent months that Boeing has moved to buy a struggling supplier that it used to own, following the company’s recent announcement that it would seek to acquire aerostructures maker Spirit Aerosystems.

The two moves could help Boeing stabilize some operations at its defense business as the company toils to get fixed-price development programs on track. Boeing, which reported its first quarter earnings for 2024 on Wednesday, turned a $151 m profit in the quarter while incurring $222 m in losses between the KC-46A tanker and T-7A trainer programs.

Despite wrestling with a new safety crisis on its commercial side that has upended the company, and a loss this week on a high-profile Air Force drone contract, the planemaker is still pressing ahead with a planned multibn-dollar expansion of its St. Louis area operations as it eyes more next-gen aircraft opportunities.  (Source: Google/Breaking Defense.com)

 

26 Apr 24. IFS announces best Q1 results in company history with 26% increase in ARR YoY and 20% increase in Cloud revenue YoY.

• New CEO visits 100 customers in first 100 days

IFS, the global cloud enterprise software company, today announced its financial results for the first quarter ending 31 March, 2024. The results reflect the best start to the year in company history – an early victory for new CEO Mark Moffat, who was appointed on 9th January, 2024.

Summary of Q1 results:

• Annual Recurring Revenue (ARR) up 26% YoY
• Cloud Revenue up 20% YoY
• Software Revenue growth up 19% YoY

A steadfast customer focus positions IFS as the demonstrable leader in all of the segments it serves. A position reinforced thanks to recent industry analyst reports recognising IFS as the #1 vendor in terms of market share for Enterprise Asset Management (EAM) and Service Management.

IFS CEO Mark Moffat commented: “In my first 100 days as CEO, I have met with over 100 customers around the world, and they consistently tell me that our customer-centric approach is a key differentiator, especially in a world where we see our competitors peddling their own agenda over that of their customers.”

“Our Q1 results are the continuation of our relentless focus on what makes us successful: listening to and delivering value to our customers. It’s also what enables us to outperform the market quarter after quarter. Our customer focus is not only ingrained in our culture, but it also extends across our partner ecosystem and the work they deliver alongside us.”

Moffat added: “Industrial AI is a huge opportunity for our customers, and we are uniquely positioned to help them harness its potential. We have been developing industry-specific AI solutions that integrate seamlessly with our existing products and leverage the data we have to deliver game-changing outcomes.” Moffat concluded: “IFS has an edge because we have been having these conversations with our customers for years, and that has informed how we shape our technology and services. The results of the first quarter show that we are on the right track, and that our vision resonates.”

Key factors supporting IFS expansion:

• A sharp uptake in demand for IFS.ai thanks to compelling Industrial AI use cases that are fast and easy to implement, and in turn able to rapidly deliver value. As more of these use cases roll out with every release of IFS Cloud, IFS is providing further capabilities for customers to innovate and differentiate within their respective fields.
• Welcoming a significant number of new customers who are moving from legacy vendors including SAP and IBM Maximo to IFS because of: relentless IFS pursuit of customer success; the single composable platform and common data model; consistent enhancements in industry functionality; and flexible deployment options that put customers in control. In the last quarter alone, Modulaire Group, NGE, Evergy and the largest US utility company, Exelon, have selected IFS as the modern, next generation alternative.
• Significant expansion of IFS within existing customers, who are similarly implementing IFS to replace outdated technology that exists in other areas of their business. With so many industrial companies looking to technology, and specifically IFS, to transform and grow, IFS is uniquely positioned to help customers improve supply chains, operate more efficiently and ultimately deliver amazing Moments of Service that stand out. For example, many manufacturers are expanding their use of IFS with the IFS Connected Worker solution from Poka to better manage, enable, and improve the productivity of their factory workers.

IFS Chief Financial Officer, Matthias Heiden, added, “Market conditions in 2024 are still volatile which puts our performance trajectory into context. 26 percent ARR increase year-on-year combined with strong subscriptions renewals is setting us up for continued steady growth in 2024.” Heiden continued: “This means we are able to prioritise investment in people and in technology bringing even more innovation into our bi-annual releases.” Heiden concluded: “We have worked hard to get to this point, and we are seeing financial benefits deep into our business with all the metrics continuing to accelerate in the right direction.”

Investments in key markets such as the US, Europe, and Japan are slated to continue through 2024, bolstering regional performance by driving increased demand for IFS.ai. In Q1 the company also launched a significant brand campaign across the US, including out-of-home advertising at the largest airports in North America, becoming the Big Ten Conference’s Official Technology Partner, and a Patron of MIT’s Center for Information Systems Research.

IFS is also pleased to today publish the 2023 IFS Sustainability Report, which details the company’s strategy, approach and achievements delivering on its own sustainability targets as well as supporting customers to achieve their ESG goals. The report, alongside an ESG Fact Sheet, is available here: https://www.ifs.com/assets/all-products/ifs-sustainability-report-2023

Financial Highlights for Q1 FY2024:

• Q1 FY2024 software revenue was EUR 217m, an increase of 19 percent versus Q1 2023.
• Q1 FY2024 recurring revenue was EUR 209m, an increase of 21 percent versus Q1 2023.
• Q1 FY2024 net revenue was EUR 269m, an increase of 16 percent versus Q1 2023.

For more information about IFS historical financial performance, please visit: www.ifs.com/company/financial-results/

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR).

For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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Sponsored by SPX CommTech (TCI & ECS)

 

www.tcibr.com

 

www.enterprisecontrol.co.uk

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26 Apr 24. US private equity firm Thoma Bravo has agreed to take UK cyber security company Darktrace private in a transaction valuing the company at $5bn. The offer, which values the shares at $7.75 or 620p each, represents a 20 per cent premium on Thursday’s closing share price. The announcement sent Darktrace’s shares up 19 per cent in early trading in London. The offer comes less than two years after the technology investor previously held talks about buying the company but ultimately decided against bidding. Darktrace floated in April 2021 at 250p per share. If a deal goes through, it would mark the latest high-profile take-private of a UK-listed company by an overseas private equity group. Last year, a number of UK companies including veterinary pharmaceuticals company Dechra and the restaurant group behind Japanese chain Wagamama were acquired by buyout firms. (Source: FT.com)

 

26 Apr 24. Saab raises sales outlook after Q1 profit jumps. Swedish defence equipment maker Saab (SAABb.ST), reported on Friday a 28% rise in operating profit for the first quarter and raised its organic sales growth outlook for the full year.

Operating profit at the maker of the Gripen fighter jet was 1.19bn crowns ($109m), compared with 928m a year earlier.

Saab, which competes with U.S. defence giant Lockheed Martin (LMT.N), France’s Dassault and Britain’s BAE Systems (BAES.L), has seen strong demand for its products over the past year and has been boosted by Sweden’s accession to NATO.

“Geopolitical tensions in the world remain high and the importance of delivering systems and solutions with a shorter lead time has become even more critical,” CEO Micael Johansson said in a statement.

“Saab started 2024 by delivering increased order intake, strong sales growth and improved profitability,” he said.

Order bookings increased to 18.5bn crowns in the quarter from 17.0bn last year. Its order backlog increased to 158 bn crowns from 133bn.

(Source: Reuters)

 

26 Apr 24. Saab’s results Q1 2024: Full steam ahead to grow our business.

Saab presents the results for January-March 2024

“Saab started 2024 by delivering increased order intake, strong sales growth and improved profitability. I am satisfied with the progress we made in the quarter on capacity-related investments and recruitments. Supported by better visibility on deliveries and timing of capacity increases, we now upgrade our outlook for the full year on organic sales growth,” says Micael Johansson, President and CEO, Saab.

Key highlights Q1 2024

• Order bookings increased 9% and amounted to SEK 18,495m (17,018), driven by strong growth in medium-sized orders.
• Sales amounted to SEK 14,185m (11,485) in the quarter with an organic sales growth of 24%. All business areas and Combitech showed growth, with strong contributions from Aeronautics and Surveillance.
• EBIT increased 28% and amounted to SEK 1,191m (928). The EBIT margin also improved to 8.4% (8.1), driven by the strong sales development.
• Net income improved to SEK 784m (735) and the earnings per share increased to SEK 5.71 (5.45).
• Operational cash flow was SEK -1,998m (3,072) in the quarter due to a high level of investment, increased inventory and lower customer milestone payments.
• Net liquidity position was SEK 0.8 bn (5.3) at the end of period.
• Upgraded sales outlook 2024: organic sales growth between 15-20%, compared to previous outlook of between 12-16%.
• The AGM decided on a dividend of SEK 6.40 (5.30) per share for the fiscal year 2023, and a 4:1 split of the Saab shares.

 

26 Apr 24. Safran posts higher Q1 revenue, keeps financial targets. French jet engine maker Safran (SAF.PA), posted an 18.1% year-on-year increase in first-quarter revenue and reaffirmed financial targets for the year, while joining its U.S. partner GE Aerospace (GE.N), in lowering a target for engine deliveries.

The Paris-based company posted quarterly revenues of 6.22bn euros ($6.67bn), up by 19.1% on an underlying basis.

The widely watched civil aftermarket business grew 27.3% in dollar terms. But deliveries of the LEAP jet engine were flat after a slow start to the year in plane production, notably at Boeing.

Safran co-produces engines for Boeing and Airbus narrow-body jets with GE Aerospace through their CFM joint venture, which is the sole supplier to Boeing’s 737 MAX family of jets and competes with Pratt & Whitney on the Airbus A320neo series.

Echoing GE earlier this week, Safran is now projecting LEAP engine deliveries will be up by 10%-15% this year, a downward revision from its previous estimate of 20%-25% growth.

Earlier this month, Reuters first reported that Boeing’s MAX output had plunged into single figures per month.

Overall propulsion revenues, up 15.4% on a like-for-like basis, lagged other divisions including aircraft interiors whose 23.8% growth was driven mainly by service revenues that are linked to rises in air traffic. However, business-class seat deliveries fell 25%.

($1 = 0.9328 euros) (Source: Reuters)

 

25 Apr 24. L3Harris raises top end of 2024 adjusted earnings outlook amid global tensions. L3Harris (LHX.N), lifted the upper-end of its annual adjusted profit target on Thursday, betting on sustained weapons demand and robust defense spending amid escalating global security concerns.

U.S. defense companies are experiencing a surge in contracts as the Russia-Ukraine war, the Middle East crisis and the specter of Chinese aggression are driving demand, but growth is still hindered by pandemic-related labor and supply-chain disruptions.

Following the Aerojet buyout in 2023, L3Harris suspended its merger and acquisition activity for the “foreseeable future” in efforts to strengthen its balance sheet.

L3Harris also launched a review of its operational performance, cost structure and portfolio composition, which is expected to be completed by this year.

The company now expects the upper-end of its annual adjusted profit to be $13.05 per share, up from its previous guide of $12.80 per share.

Earlier this week, Reuters reported that L3Harris would cut 5% of its workforce this year as part of a cost saving measure, citing an email to employees.

Florida-based L3Harris posted an adjusted profit of $3.06 per share for the quarter ended March 31, compared with $2.86 per share a year earlier.

Its overall sales in the first-quarter rose 17% to $5.2bn. (Source: Reuters)

 

25 Apr 24. L3Harris Technologies Reports Strong First Quarter 2024 Results, Increases 2024 Profitability Guidance.

• Orders1 of $5.5bn; book-to-bill of 1.06x
• Revenue of $5.2bn, up 17%, up 5% organically1
• Operating margin of 7.3%; Adjusted segment operating margin1 of 15.1%
• Earnings per share (EPS) of $1.48; Non-GAAP EPS1 of $3.06
• 2024 adjusted segment operating margin1 guidance increases from ~15% to >15%*
• 2024 non-GAAP EPS guidance range increases from $12.40 – $12.80 to $12.70 – $13.05*

L3Harris Technologies, Inc. (NYSE: LHX) reported first quarter 2024 net income attributable to L3Harris of $283m, or diluted earnings per share (EPS) of $1.48, on first quarter revenue of $5.2bn. First quarter 2024 non-GAAP1 net income attributable to L3Harris was $584m, or non-GAAP1 diluted EPS of $3.06.

“We’re off to a strong start to 2024, reporting solid revenue with higher operating margin across all four segments and our Trusted Disruptor strategy continues to drive demand for innovative, resilient and mission-critical solutions aligned with national security needs. We delivered double-digit top line growth while continuing to drive improvements to operational and program performance,” said Christopher E. Kubasik, Chair and CEO.

Kubasik continued, “Given the strength of our first quarter, we are increasing 2024 profitability guidance, while reaffirming revenue and free cash flow commitments. With our progress, we remain confident in the financial framework that we laid out at investor day which is driven by operational rigor and structural enhancements from our LHX NeXt initiative.”

Revenue: First quarter revenue increased 17%, primarily from the acquisition of Aerojet Rocketdyne (AR) and organic growth from continued growth in Space and classified programs within Space & Airborne Systems (SAS) segment and growth from tactical, broadband communication and vision products within the Communication Systems (CS) segment. These increases were partially offset by a decline in Intelligence, Surveillance and Reconnaissance (ISR) aircraft procurement activity within the Integrated Mission Systems (IMS) segment compared with the first quarter 2023.

SEGMENT RESULTS AND GUIDANCE:

Space & Airborne Systems (SAS)

Revenue: First quarter revenue increased 6%, primarily from continued growth in Space Systems and classified program growth in Intel and Cyber.

Operating Margin: First quarter operating margin increased 100 bps largely due to improved operational and program performance, particularly in Space Systems reflecting progress on development programs and maturing capabilities resulting in net favorable program matters. Operating margin also benefited from higher volume which was partially offset by mix.

Integrated Mission Systems (IMS)

Revenue: First quarter revenue decreased 2%, primarily from lower ISR aircraft procurement activity compared with first quarter 2023.

Operating Margin: First quarter operating margin increased 50 bps from improved program performance, including stabilizing programs resulting in fewer negative Estimate as Completion (EAC) adjustments, partially offset by less favorable product mix.

Communication Systems (CS)

Revenue: First quarter revenue increased 11%, primarily from higher volumes in Tactical Communications, Integrated Vision Systems and Broadband Communications.

Operating Margin: First quarter operating margin increased 110 bps primarily from the benefit of higher volume and improved operational performance in Integrated Vision Systems, partially offset by higher domestic tactical radio mix.

Aerojet Rocketdyne (AR)

Revenue and Operating Margin: First quarter results are attributed to program execution across Missile Solutions and Space Propulsion and Power Systems. (Source: BUSINESS WIRE)

 

25 Apr 24. Textron Reports First Quarter 2024 Results.

• EPS of $1.03; adjusted EPS of $1.20, up from $1.05 from prior year
• Segment profit of $290m, up $31m from prior year

Textron Inc. (NYSE: TXT) today reported first quarter 2024 net income of $1.03 per share, as compared to $0.92 per share in the first quarter of 2023. Adjusted net income, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $1.20 per share for the first quarter of 2024, compared to $1.05 per share in the first quarter of 2023.

“In the quarter, we saw profit growth across our Aviation, Bell, and Systems businesses,” said Textron Chairman and CEO Scott C. Donnelly. “At Aviation, we saw continued strong market demand which contributed to $177m in backlog growth. At Bell, we saw revenue growth driven by the FLRAA program.”

Cash Flow

Net cash used by operating activities of the manufacturing group for the first quarter was $30m, compared to $153m in cash provided last year. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, reflected a use of cash of $81m for the first quarter, compared to a cash inflow of $104m last year.

In the quarter, Textron returned $317m to shareholders through share repurchases.

First Quarter Segment Results

Textron Aviation

Textron Aviation’s revenues were $1.2bn, up $39m from last year’s first quarter, reflecting higher pricing of $48m, partially offset by lower volume and mix of $9m.

Textron Aviation delivered 36 jets in the quarter, up from 35 in the first quarter of 2023, and 20 commercial turboprops, down from 34 in last year’s first quarter.

Segment profit was $143m in the first quarter, up $18m from a year ago, primarily reflecting a favorable impact from pricing, net of inflation, of $14m.

Textron Aviation backlog at the end of the first quarter was $7.3bn.

Bell

Bell revenues were $727m, up $106m from the first quarter of 2023, largely reflecting higher military volume of $95m, primarily related to the FLRAA program, partially offset by lower volume on the V-22 and H-1 programs.

Bell delivered 18 commercial helicopters in the quarter, down from 22 in last year’s first quarter.

Segment profit of $80m was up $20m from last year’s first quarter, largely due to a favorable impact from performance of $30m, which included $13m of lower research and development costs.

Bell backlog at the end of the first quarter was $4.5bn.

Textron Systems

Revenues at Textron Systems were $306m, flat with last year’s first quarter.

Segment profit of $38m was up $4m, compared with the first quarter of 2023.

Textron Systems’ backlog at the end of the first quarter was $1.8bn.

Industrial

Industrial revenues were $892m, down $40m from last year’s first quarter, largely due to lower volume and mix of $51m, principally in the Specialized Vehicles product line, partially offset by higher pricing of $16m in the segment.

Segment profit of $29m was down $12m from the first quarter of 2023, primarily due to lower volume and mix at Specialized Vehicles.

Textron eAviation

Textron eAviation segment revenues were $7m and segment loss was $18m in the first quarter of 2024, compared with a segment loss of $9m in the first quarter of 2023, primarily related to higher research and development costs.

Finance

Finance segment revenues were $15m, and profit was $18m.

Restructuring

In the first quarter of 2024, we incurred $14m in special charges under the 2023 restructuring plan, largely related to headcount reductions to improve the cost structures of the Textron Systems and Bell segments in light of the cancellation of the Shadow and FARA programs in the quarter. Textron expects to incur additional severance costs in the second quarter of 2024 in the range of $25m to $30m, largely related to headcount reductions in the Industrial segment. As a result, Textron has expanded its 2023 restructuring plan from the previously announced range of $115m to $135m in pre-tax special charges to a range of $165m to $170m.

(Source: BUSINESS WIRE)

 

25 Apr 24. Oshkosh Corporation Reports 2024 First Quarter Results.

Reports Diluted Earnings per Share of $2.71, up 102 Percent

Reports Adjusted1 Earnings per Share of $2.89, up 77 Percent

Reports Sales of $2.54bn, up 12 Percent

Raises 2024 Sales and Earnings Expectations

Declares Quarterly Cash Dividend of $0.46 Per Share

Oshkosh Corporation (NYSE: OSK), a leading innovator of purpose-built vehicles and equipment, today reported 2024 first quarter net income of $179.4m, or $2.71 per diluted share, compared to net income of $88.5m, or $1.34 per diluted share, for the first quarter of 2023. Adjusted1 net income was $191.1m, or $2.89 per diluted share, for the first quarter of 2024 compared to $107.6m, or $1.63 per diluted share, for the first quarter of 2023. Comparisons in this news release are to the first quarter of 2023, unless otherwise noted.

Consolidated sales in the first quarter of 2024 increased 12.2 percent to $2.54bn primarily due to sales related to the AeroTech acquisition of $176.1m, improved organic volume and improved pricing, offset in part by the sale of the rear-discharge concrete mixer business.

Consolidated operating income in the first quarter of 2024 increased 98.5 percent to $259.7m, or 10.2 percent of sales, compared to $130.8m, or 5.8 percent of sales, in the first quarter of 2023. The increase in operating income was primarily due to improved price/cost dynamics, favorable mix, higher organic sales volume and the absence of a loss on the sale of a business. Adjusted1 operating income in the first quarter of 2024 was $275.3m, or 10.8 percent of sales, compared to $151.7m, or 6.7 percent of sales, in the first quarter of 2023.

“We’re off to a strong start in 2024, as we grew adjusted operating income by over 80 percent leading to adjusted earnings per share of $2.89 in the first quarter. Our results were driven by outstanding execution as well as healthy demand and strategic acquisitions,” said John Pfeifer, president and chief executive officer of Oshkosh Corporation. “Our Access and Vocational segments both delivered strong year-over-year earnings growth during the quarter and have solid visibility for the remainder of the year.

“We are delivering on many new technologies in electrification, autonomy and digital products. This month, we began production of the USPS Next Generation Delivery Vehicle and built a pre-production pilot of our all-electric, fully integrated Volterra ZSL refuse and recycling vehicle, representing key milestones on programs that we believe will drive growth at Oshkosh well into the future. Our outlook and visibility remain strong across the company, bolstered by solid market dynamics and backlogs, the ramp-up of new programs and capacity expansions. It’s truly an exciting time for our company.

“Based on our strong first quarter results and a combination of solid demand and operational execution, we are raising our full-year earnings per share outlook to be in the range of $10.55 per share and adjusted earnings per share outlook to be in the range of $11.25 per share. We remain highly committed to leading with innovation and delivering exceptional value for our shareholders, customers and the communities in which we live and operate,” said Pfeifer.

Factors affecting first quarter results for the Company’s business segments included:

Access – Access segment sales for the first quarter of 2024 increased 3.7 percent to $1.24bn as a result of higher sales volume in North America, offset in part by lower sales volume in Europe.

Access segment operating income in the first quarter of 2024 increased 54.1 percent to $208.1m, or 16.8 percent of sales, compared to $135.0m, or 11.3 percent of sales, in the first quarter of 2023. The increase was primarily due to improved price/cost dynamics, improved customer mix and higher sales volume.

Adjusted1 operating income in the first quarter of 2024 was $210.4m, or 17.0 percent of sales, compared to $136.0m, or 11.4 percent of sales, in the first quarter of 2023.

Defense – Defense segment sales for the first quarter of 2024 increased 4.6 percent to $536.9m primarily due to higher aftermarket parts and Family of Medium Tactical Vehicle sales volume, offset in part by lower Joint Light Tactical Vehicle program volume.

Defense segment operating income in the first quarter of 2024 increased 564.7 percent to $11.3m, or 2.1 percent of sales, compared to $1.7m, or 0.3 percent of sales, in the first quarter of 2023. The increase was primarily the result of improved product mix and higher sales volume.

Adjusted1 operating income in the first quarter of 2024 was $12.6m, or 2.3 percent of sales, compared to $4.1m, or 0.8 percent of sales, in the first quarter of 2023.

Vocational – Vocational segment sales for the first quarter of 2024 increased 37.3 percent to $772.4m due to the inclusion of sales related to the AeroTech acquisition and improved pricing. AeroTech had sales of $176.1m during the first quarter of 2024.

Vocational segment operating income in the first quarter of 2024 increased 185.1 percent to $80.1m, or 10.4 percent of sales, compared to $28.1m, or 5.0 percent of sales, in the first quarter of 2023. The increase was primarily due to improved price/cost dynamics, the absence of a loss on the sale of the rear-discharge mixer business and improved product mix.

Adjusted1 operating income in the first quarter of 2024 was $92.1m, or 11.9 percent of sales, compared to $45.0 m, or 8.0 percent of sales, in the first quarter of 2023.

Corporate – Corporate costs in the first quarter of 2024 increased $5.8m to $39.8m due to higher new product development investments and higher share-based compensation expense.

Interest Expense Net of Interest Income – Interest expense net of interest income in the first quarter of 2024 increased $13.6m to $20.8m due to increased borrowings on the Company’s revolving credit facility as a result of the acquisition of AeroTech.

Miscellaneous, net – Miscellaneous expense, net in the first quarter of 2024 was $2.0m compared to miscellaneous income, net of $5.8m in the first quarter of 2023. Miscellaneous income, net for the first quarter of 2023 included a $4.7m gain on a settlement with the Company’s pension advisor.

Provision for Income Taxes – The Company recorded income tax expense in the first quarter of 2024 of $54.7m, or 23.1 percent of pre-tax income, compared to $34.2m, or 26.4 percent of pre-tax income, in the first quarter of 2023. Results for the first quarter of 2023 were impacted by $3.4m of discrete tax charges, including a $1.7m charge related to a valuation allowance recorded with respect to a deferred tax asset on marketable securities. (Source: BUSINESS WIRE)

BATTLESPACE Comment: It is interesting to note that ‘Defense segment operating income in the first quarter of 2024 increased 564.7 percent to $11.3m, or 2.1 percent of sales, compared to $1.7m, or 0.3 percent of sales, in the first quarter of 2023. The increase was primarily the result of improved product mix and higher sales volume.’ This clearly shows that the JLTV Program profit margins were limited due to the limitations of price per vehicle of $250,000 placed by the DoD. AM General is likely to face similar limitations to profitability, with both companies making money from future spare and support contracts.

 

25 Apr 24. Airbus reports First Quarter (Q1) 2024 results.

• 142 commercial aircraft delivered
• Revenues €12.8 bn; EBIT Adjusted € 0.6bn
• EBIT (reported) €0.6bn; EPS (reported) €0.76
• Free cash flow before customer financing €-1.8bn
• 2024 guidance unchanged

Airbus SE (stock exchange symbol: AIR) reported consolidated financial results for its First Quarter (Q1) ended 31 March 2024.

“We delivered first quarter 2024 results against the backdrop of an operating environment that shows no sign of improvement. Geopolitical and supply chain tensions continue. In that context, we delivered 142 commercial aircraft,” said Airbus CEO Guillaume Faury. “We started 2024 with a solid order intake across our businesses. The strong momentum on widebody aircraft underpins our decision to increase the production rate for the A350 to 12 aircraft a month in 2028. Our ramp up plans are continuing, supported by the investments in our production system while relying on our core pillars of safety, quality, integrity, compliance and security.”

Gross commercial aircraft orders totalled 170 (Q1 2023: 156 aircraft) with the same number of net orders due to no cancellations (Q1 2023 net orders: 142 aircraft). The order backlog amounted to 8,626 commercial aircraft at the end of March 2024. Airbus Helicopters registered 63 net orders (Q1 2023: 39 units), mainly in the light and medium segments. Airbus Defence and Space’s order intake by value was €2.0bn (Q1 2023: €2.5bn).

Consolidated revenues increased 9 percent year-on-year to €12.8bn (Q1 2023: €11.8bn). A total of 142 commercial aircraft were delivered (Q1 2023: 127 aircraft), comprising 12 A220s, 116 A320 Family, 7 A330s and 7 A350s. Revenues generated by Airbus’ commercial aircraft activities increased 13 percent, mainly reflecting the higher number of deliveries. Airbus Helicopters’ deliveries totalled 50 units (Q1 2023: 71 units) while its revenues decreased 9 percent, reflecting the lower volume of deliveries, partially offset by services. Revenues at Airbus Defence and Space increased 4 percent mainly driven by the Air Power business, partly offset by a less favourable phasing in Space Systems. One A400M military airlifter was delivered in the quarter.

Consolidated EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – was €577m (Q1 2023: €773m). It includes the planned impact linked to the increased Airbus Employee Share Ownership Plan, which saw record participation among employees, and resulted in a year-on-year expense increase of slightly above €0.1bn.

EBIT Adjusted related to Airbus’ commercial aircraft activities decreased to €507m (Q1 2023: €580m), with the positive impact from higher deliveries being offset by a slightly less favourable hedge rate as well as investments for preparing the future.

The A220 ramp-up continues towards a monthly production rate of 14 aircraft in 2026, with a focus on the programme’s industrial maturity and financial performance. On the A320 Family programme, the Company is making progress towards the rate of 75 aircraft per month in 2026. Entry-into-service of the A321XLR continues to be expected in Q3 2024. On widebody aircraft, the Company has decided to increase the production rate for the A350 to 12 aircraft a month in 2028 and continues to target rate 4 for the A330 in 2024.

Airbus Helicopters’ EBIT Adjusted decreased to €71m (Q1 2023: €156m), from a particularly strong first quarter in 2023 and reflecting the lower deliveries.

EBIT Adjusted at Airbus Defence and Space decreased to €-9m (Q1 2023: €36m), mainly reflecting the lower volume and profitability of Space Systems, notably linked to the Estimates at Completion updates performed in the second half of 2023.

On the A400M programme, development activities continue towards achieving the revised capability roadmap. Retrofit activities are progressing in close alignment with the customer. No net material impact was recognised in the first quarter of 2024. Risks remain on the qualification of technical capabilities and associated costs, on aircraft operational reliability, on cost reductions and on securing overall volume as per the revised baseline.

Consolidated self-financed R&D expenses totalled €743m (Q1 2023: €683m).

Consolidated EBIT (reported) amounted to €609m (Q1 2023: €390m), including net Adjustments of €+32m.

These Adjustments comprised:

• €-13m related to the dollar working capital mismatch and balance sheet revaluation. This mainly reflects the phasing impact arising from the difference between transaction date and delivery date;
• €+51m related to the gain on Airbus OneWeb Satellites, linked to the recent acquisition of the remaining 50% of the joint venture;
• €-6m of other costs including compliance costs.

The financial result was €229m (Q1 2023: € 149m), mainly reflecting a positive impact from the revaluation of certain equity investments. Consolidated net income(1) was €595m (Q1 2023: €466m) with consolidated reported earnings per share of €0.76 (Q1 2023: €0.59).

Consolidated free cash flow before customer financing was €-1,791m (Q1 2023: €-876m), mainly reflecting the planned inventory build-up resulting from the execution of the ramp-up across programmes. Consolidated free cash flow was €-1,799m (Q1 2023: €-873m). The gross cash position stood at €23.4bn at the end of March 2024 (year-end 2023: €25.3bn), with a consolidated net cash position of €8.7bn (year-end 2023: €10.7bn).

Outlook

The guidance issued in February 2024 remains unchanged.

As the basis for its 2024 guidance, the Company assumes no additional disruptions to the world economy, air traffic, the supply chain, the Company’s internal operations, and its ability to deliver products and services.

The Company’s 2024 guidance is before M&A.

On that basis, the Company targets to achieve in 2024:

• Around 800 commercial aircraft deliveries;
• EBIT Adjusted between €6.5bn and € 7.0bn;
• Free Cash Flow before Customer Financing of around €4.0bn.

 

25 Apr 24. General Dynamics Reports First-Quarter 2024 Financial Results.

• Revenue of $10.7bn, up 8.6% from year-ago quarter
• Operating earnings of $1bn, up 10.4% from year-ago quarter
• Diluted EPS of $2.88, up 9.1% from year-ago quarter
• Operating margin of 9.7%, a 20 basis-point expansion from year-ago quarter

General Dynamics (NYSE: GD) today reported first-quarter 2024 revenues of $10.7bn, up 8.6% from the first quarter of 2023. Operating earnings of $1bn were up 10.4% from the year-ago quarter, with operating margins expanding 20 basis points to 9.7% from the year-ago quarter. Diluted earnings per share (EPS) were $2.88, up 9.1% from the year-ago quarter.

“Our businesses delivered solid operating results in the quarter, growing revenue and backlog, while expanding margins, even as we awaited G700 certification,” said Phebe N. Novakovic, chairman and chief executive officer. “In the Aerospace segment, the recent FAA certification of the Gulfstream G700 has enabled us to begin customer deliveries. This is a strong start to 2024 and we remain confident in our outlook.”

Cash And Capital Deployment

Net cash used by operating activities in the quarter was $278m due to growth of operating working capital in both the Aerospace and defense segments.

During the quarter, the company invested $159m in capital expenditures, paid $361m in dividends, and used $105m to repurchase more than 390,000 shares, ending the quarter with $1bn in cash and equivalents.

Backlog

The consolidated book-to-bill ratio, defined as orders divided by revenue, was 1-to-1 for the quarter. Company-wide backlog of $93.7bn was up 4.4% from the year-ago quarter. Estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $40.3bn. Total estimated contract value, the sum of all backlog components, was $134 bn, up 4.4% from the year-ago quarter.

In the Aerospace segment, orders in the quarter totaled $2.4bn, growing backlog to $20.5bn, up 6.2% from the year-ago quarter. Aerospace book-to-bill was 1.2-to-1 for the quarter.

In the defense segments, orders in the quarter totaled $8.8 bn, with particular strength in Combat Systems and Technologies, which had book-to-bill ratios of 1.6-to-1 and 1.2-to-1, respectively.

Significant awards in the defense segments included an IDIQ contract from the U.S. Army to provide medium-caliber ammunition cartridges, with a maximum potential value of $3bn among two awardees; $1.3bn, with a maximum potential value of $2bn, from Austria’s ministry of defense to produce Pandur 6×6 wheeled combat vehicles; four IDIQ contracts from the Canadian government with a maximum potential value of $1.3bn to support the Land Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) system for the Canadian army; $505 m, with a maximum potential value of $995m, for several key contracts for classified customers; $325m from the Canadian government to produce armored combat support vehicles; and $310m from the U.S. Navy for maintenance, modernization and repair work on a Wasp-class amphibious assault ship.

 

25 Apr 24. Northrop Grumman Reports First Quarter 2024 Financial Results. • Sales increase 9 percent to $10.1bn.

• Operating income increases 13 percent driven by strong performance and cost efficiencies
• Diluted earnings per share increase 15 percent to $6.32
• $1.5bn returned to shareholders through dividends and share repurchases
• Reaffirming 2024 company-level

Northrop Grumman Corporation (NYSE: NOC) reported first quarter 2024 sales increased 9 percent to $10.1bn, as compared with $9.3bn in the first quarter of 2023. First quarter 2024 sales reflect continued strong demand for our products and services. First quarter 2024 net earnings totaled $944m, or $6.32 per diluted share, as compared with $842m, or $5.50 per diluted share, in the first quarter of 2023.

“Northrop Grumman’s first quarter performance includes 9 percent sales and double digit earnings growth, showing we are off to a strong start to the year. We’re also seeing the results of our focus on productivity and cost efficiency to improve operating margin in many of our businesses,” said Kathy Warden, chair, chief executive officer and president. “Robust global defense spending and our strong backlog, along with expanding margins, continue to support our multi-year outlook for free cash flow growth.”

Sales

First quarter 2024 sales increased $832m, or 9 percent, due to higher sales at all four sectors, including 18 percent growth at Aeronautics Systems. First quarter 2024 sales reflect continued strong demand for our products and services. Operating Income and Margin Rate First quarter 2024 operating income increased $124m, or 13 percent, and operating margin rate increased to 10.6 percent, primarily due to higher segment operating income and a benefit associated with the FAS/CAS operating adjustment.

Segment Operating Income and Margin Rate

First quarter 2024 segment operating income increased $102m, or 10 percent, primarily due to higher sales. Segment operating margin rate increased to 10.9 percent and reflects higher operating margin rates at Aeronautics Systems, Defense Systems and Mission Systems, partially offset by a lower operating margin rate at Space Systems.

Federal and Foreign Income Taxes The first quarter 2024 effective tax rate increased to 16.5 percent from 15.6 percent in the prior year period principally due to higher interest expense on unrecognized tax benefits. Net Earnings

First quarter 2024 net earnings increased $102m, or 12 percent, primarily due to a 13 percent increase in operating income and a $36m increase in the non-operating FAS pension benefit, partially offset by a higher effective tax rate.

Cash Flows

First quarter 2024 cash used in operating activities was comparable with the prior year period. Higher net earnings were offset by changes in trade working capital. First quarter 2024 free cash flow increased $35m, or 3 percent, principally due to lower capital expenditures largely driven by timing. The net use of cash during the first quarter is consistent with the company’s historical timing of operating cash flows, which are generally more heavily weighted towards the second half of the year.

Awards and Backlog

First quarter 2024 net awards totaled $6.5bn and backlog totaled $78.9bn. Significant first quarter new awards include $3.1bn for restricted programs (primarily at Aeronautics Systems, Space Systems, and Mission Systems). As previously disclosed, in January 2024, the company received a termination for convenience in our restricted Space business. The company reduced unfunded backlog by $1.6bn during the first quarter of 2024 related to the termination.

Financial Results

Segment Operating Results

AERONAUTICS SYSTEMS

Sales

First quarter 2024 sales increased $454m, or 18 percent, primarily due to higher volume on restricted programs, a $114m increase on the F-35 program driven by higher volume on sustainment and production contracts, and higher volume on the E-2, Triton and Global Hawk programs. The increases on F-35 and restricted programs are due, in part, to material timing in the first quarter.

Operating Income

First quarter 2024 operating income increased $60m, or 25 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 10.0 percent from 9.4 percent principally due to higher net EAC adjustments largely driven by improved performance and cost efficiencies on certain production programs, including F-35 and F/A-18, which more than offset sales growth on a low margin restricted program. DEFENSE SYSTEMS

Sales

First quarter 2024 sales increased $36m, or 3 percent, primarily due to ramp-up on the Stand-in Attack Weapon (SiAW) program and higher volume on Guided Multiple Launch Rocket Systems (GMLRS) and certain military ammunition and cannon systems programs, partially offset by lower volume due to the completion of an international training program. Operating Income First quarter 2024 operating income increased $17m, or 11 percent, due to a higher operating margin rate and higher sales. Operating margin rate increased to 12.5 percent from 11.6 percent principally due to improved performance driven by changes in contract mix and cost efficiencies.

MISSION SYSTEMS

Sales

First quarter 2024 sales increased $96m, or 4 percent, primarily due to higher restricted sales on advanced microelectronics programs, partially offset by lower sales on the Scalable Agile Beam Radar (SABR) program. Operating Income First quarter 2024 operating income increased $18m, or 5 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 14.2 percent from 14.0 percent, primarily due to sales growth on higher margin advanced microelectronics programs and a prior year loss related to an unconsolidated joint venture. These benefits were partially offset by lower net EAC adjustments on certain radar production programs.

SPACE SYSTEMS

Sales

First quarter 2024 sales increased $305m, or 9 percent, primarily due to a $117m increase on the Space Development Agency (SDA) Tranche 2 Transport Layer (T2TL) programs and higher volume on restricted programs, Commercial Resupply Services (CRS) missions, hypersonics programs and the Glide Phase Interceptor (GPI) program. These increases were partially offset by lower volume on the Ground-based Midcourse Defense (GMD) program. Operating Income First quarter 2024 operating income increased $19m, or 6 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 9.1 percent from 9.3 percent principally due to a prior year benefit from the sale of a license to a customer, partially offset by an improvement in net EAC adjustments.

 

25 Apr 24. Northrop sees F-16 IVEWS, IBCS as ‘multibillion dollar’ international sales drivers. In addition, CEO Kathy Warden says the company sees a chance to sell up to five Triton UAVs to the NATO alliance.

Burgeoning international weapons demand is poised to spur “multibillion-dollar” sales for Northrop Grumman on programs like F-16 electronic warfare modernization and air and missile defense battle management, company executives projected today.

Speaking to investors during the defense giant’s first quarter earnings call for 2024, which beat analyst expectations, Chief Executive Officer Kathy Warden said that exports currently make up about 14 percent of the contractor’s overall sales. While executives don’t expect that number to change “significantly” in the near term, Warden said Northrop anticipates that international sales will grow at a faster rate than domestic deals as sales are executed in the coming years.

The robust international demand “is the strongest that I’ve seen in a long time,” she said.

Specifically, Warden pointed to a few key programs that are informing the company’s rosy outlook on international expansion. One is the Integrated Viper Electronic Warfare Suite (IVEWS), a new EW system for the F-16. Northrop has booked two international customers already and is in talks with seven others, Warden said, which “has the potential to be a new multibillion-dollar product line for us.”

Additionally, fresh off a successful sale to Poland, Warden said that she sees global demand for the company’s Integrated Air and Missile Defense Battle Command System (IBCS) materializing in a “pipeline” worth roughly $10bn.

Other sales opportunities are growing as export restrictions on certain platforms are relaxed, according to Warden. One example she cited is the MQ-4C Triton maritime surveillance drone: NATO is looking to expand its maritime surveillance capabilities, Warden said, which could offer the chance to sell up to five Tritons to the alliance. Other customers in Europe are interested in the platform as well, though she did not say who.

To score wins on those product lines, Northrop will likely have to aggressively compete. L3Harris, for example, is pitching its Viper Shield F-16 EW suite and has already booked multiple foreign customers. Similarly, Northrop has stiff competition for battle management capabilities from the likes of Lockheed Martin. And, NATO would presumably have other options for maritime surveillance.

Generally, Warden said Northrop would look to offer autonomous systems as global drone demand grows, though the company suffered a setback yesterday after the US Air Force decided to proceed with only General Atomics and Anduril for the service’s Collaborative Combat Aircraft program.

Warden today downplayed that loss, saying that the phase the service down-selected for yesterday “was relatively small” and that more opportunities lay ahead. Looking forward, she said the company doesn’t want to be seen as only offering “exquisite and expensive technology,” though she cautioned that desire would only go so far.

“We are really positioned to provide the best solutions that our customer needs against a high end threat. However, we are not looking to compete in a more commoditized part of the market that’s very low cost and not survivable systems. That’s just not our business model and we know that,” she said. (Source: Breaking Defense.com)

 

25 Apr 24. DJI Just Got a New Rival in the US that Licenses, DJI Technology. There’s no doubt about it – DJI is the industry-leading maker of the best drones. However, if you’re in the US that’s a problem because of the uncertainty around future restrictions and current bans on Chinese-made drone tech amid data security concerns. Cue Anzu Robotics, a new name in the drone space and a DJI alternative that actually uses DJI tech.

Launched by former Autel Robotics CEO Randal Warnas, the new company Anzu Robotics has fast-tracked the creation of high-quality drones by licensing proven DJI drone technology. In a one-time deal for its new Raptor series of drones (and no ongoing DJI partnership being reported), Anzu Robotics has used DJI Mavic 3 Enterprise hardware: a highly-rated professional folding drone from 2022 with superb 20MP micro four thirds sensor.

If Raptor drones use DJI tech, how does it avoid restrictions in US air space? Well, the drones are manufactured outside of China in Malaysia and use domestically-developed software created in collaboration with Aloft Technologies. This ingenious approach takes advantage of the best technology from the drone industry leader DJI, while circumventing potential bans and current restrictions imposed on Chinese-tech in the US.

It’s a move that could have Skydio and Brinc sweating. The two US-based drone makers have benefitted from DJI’s recent troubles in the US, with a recent Congressional bill proposing a complete ban on DJI drones in federal government bodies including the armed forces, plus geofencing for public safety departments such as the fire service. Consequently, Skydio ceased production of its consumer drones to focus on the lucrative commercial and government markets where DJI drones are banned or facing bans.

Skydio and Brinc professional drones are also super expensive, and Anzu Robotics is looking to disrupt the US-based drone market by undercutting its rivals with new drones that use industry-leading DJI tech. Many such companies that previously used DJI drones and are familiar with the tech have been forced to close down their fleets. For them, Anzu Robotics would be the compelling choice to take to the US skies once more.

Raptor drones start at $5,000 (around £4,000 / AU$7,790) which is more than double what you pay for the DJI Mavic 3 that the Raptors’ hardware is based on. It’s the steep price that US-based agencies could have to pay to avoid the restrictions on Chinese drone tech.

The Ongoing DJI Saga

We’ve been reporting about a DJI ban in the US for years. In 2024, it’s still not a total ban; consumers are able to use their DJI drones purchased on US soil. However, at the time of writing, a new push from a House of Representatives committee is calling for harsher tariffs on DJI drones and even a de facto ban for both enterprise and consumers owners. (Source: UAS VISION/Techradar)

 

25 Apr 24. Kitron: Q1 2024 – Strong underlying profitability in challenging market. Kitron today reported strong underlying profitability in a challenging market. Cost initiatives are implemented to maintain operating margins in line with the company’s strategic target.

Kitron’s revenue for the first quarter was EUR 173.9m, compared to 190.6m last year. There was strong growth within the Defence/Aerospace market sector, while other market sectors showed declines.

First-quarter operating profit (EBIT) was EUR 10.6m, compared to 17.3m last year. EBITDA was EUR 15.2m, compared to 21.4m last year. Profits are impacted by restructuring charges of EUR 4.8m.

Profitability expressed as EBIT margin was 6.1 per cent, including the restructuring charges, compared to 9.1 per cent last year. Profitability adjusted for restructuring charges was 8.8 per cent.

The order backlog ended at EUR 445m, a decrease of 24 per cent compared to last year and a decrease of 10 per cent from the preceding quarter.

Peter Nilsson, Kitron’s CEO, comments: “Nordic and U.S. operations show positive momentum, mainly driven by increased demand in the Defence and Aerospace sectors. However, the broader market environment is challenging, leading us to revise our full year sales outlook. The slower than anticipated market recovery, along with extended de-stocking activities by our customers, necessitate this adjustment. These challenges are affecting our operations in Central and Eastern Europe (CEE) and to a greater extent in China. Despite these headwinds, we see signs of recovery in some market sectors as we approach the fourth quarter.

In response to these conditions, we are strategically aligning our capacity with the prevailing demand to bolster our future efficiency and competitiveness. We are implementing cost initiatives expected to reduce our annual cost base by approximately EUR12m, with the full benefits to be realized starting from the middle of the second quarter.

We remain agile and fully prepared to seize any opportunities should the market conditions improve sooner than expected.

While our commitment to our strategic targets remains steadfast, we recognize that short-term fluctuations around our 9 percent margin target may occur as we adapt our strategies responsively based on evolving market conditions.”

Profit after tax amounted to EUR 6.5m, compared to 13.3m in the same quarter the previous year. This corresponds to earnings per share of EUR 0.03, down from 0.07 last year.

Stable working capital

Operating cash flow in the first quarter was EUR 8.5m, compared to 10.5m in the first quarter of 2023.

Net working capital was EUR 196.9m, an increase of 7.1 per cent compared to the same quarter last year. Net working capital as a percentage of revenue was 28.0 per cent compared to 23.7 per cent last year.

Outlook

For 2024, Kitron has previously indicated a revenue outlook of between EUR 700 and 800m and an operating profit (EBIT) between EUR 60 and 74m. Due to the challenging market outlook, we now expect revenue to be between EUR 660 and 710m. Cost initiatives are implemented to maintain operating margins, and we expect an operating profit (EBIT) between EUR 53 and 60m, including EUR 4.8m in restructuring costs in the first quarter. (Source: Google/Yahoo!)

 

24 Apr 24. Boeing reports first revenue drop in 7 quarters as deliveries decline. Boeing (BA.N), on Wednesday reported its first quarterly revenue drop in seven quarters, but the U.S. planemaker beat analyst expectations that were lowered after a January mid-air blowout of a door plug prompted it to slow production of its strongest-selling jets.

After the report, Boeing CEO Dave Calhoun told CNBC that a deal to acquire its key supplier Spirit AeroSystems (SPR.N), is more than likely during the second quarter.

Issues that must be worked out include price and talks with Spirit customer Airbus (AIR.PA), Boeing’s major rival. But Calhoun told analysts Boeing can move forward without full clarity on the Airbus side.

“We’re not being held hostage,” said Calhoun who is leaving by the end of the year.

Quarterly revenue was $16.57bn, down from $17.92bn a year earlier but beating expectations of $16.23bn. Boeing and Spirit Aero shares were down about 3% in early afternoon trade.

Boeing CFO Brian West told analysts second quarter cash burn would be “sizeable” although he expected free cash usage to improve from the $3.93bn cash burn in the first quarter. That was less than the $4.49bn analysts expected following the Jan. 5 accident involving a nearly new 737 MAX 9 jet.

“Well it could have been worse. While the loss and the cash outflow are not as bad as feared, the company is still clearly facing some serious challenges,” Vertical Research Partners analyst Robert Stallard said in a note.

In the afternoon, Moody’s cut Boeing’s credit rating to the bottom of investment grade. The agency expects headwinds surrounding the company’s commercial airplanes to persist at least through 2026 when Boeing has $8 bn in debt coming due.

Multiple legal actions resulted from the Alaska Airlines accident. Boeing recorded an earnings charge of $443m, net of insurance recoveries, according to a company filing.

Since the accident, the U.S. Federal Aviation Administration (FAA) has imposed a cap on production of single-aisle 737 MAX jets and given Boeing 90 days from Feb. 28 to develop a comprehensive plan to improve quality control.

Reuters reported this month that output of Boeing’s cash-cow 737 MAX had fallen sharply as U.S. regulators stepped up factory checks. Calhoun said production will stay sporadic through the second quarter as the company devises a plan to better monitor its manufacturing system. He said production rates would not rise until the system is under control.

“So 90 days isn’t like ‘wave a magic flag, and everything is great,’ and you guys can go from 38 to 40” jets per month, Calhoun said. Boeing has engaged independent quality experts, whom Calhoun expects will stay for several years.

While Boeing has not named a successor, Calhoun told CNBC he believes commercial airplanes boss Stephanie Pope has potential to run the company.

Analysts have warned the slow pace of deliveries could delay Boeing’s financial and production goals. Boeing’s CFO said last month the company needs more time to hit a goal outlined in 2022 for an annual cash flow of about $10bn by 2025 or 2026.

That goal is seen as key as Boeing works to accelerate its recovery from an earlier crisis after two MAX jets crashed in 2018 and 2019.

Boeing delivered 13 twin-aisle 787 Dreamliner jets in the quarter. It expects production to return to five per month later this year. Calhoun attributed the slowdown to supply chain issues involving airline seats and parts used in cooling.

Yet with production constrained at Boeing and Airbus, demand remains strong, though the European planemaker has increased its lead in the narrowbody market.

Calhoun said Boeing would have “largely delivered” its inventory of 737s and 787s by the end of the year, bringing in much-needed cash. He added that its defense business, which has been losing money, “will be progressing toward more historical levels of performance.”

Operating margins at Boeing’s defense business rebounded to 2.2% in the quarter from a negative 3.2% a year ago, though it still lost $222m on certain fixed-price development programs.

Boeing delivered 67 737s in the quarter through March, down 41% from last year. Planemakers receive the bulk of the cash upon delivery of the aircraft.

Combined with compensation Boeing had to pay airlines for the temporary grounding of MAX 9 aircraft, margins at its commercial airplanes business deteriorated to negative 24.6% from negative 9.2%.

Overall adjusted loss per share narrowed to $1.13, beating expectations of loss per share of $1.76, as per LSEG data. (Source: Reuters)

 

24 Apr 24. Boeing burnt through almost $4bn of cash in the first quarter, reflecting slower 737 Max production and compensation to customers as the US plane maker grappled with the aftermath of the mid-air accident in January. The $3.9bn of free cash outflow is slightly lower than the $4bn-4.5bn the company had warned in March, but compares with an outflow of $786mn for the same period last year. Boeing reported a $355mn net loss in the first quarter. The company’s financial results “reflect the immediate actions we’ve taken to slow down 737 production to drive improvements in quality,” said chief executive Dave Calhoun. “We are leaving no stone unturned and are making significant progress,” Calhoun said in a memo to employees, noting Boeing is making improvements in training, tooling, inspection procedures and controlling the flow of travelled work through its 737 factory in Renton, Washington. “We are using this period, as difficult as it is, to deliberately slow the system, stabilise the supply chain, fortify our factory operations and position Boeing to deliver with the predictability and quality our customers demand,” he added. The plane maker is building fewer than 38 Maxes per month, reducing deliveries that are necessary to bring in cash in order to improve the quality of its manufacturing following the mid-air blowout of a door panel on an Alaska Airlines flight. Boeing faces investigations by aviation regulators and the US Justice Department. Though no one was killed, the explosive loss of cabin pressure injured some on board and recalled the two fatal crashes that led to the worldwide grounding of the Max for nearly two years. A preliminary report by the National Transportation Safety Board found that four bolts meant to fasten the panel to the fuselage were missing. A US Federal Aviation Administration audit of Boeing found “multiple instances” where it allegedly failed to meet manufacturing and quality control requirements. Regulators have given the company until the end of May to submit a plan to improve. The company did not issue any financial guidance for the year on Wednesday. It initially declined to issue guidance in January, with Calhoun saying “now is not the time”. The 737’s troubles have led to a shake-up in Boeing leadership. Calhoun said last month he would step down as Boeing chief executive at the end of the year, with the chair of the board Larry Kellner leaving after the annual meeting in May. Stan Deal, head of Boeing’s commercial plane division, departed immediately. (Source: FT.com)

 

24 Apr 24. Boeing Reports First Quarter Results.

First Quarter 2024

• Undertaking comprehensive actions in our commercial business to strengthen quality and safety
• Financial results reflect lower 737 deliveries and 737-9 grounding customer considerations
• Revenue of $16.6bn, GAAP loss per share of ($0.56) and core (non-GAAP)* loss per share of ($1.13)
• Operating cash flow of ($3.4)bn and free cash flow of ($3.9)bn (non-GAAP)*
• Total company backlog grew to $529 bn, including over 5,600 commercial airplanes

The Boeing Company [NYSE: BA] recorded first quarter revenue of $16.6 bn, GAAP loss per share of ($0.56) and core loss per share (non-GAAP)* of ($1.13). Boeing reported operating cash flow of ($3.4)bn and free cash flow of ($3.9)bn (non-GAAP)*. Results primarily reflect lower commercial delivery volume.

“Our first quarter results reflect the immediate actions we’ve taken to slow down 737 production to drive improvements in quality,” said Dave Calhoun, Boeing president and CEO. “We will take the time necessary to strengthen our quality and safety management systems and this work will position us for a stronger and more stable future.”

Operating cash flow was ($3.4)bn in the quarter reflecting lower commercial deliveries, as well as unfavorable timing of receipts and expenditures.

Cash and investments in marketable securities totaled $7.5bn, compared to $16.0bn at the beginning of the quarter reflecting debt repayment and free cash flow usage in the quarter. Debt was $47.9bn, down from $52.3bn at the beginning of the quarter due to the pay down of maturing debt. The company has access to credit facilities of $10.0bn, which remain undrawn.

Total company backlog at quarter end was $529bn.

Segment Results

Commercial Airplanes

Commercial Airplanes first quarter revenue of $4.7bn and operating margin of (24.6) percent primarily reflect lower 737 deliveries and 737-9 grounding customer considerations.

During the quarter, the 737 program slowed production below 38 per month to incorporate improvements to its quality management system and reduce traveled work within its factory and supply chain. In addition, Commercial Airplanes is implementing a comprehensive action plan to address feedback from the FAA audit of 737 production.

Commercial Airplanes booked 125 net orders, including 85 737-10 airplanes for American Airlines and 28 777X airplanes for customers including Ethiopian Airlines. Commercial Airplanes delivered 83 airplanes during the quarter and backlog included over 5,600 airplanes valued at $448 bn.

Defense, Space & Security

Defense, Space & Security first quarter revenue was $7.0 bn. First quarter operating margin increased to 2.2 percent, primarily driven by higher volume and improved performance. Results also reflect $222 m of losses on certain fixed-price development programs.

During the quarter, Defense, Space & Security captured awards for 17 P-8A Poseidon aircraft for the Royal Canadian Air Force and German Navy, secured the final new-build production contract from the U.S. Navy for 17 F/A-18 Super Hornets, and was awarded an MQ-25 cost-type contract modification from the U.S. Navy including two additional test aircraft. Backlog at Defense, Space & Security was $61 bn, of which 31 percent represents orders from customers outside the U.S.

Global Services

Global Services first quarter revenue of $5.0 bn and operating margin of 18.2 percent reflect higher commercial volume and favorable mix.

During the quarter, Global Services opened a maintenance facility in Jacksonville, Florida, supporting military customers and the U.S. Navy exercised options on a P-8 sustainment modification contract.

 

23 Apr 24. Lockheed Martin projects potential $1bn loss on classified program. Lockheed CFO Jay Malave said the company currently expects the program to become profitable on an annual basis around the 2028 timeframe.

Lockheed Martin took a $100m loss on a classified program inside its missiles and fire control unit and could rack up an additional $225 m in losses by the end of the year, executives said today.

Regulatory filings that will be available later today will state that the world’s largest defense contractor could incur in excess of $1 bn in potential losses on this program, Lockheed Chief Financial Officer Jay Malave told analysts during an earnings call today.

However, CEO Jim Taiclet characterized the program as a long-running franchise that will deliver a strong return on investment after going through a period of teething pains.

“For a quarter for the year, maybe for a couple of years, we’re going to absorb the loss,” but afterwards “it’s going to be significantly positive,” he said.

Malave said factors such as “technical milestone achievement through the balance of the year, discussions with our customers [and] visibility of funding” could all impact the size and timing of future losses, but that the company currently expects the program to become profitable on an annual basis around the 2028 timeframe.

The loss contributed an 18 percent decrease in profits in the company’s missiles and fire control segment compared to the same period last year, executives said. Overall, however, Lockheed’s net sales grew from $15.1bn in the first quarter of 2023 to $17.1bn this year, led by about 25 percent sales growth in missiles and fire control.

News of the classified program loss comes on the heels of a major win on the Next Generation Interceptor program by Lockheed’s space unit, which beat out Northrop Grumman. The Missile Defense Agency announced its decision about a year earlier than expected, citing budget constraints and the data it has collected from both vendors so far as the reasons for the early selection.

Taiclet attributed Lockheed’s win on the program to its ongoing digital transformation initiative, in which the company is investing about $6bn over a decade to transition Lockheed to using model-based engineering and other advanced design and manufacturing technologies.

NGI was tapped as one of the initial “pathfinders” for such technologies, which helped “accelerate the schedule and contain the cost of the development and ultimately production,” he said. “I think because of our speed and our ability to demonstrate manageable cost over time, we won and kind of won early.”

Due to the earlier-than-expected selection, Lockheed continues to develop NGI using funds from a contract previously awarded in 2021.

However, the company was required to provide pricing for several different contract structures, including both a cost-plus contract and a fixed-price incentive structure that would shift more risk to the company, Malave said.

The US government has yet to indicate which path it will choose for its future NGI contract, but neither of the options Lockheed provided were based on an aggressive bidding strategy, Malave said. “We’ve taken a middle of the road approach to our pricing and this is no different.”

Taiclet added that a fixed price approach would incur “a risk premium that’s significantly higher” than those in a cost-plus contract to mitigate the chance of future losses. (Source: Defense News Early Bird/Breaking Defense)

 

24 Apr 24. CACI Reports Results for Its Fiscal 2024 Third Quarter and Raises Fiscal Year Guidance.

Revenues of $1.9bn, +11% YoY

Net income of $115.4m and diluted EPS of $5.13, +18% YoY

Adjusted net income of $129.0m and adjusted diluted EPS of $5.74, +17% YoY

EBITDA margin of 11.3%, +200 basis points sequentially

Contract awards of $3.5bn representing a book-to-bill of 1.8x

Raising Fiscal Year 2024 guidance for revenue, adjusted net income, and adjusted diluted EPS

CACI International Inc (NYSE: CACI), a leading provider of expertise and technology to government customers, announced results today for its fiscal third quarter ended March 31, 2024.

“CACI’s outstanding performance reflects the continued successful execution of our strategy. We’re winning and delivering in the marketplace with differentiated capabilities, exceptional business development, and program execution,” said John Mengucci, CACI President and Chief Executive Officer. “Our third quarter results were strong across the board, including double-digit organic growth, margin expansion, $3.5bn of awards, and record backlog. Our performance enables us to again raise fiscal year 2024 revenue and earnings guidance. We remain confident in our ability to drive long-term growth, increase free cash flow, and generate value for our customers and our shareholders.”

Third Quarter Results

Revenues in the third quarter of fiscal year 2024 increased 11 percent year-over-year, driven by 10 percent organic growth. The increase in income from operations was driven by higher revenues and gross profit. Growth in diluted earnings per share and adjusted diluted earnings per share was driven by higher income from operations and share repurchases earlier in the year, partially offset by a higher tax provision and higher interest expense. The increase in cash from operations, excluding MARPA, was driven primarily by strong working capital and capital expenditure management, and higher net income.

Third Quarter Contract Awards

Contract awards in the third quarter totaled $3.5bn, with approximately 46 percent for new business to CACI. Awards exclude ceiling values of multi-award, indefinite delivery, indefinite quantity (IDIQ) contracts. Some notable awards during the quarter were:

• A five-year task order worth a total estimated value of $1.3bn to provide communications and information technology expertise to U.S. European Command (USEUCOM) and U.S. Africa Command (USAFRICOM). This work continues and expands CACI’s current relationship with these two 4-star commands, service component commands, and associated staff elements and organizations, by providing innovative IT solutions and expertise tailored to their missions to execute global multi-domain operations with NATO, allies, and mission partners to prevent conflict and respond in crisis.
• A $638m task order to provide enterprise product support to the Department of Defense (DoD) for five years, enabling faster and more effective development and dissemination of actionable intelligence.
• A five-year DoD logistics and sustainment support task order worth up to $271m.
• A task order valued at up to $199m over five years to provide expertise to the DoD for tactical command, control, and communications support across the warfighting functions of movement and maneuver, command and control, fires, sustainment, protection, intelligence, and engagement.
• An order of counter-unmanned aircraft systems (C-UAS) by the Canadian Armed Forces that will defeat unmanned aerial vehicle threats, including small drones.

Total backlog as of March 31, 2024 was $28.6bn compared with $25.3bn a year ago, an increase of 13.0 percent. Funded backlog as of March 31, 2024 was $3.2bn compared with $3.4 bn a year ago, a decrease of 5.9 percent. The change in funded backlog was driven by normal variation in timing of funding as well as particularly strong funding in the year-ago quarter.

Additional Highlights

• Fortune magazine recognized CACI as one of the World’s Most Admired Companies in 2024, commemorating its seventh consecutive year on the list and its 13th appearance since the list’s inception. CACI received notable results in Fortune’s survey criteria for the quality of its expertise and technology, long-term investment strategy, financial soundness, and social responsibility. CACI was chosen from among approximately 1,500 global companies considered by Fortune.
• For the fourth consecutive year, CACI was named a Top Workplace USA by employee engagement technology partner Energage, LLC. This latest accolade is a result of the company’s strong culture, total rewards, and legacy spanning more than 60 years.
• Twenty one CACI employees were honored for their excellence in science, technology, engineering, and math (STEM) at the 38th annual Black Engineer of the Year Awards (BEYA) Global Competitiveness Conference held Feb. 15-17 in Baltimore, Maryland.

Fiscal Year 2024 Guidance

The table below summarizes our fiscal year 2024 guidance and represents our views as of April 24, 2024. Our revenue guidance reflects approximately $200m of higher-than-expected material purchases by our customers, split evenly between the first and second quarters of fiscal year 2024. Our guidance also reflects lower diluted weighted average shares due to the effect of share repurchases earlier in the year.

(Source: BUSINESS WIRE)

 

24 Apr 24. Amphenol Reports First Quarter 2024 Results and Announces New Stock Repurchase Program.

First Quarter 2024 Highlights:

• Sales of $3.26bn, up 9% in U.S. dollars and 6% organically compared to the first quarter of 2023
• GAAP Diluted EPS of $0.87, up 23% compared to prior year
• Adjusted Diluted EPS of $0.80, up 16% compared to prior year
• GAAP and Adjusted Operating Margin of 21.0%
• Operating and Free Cash Flow of $599m and $506m, respectively
• Announces a new three-year, $2bn open market stock repurchase program

Amphenol Corporation (NYSE: APH) today reported first quarter 2024 results. In addition, the Company is announcing a new three-year, $2bn stock repurchase program.

“We are pleased to have closed the first quarter of 2024 with sales and Adjusted Diluted EPS both exceeding the high end of our guidance,” said Amphenol President and Chief Executive Officer, R. Adam Norwitt. “Sales increased from prior year by 9%, driven by growth in the IT datacom, commercial air, automotive and defense markets as well as contributions from the Company’s acquisition program, partially offset by moderations in the mobile networks, broadband and industrial markets. During the quarter, we again realized strong profitability with Adjusted Operating Margin of 21.0%, a first-quarter record. We are very proud of the Company’s outstanding performance during the quarter.”

During the first quarter of 2024, Amphenol continued to deploy its financial strength in a variety of ways to increase shareholder value. During the quarter, the Company purchased 1.4m shares of its common stock for $154 m and paid dividends of $132m, resulting in total capital returned to shareholders of $286m.

New Stock Repurchase Program

In April 2024, the Company purchased the remaining authorized amount of common stock under the existing three-year, $2bn stock repurchase plan. On April 23, 2024, the Company’s Board of Directors approved a new three-year, $2 bn open market stock repurchase plan.

Second Quarter 2024 Outlook

The current economic environment remains uncertain. Assuming the continuation of current market conditions as well as constant exchange rates, for the second quarter of 2024, Amphenol expects sales to be in the range of $3.24bn to $3.30bn. This represents a 6% to 8% increase over the prior year quarter. Adjusted Diluted EPS is expected to be in the range of $0.79 to $0.81, representing a 10% to 13% increase from the second quarter of 2023.

Mr. Norwitt continued, “I am pleased with the Company’s first quarter 2024 results. The revolution in electronics continues to accelerate, with new innovations creating exciting growth opportunities for Amphenol across each of our diversified end markets. In turn, we have expanded our range of high-technology interconnect products, both through our organic innovation efforts as well as through our successful acquisition program. This expanded technology position coupled with our unique entrepreneurial culture has strengthened our competitive advantage. Our ongoing drive to leverage that competitive advantage and thereby create sustained financial strength has established an excellent base for the Company’s future performance. I am confident in the ability of our outstanding and growing entrepreneurial management team to continue to dynamically adjust to changing market conditions, to capitalize on the wide array of growth opportunities that arise in all market cycles and to continue to generate sustainable long-term value for our shareholders and other stakeholders.”

(Source: BUSINESS WIRE)

 

24 Apr 24. Teledyne Technologies Reports First Quarter Results.

Teledyne Technologies Incorporated (NYSE:TDY):

• Orders of $1,433.2m, an increase of 7.8% compared with last year
• Sales of $1,350.1m
• First quarter GAAP operating margin of 17.4% and record first quarter non-GAAP operating margin of 21.2%
• GAAP diluted earnings per share of $3.72 and record first quarter non-GAAP diluted earnings per share of $4.55
• Record first quarter cash from operations of $291.0m and all-time record free cash flow of $275.1m
• Revising full year 2024 GAAP diluted earnings per share outlook to $16.02 to $16.27, compared with the prior outlook of $17.15 to $17.53, and revising full year 2024 non-GAAP earnings per share outlook to $19.25 to $19.45, compared with the prior outlook of $20.35 to $20.68
• Announced pending acquisition of Adimec Holdings B.V.
• Recently completed acquisition of Valeport on April 10, 2024
• Consolidated Leverage Ratio improved to 1.7x
• Further reduction in gross debt with a $450m debt maturity payment made after quarter-end on April 1, 2024
• Planned capital deployment to include stock repurchases of approximately $250.0 to $300.0 m under the company’s new authorization

Teledyne today reported first quarter 2024 net sales of $1,350.1m, compared with net sales of $1,383.3m for the first quarter of 2023, a decrease of 2.4%. Net income attributable to Teledyne was $178.5m ($3.72 diluted earnings per share) for the first quarter of 2024, compared with $178.7m ($3.73 diluted earnings per share) for the first quarter of 2023, a decrease of 0.1%. The first quarter of 2024 included $49.4m of pretax acquired intangible asset amortization expense, $2.2m of pretax FLIR integration costs and $0.3m of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the first quarter of 2024 was $218.3m ($4.55 diluted earnings per share). The first quarter of 2023 included $49.7m of pretax acquired intangible asset amortization expense and $0.3m of acquisition related discrete income tax expense. Excluding these items, non-GAAP net income attributable to Teledyne for the first quarter of 2023 was $217.2 m ($4.53 diluted earnings per share). Operating margin was 17.4% for the first quarter of 2024, compared with 17.5% for the first quarter of 2023. Excluding the non-GAAP items discussed above, non-GAAP operating margin for the first quarter of 2024 was 21.2%, compared with 21.1% for the first quarter of 2023.

“We achieved record first quarter non-GAAP operating margin, adjusted earnings per share and free cash flow,” said Robert Mehrabian, Executive Chairman. “While overall orders remained strong, sales were impacted by deterioration in some of our shorter cycle imaging and instrumentation markets. We had previously assumed no full year sales growth in industrial automation as well as test and measurement markets. However, those markets weakened more than planned in the first quarter, and we now forecast full year sales in those product families to decline meaningfully in 2024. Nevertheless, we believe such sales declines will be offset by our marine, aviation and certain defense businesses resulting in flat full year sales compared with 2023. Despite those anticipated sales reductions in what are among our highest margin businesses, we believe overall operating margin will remain flat. For example, driven by organic growth and strong margin improvement at Teledyne FLIR, we were able to protect first quarter operating margin in the Digital Imaging segment despite a significant year-over-year reduction in sales related to industrial automation. Finally, given our even stronger balance sheet and record free cash flow, we believe it is an opportunistic time to add stock repurchases to our capital deployment plans.”

Review of Operations

Comparisons are with the first quarter of 2023, unless noted otherwise.

Digital Imaging

The Digital Imaging segment’s first quarter 2024 net sales were $740.8m, compared with $772.5m, a decrease of 4.1%. Operating income was $113.8m for the first quarter of 2024, compared with $122.2m, a decrease of 6.9%. The first quarter of 2024 included $2.2m of pretax FLIR integration costs, and there were no comparable costs in the first quarter of 2023. Acquired intangible amortization expense for both the first quarter of 2024 and 2023 was $45.8m. Excluding these items, non-GAAP operating income for the first quarter of 2024 was $161.8m, compared with $168.0 m, a decrease of 3.7%.

The first quarter of 2024 net sales decreased primarily due to lower sales of industrial imaging cameras and micro-electro-mechanical systems (“MEMS”), partially offset by higher sales of infrared detectors and subsystems as well as unmanned systems. The decrease in operating income was primarily due to lower sales and unfavorable product mix.

Instrumentation

The Instrumentation segment’s first quarter 2024 net sales were $330.4m, compared with $333.5m, a decrease of 0.9%. Operating income was $86.0m for the first quarter of 2024, compared with $80.7m, an increase of 6.6%.

The first quarter of 2024 net sales decrease resulted from a $15.9m decrease in sales of test and measurement instrumentation as well as a $6.8m decrease in sales of environmental instrumentation, partially offset by a $19.6m increase in sales of marine instrumentation. The increase in operating income primarily reflected the impact of higher marine instrumentation sales and improved marine instrumentation product margins.

Aerospace and Defense Electronics

The Aerospace and Defense Electronics segment’s first quarter 2024 net sales were $185.7m, compared with $173.2m, an increase of 7.2%. Operating income was $51.9 m for the first quarter of 2024, compared with $47.0m, an increase of 10.4%.

The first quarter of 2024 net sales reflected higher sales of $10.1m for aerospace electronics and $2.4m for defense electronics. The increase in operating income primarily reflected the impact of a higher percentage of segment sales being aerospace electronics, which has higher product margins.

Engineered Systems

The Engineered Systems segment’s first quarter 2024 net sales were $93.2m, compared with $104.1m, a decrease of 10.5%. Operating income was $2.7m for the first quarter of 2024, compared with $10.0m, a decrease of 73.0%.

The first quarter of 2024 net sales reflected lower sales of $10.1m for engineered products and $0.8m for energy systems. The lower sales for engineered products primarily reflected decreased sales from defense and maritime programs. The decrease in operating income was primarily driven by program mix and unfavorable estimate changes related to electronic manufacturing services contracts.

Additional Financial Information

Cash Flow

Cash provided by operating activities was $291.0m for the first quarter of 2024 compared with $203.0m, with the increase driven by stronger working capital performance in the first quarter of 2024. Depreciation and amortization expense for the first quarter of 2024 was $78.0m compared with $82.1m. Stock-based compensation expense for the first quarter of 2024 was $12.0m compared with $7.9m, with the increase related to timing of grants, including certain grants that were fully expensed in the first quarter of 2024.

Capital expenditures for the first quarter of 2024 were $15.9m compared with $24.4m. Teledyne received $9.1m from the exercise of stock options in the first quarter of 2024 compared with $10.2m.

As of March 31, 2024, net debt was $2,333.9m which is calculated as total debt of $3,246.3m, net of cash and cash equivalents of $912.4m. As of December 31, 2023, net debt was $2,596.6m representing total debt of $3,244.9m, net of cash and cash equivalents of $648.3m. Subsequent to the end of the quarter, the Company made a $450m debt maturity payment.

As of March 31, 2024, $1,128.2m was available under the $1.15bn credit facility, after reductions of $21.8m in outstanding letters of credit.

Income Taxes

The effective tax rate for the first quarter of 2024 was 20.6%, compared with 20.1%. The first quarter of 2024 reflected net discrete income tax benefits of $4.4 m compared with $6.6m. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 22.5% for the first quarter of 2024, compared with 23.0%.

Other

Corporate expense was $20.1m for the first quarter of 2024 compared with $17.4m, with the increase driven primarily by higher compensation cost, including higher stock-based compensation expenses. Non-service retirement benefit income was $2.7m for the first quarter of 2024 compared with $3.3m. Interest expense, net of interest income, was $12.7m for the first quarter of 2024 compared with $21.0m. The decrease was due to reduced outstanding borrowings with lower weighted average interest rates compared to the first quarter of 2023.

Outlook

Based on its current outlook, the company’s management believes that second quarter 2024 GAAP diluted earnings per share will be in the range of $3.57 to $3.70 and full year 2024 GAAP diluted earnings per share will be in the range of $16.02 to $16.27. The company’s management further believes that second quarter 2024 non-GAAP diluted earnings per share will be in the range of $4.40 to $4.50 and full year 2024 non-GAAP diluted earnings per share will be in the range of $19.25 to $19.45. The non-GAAP outlook excludes acquired intangible asset amortization for all acquisitions, further FLIR integration costs and acquisition-related tax matters. The company’s annual expected tax rate for 2024 is 22.5%, before discrete tax items. (Source: BUSINESS WIRE)

 

23 Apr 24. RTX beats estimates on military demand, aviation strength. Aerospace and defense major RTX (RTX.N), on Tuesday beat first-quarter earnings estimates, helped by demand for missile defense systems and strength in the commercial aftermarket business.

The aftermarket business gained as airlines had to extend the service life of aircraft to keep up with the recovery in air travel amid the limited availability of new commercial planes.

The Arlington, Virginia-based company reported revenue of $19.3bn on a per-share profit of $1.34 for the quarter.

Analysts on average had expected revenue of $18.41bn and earnings of $1.23 per share, as per LSEG data.

Pratt and Whitney, a subsidiary of RTX, reported a sales rise of 23% amid the ongoing inspection drive to check for potentially flawed components in its geared turbofan (GTF) jet engines.

The GTF engine issue relates to a powder metal used in engine parts, such as high pressure turbine disks and high-pressure compressor disks, that could result in micro-cracks and fatigue.

Following the quality crisis in some GTF engines last year, RTX estimated grounding of 350 jets annually from 2024 through 2026, outlining $6bn to $7 bn in recall cost including compensating customers for lost capacity.

Chief Financial Officer Neil Mitchill told Reuters in an interview the company’s negotiations with customers were progressing with agreements finalized with 9 customers who “represent a healthy portion of the fleet,” and 6 more in process.

More than 40 customers operate the PW 1100 engine, he said.

RTX still expects about 350 aircraft to be grounded at any time due to engine removals, “we’re essentially at the peak here in April. It will continue to be at about an average of 350 between 2024 and 2026. So, no changes to those assumptions,” Mitchill said.

Pratt’s operating profit declined as new engine deliveries offset aftermarket benefits. Engine makers often sell new units at discount to make profits over the life of the engine through aftermarket sales.

Driven by strong demand for both original equipment and aftermarket service, sales at RTX’s Collins Aerospace unit, which makes avionics and aerospace components, rose 9%.

International demand for U.S. weaponry is soaring following Russia’s invasion of Ukraine, the specter of Chinese aggression, and conflicts in the Middle East, with countries striking and negotiating new deals to buy arms and looking to speed up existing contracts.

Operating profit at RTX’s defense arm, Raytheon, jumped 74%, aided by its in-demand Patriot defense system, and gains from the divestiture of the cybersecurity, intelligence, and services business.

During the quarter, Raytheon booked a $1.2 bn order for Germany Patriot air and missile defense systems. (Source: Google/Reuters)

 

23 Apr 24. RTX Reports Q1 2024 Results. RTX delivers strong 12% sales growth; Q1 book-to-bill of 1.34 with an RTX record backlog of $202bn; Reaffirms full year outlook

RTX (NYSE: RTX) reported first quarter 2024 results.

First quarter 2024

• Sales of $19.3bn, up 12 percent versus prior year on a reported and organic* basis
• GAAP EPS of $1.28, up 32 percent versus prior year, which included $0.29 of acquisition accounting adjustments and a $0.23 benefit from net significant and/or non-recurring items and restructuring
• Adjusted EPS* of $1.34, up 10 percent versus prior year
• Operating cash flow of $0.3bn; Free cash outflow* of $0.1bn
• Gross proceeds of $1.3bn from the completion of the divestiture of Raytheon’s Cybersecurity, Intelligence and Services business
• Company backlog of $202bn; including $125 bn of commercial and $77bn of defense
• Realized $105m of incremental RTX gross cost synergies

Reaffirms outlook for full year 2024

• Sales of $78.0 – $79.0bn
• Adjusted EPS* of $5.25 – $5.40
• Free cash flow* of approximately $5.7bn

“RTX saw strong momentum in the first quarter, delivering 12 percent organic sales* growth and winning over $25bn in new orders across our businesses,” said RTX President and Chief Operating Officer Chris Calio. “We are making progress on our key priorities to deliver for customers and shareowners, including executing on our GTF fleet management plans, which remain on track.”

“We’re operating in one of the strongest demand periods in our history with a record $202 bn backlog and a portfolio of products and services which are fully aligned to our customers’ top priorities. Our focus on execution and driving performance and margin expansion is supported by our CORE operating system, and we continue to invest in operational modernization and production capacity, digital transformation and technological innovation to sustain our growth well into the future.”

First quarter 2024

RTX reported first quarter sales of $19.3bn, up 12 percent over the prior year. GAAP EPS of $1.28 was up 32 percent versus the prior year, and included $0.29 of acquisition accounting adjustments, a $0.21 benefit related to tax audit settlements, an $0.18 net gain related to the Cybersecurity, Intelligence and Services divestiture, a $0.13 charge associated with initiating alternative titanium sources, and $0.03 of restructuring and other net significant and/or non-recurring charges. Adjusted EPS* of $1.34 was up 10 percent versus the prior year.

The company recorded net income attributable to common shareowners in the first quarter of $1.7bn which included $389 m of acquisition accounting adjustments, a benefit of $285 m related to tax audit settlements, a net gain of $241m related to the Cybersecurity, Intelligence and Services divestiture, a $175m charge associated with initiating alternative titanium sources, and $44m of restructuring and other net significant and/or non-recurring charges. Adjusted net income* of $1.8bn was flat versus prior year as growth in adjusted segment operating profit* was more than offset by higher interest expense and lower pension income. Operating cash flow in the first quarter was $342m. Capital expenditures were $467 m, resulting in a free cash outflow* of $125m.

Summary Financial Results – Operations Attributable to Common Shareowners

Backlog and Bookings

Backlog at the end of the first quarter was $202 bn, of which $125bn was from commercial aerospace and $77bn was from defense.

Notable defense bookings during the quarter included:

• $1.6bn of classified bookings at Raytheon
• $1.2bn for Germany Patriot production at Raytheon
• $818m for NATO GEM-T production at Raytheon
• $623m for international GEM-T production at Raytheon
• $282m for Ukraine NASAMS production at Raytheon
• $251m for international GEM-T production at Raytheon

Segment Results

The company’s reportable segments are Collins Aerospace, Pratt & Whitney, and Raytheon.

Collins Aerospace

Collins Aerospace had first quarter 2024 reported sales of $6,673m, up 9 percent versus the prior year. The increase in sales was driven by a 14 percent increase in both commercial aftermarket and commercial OE, and a 1 percent increase in defense. The increase in commercial sales was driven primarily by strong demand across commercial aerospace end markets, which resulted in higher flight hours and higher OE production rates. The increase in defense sales was driven primarily by higher volume.

Collins Aerospace recorded operating profit of $849m, down 5 percent versus the prior year. Reported operating profit included $175m of charges related to unfavorable purchase commitments and an impairment charge as a result of initiating alternative titanium sources. On an adjusted basis, operating profit* of $1,048m was up 16 percent versus the prior year. The increase in adjusted operating profit* was primarily driven by drop through on higher commercial aftermarket volume, partially offset by unfavorable OE mix, higher space program costs and increased R&D expense.

Pratt & Whitney

Pratt & Whitney had first quarter 2024 reported sales of $6,456m, up 23 percent versus the prior year. The increase in sales was driven by a 64 percent increase in commercial OE, a 21 percent increase in military, and a 9 percent increase in commercial aftermarket. The increase in commercial sales was primarily due to higher GTF OE volume and favorable mix, and higher aftermarket volume. The increase in military sales was driven by higher sustainment volume across multiple platforms and higher development volume driven primarily by the F135 Engine Core Upgrade program.

Pratt & Whitney recorded operating profit of $412m, down 1 percent versus the prior year. The benefit of favorable commercial OE mix and drop through on higher commercial aftermarket volume was partially offset by headwinds from increased commercial OE deliveries, unfavorable commercial aftermarket mix, and the absence of a favorable $60 m prior year contract matter. Higher military volume and favorable mix was more than offset by higher R&D and SG&A expenses. On an adjusted basis, operating profit* of $430 m was down 1 percent versus the prior year.

Raytheon

Raytheon had first quarter 2024 reported sales of $6,659m, up 6 percent versus prior year. The increase in sales was primarily driven by higher volume on land and air defense systems, including Global Patriot, counter-UAS systems and NASAMS, and advanced technology programs.

Raytheon recorded operating profit of $996m, up 74 percent versus the prior year. The increase in operating profit was driven primarily by higher volume and improved net productivity, partially offset by unfavorable mix. Reported operating profit included a $375 m net gain on the sale of the Cybersecurity, Intelligence, and Services business. On an adjusted basis, operating profit* of $630m was up 8 percent versus the prior year. (Source: PR Newswire)

 

22 Apr 24. Driving Innovation: Sigma Defense Expands CJADC2 Capabilities with EWA Acquisition. Sigma Defense, a Sagewind Capital portfolio company and leading provider of advanced technology solutions for the defense sector, today announced the acquisition of EWA Inc., a prominent player in the field of Electronic Warfare (EW) headquartered in Herndon, Virginia. With over 47 years of experience in developing and delivering EW capabilities, EWA provides a comprehensive understanding of evolving threats across the electromagnetic spectrum. The acquisition of EWA will enhance Sigma Defense’s ability to deliver on the CJADC2 vision of “sense, make sense and act” delivering new capabilities to joint and coalition forces.

EWA’s long history of delivering EW technologies to the DoD and National Security stakeholders aligns with Sigma Defense’s software led approach, augmenting its CJADC2 ecosystem for collecting, analyzing, and distributing data for near real-time intelligence. This strategic move further advances Sigma Defense’s vision enabling the company to provide a comprehensive understanding of evolving threats across the electromagnetic spectrum.

Matt Jones, CEO of Sigma Defense, noted the significance of the acquisition and the impact it will have to the warfighter, stating, “We are honored to continue the amazing work that Carl Guerreri, the founder of EWA, started over 4 decades ago, and has built into a world class electronic warfare systems and solutions organization. The electromagnetic spectrum is a critical source of signature data that must be collected, analyzed, distributed, and acted on with speed, the same as all other elements of CJADC2.  Understanding the full impact of EW attack and countermeasures is a critical component against a near peer adversary, so the alignment between EWA and Sigma Defense was a natural fit that accelerates our ability to deliver new solutions for our customers. We are very proud to welcome the EWA team to the Sigma Defense family.”

“We started EWA in 1977 supporting the U.S Army Missile Intelligence Agency and over 47 years it has grown to provide electronic warfare solutions, testing and training, threat simulators and more across the U.S Army, Navy, Air Force, Space Force, and other U.S. National Security agencies,” said Carl Guerreri, Founder, CEO, and President of EWA. “We have continued to evolve to best serve the needs of our customers, and the Sigma Defense partnership represents the next step in our evolution as a company to respond to the ‘sense, make sense, and act capabilities’ requirements for CJADC2.”

The integration of EWA’s expertise and resources into Sigma Defense’s portfolio will enable the combined company to provide new and innovative approaches to address the evolving challenges faced by military and defense organizations worldwide. KippsDeSanto & Co. was the financial advisor to EWA.

For more information about Sigma Defense please visit www.sigmadefense.com.

About Sigma Defense

Sigma Defense Systems LLC is a leading technology company serving the Department of Defense (DoD) providing systems and services for JADC2, C5ISR and DevSecOps since 2006.  The company’s software-focused approach to tactical communications accelerates information collection and sharing for faster decision making and better mission outcomes.  Customers turn to Sigma Defense for engineering, program management, and data logistics services for technical solutions that encompass ground, air, and space-based systems and sensors and network and satellite communications.  Sigma is headquartered in Perry, GA with satellite offices both CONUS and OCONUS.

About EWA

EWA is a technology business providing professional services and specialized products to its customers. EWA prides itself on overcoming technological challenges and delivering on-time products for its customers. For over 47 years, EWA has been specializing in a broad array of EW products and services, including analysis, simulation and training, RF threat simulators and custom instrumentation for laboratories and OARs, signal analysis software, and embedded training hardware and software. They also provide engineering products and services in cyber defense, intelligence, security, training, tactical mission planning, information operations, wireless applications, range instrumentation, spectrum, radar development, force protection and counter-UAS solutions.

About Sagewind Capital LLC

Sagewind Capital LLC is a New York-based middle-market private equity firm that partners with exceptional management teams and focuses on significant capital appreciation by helping business grow organically and through strategic acquisitions. Sagewind invests across several industries, including government services, aerospace & defense, software, information technology, healthcare, and business services. The firm is focused on long-term capital appreciation and has the flexibility to own businesses for extended periods. For more information, please visit www.sagewindcapital.com. (Source: PR Newswire)

 

19 Apr 24. Turkish Artificial Intelligence Defense Company RobotEye Receives Investment from ARZPortfoy at a Valuation of $12.5m.

RobotEye AI, which produces next-generation smart surveillance and reconnaissance systems, secured investment from ARZ Portfoy, known for its investments in technology-based startup companies, at a valuation of $12.5m to enhance its border security solutions. This investment marks a significant step towards addressing defense and security system demands from Western Europe, North Africa, the Arabian Peninsula, and Indo-Pacific countries facing border security challenges.

RobotEye AI made a rapid entry into the intelligence, surveillance, and reconnaissance market with its

devices specially developed for vast and challenging terrains where traditional human-based border

security systems are not effective and communication infrastructure is inadequate. These innovative and smart systems offer cost-effective and fully autonomous solutions, due to specially developed, field-proven artificial intelligence algorithms. RobotEye’s command and control software platform, “Central”, smartens up legacy devices, reduces human dependency in existing defense systems, and operates as a next-generation decision support system. RobotEye’s patented flagship product “Smart Trailcam – Solo” combines satellite connectivity and on-device edge AI to secure critical crossing points. Developed for tactical and special operations units, the “Eye” System provides situational awareness independent of any communication infrastructure in the field. The system enhances the security of

special forces operating in both domestic and cross-border sensitive areas by protecting them against infiltration and sabotage threats, thus increasing their safety.

Dr. Ferit Cakici, the CEO of RobotEye AI, stated, “This investment from ARZ Portfoy will provide strong support to our company’s technology and vision. With this investment, we will accelerate our growth, expand our technological capabilities, and enhance our capacity to respond to international security needs.”

Murat Onuk, who serves as the Board Member and CEO of ARZ Portfoy, remarked, “Defense industry  ventures producing next-generation solutions that are intelligent and AI-based, requiring no human intervention, have begun to emerge worldwide. Turkish initiative RobotEye stands out in this field, filling a critical gap in border protection and surveillance with their specially designed AI-supported smart surveillance systems. We are delighted to support an innovative and visionary Turkish company like RobotEye on a global scale.” Recent security problems in various regions of the world have increased the need for AI-supported

defense technologies and highlighted the importance of companies working in this field. Companies such as Anduril Industries, Helsing, Shield AI, which attract attention with their unmanned and smart defense solutions, have already reached bn-dollar valuations. Similarly, Athens-based Lambda Automata, which operates in the same field, recently attracted attention by securing a €6M investment from European Union countries. These developments clearly show how artificial intelligence-supported defense solutions are gaining momentum worldwide. These developments clearly indicate the momentum that AI-supported defense solutions have gained globally. (Source: Defense Arabia)

 

23 Apr 24. Lockheed Martin beats Q1 expectations on strong demand, sees supply chain improvement. U.S. weapons maker Lockheed Martin (LMT.N), beat Wall Street expectations for first-quarter sales and profit on Tuesday, as simmering geopolitical tensions prompted some countries to boost their defense spending, driving demand for new weapons.

Sales in Lockheed’s missiles and fire control unit jumped 25.3% to nearly $3bn, boosted by strong demand for high mobility artillery rocket system (HIMARS) and guided multiple launch rocket system (GMLRS), key weapons used by Ukraine in its conflict with Russia.

“We saw strong labor and material throughput, indicative of an improving supply chain,” Lockheed CFO Jay Malave said on the post-earnings conference call on Tuesday.

Sales in the company’s aeronautics business, its biggest unit and which makes the F-35 fighter jets, rose 9.2% to $6.85bn.

“These first-quarter results reinforce our confidence in our ability to achieve the full-year financial expectations we set in January,” CEO Jim Taiclet said in a statement.

It had forecast full-year net sales of $68.5bn to $70bn and profit of $25.65 to $26.35 per share.

It started the year with a quarterly profit of $6.39 per share, well above analysts’ expectations of $5.83 per share, according to LSEG data.

The delay in resuming deliveries of its marquee F-35 jet to Pentagon due to the TR-3 software upgrade has left Lockheed with fighter jets in its inventories.

TR-3 refers to a series of enhancements to the F-35, encompassing improved displays, increased computer memory and enhanced processing capabilities.

“The test results to date support our expected timeline of delivering the first TR-3 combat training-capable aircraft in the third quarter and then transition to a fully combat-capable aircraft in 2025,” Taiclet said.

Lockheed’s first-quarter net sales rose 14% to $17.2bn, also beating analysts’ expectations of $16.02bn.

Last week, the U.S. Missile Defense Agency said Lockheed won a $17bn contract to develop the next generation of interceptors to defend the United States against an intercontinental ballistic missile attack.

(Source: Reuters)

 

23 Apr 24. Lockheed Martin Reports First Quarter 2024 Financial Results.

• Net sales of $17.2bn
• Net earnings of $1.5bn, or $6.39 per share
• Cash from operations of $1.6bn and free cash flow of $1.3bn
• $1.8bn of cash returned to shareholders through dividends and share repurchases
• Reaffirms 2024 financial outlook

Lockheed Martin Corporation [NYSE: LMT] today reported first quarter 2024 net sales of $17.2bn, compared to $15.1bn in the first quarter of 2023. Net earnings in the first quarter of 2024 were $1.5bn, or $6.39 per share, compared to $1.7bn or $6.61 per share, in the first quarter of 2023. Cash from operations was $1.6bn in both the first quarters of 2024 and 2023. Free cash flow was $1.3bn in both the first quarters of 2024 and 2023. First quarter 2024 results included 13 weeks compared to 12 weeks for first quarter 2023.

“Our strong start to 2024 demonstrates our continued success designing, developing and delivering 21st Century Security solutions in support of integrated deterrence for customers around the world. These first quarter results reinforce our confidence in our ability to achieve the full year financial expectations we set in January,” said Lockheed Martin Chairman, President and CEO Jim Taiclet. “First quarter sales increased significantly year-over-year and we generated robust free cash flow of nearly $1.3bn, while taking assertive actions to further strengthen production capacity. In addition, we continued our disciplined and dynamic capital deployment by investing over $700m into R&D and capital projects and returned significant capital to shareholders through dividends and share repurchases as we remain committed to delivering meaningful free cash flow per share growth over the long-term.

“Our $159bn backlog includes several large National Security Space awards in the quarter and attests to the breadth of our portfolio, depth of our technical expertise, and understanding of our customers’ needs. These capabilities uniquely position us to lead the realization of joint all domain operations, including reliable battle management and command and control systems integrated across multiple domains, military services, and allied forces. We remain exceptionally focused on the execution of the F-35 program, working with our customers and suppliers to implement TR-3 capabilities, and are encouraged by the progress towards delivery of the first TR-3 configured aircraft. The innovation and open architecture solutions across our portfolio enable customers worldwide to stay prepared and agile amidst an ever-changing threat environment.”

Cash Flows and Capital Deployment Activities

Cash from operations in the first quarter of 2024 was $1.6bn and capital expenditures were $378m, resulting in free cash flow of $1.3bn. The operating and free cash flows for the first quarter of 2024 were comparable to the same period in 2023.

The company’s cash activities in the quarter ended March 31, 2024, included the following:

• paying cash dividends of $780m;
• paying $1.0bn to repurchase 2.3m shares; and
• receiving net proceeds of $2bn from a debt issuance of senior unsecured notes, consisting of $650m aggregate principal amount of 4.50% Notes due 2029, $600m aggregate principal amount of 4.80% Notes due 2034 and $750m aggregate principal amount of 5.20% Notes due 2064.

Segment Results

The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the company’s business segments and reconciles these amounts to the company’s consolidated financial results.

Net sales and operating profit of the company’s business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation and not included in management’s evaluation of performance of each segment. Business segment operating profit includes the company’s share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of the company’s business segments.

Business segment operating profit excludes the FAS/CAS pension operating adjustment, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, intangible asset amortization expense, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from the company’s business segments and its consolidated operating profit.

Changes in net sales and operating profit generally are expressed in terms of volume, contract mix, and/or performance (referred to as profit adjustments). Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. Contract mix refers to changes in the ratio of contract type or life cycle (e.g., cost-type, fixed-price, development, production and/or sustainment). In addition, comparability of the company’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the company’s contracts. Increases in profit booking rates, typically referred to as favorable profit adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit adjustments. Increases or decreases in profit booking rates are recognized in the period they are determined and reflect the inception-to-date effect of such changes.

The company’s consolidated net favorable profit booking rate adjustments represented approximately 11% and 25% of total segment operating profit in the quarters ended March 31, 2024 and March 26, 2023. The decrease in the net favorable profit booking rate adjustments was driven by a $100 m reach-forward loss recognized on a classified program at MFC after updating the company’s assessment of the likelihood that the options may be exercised and concluded that an option would be exercised based on progress made on the program and discussions with the customer. In addition to this reach-forward loss, net favorable profit booking rate adjustments were lower by $120 m, see the discussion below.

Aeronautics

Aeronautics’ net sales in the first quarter of 2024 increased $576 m, or 9%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $305m on the F-35 program due to higher volume on production, development and sustainment contracts; $155m on classified programs driven by higher volume; and $60m on the F-16 program due to the ramp up on production.

Aeronautics’ operating profit in the first quarter of 2024 was comparable to the same period in 2023. Operating profit increased $50m on the F-16 program as operating profit for the first quarter of 2023 reflects the impact of unfavorable profit adjustments on a production contract and sustainment contracts as a result of schedule delays related to software and technical specification risks that did not recur in the first quarter of 2024. This increase was partially offset by lower operating profit of $30m on the F-35 program primarily due to lower net profit adjustments on production contracts as a result of higher than anticipated material costs, partially offset by higher volume described above. Total net profit booking rate adjustments were $40m lower in the first quarter of 2024 compared to the same period in 2023.

Missiles and Fire Control

MFC’s net sales in the first quarter of 2024 increased $605 m, or 25% compared to the same period in 2023. The increase was primarily attributable to higher net sales of $460 m for tactical and strike missile programs due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS), High Mobility Artillery Rocket System (HIMARS), Joint Air-to-Surface Standoff Missile (JASSM) and Long Range Anti-Ship Missile (LRASM) programs; and $100m for integrated air and missile defense programs primarily due to higher volume on PAC-3 and Terminal High Altitude Area Defense (THAAD).

MFC’s operating profit in the first quarter of 2024 decreased $66 m, or 18%, compared to the same period in 2023. The decrease was primarily attributable to lower operating profit for tactical and strike missile programs due to a $100 m reach-forward loss recognized for an option on a classified program and an unfavorable profit adjustment on HELLFIRE as a result of additional costs expected to be incurred associated with a contract claim, partially offset by the production ramp up described above. Total net profit booking rate adjustments, inclusive of the $100 m loss described above, were $120m lower in the first quarter of 2024 compared to the same period in 2023.

Rotary and Mission Systems

RMS’ net sales in the first quarter of 2024 increased $578 m, or 16% compared to the same period in 2023. The increase was primarily attributable to higher net sales of $295 m on integrated warfare systems and sensors (IWSS) programs due to new program ramp up within the laser systems portfolio and higher volume on the Aegis and radar programs; $150m for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to higher volume; and $100m for Sikorsky helicopter programs due to higher volume on Seahawk and CH-53K programs.

RMS’ operating profit in the first quarter of 2024 increased $80m, or 23%, compared to the same period in 2023. The increase was primarily attributable to higher operating profit of $40m on IWSS programs due to higher volume described above and a favorable profit rate adjustment as a result of the delivery of a ground-based radar which retired the technical risk; and $25m on Sikorsky helicopter programs due to higher volume described above and higher margins due to contract mix, partially offset by unfavorable profit adjustments on Seahawk programs. Total net profit booking rate adjustments were $30m lower in the first quarter of 2024 compared to the same period in 2023.

Space

Space’s net sales in the first quarter of 2024 increased $310m, or 10%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $140m for strategic and missile defense programs due to higher volume on Fleet Ballistic Missile (FBM) and ramp up in the hypersonic and Next Generation Interceptor (NGI) development programs; and higher net sales of $115m for national security space programs due to higher volume on Transport Layer and GPS III programs and ramp up on the Tracking Layer program.

Space’s operating profit in the first quarter of 2024 increased $45m, or 16%, compared to the same period in 2023. The increase was primarily attributable to $30m of higher equity earnings from the company’s investment in United Launch Alliance (ULA) due to higher launch volume, and higher operating profit of $20m on strategic and missile defense programs due to the higher volume described above. These increases were partially offset by lower operating profit of $25 m for national security space programs due to the impact of lower net favorable profit adjustments on Next Gen OPIR as a result of the timing of the award and incentive fee assessments. Total net profit booking rate adjustments were $30m lower in the first quarter of 2024 compared to the same period in 2023.

Total equity earnings/(losses) (primarily ULA) represented approximately $15m or 5% in the first quarter of 2024, compared to approximately $(15)m or (5)% for the same period in 2023.

 

23 Apr 24. PLD Space achieves 120m euros in funding.

• The company has obtained 78m in funding, in addition to the 42m awarded by the Plan for Recovery and Transformation (PERTE) for the Spanish space launcher.
• The funds will mainly be allocated to create the first Spanish factory producing space rockets in series, located in Elche (Spain), as well as to expand the team in the areas of production, supply chain and quality.
• Furthermore, the company will be multiplying by five its capacity to test integrated engines and launchers, thereby boasting the biggest private infrastructure in Europe for designing, manufacturing, testing and launching space rockets.
• PLD Space is continuing to work with the French Space Agency CNES to build the MIURA 5 launch base in French Guiana this year.

The Spanish company PLD Space has attained 120m euros in funding to date, thus ensuring it can meet its upcoming technological and corporate milestones, culminating in the launch of the MIURA 5 mission at the end of 2025.

The company, which made history in October 2023 with the successful flight of MIURA 1, has today received 78 m euros for investment from shareholders who have placed their trust in its proven technological programme and solid business model. In addition to this sum, there are 42 m euros from the PERTE backed by the Government of Spain for a Spanish space launcher, which it was awarded at the end of January 2024.

PLD Space’s investor profile is industrial and qualified institutional, such as Aciturri or the Centre for the Development of Industrial Technology (CDTI) through its Innvierte programme, which provides both financing and strategic know-how.

“The funding for our work has been one of the most difficult tasks in developing our MIURA family of rockets. Despite this, the successful launch of MIURA 1 has bolstered our position as leaders in the industry, an achievement acknowledged by investors and clients,” says the CBDO and co-founder of PLD Space, Raúl Verdú. “PLD Space is a company that delivers what it promises, and we are working hard to achieve the first orbital launch of MIURA 5, which would not be possible without the trust of our shareholders, clients, team and suppliers.”

Infrastructure and corporate expansion

The funds attained will mainly be earmarked to ensure the expansion of PLD Space’s infrastructure, as well as its corporate structure. Specifically, the firm will be multiplying the size of its facilities by five, growing from 169,000 to 834,000 square metres.

Within this industrial expansion plan, the company intends to inaugurate the first serial space rocket factory in Spain in mid-2024. The facilities will also enable vertical integration of the launchers. The industrial site, whose building work is already underway, will house the factory for the first MIURA 5 units as well as the company’s head offices. In total, PLD Space will be able to count on 18,400 square metres of industrial facilities in Elche (Alicante).

The Spanish company’s plan for growth also includes the next phase to extend its test facilities, which will grow from 154,000 to 800,000 square metres. PLD Space is thus bolstering one of its competitive strengths by possessing its own facilities, thereby lending flexibility in carrying out its testing campaigns, as well as in cutting development times and improving cost effectiveness.

Also scheduled for 2024, construction work is to begin on the launch base at the European CSG spaceport in Kourou (French Guiana), which belongs to CNES. This site, covering over 15,700 square meters, will host MIURA 5’s first launches.

Together, these industrial facilities mean that PLD Space will own the largest private infrastructure in Europe for designing, manufacturing, testing and launching space rockets.

On the corporate side, the company plans to expand its workforce to 300 employees by the end of the year, a goal that is progressing at a good pace. Whereas 2024 began with 161 people in the team, today there are now 194 professionals. This growth has taken place most notably in the areas of production, the supply chain and quality.

Throughout 2025, the focus will be on testing and launching the first MIURA 5 unit on its maiden flight. The company is expected to begin commercial activity in 2026 with the ultimate goal of exceeding 30 launches a year by 2030.

About PLD Space

PLD Space is a pioneering Spanish aerospace company and a benchmark reference in Europe for developing reusable rockets. With a solid reputation and steadfast commitment, the company has produced MIURA launcher family. These innovations position Spain among the select few nations capable of successfully deploying small satellites into space.

PLD Space was founded in 2011 by Raúl Torres and Raúl Verdú with the aim of facilitating access to space. The company, based in Elche (Alicante) and with technical facilities in Teruel, Huelva and French Guiana, has a team of more than 190 professionals.

 

15 Apr 24. Aerospacelab acquires AMOS. Aerospacelab has acquired AMOS, known for their opto-mechanical systems that are widely used in space, astronomy and other industries. With a unique approach to vertical integration, this acquisition will reinforce Aerospacelab and AMOS’ market reach and product offerings throughout the access to a wider range of solutions to meet the diverse needs of customers across various sectors including telecommunications, Earth Observation (EO), navigation, astronomy, scientific research and industry.

“This strategic acquisition represents a pivotal moment for both organizations as we combine our expertise, resources, and talents to accelerate technological advancements in satellite manufacturing and deployment,” said Benoit Deper, CEO of Aerospacelab. “Together, we aim to foster a culture of innovation that will drive the development of cutting-edge space technologies, ensuring we remain at the forefront of the industry. By leveraging the talent and resources of the AMOS team alongside Aerospacelab’s extensive products portfolio including turnkey satellites, satellite platforms, avionics and subsystems, the ultimate objective is to establish a path towards efficient and affordable access to space.”

“This new chapter of growth and innovation reaffirms our commitment to adaptability and embracing change in order to thrive in the dynamic business landscape,” said Damien Kaivers, CEO of AMOS. “We bring 40 years of deep expertise in a wide variety of critical optical technologies for space and ground applications. Together, we will explore clear synergies to craft innovative solutions to meet our customers’ needs and continue to strengthen the legacy business of AMOS such as professional astronomy, institutional space and test facilities.”

About Aerospacelab

Founded in 2018, Aerospacelab is an emerging figure in the aerospace sector, showcasing a remarkable achievement of 8 satellites successfully deployed in orbit. We pride ourselves on our dedication to vertical integration and TRL9 implementation, solidifying our commitment to driving innovation in the space industry. With our operations strategically placed in various locations, including the US, Aerospacelab remains steadfast in its mission to deliver pioneering solutions for our diverse customer community.

About AMOS

For more than 40 years, AMOS has been designing and building solutions in the fields of professional astronomy, space-based Earth Observation and scientific exploration, test systems and opto-mechanical solutions for laboratories and industry. Its main achievements are professional telescopes, space optical instruments, test equipment for space sensors, thermal-vacuum chambers, complex optomechanical and high-precision mechanical ground support equipment. It employs today about 100 employees highly skilled in advanced technologies. The company has a worldwide reputation for its professional telescopes, its optics manufacturing capabilities, and the performance of its optical systems. Next to its large customer base in Europe, United States, India or Chile, AMOS continues to expand its activities in other geographies such as Turkey to name but a few. (Source: Satnews)

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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Sponsored by SPX CommTech (TCI & ECS)

 

www.tcibr.com

 

www.enterprisecontrol.co.uk

 

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18 Apr 24. Time to look at blue chip defense stocks as Middle East tensions rise.

• The rising global unrest in the Middle East and the Ukraine/Russia war combined with sticky inflation numbers has stopped the rally of the US S&P 500 index to 5,123.41 levels from an ATH 5,264.85. It was the second week in a row when the index lost some ground.

It posted its largest weekly loss of –1.55% YTD. The 50-day moving average is at 5,111.17, which will be tested in the coming weeks. The 100-day MA is at 4,910.93 at time of writing, or -12.5%, and the 200-day MA at 4,659.14 or -16%, again at time of writing.

2024 is turning out to be very successful year for our US stock picks, after we started the US column last September. My personal picks have enjoyed great success with one exception – in order of the pick:

• September: Nvidia [NASDAQ:NVDA] ($462.41 to $881.86 +90.7%,
• October: Skechers [NYSE:SKX] $48.29 to $56.17 +16.3%,
• November: Palantir Technologies [NYSE:PLTR] $17.79 to $22.67 +27.4%,
• December: General Dynamics [NYSE:GD] $244.83 to $287.87 +17.6%
• January: Palo Alto Networks [NASDAQ:PANW] $340 to $279.07 -17.9%
• February: Live Nation Entertainment [NYSE:LYV] $88 to $101.04 +14.8%
• March: Meta Platforms [NASDAQ:META] $506 to $511.90 +1.2%

This compared to the US S&P 500 index over the period from the end of August, 4,514.87 to 5,123.41 being up +13.5% (all data April 12th, 2024).

This is all since we started the column in September 2023; it goes to show that stock picking using fundamental research and analysis can pay off – and you can beat the market – with six out of eight of my picks beating the market: this is a total equally weighted alpha return of 18.8% including PANW’s loss and META’s small gain beating the market’s return of 13.5% by 5.3%. (Source: https://www.thearmchairtrader.com/)

 

18 Apr 24. New fund looks to invest $1bn into Australian defence industry. Periscope Capital Partners, launched 18 April, aims to invest $1bn of Australian private capital into defence industry over the coming decade, supporting the pipeline of military technology into the Australian Defence Force.

A new Australian private equity fund has launched (18 April) to support Australian defence businesses access private capital.

Periscope Capital Partners, headed by managing partner Mark Stevens, is a sovereign, specialised defence and national security fund focused on supporting the development of Australian sovereign capability.

According to a company spokesperson, the fund aims to address the industry’s most significant business development issues including a lack of access to private capital.

The fund is looking to invest $1bn of Australian private capital into industry over the next decade, while looking to bolster Australia’s ongoing commitments to AUKUS Pillars 1 and 2.

Periscope’s team, headed by Stevens, has over 100 years of collective experience in Defence and national security advisory, and has conducted over 70 private capital deals.

A company spokesperson explained that developing Australian capability is critical to Australia’s security with regional conflict anticipated in the region from 2027.

“We want to ensure that Australian defence industry realises its full potential. By deploying significant capital into these businesses, we will build sovereign capability while keeping supply chains, jobs, and profits in Australia,” Stevens said.

“Periscope is not just a ‘fund of funds’, we are cultivating an ecosystem that nurtures and accelerates the growth of Australia’s defence capabilities to contribute to AUKUS through strategic partnerships and direct capital support.”

In working with partners, the company aims to bridge the gap for companies between early-stage funding and capital market support, and support developing technology pipelines with the ADF.

“Periscope is aligned with the aims of the government’s Defence Industry Development Strategy (DIDS) and can sit alongside the Advanced Strategic Capabilities Accelerator (ASCA) and other government initiatives and play its role in revitalising defence industry by directing private capital to enhance sovereign innovation,” Stevens said. (Source: Defence Connect)

 

18 Apr 24. Fujitsu announces new cyber security consulting division.

IT giant Fujitsu launches trans-Tasman Fujitsu cyber security services consulting team.

Multinational IT and communications firm Fujitsu has announced a new cyber security division focused on Australia and New Zealand.

The new Fujitsu cyber security services division will provide a range of services, including consulting and assurance, AI-enhanced security services, digital forensics, and cyber security assessments.

The service is aimed at assisting Oceanic organisations navigate their cyber security needs as they evolve.

“Organisations of all sizes are increasingly facing cyber threats,” said Graeme Beardsell, chief executive officer Asia-Pacific at Fujitsu, in a statement.

“Fujitsu cyber security services will support firms to prepare and respond to the most pressing data security challenges today. Our integrated team of experts provides comprehensive, tailored solutions, from advanced threat intelligence to rapid response mechanisms. By unifying our firm’s regional expertise, Fujitsu offers a unique strategic advantage, enabling our clients to focus on their core business with the assurance of robust cyber resilience.”

The creation of the new division comes off the back of several recent regional acquisitions, including cyber security specialist MF & Associates, Microsoft cloud security provider oobe, and Enable, APAC’s largest ServiceNow provider.

Stuart Kilduff, head of Fujitsu cyber security services, said the new division is “backed by Fujitsu’s legacy of innovation”.

(Source: Defence Connect)

 

16 Apr 24. Qinetiq shares lose momentum. Growth in the Avantus Federal business was “modest” in its second half.

• Earnings forecasts remain upbeat
• Shares trade at discount to five-year average

Shares in defence technology group Qinetiq (QQ.) took a dive after the company warned that market conditions had remained “difficult” in the US. Over the second half of its financial year, growth at Avantus Federal – the company it spent $590m (£348m) on in August 2022 – was described as “modest” when compared with the first half.

Outside the US, Qinetiq has continued to perform well and said full-year expectations remain in line with analysts’ forecasts, which look decent. Company-compiled estimates show revenue is expected to grow by 19 per cent to £1.88bn for the year just ended, while underlying operating profit before research and development (R&D) credits is set to increase by 18 per cent to £211mn. New orders continue to outrun revenue growth, too, with the company achieving a book-to-bill ratio of 1.1 times.

The company also remains bullish on hitting longer-term goals. In October last year, it spelled out a plan to grow revenue by 7-9 per cent a year while maintaining stable margins of 11-12 per cent and converting 90 per cent of the ensuing profits into cash. So a 7 per cent slide in its shares, dragging the price over a 12-month period down 6 per cent, is perhaps more reflective of the prevailing mood around European defence stocks, which have sold off in recent days.

FactSet consensus forecasts are for Qinetiq’s earnings to grow by 4 per cent for the financial year just ended and by a further 11 per cent this year to 30.5p by next March. Using the latter figure, the shares trade at 11 times earnings – a discount to their five-year average of 14 times and well below peer ratings. Last IC view: Buy, 337p, 16 Jan 2024. (Source: Investors Chronicle)

 

16 Apr 24. James Fisher swings to a loss but there are positive signs.

• The exit of lower-margin marine transportation contracts
• Goodwill impairment and increased net financing expenses

It might be slightly crude to liken James Fisher’s (FSJ) full-year assessment to a post-operative review, but management believes that the divestiture of non-core businesses has already resulted in streamlined manufacturing and supply chain functions. But it’s debatable whether this rationalisation has had a pronounced impact on financial performance, although it could conceivably be a question of timing.

Management notes that the sale of the engineering group’s nuclear decommissioning business negatively impacted the refinancing of its bank debt with all the attendant problems that entails. The sale was completed for a nominal sum, and a £6.4mn provision was included in the results to cover potential claims/settlements under parent company guarantees. Arguably, the difficulties here show why the successful implementation of the group’s strategic objectives necessitates beefed-up risk management functions, presumably a priority for the new chief financial officer, Karen Hayzen-Smith.

There were mixed outcomes in terms of trading volumes. The energy and defence divisions performed creditably, although new business at the latter division was constrained due to delays in customer procurement processes. Another rationalisation measure – the exit of lower-margin maritime transportation contracts – had a negative impact on the top line, although, by definition, it will be a temporary effect.

The group swung to an operating loss of £18.6m against a profit of £24.7m in the prior year. Management highlighted a “stronger underlying business performance”, but James Fisher headed into negative territory due to a £28mn goodwill impairment, coupled with increased net financing expenses.

There were certainly positives from an operational perspective, and an adjusted forward rating of 14 times consensus earnings isn’t prohibitive given implied price/earnings (PE) ratings over the following two financial years, but the debt overhang casts a long shadow. Sell. Last IC view: Sell, 345p, 21 Sep 2023. (Source: Investors Chronicle)

 

16 Apr 24. Cicor records solid growth in the first quarter and further strengthens its position in the core markets. The Cicor Group (SIX Swiss Exchange: CICN) continued to grow in the first three months of the year. Quarterly sales increased by 11.8% to CHF 107.3m compared to the first quarter of the previous year (Q1/2023: CHF 96.0m). Despite the current economic weakness, the Cicor Group achieved slight organic sales growth of 0.3% and a book-to-bill ratio of 1.0 before acquisitions. The main contribution to growth came from STS Defence (STS), which has been consolidated since January 24, 2024. Due to the aperiodic order intake in the aerospace & defence market – important projects had been won in the months prior to the integration – STS has only recorded a small number of new orders since the acquisition. As a result, new orders in the first quarter of 2024 amounted to CHF 97.4m (Q1/2023: CHF 95.0m), corresponding to a book-to-bill ratio of 0.9. Cicor thus continues to have a very high order backlog, which is almost equivalent to one year’s sales. Effective March 31, 2024, Cicor became the European market leader in the production of high-end electronics for the aerospace and defence sector and achieved market leadership in the UK through the acquisition of the three production sites of TT Electronics in the UK and China and the previously acquired companies Axis Electronics (integration 2021) and STS Defence (integration 2024). With these acquisitions and the integration of Evolution Medtec in February 2024, Cicor has taken another step forward in implementing its strategy to become the European market leader in the core markets of medical, industrial and aerospace & defence. Sustainable acquisitions and organic growth will continue to play an important role in Cicor’s strategy, as the company sees attractive opportunities to create value in a highly fragmented market. Cicor is very well positioned and is benefiting from the dynamic developments in its three core markets. Cicor expects business to increase in the second half of the year. Provided that geopolitical, economic and financial conditions do not deteriorate significantly, Cicor continues to expect sales growth to CHF 460-500 m and an EBITDA margin in the target range of 10-13% for the full year 2024. The current guidance includes the contribution of the companies acquired in the first quarter. (Source: Google/https://www.eqs-news.com/)

 

15 Apr 24. Leonardo close to selling submarine unit WASS to Fincantieri. Italian defence group Leonardo (LDOF.MI), is close to finalising a deal to sell its submarine unit Whitehead Alenia Sistemi Subacquei (WASS) to shipbuilder Fincantieri (FCT.MI), Leonardo’s chief executive said on Monday.

“We are talking days, not months,” Leonardo CEO Roberto Cingolani told reporters in the port city of Genoa, in remarks confirmed by a spokesperson.

The deal, expected to be worth between 200m and 300m euros ($213m-$320m), would be part of Fincantieri’s broader strategy to grow through acquisitions and focus more on the fast-growing defence sector and strengthen its position in the underwater business.

Cingolani said there had been a slowdown in negotiations due to “temporary resistances” from internal managers, but added that he was in direct contact with his counterpart, Fincantieri’s Pierroberto Folgiero, on the deal.

Both companies are state-controlled.

Financial newspaper Milano Finanza reported on Saturday that the negotiations, though at an advanced stage, were being slowed by disagreements over the price of WASS and the scope of assets and employees covered by the deal. ($1 = 0.9382 euros) (Source: Reuters)

 

15 Apr 24. Accenture Federal Services to Acquire Cognosante. Accenture Federal Services has entered into an agreement to acquire Cognosante, a mission-driven provider of digital transformation and cloud modernization solutions for federal health, defense, intelligence, and civilian agencies. Founded in 2008 by Michele Kang, Cognosante has grown rapidly to become a trusted provider of innovative technology solutions with its federal government clients, including healthcare programs supporting veterans, active-duty military, patients, beneficiaries, providers, and payors. The company has an exemplary delivery track record powered by technology expertise, cloud modernization and migration capabilities, and exceptional program management. Cognosante is recognized for providing great user experiences, making healthcare more accessible and equitable, and maximizing the value of federal government investments.

“We are continually innovating and investing to help federal agencies stay ahead of the ever-changing needs of their mission and customers,” said Accenture Federal Services CEO John Goodman. “Accenture Federal Services is excited to welcome the Cognosante team. We are truly impressed with their people, capabilities, and impact. Together, we will deliver on the promise of technology for the nation’s priorities.”

Cognosante’s team of more than 1,500 people will join Accenture Federal Services’ more than 14,000 people to reimagine how work gets done, solve critical challenges, and create meaningful change.

“The Cognosante team is thrilled to embark on this next chapter of our remarkable journey,” said Kang. “I am grateful for the extraordinary group of past and present employees and clients who made Cognosante what it is today. As we explored ways to continue to scale and grow, we could not have found a better home than Accenture Federal Services. The company shares our commitment to its clients and people and has industry-leading capabilities, talent, speed, and scale. We look forward to continuing to help our clients modernize, enable the future mission, and enhance the lives of millions of people.”

The completion of the acquisition is subject to regulatory review and other customary closing conditions. Terms of the transaction were not disclosed.

Accenture Federal Services is a wholly owned subsidiary of Accenture (NYSE: ACN).

About Accenture Federal Services

Accenture Federal Services is a leading US federal services company and subsidiary of Accenture LLP. We empower the federal government to solve challenges, achieve greater outcomes, and build a digital core that is agile, smart, and secure. Our more than 14,000 people are united in a shared purpose to advance our clients’ mission-critical priorities that make the nation stronger and safer, and life better for people. We draw out the best of Accenture’s global network in nearly every industry, bringing proven commercial innovation to solutions built with advanced R&D, emerging technologies, and human-centered design at speed and scale. Together, we help clients create lasting value for their workforce, customers, and partners and make a difference for the country and our communities. See how we make change that matters at accenturefederal.com. (Source: BUSINESS WIRE)

 

09 Apr 24. KNDS, a leading European manufacturer of military land systems based in Amsterdam, has formally renamed its Group companies Krauss-Maffei Wegmann GmbH & Co. KG and Nexter Systems S. A. with effect from 8 April 2024. Krauss-Maffei Wegmann GmbH & Co. KG now operates as KNDS Deutschland GmbH & Co. KG, Nexter Systems S. A. as KNDS France S. A. As part of these renamings, the names of the German, French, British, Italian and Belgian subsidiaries of KNDS France and KNDS Germany have also been legally adapted. For all other subsidiaries of the Group, the name changes will be implemented by the end of 2024. The previous brand names had already been replaced by the ‘KNDS’ brand in June 2023. The legal name changes required special coordination with authorities, customers and suppliers. They were therefore implemented in a second step. (Source: www.joint-forces.com)

 

14 Apr 24. Czech arms maker CSG chief eyes place on global stage. Michal Strnad, who a decade ago became head of CSG, a family defence business, is closing in on buying U.S. ammunitions maker Kinetic Group that will transform a company that started by buying tanks for scrap into a key player in the global arms market.

But first Strnad, the 31-year old Czech, owner and chairman of the Czechoslovak Group (CSG) — a large supplier to Ukraine — needs to fend off a rival offer for Kinetic parent Vista Outdoor (VSTO.N), to get control of around 20 percent of the West’s small ammunitions market and nearly double its revenue from last year’s 1.7 bn euros.

“We are a long-term strategic investor that wants to take it private to build it and grow it and invest in new capacity and technology,” Strnad told Reuters in an interview on Friday. “We will not just come and shake the company for the money and try to squeeze it.”

The privately-held company, which employs more than 10,000 workers at 37 sites in Europe and the United States, has made a $1.91 bn all-cash offer for Kinetic Group, formerly known as the Sporting Products, which includes its ammunition production business.

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Vista Outdoor has agreed to the CSG bid, which needs clearance from shareholders in May, and approval from Committee on Foreign Investment in the United States.

The company has also received a revised unsolicited $3 bn all-cash bid deal from investment firm MNC capital, after rejecting a previous offer from the firm.

Strnad, whose net worth more than doubled last year to $4.4 bn according to Forbes, said his company’s offer makes sense for a privately-held company like his not answerable to shareholders that has the financial wherewithal to utilise and expand capacity and withstand what he called “peaks and valleys” in the industry.

Taken together with the 2022 acquisition 70% of Italy’s small-calibre ammunition maker Fiocchi Munizioni, the deal would make CSG the biggest player in that market in the world outside China and Russia, Strnad said.

“There is big space to improve efficiency and invest into automation, new production lines and machines,” said Strnad, who sees the deal giving the Czech company entry into the market for government contracts in the United States and elsewhere.

FROM SCRAP TO GLOBAL PLAYER

Strnad’s father Jaroslav started the business in the 1990s after the Cold War, buying Soviet-era military equipment, initially meant for scrapping. He then turned to refurbishing it, and slowly growing the company from a small outfit with family members.

The father stepped away in 2013 and handed CSG leadership to then 21-year old Strnad, who started working at the company in high school and has overseen its growth into a major producer in the European Union and exporter to over 50 markets including many fellow NATO member states.

“I finished school when I was 18… at 1 p.m. I got in the car and went to the factory to work,” said Strnad whose first job at the company was working in a storage warehouse with his grandmother during summer holidays when he was just 13.

The fast growth under Strnad accelerated in 2022 following Russia’s invasion of Ukraine because the company was able to supply refurbished Soviet-era tanks as well as new equipment, and quickly ramped up shell production.

Core earnings more than doubled in 2023 to 439 m euros and CSG forecast continued strong demand for its heavy military equipment and large-caliber ammunition as countries ramp up defence spending amid the war in Ukraine.

Strnad said the company plans to tap its war chest for some additional acquisitions, though nothing the scale of Vista.

“We would like to grow in all of our divisions in the group,” said Strnad who said targets in the defence industry had big premiums these days. “In each group there are small or bigger acquisitions. Some are vertical while some are buying competitors.”

ARTILLERY BACKLOG

Where Strnad said the company has seen huge growth due to Ukraine is the production of large calibre ammunition, where its annual capacity has increased 10-fold to more than 500,000 rounds of tank and various artillery rounds, which is a significant part of current European capacity.

“We have invested hundreds of millions of euros since the start of the war in capacity,” Strnad said.

He said the company now had a backlog of artillery orders for six years and was investing further into new capacity at its plants in Slovakia, Spain and Serbia.

Strnad said CSG also planned to restart and idle gun powder and nitrocellulose production line at an Italian factory, in cooperation with the Italian government, to address what he called a huge bottleneck for European ammunition makers.

The company, which also makes howitzers, armoured vehicles or multiple rocket launchers sees promising markets Asia, the Middle East and Africa but also Ukraine where it has been exploring joint ventures with Ukrainian companies.

While the war makes it difficult to set up shop now, Strnad believes that the help and good will his company and the Czechs have received for supplying weapons and equipment to Ukraine can translate into an important foothold in the nation’s future defence industry.

“In the long term or mid term we would like to localize and help them with their own defence industry,” Strnad said. (Source: Reuters)

 

14 Apr 24. DroneShield Limited (ASX:DRO) (“DroneShield” or the “Company”) released its business update and Appendix 4C for the three-month period ended 31 March 2024.

Highlights

• 1Q24 revenues of $16.4m, up 10x vs 1Q23 ($1.6m)

o Exceptional ongoing momentum, following reaching $9.3m profit after tax in 2023

• 1Q24 customer cash receipts of $7.1m, up vs 1Q23 ($7m)

o Highest ever March quarter

• The main difference between revenues and cash receipts in 1Q24 was due to US Government orders where deliveries took place in 1Q24, and payments due in 2Q24 (30 days past delivery), a substantial portion of which has now been received
• Strong start to 2024 given strong seasonality in revenues and cash receipts, with the March quarter being the slowest period

o This is due to most payments being from US Government, with typical net30 payment terms (and December and January being generally quieter months), hence only one “business as usual” month of February being captured under net30 in the March quarter cash receipts)

o End of calendar year often corresponds to the start of a new budget cycle for many customers

o Accordingly, the cost base of the business reflects annual rather than first quarter revenues

• 1Q24 SaaS revenues doubled to $561k vs 1Q23 ($239k)

o SaaS growth underpinned by customers requiring Company’s latest AI software engines, upgraded quarterly, in response to a rapidly evolving drone threat

o Additional SaaS based solutions planned for launch in the next 12 months

• Cash balance of $56.4m as of 31 March 2024, no debt or convertibles

o Committed supply chain payments for inventory of $35.4m over the next 9 months

o DroneShield hardware carries sophisticated componentry (which assists high margins and competitive differentiation), driving requirement for componentry purchasing in advance due to the build time

• $27m contracted backlog and pipeline of over $519m (as at 31 March 2024)
• Ongoing investment into ready to sell inventory during the quarter

o Inventory book value of $24m at 31 March 2024 vs $19 m at 31 December 2023

• Following expansion of DroneShield’s Sydney facility and its supply chain network, the current manufacturing capacity is $400m per annum

o 120 team members including over 95 engineers

o A number of hires are recent, with productivity expected to get a further significant boost as they ramp up their contribution to the business

• Launch of the Expeditionary Fixed Site (EFS) Kit for DroneSentry-X Mk2. DroneSentry-X Mk2 is a multi-mission C-UAS solution providing AI driven detection, identification and next generation electronic defeat capabilities engineered for mobile and expeditionary use cases. DroneShield’s EFS Kit enables rapid deployment of the DroneSentry-X Mk2 across a wide range of operations, setting a new standard for ease of use among tactical end users.

Outlook and Key Themes

Small drones continue to be used extensively in virtually every conflict around the world today, taking advantage of their low cost, ease of use, and versatility. They are used to deliver explosive payloads, battle reconnaissance, directing artillery strikes, and more. Outside of the military applications, drones are used to deliver contraband into prisons, disrupt airports, conduct terrorist attacks, disrupt critical infrastructure and shipping, and conduct corporate espionage. This is expected to continue to rapidly rise, as the drone technology continues to improve. Geopolitics and conflicts are generally expected to further deteriorate over coming years, by most commentors.

Counterdrone/C-UAS market is at a negligible saturation point today, due to how new the drones are. This is in contrast to markets such as helmets, body armour and tactical radios, as those markets have existed for a relatively long time, and are saturated as a result.

This means the buyers of C-UAS systems, such as military planners and security acquirers are rapidly starting to be aware of the need to fulfil their counterdrone requirements, and are presently gearing up for large acquisitions of C-UAS equipment, following smaller purchases and trials over recent years.

DroneShield’s Positioning

As a pioneer and global leader in the C-UAS sector, DroneShield has a number of technical and commercial differentiators compared to its competitors. These differentiators have been developed over years and are challenging to disrupt. On the commercial side, this includes deep trusted relationships and being written into multi-year requirement plans with key customers across the U.S. Department of Defense (“DoD”) and other organisations directly, and the defence prime contractors working with the DoD, to support current and coming priorities. Global defence primes are often customers and partners, as opposed to competitors for DroneShield, as they prefer to leverage DroneShield’s expertise and organisational structure to operate and deliver at the required speed of innovation for the C-UAS sector.

With current annual production capacity of $400 m in hardware value, the Company is well positioned for the quickly growing demand.

Technically, with over 95 hardware and software engineers, DroneShield is able to continue to rapidly innovate and build on its unique differentiators, which include a dedicated Data Engineering team with a substantial proprietary database of data samples feeding its Artificial Intelligence software engines, growing through the ability of the field deployed devices with the customer option to relay the data back to DroneShield for prioritisation of new functionality and capabilities.

The United States is expected to continue to be the largest market for DroneShield (around 70% of its 2023 revenues), with a growing customer base across numerous government agencies, including both military and non-military federal agencies. With numerous customers and supporting several different C-UAS use cases, DroneShield is poised for continued diversified growth. The Company is actively progressing opportunities, both directly and as a subcontractor, across all its major accounts.

There are also a number of large non-US leads being pursued, with 2024 expected outcomes.

 

13 Apr 24. Solid State beats analyst forecasts with strong performance in systems division. Solid State [LON:SOLI], the Redditch-based electronic components distribution and manufacturing company has published a trading update for the year to end-March 2024.

As previously reported, Solid State is a specialist value added component supplier and design-in manufacturer of computing, power, and communications products.

The company has had a record-breaking year, especially in the latter part of the year, with revenues and profit before tax being ahead of analysts’ consensus on the back of its Systems division, receiving revenues that were expected to be realised in 2025. Subsequently the company upgraded its expectations for FY25.

Solid State upgrades expectations

The company now expects revenues of GBP155.3m for FY23/24 and revenues of GBP152m for FY24/25. This equates to adjusted profit before tax of GBP12.5 for both financial years. However the company plans to reduce its debt exposure and transform this into a positive cash position of GBP1.1m, a turnaround of near 140%.

As The Armchair Trader previously reported, debt was a concern for Solid State, seeing a 56% increase year-on-year for the year to end-March 2023 and the electronics company seems to have taken this to heart and committed to increasing its cash reserves. (Source: https://www.thearmchairtrader.com/)

 

13 Apr 24. Melrose bosses to share £300m as founder eyes new venture. The 20 top executives at the aerospace giant are set win huge share awards next month, as former boss Simon Peckham establishes ‘Melvest’ to hunt for deals

Simon Peckham says that he is “one of those sad people whose work is their hobby”, and is already planning his next challenge after a month of unemployment

For the first time in a very long while, Simon Peckham is unemployed. He left the FTSE 100 company he co-founded, Melrose, last month after two decades — for the last 12 years of which he was chief executive. In that time, he steered it through a succession of deals that transformed it into a £7 bn aerospace giant. Now he’s a free agent, but he’s not killing time on the golf course.

“I’ve been quoted before: I don’t play golf. I’m one of those sad people whose work is their hobby. It’s what I love doing.”

Peckham, 61, has stepped out of a late lunch to speak to The Sunday Times, and explain why, after the success of Melrose, he’s keen to do it all over again. He has put together a crew of Melrose veterans to launch a new vehicle that will repeat the former’s model of buying manufacturers, sprucing them up, and selling them on for a profit, or “buy, improve, sell”, in the Melrose mantra.

Many people in his position would be minded to retire. After all, the man need never work again. Melrose has made Peckham and his co-founders maires many times over. In 2017, the Melrose quartet of top executives pocketed £42m each for their efforts. Next month, a cohort of 20 bosses — including Peckham, and his successor as CEO, Peter Dilnot — stands to make about £300m from a four-year performance scheme.

The scheme — which will pay out in shares — equates to 7.5 per cent of the rise in Melrose’s market value since December 2022. In that time, the company has recovered from a Covid downturn: by the end of last year, it had added £4bn in value, according to its annual report. On current estimates, that makes pot about £302m. Sources close to the company cautioned the final amount was not fixed and would depend on where the shares end up next month.

“It’s going to be a good payout — at least we hope it is. But our shareholders made a lot more money,” Peckham said. “You could take a view that no one should earn more than this or that, but at the end of the day, I would say that’s capitalism working.”

Since its first acquisition in 2005, the total shareholder return for Melrose — including its share price rise and the dividends it has paid out — is 3,039 per cent, according to the company. This is against a total return on the FTSE 100 of 210 per cent.

So what’s the plan for Melrose 2.0? Peckham says he has backers lined up and targets in mind in both North America and the UK. His biggest problem may be the name: ‘Melvest’.

“I personally came up with it and I’ve said to everyone, ‘if you’ve got a better name, please give it to me’. If The Sunday Times wants to have a competition to come up with one, I’m cool with that.” Readers may head to the comments online to have their say.

So the name and the model may hark back to the original Melrose, but it won’t be entirely the same. Peckham says he will look at not just under-performing companies, but under-valued ones, of which he believes there are many in the UK, particularly on the stock market. In practical terms, this might mean working with management teams, rather than turfing them out, as Melrose famously did in its hostile takeover of British engineer GKN in 2018.

“In our new future life, we should be able to work with existing management teams to improve their businesses,” said Peckham. “Management teams are better now. And some firms are undervalued and it’s not management’s fault.”

Melvest may seek a listing, Peckham said, but it’s too early to say. “If we were going to list, we would list in London,” he said, putting to bed fears that he may follow a stampede of other firms in ditching the UK for the temptation of a US float.

Peckham is a cheerleader of the public markets — as well he may be, given Melrose’s success — but he’s clear-eyed about London’s problems. “The UK stock market is in danger of being ordinary,” he said. The exodus of UK pension fund money out of British shares has weakened the City, he reckons. “If you have a large stock market, but you don’t have home investors, it’s going to have consequences… There’s a core domestic market of companies that are looking for foreign capital but cannot access it.”

His solution? “You need to encourage capital back. What the UK needs to do is find enough of a home base of investment to get companies to grow.”

He resists making demands of any new government, but says: “What I’d like to hear from all of our politicians is actually, how are they going to grow the wealth of this country? Instead of talking about how they are going to spend the tax that comes out of that wealth.”

The GKN deal attracted scores of headlines amid claims that Melrose was out to “asset-strip” a venerable British company, a maker of aeroplane wings and car parts that traced its heritage back to the 18th century. “We were 100 per cent accused of being raiders when we walked in,” Peckham said. “But we looked after the pension schemes. We invested in the business.”

Melrose sealed the £8 bn deal and cut 1,000 jobs, before making further redundancies to weather the Covid downturn. Under Peckham’s watch, Melrose split off GKN’s car business into a new listed firm called Dowlais and kept the aerospace business. His partners in Melrose agreed to break with tradition and keep hold of the latter, effectively cementing the company’s status as an engineering firm, rather than a buyout vehicle. Hence the need to form Melvest.

The truth is that Peckham simply isn’t ready to retire. Having left behind an organisation of 38,000, he is now set up in a “four-person” office in central London. “It’s like going back 20 years and it’s a lot of fun. I can’t wait to get going.” (Source: The Sunday Times)

 

12 Apr 24. Overdue Denel AGMs reprieved by Companies Tribunal. Denel, under the leadership of a permanent chief executive for the first time in over three years, has been reprieved by the Companies Tribunal for not timeously holding annual general meetings (AGMs).

The reprieve was reported by Johannesburg-based financial daily Business Day, which noted the Centurion-headquartered State-owned defence and technology conglomerate last held an AGM in January 2021. The Companies Tribunal has it, in terms of the Companies Act, that AGMs must be held annually and no more than 15 months after the date of the previous AGM.

Business Day reported the SOE had finalised its financials “but the Auditor General (AG) was unable to conclude the audits within the stipulated time”. This “forced” Denel to request further extensions for the 2021, 2022 and 2023 financial years by no later than the end of May this year. The request was granted by the Companies Tribunal, the paper reported.

The Companies Tribunal is an agency of the Department of Trade, Industry and Competition (DTIC) established in terms of the Companies Act to provide speedy resolution of company disputes.

Also this week, Democratic Alliance (DA) shadow public enterprises minister Mimmy Gondwe heard the Denel’s turnaround plan will be implemented over a three year period with the stabilise and sustain component already done. It is envisaged the turnaround plan will be fully implemented by the end of the 2024/25 financial year.

She was further told by Public Enterprises Minister Pravin Gordhan, in response to a Parliamentary question, that Denel’s order book stands at R4 406m with R16 580m listed as “order pipeline/winnable projects” at the end of last year.

In a reply to another parliamentary question, it also emerged this month that Denel has not paid out any bonuses to the Chief Executive Officer, Chief Operations Officer and the Chief Financial Officer since May 2019. (Source: https://www.defenceweb.co.za/)

 

12 Apr 24. Bluestone Announce Another Add-on Acquisition for its Portfolio Company CTI. Bluestone Investment Partners, a private equity firm focused on the defense and government technology sector, is pleased to announce the successful acquisition of Asymmetric Technologies LLC by its portfolio company, Chesapeake Technology International Corp. (CTI). This strategic move marks a significant expansion of CTI’s capabilities in the realm of defense technology and underscores Bluestone’s commitment to fostering growth and innovation within its portfolio.

Asymmetric Technologies, recognized for its expertise in open-source technology tailored to mission-specific needs, aligns with CTI’s mission to deliver advanced, operator-focused technologies. The integration of Asymmetric’s innovative products like IronClad and Whisper enhances CTI’s portfolio, providing sophisticated solutions for flight autonomy and edge communications across various Department of Defense and national security customers. “This acquisition will enhance our ability to deliver comprehensive software and purpose-built hardware products and solutions for our customers and reaffirms our strategy to invest in our business to address evolving national security needs,” said Jay Moorman, CEO of CTI.

Dustan Hellwig, Founder and Chief Strategy Officer of CTI commented: “The acquisition of Asymmetric marks another milestone in our strategic growth journey with Bluestone. It complements our existing technology and expands our capabilities to support emerging needs from our customers.”

John Allen, Managing Partner at Bluestone Investment Partners, stated that “Our acquisition strategy at Bluestone is designed to complement and enhance CTI’s rapid organic growth. We are excited to continue to partner with the CTI leadership team to further accelerate the company’s expansion through strategic M&A initiatives.”

The collaboration between CTI and Asymmetric presents new opportunities for innovation and growth, reinforcing Bluestone’s strategic vision for its portfolio companies. Bluestone remains committed to its mission of providing value-added capital and strategic support, ensuring continued success and advancement in the defense and government technology sector.

Bluestone and CTI are actively seeking additional add-on acquisition opportunities. We are particularly interested in companies possessing technologies that advance next-generation electronic warfare, intelligence, surveillance, reconnaissance, and situational awareness programs for the Department of Defense and national security customers. For further information, please reach out to Zack Hester, Director of M&A Strategy and Deal Generation at Bluestone (contact information below).

About Bluestone Investment Partners

Bluestone is a private equity firm investing exclusively in lower middle-market companies in the defense and government technology arena. Bluestone’s principals have a long and successful track record of owning, operating, investing in, and advising companies in the defense and government services sector.

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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Sponsored by SPX CommTech (TCI & ECS)

 

www.tcibr.com

 

www.enterprisecontrol.co.uk

 

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11 Apr 24. Space startups see funding surge as government spending remains high, report says. Funding for space startups more than doubled in the first quarter as government spending remained robust setting the stage for the space economy to grow stronger, venture capital firm Space Capital said on Thursday. Geopolitical uncertainties have largely driven the surge in funding, as geospatial data and images collected by satellites are used by government agencies for everything from analyzing weather patterns and agriculture to changes and movements along international borders.

“While we still have some consolidation to get through, the overall space economy is rebounding and it is now replete with a number of rising stars,” said Chad Anderson, the venture capital firm’s managing partner.

Funding for space startups rose to $6.5bn in the first quarter ended March 31, from $2.9bn a year earlier, and inflows were up 33% from the fourth quarter, as investment in geospatial intelligence overtook satellite communications for the first time, showing the growing demand for such data.

Meanwhile, pricing for satellite capacity has also fallen helping attract companies to use assets in space for commercial purposes.

The first quarter saw many milestones including SpaceX’s successful Starship flight test to United Launch Alliance’s launch of Astrobotic and Intuitive Machines’ (LUNR.O), opens new tab mission, which was the first touchdown on the lunar surface by a U.S. spacecraft in more than half a century.

The space economy’s size is set to triple to $1.8trn by 2035 and roughly rival the size and reach of the global semiconductor industry, according to a World Economic Forum report released earlier this week.

This underscores the potential impact on investors, businesses, and government entities, who stand to gain significantly from the growth of the space sector. (Source: Reuters)

 

11 Apr 24. Firan Technology Group Corporation (“FTG”) Announces First Quarter 2024 Financial Results. Firan Technology Group Corporation (TSX: FTG) today announced financial results from its first quarter of 2024.

• First quarter bookings of $37.5m were up 14% over Q1 2023.
• FTG first quarter revenues of $35.0m were up 42% over Q1 2023.
• FTG achieved Adjusted Net Earnings in Q1 2024 of $1.1m.
• FTG achieved Adjusted EBITDA of $4.6m, which was up 42% over Q1 2023.

Business Highlights

During Q1 2024, the Corporation has continued to invest in technology in existing sites, grow the business organically, and integrate the two acquisitions completed last year. FTG is strategically deploying its capital in ways that will drive increased shareholder returns for the future in both the near term and long term. Specifically, FTG accomplished the following in Q1 2024, which continues to improve the Corporation and position it for the future:

• Integration activities at both acquisitions progressed well through 2023 and Q1 2024 with improved throughput, improved pricing, cost savings and FTG ERP implementation completed at Circuits Minnetonka, and cost savings, equipment investments and growth plans at Circuits Haverhill. More activities and full FTG ERP implementation for Circuits Haverhill are planned for the balance of 2024.
• Also, in support of the new acquisitions, and the overall growth of FTG, Leo LaCroix was hired as Executive Vice President, Circuits to oversee FTG’s US Circuits operations including the newly acquired sites. Leo has extensive senior management experience in the circuit board industry selling into the defence market.
• FTG managed through a six-week strike by 67 unionized employees at the FTG Aerospace Toronto facility, which resulted in decreased product shipments during Q1 2024 of approximately $3.0m. The reduction in revenue had a negative impact on Net Earnings of approximately $1m. A new 4-year agreement with the employees was concluded and the employees returned to work on January 23, 2024. The new contract expires in August 2027.
• Customer orders received in Q1 2024 totaled $37.5m, resulting in a book-to-bill ratio of 1.07:1.
• As of March 1, 2024, FTG had a total backlog of $99.3m, which is a 34% increase over the Q1 2023 backlog of $74.2m. The two acquisitions added approximately $17.0m of additional backlog as of their closing date.

(Source: Google/GLOBE NEWSWIRE)

 

11 Apr 24. Williams launches new company to solve clients’ engineering challenges with F1-derived innovation and pedigree. Williams announced the launch of a new company that will apply the cutting-edge innovation and technologies of F1 to tackling clients’ engineering challenges in other sectors. Drawing on lessons learned over almost 50 years at the pinnacle of motorsport, Williams Grand Prix Technologies will bring a laser focus to solving clients’ problems using world-leading engineering capabilities. Sitting alongside Williams Racing, and also owned by Dorilton Capital, the new company will be based at the team’s technology campus in Grove, UK. Racing in Formula 1 involves a lightning-fast development cycle, taking a car from concept to competition in less than 12 months. Williams Racing is one of the most successful teams in F1 history, with nine Constructors’ Championships, seven Drivers’ Championships and 114 race wins. Williams Grand Prix Technologies will offer this innovation-led approach and extraordinary pedigree to a wide range of new sectors including wider motorsport, premium automotive, aerospace, defence, marine, energy, sport and lifestyle.

Clients will be able to draw on the resources, assets, skillsets, technologies and talent available to the racing team to unlock new performance and potential in their businesses. Williams Grand Prix Technologies will also work closely with Williams Racing’s technology suppliers and partners to bring advanced solutions in simulation intelligence and data engineering to clients.

A mix of highly-skilled people and unique engineering assets will combine to offer services including: platform dynamics; advanced materials; simulation and modelling; instrument and data analytics and high performance computing. Sitting alongside these core engineering services is a range of in-house prototype testing and evaluation resources that include: wind tunnel; driver-in-the-loop simulator; single-axis testing machines; 8-post rig; chassis rig; other testing rigs and bedplate testing. Whilst originally developed for the purposes of the race team, these capabilities and assets have far wider applicability which the new company will harness.

Prior to the establishment of Williams Grand Prix Technologies in 2024, Williams also had other business interests beyond F1 racing. Williams owned a majority stake in Williams Hybrid Power Limited and also established Williams Advanced Engineering – both businesses took technology developed for F1 and adapted it for multiple commercial applications. Williams Hybrid Power was sold to GKN in March 2014 and Williams Advanced Engineering was sold to Fortescue in February 2022.

Matthew Savage, Chairman at Williams Grand Prix Engineering Limited, said: “We are delighted to be establishing Williams Grand Prix Technologies, bringing F1-derived innovation and pedigree to a wide range of other sectors. Williams Grand Prix Technologies offers a unique mix of engineering experience, expertise and capabilities to solve customers’ problems and we have already received significant interest from a diverse set of clients even before launch. We will be using skills and assets that have been established, developed and refined over five decades of competing at the highest level of motor racing on a global stage, which is a unique pedigree that only Williams can offer. Being part of the wider Dorilton group of companies also allow Williams Grand Prix Technologies to offer services from across the group to further enhance the technologies and services available to the customer”.

 

11 Apr 24. Darktrace upgrades outlook again. Shares in cybersecurity company Darktrace (DARK) climbed almost 8 per cent in response to higher guidance for 2024 revenue growth, the second time in two months. The company said its annualised recurring revenue growth would be between 22.25 per cent and 23 per cent, lifting the low end from 21.5 per cent, and also lifted the expected full year adjusted Ebitda margin from 21 per cent to 23 per cent. The third quarter saw sales of $176mn (£140m) with an adjusted cash profit of above $37m. CFO Cathy Graham said cyber threats were coming thick and fast and businesses were spending more on security as a result. “[Hackers] are increasingly exploiting generative AI, automation and cybercrime-as-a-service to increase the speed, sophistication, and success of cyber security attacks,” she said.  This week, Darktrace also said Mick Lynch and other large shareholders would no longer have the right to nominate directors due to their stakes falling. Lynch’s appointee Patrick Jacob failed to get on the board in December after shareholders voted him down. (Source: Investors Chronicle)

 

10 Apr 24. Hexcel drops after surprise appointment of former Spirit Aero chief as CEO. Hexcel’s (HXL.N), surprise appointment of the former top boss of troubled aerospace supplier Spirit AeroSystems (SPR.N) as its new CEO spooked investors on Wednesday, sparking a 12% fall in its shares. Hexcel, which supplies composite parts such as carbon fibers and structural adhesives to Boeing (BA.N), and Airbus (AIR.PA), said on Tuesday current chief Nick Stanage will transition to an executive chairman role and will retire at the end of the year.

“We note the surprising nature of this announcement as the company did not communicate to the market that it had been pursuing new leadership,” BofA Securities wrote in a note, while downgrading the stock to “underperform” from “neutral”.

Tom Gentile, who will take over as Hexcel CEO, stepped down from his role at Spirit Aero in October after a series of industrial challenges left the supplier struggling to stabilize cash flows. He had been the top boss of the company since 2016.

Spirit’s shares declined more than 60% while he was the CEO. His tenure was marked by a series of supply chain challenges and production defects, most recently misdrilled holes on the Boeing 737 MAX aft pressure bulkhead.

The company has also been under regulatory scrutiny in recent months following the mid-air cabin panel blowout of a Boeing 737 MAX 9 jet, the fuselage for which was made by Spirit.

“We question whether his tenure with a heavily Boeing-related supplier will translate well to Hexcel, which has more business with Airbus,” wrote Ken Herbert of RBC Capital Markets in a note.

Hexcel said Gentile’s appointment as CEO and President followed a “comprehensive succession process”. He is expected to assume the role on May 1 and be appointed to the board following the annual shareholder meeting on May 2. (Source: Reuters)

 

10 Apr 24. Post-Brexit boost for the City as EU rules on stock market research scrapped. FCA consults on plans to remove laws underpinning £9trn industry. EU rules on stock market research underpinning Britain’s £9trn money management industry will be scrapped in a post-Brexit boost for the City. The Financial Conduct Authority (FCA) is consulting on plans to remove laws forcing fund managers to pay separately for research on UK-listed companies. EU rules prevented stock brokers from “bundling” their research into a package of trading services sold to fund managers in 2018. The FCA said the current system was too complex and disadvantaged smaller fund managers. The system has also been blamed for the current malaise on the UK stock market, with a lack of research contributing to less investment in UK stocks. Under the new proposals, research and trading fees will be combined in a single payment.

Sarah Pritchard, an FCA director, said: “High-quality, easily accessible investment research is a vital part of a healthy, dynamic capital market. It supports the decisions investors make.

“We are proposing to provide more options on how to pay for such research, helping boost competition and making it easier to buy research across borders.”

The regulations were part of Brussels’ MiFID II rulebook, which were introduced in early 2018 before the UK quit the EU.

Before this fund managers would get their company research for free from stockbrokers.

The overhaul led to a dearth of research on UK companies, as brokers cut back on offering research.

“One major reason for the City of London’s current malaise is a dearth of investment research to inform decisions,” said Fraser Thorne, founder of Edison, the investment research firm.

“Asset managers and institutional investors remain unaware of the breadth of opportunities, and innovative new firms are left to languish in obscurity.”

EU rules on stock market research underpinning Britain’s £9 trn money management industry will be scrapped in a post-Brexit boost for the City.

The Financial Conduct Authority (FCA) is consulting on plans to remove laws forcing fund managers to pay separately for research on UK-listed companies.

EU rules prevented stock brokers from “bundling” their research into a package of trading services sold to fund managers in 2018.

The FCA said the current system was too complex and disadvantaged smaller fund managers.

The system has also been blamed for the current malaise on the UK stock market, with a lack of research contributing to less investment in UK stocks.

Under the new proposals, research and trading fees will be combined in a single payment.

Sarah Pritchard, an FCA director, said: “High-quality, easily accessible investment research is a vital part of a healthy, dynamic capital market. It supports the decisions investors make.

“We are proposing to provide more options on how to pay for such research, helping boost competition and making it easier to buy research across borders.”

The regulations were part of Brussels’ MiFID II rulebook, which were introduced in early 2018 before the UK quit the EU.

Before this fund managers would get their company research for free from stockbrokers.

The overhaul led to a dearth of research on UK companies, as brokers cut back on offering research.

“One major reason for the City of London’s current malaise is a dearth of investment research to inform decisions,” said Fraser Thorne, founder of Edison, the investment research firm.

“Asset managers and institutional investors remain unaware of the breadth of opportunities, and innovative new firms are left to languish in obscurity.” (Source: Daily Telegraph)

 

10 Apr 24. Semiconductor Research Corporation Announces 2024 Call for Research, $13.8m in Funding Opportunities. Semiconductor Research Corporation (SRC), a premier research and workforce development consortium, is announcing the start of solicitation season with $13.8m in funding opportunities. Calls for research will begin in early April and will run through June. Research programs releasing solicitations include Nanomanufacturing Materials and Processes (Apr 10); Packaging + Center for Heterogeneous Integration Research in Packaging (Apr 10); Hardware Security (May 7); Computer-Aided Design and Test (May 7); and Environment, Safety, and Health (May 7). Details and submission information will be available at https://src.secure-platform.com/a/page/GetFunded beginning April 10, 2024.

Research ideas selected for 3-year projects should align with the Microelectronics and Advanced Packaging Technologies (MAPT) Roadmap. Building upon the 2030 Decadal Plan for Semiconductors, the MAPT Roadmap serves as a guiding light for initiatives such as the National Semiconductor Technology Center, the National Advanced Packaging Manufacturing Program, and SMART USA Institute, the industry-led CHIPS Manufacturing USA Institute bid. Both the Decadal Plan and the MAPT Roadmap are the results of collaboration between hundreds of industry and academic experts. By aligning our research call to the MAPT Roadmap, we ensure that selected research proposals address topics of utmost importance to the semiconductor industry.

Along with creating critical, industry-relevant technology, these calls will fund degrees for between 50 to 100 student scholars of diverse ethnicity, gender, and geography. The semiconductor industry is facing a severe talent shortfall in coming years. While SRC programs have prepared 20% of all semiconductor Ph.D. in the United States, we are committed to growing our student base by fostering a balanced mix of bachelors, masters, and Ph.D.-level grads while helping students of all backgrounds to feel comfortable and safe pursuing their chosen career. SRC welcomes submissions from US and international colleges and universities that sponsor bachelor’s degrees to postdocs. SRC members include global leaders in the semiconductor industry who are committed to investing in revolutionary research, a more diverse and inclusive community, and a long-term, worldwide outlook for sustainability. Learn more at https://src.secure-platform.com/a/page/GetFunded.

About SRC

Semiconductor Research Corporation (SRC.org), a world-renowned, high technology-based consortium, serves as a crossroads of collaboration between technology companies, academia, government agencies, and SRC’s highly regarded engineers and scientists. Through its interdisciplinary research programs, SRC plays an indispensable role in addressing global challenges, using research and development strategies, and advanced tools and technologies. Members of SRC work synergistically together, gain access to research results, fundamental IP, and highly experienced students to compete in the global marketplace and build the workforce of tomorrow. (Source: BUSINESS WIRE)

 

09 Apr 24. GE Aerospace finds freedom as a singleton.

• Savings can be made from cutting bloated overheads
• Other remnants of former group can be sold off

One of the US’s most storied conglomerates has completed its break-up, as GE spun out its $33bn (£26bn)-turnover power and renewable energy business, GE Vernova (US:GEV), via a listing on the New York Stock Exchange last week.

Its disentanglement followed the hive-off of the $20bn-a-year GE Healthcare (US:GEHC) in January. What remains is a company focused on the aerospace market that chair and chief executive Larry Culp described as “maybe not as big as GE once was, but big enough”.

Culp has masterminded the transformation of GE, shaving more than $100bn off its debt pile and then sketching out the plan for this year’s split three years ago. He remains with the core business now known as GE Aerospace (US:GE), comfortably the biggest maker of jet engines in the world with $32bn of adjusted revenues.

It has a fleet of 44,000 commercial aircraft engines or almost half of the global fleet. Its share of the market is bigger than RTX’s (US:RTX)  Pratt & Whitney and Rolls-Royce (RR.) combined, according to Wells Fargo Securities.

On top of this, it has a defence and propulsion technologies arm that has around 26,000 engines in service, powering General Dynamics’ (US:GD) F-16 and Boeing’s (US:BA) F-15 fighter jets, as well as the latter’s Apache and Sikorsky’s Black Hawk helicopters. Both sides of the business are growing, with increased defence spending in the US and Europe set to push global military expenditure from $1.8tn last year to $2.1tn by 2028.

It is the commercial aerospace side of the business that offers the greatest opportunity, though, with the Airbus (FR:AIR) and Boeing duopoly currently trying to ramp up production of narrowbody planes to fill orders that already stretch into the 2030s. “We really are at a point in time where demand isn’t our challenge,” Culp said at an investor day last month.

Boeing expects to achieve “low double-digit” growth in its revenue over the next two years, and for operating profit to outpace this, increasing from $5.6bn last year to between $7.1bn-$7.5bn in 2025. By 2028, it expects to be generating $10bn of operating profit a year, with a 100 per cent cash conversion ratio.

GE’s aerospace arm “was always the crown jewel” of the former conglomerate, according to Morningstar equity analyst Nicolas Owens. It was the cash cow that allowed the group to make investments in, or prop up, other ventures.

“What had to happen for Vernova to be spun off is GE had to put several bn dollars of cash into the business in order to have it stand on its own,” he said. “[GE’s] jet engine business is an incredible business. You have 30-year visibility into lots of revenue, lots of profitability.” The company also has a wide economic moat given its technical capabilities and the high cost to airlines of switching suppliers, with much of the industry locked into long-term service agreements.

GE’s engine portfolio also has more favourable characteristics than most of its peers, according to Wells Fargo Securities analyst Matthew Akers.

Almost two-thirds of its engines are in their mid-life range (between 6 and 20 years old), which is the sweet spot in terms of higher-margin aftermarket revenues. Pratt & Whitney has more new engines, where aftermarket revenues are limited by the fact they are still under warranty, while Rolls-Royce’s engine fleet is much older.  Rolls-Royce is also largely focused on the widebody part of the market but most of the anticipated growth is in the narrowbody sector powering models like Airbus’s A320neo and Boeing’s 737 Max.

GE Aerospace is also targeting a 1.5 percentage point cut in selling, general and administrative costs post spin-out but Wells Fargo’s Akers thinks there is scope for a much bigger reduction of between 3 and 5 percentage points, as the company carries more non-operations (IT, HR and finance) roles than peers – a hangover from its conglomerate structure. Then there is the “leftover stuff” it has inherited, Owens said, such as a long-term life insurance care portfolio and a Polish real estate portfolio, which can presumably be sold off.

He expects GE Aerospace to be able to generate cash flows of around $85bn over the next decade, and with the company pledging to hand back 75 per cent of excess cash to shareholders through dividends and up to $15bn in buybacks over the next three years, it should offer a steady source of income. This comes at a cost, though. GE’s share price has almost doubled over the past 12 months and the shares trade at over 33-times FactSet consensus earnings – a substantial premium over their five-year average and of peers RTX (18-times), Rolls-Royce (26-times) and Safran (28-times). (Source: Investors Chronicle)

 

09 Apr 24. Rheinmetall leads defence stocks slump as traders worry after record run. Germany’s Rheinmetall (RHMG.DE), led European defence stocks into their biggest one-day drop in a year on Tuesday, with traders turning nervous about the sector’s record-breaking run and analysts pointed to potentially stretched valuations.

Defence stocks have been among the best performers in Europe for over three years as portfolio managers poured money into the sector, betting on rising military spending in the wake of Russia’s invasion of Ukraine in February 2022.

Goldman Sachs said in a note released on Tuesday that European defence stock valuations now likely presented more downside than upside risk going into 2025.

“While our Portfolio Strategy team are relatively constructive on the European Defence outlook, they are not recommending EU Defense given the challenging valuation premium and recent outperformance,” the note said.

A gauge of European aerospace and defence stocks (.SXPARO), was down more than 3% by 0956 GMT, on track for its biggest single-day fall since March 2023. The index has doubled in value since Russia’s invasion of Ukraine.

One Frankfurt-based trader said there was no immediate reason behind the plunge and pointed to possible profit taking.

Rheinmetall was last down 10%, set for its biggest one-day fall since August 2022.

Sweden’s SAAB (SAABb.ST), Italy’s Leonardo (LDOF.MI), and France’s Dassault Aviation (AM.PA), were also among the biggest fallers on the index, down between 4.3% and 8.6%.

At 20 times its expected earnings, defence stocks trade at a 45% premium to the broader European equity market (.STOXX), versus a historical discount of 10%, according to Goldman Sachs. (Source: Google/Reuters)

 

08 Apr 24. RENI – Resilient Energy Inc. Unveils Shareholder Update Following Groundbreaking Acquisition of Challenger Aerospace & Defense, Inc., Elevating Corporate Vision.

Resilient Energy, Inc. (OTC Markets: RENI) (“RENI” or “the Company”) releases a shareholder update on the successful acquisition of Challenger Aerospace & Defense, Inc (“CADI”), a premier designer, manufacturer, and tester of aerial, surface, and maritime unmanned vehicles catering to private and commercial operators, government agencies, industrial, agriculture, and defense organizations. RENI’s CEO, Mr. Jon Bianco, provides a comprehensive update on immediate revenue growth, supported by over $3 m in purchase orders, impacting the Company’s enterprise value.

Dear Shareholders,

I am pleased to announce a momentous milestone for Resilient Energy, Inc. (OTC Markets: RENI). On April 2, 2024, we successfully completed the acquisition of Challenger Aerospace & Defense, Inc. (CADI), marking our entry into the thriving $35bn drone and electronic surveillance technology markets. This strategic move positions RENI for accelerated growth, diversification, and enhanced shareholder value.

Challenger Aerospace & Defense, Inc., founded in 2009, is a leading designer, manufacturer, and tester of unmanned aerial, surface, and maritime vehicles. With an impressive portfolio, a robust sales pipeline, and existing purchase orders exceeding $3m, CADI brings substantial revenue potential and invaluable intellectual property to RENI. As a wholly owned subsidiary, CADI will continue its operations under existing management, ensuring continuity and expertise within the organization.

The acquisition of CADI aligns with RENI’s selective acquisition strategy in the technology and energy sectors. Looking ahead, we anticipate exponential sales growth driven by financing purchase orders and expanding manufacturing facilities. CADI’s clientele includes domestic and international government agencies, positioning us strategically within the security and law enforcement sectors. Furthermore, as CADI introduces new products, we foresee expanded market reach and revenue streams.

Mr. LeRoy Aday, President of Challenger Aerospace & Defense, Inc., brings over three decades of impressive experience in founding, leading, and scaling businesses in the aerospace and defense industries. His leadership, commitment to innovation, and excellence will drive RENI’s ascent as a global leader in unmanned technologies. We are excited about the synergies and opportunities that lie ahead as we integrate CADI into the RENI group of companies.

The global drone market is projected to reach USD 101.1bn by 2032, driven by technological advancements and expanding applications across industries. Drones play a pivotal role in sectors such as agriculture, logistics, surveillance, and defense. CADI’s focus on surveillance systems will further diversify our offerings and capitalize on the increasing demand for unmanned technologies.

In conclusion, the acquisition of Challenger Aerospace & Defense, Inc. represents a significant step forward for Resilient Energy, Inc. We are well-positioned to capitalize on the immense opportunities presented by the burgeoning drone market. I extend my gratitude to our shareholders for their continued support and confidence in our strategic vision. Together, we will embark on this exciting journey of growth and innovation.

Expect regular updates on our progress and successes as we actively communicate our vision and provide frequent company updates through various channels.

Sincerely,

Jon Bianco

CEO, Resilient Energy, Inc.

About Resilient Energy, Inc.

Resilient Energy, Inc. (OTC: RENI) (www.resilientenergyinc.com) operates as an independent energy company with a strategic business plan centered on the acquisition, exploration, development, and production of North American conventional oil and gas properties. The company is committed to expanding its portfolio by acquiring businesses in manufacturing, technology, and other sectors to diversify its revenue streams and leverage management’s 30 years of experience and reduce reliance on the volatile oil and gas markets. Resilient Energy distinguishes itself by offering a consistent deal flow and maintaining operational efficiency at low costs.

About Challenger Aerospace & Defense, Inc.

Challenger Aerospace & Defense, Inc. (CADI) is in Reno, Nevada and was established in 2009. Challenger Aerospace is a conglomerate of multiple companies focused on providing the best unmanned systems to our customers. These currently include: AeroComputers, Challenger Precision Machine, Challenger Mission Systems, Challenger Flight Systems, Challenger Training and Support, Challenger Aerospace: Dragon Works Team, Challenger Marine Systems and Challenger Ground Systems. All these companies serve myriad of customers from its State-of-the-Art Facility in the United States. Challenger serves a global consumer-base consisting of private and commercial operators, government agencies and national defense departments. (Source: PR Newswire)

 

08 Apr 24. Tyto Athene, an Arlington Capital Partners Portfolio Company, Bolsters Space System Capabilities Through the Acquisition of Microtel, LLC. Tyto Athene, LLC (“Tyto”), a federal systems integrator of mission-focused digital transformation solutions, has completed its acquisition of Microtel LLC (“Microtel” or the “Company”), a software development and systems engineering firm deeply embedded in long-term, space missions for NASA and international space programs. Tyto is a portfolio company of Arlington Capital Partners (“Arlington”), a Washington, D.C.-area private investment firm specializing in government regulated industries.

Tyto is an innovator in Space Domain Awareness and Combat Power with expertise in Space Threat Intelligence Analysis and Modeling and Simulation. The acquisition of Microtel further strengthens Tyto’s longstanding customer relationships and capabilities across the space domain, as the Company’s key software development specialties include mission-critical flight software to control robotic spacecraft, rovers, and other onboard flight applications for command, telemetry, and science data processing.

Michael Lustbader, a Managing Partner at Arlington, said, “For nearly three decades, Microtel has been a proven leader in software development for space programs and this expertise complements our existing space command work. This acquisition underscores Tyto’s commitment to delivering exceptional solutions and expanding its presence in critical markets, including its relationship with NASA. We look forward to supporting Dennis as he drives the integration and advances Tyto’s growth.”

“I am very pleased to welcome Microtel to the Tyto family,” said Dennis Kelly, CEO of Tyto Athene. “Microtel’s impressive team of professionals are hands-on technologists with deep expertise in software development and AI/ML technologies. We look forward to leveraging our combined capabilities to further our growth and bring new innovations to our customer’s mission.”

“Our shared vision of innovation will allow us to explore other mission areas we can support,” said Jerry Hengemihle, CEO of Microtel. “We are excited for our future with Tyto, and we look forward to delivering next-generation solutions that expand our support to NASA and other federal agencies.”

About Tyto Athene

Headquartered in Herndon, Virginia, Tyto Athene harnesses the power of technology to provide solutions that shape the future. With over 60 years of experience providing mission-focused digital transformation and nine offices across the U.S., our team of experts connects people with technologies to seamlessly integrate and modernize enterprise-level operations that increase mission resiliency, capability, and flexibility for U.S. defense, national security, intelligence, space, and public safety agencies around the globe. Tyto’s deep understanding of the customer’s mission brings proven results. For more information, visit https://gotyto.com/ or Tyto Athene on LinkedIn. (Source: BUSINESS WIRE)

 

02 Apr 24. Telesat + Government of Canada agree to C$ billions loan terms in support of Lightspeed.  The letter states that, following several months of negotiations between Telesat and federal officials, the Government of Canada (GoC) is prepared to invest C$2.14bn in Telesat Lightspeed by way of a loan to Telesat LEO Inc., a wholly owned subsidiary of Telesat, that is developing and will own and operate the Telesat Lightspeed LEO global broadband satellite constellation.

The loan will carry a floating interest rate that is 4.75% above the Canadian Overnight Repo Rate Average (CORRA) with a 15-year maturity. Interest is payable in-kind during the Telesat Lightspeed construction period, followed by a 10-year sculpted amortization. Furthermore, Telesat LEO Inc. will provide the GoC with warrants for 10% of the common shares of Telesat LEO based upon an equity valuation for Telesat LEO of US$3 bn.

“Telesat Lightspeed is a highly innovative and disruptive global broadband network and the largest space program in Canada’s long and distinguished history as a space faring nation,” said Dan Goldberg, Telesat’s President and CEO. “I am delighted with the engagement we have had with the Government of Canada on this flagship program, which will help bridge the global digital divide, create and sustain thousands of high-quality jobs in Canada, spur domestic innovation, investment and exports, and ensure that Canada is at the forefront of the rapidly growing New Space Economy. The Government of Canada has been a strong supporter of the Telesat Lightspeed program and we applaud their leadership and foresight. We estimate that, in addition to the roughly $2 bn of capital cost savings, we will realize roughly $750 m of savings in reduced borrowing costs relative to the original Telesat Lightspeed program. Telesat Lightspeed will revolutionize broadband connectivity for enterprise and government users and represents a highly compelling growth and value creation opportunity for Telesat and its stakeholders.”

The GoC investment is subject to certain conditions, including the entry of definitive documentation with the GoC and Telesat’s other financing sources to the GoC’s satisfaction. (Source: Satnews)

 

05 Apr 24. L3Harris Technologies (NYSE:LHX) has signed a definitive agreement under which an affiliate of Kanders & Company, Inc. will acquire its antenna and related businesses for $200m. The transaction is expected to close this quarter and is subject to customary closing conditions and regulatory approvals. The agreement aligns with L3Harris’ portfolio-shaping strategy for non-core assets, with transaction proceeds to be used consistent with capital allocation plans. The transaction is made up of $175m of cash at closing and a $25m seller note. The businesses L3Harris will divest offer a variety of airborne and ground-based antennas and test equipment. They are part of the Space & Airborne Systems segment and employ approximately 375 people. (Source: BUSINESS WIRE)

 

05 Apr 24. Epiq Solutions (“Epiq”), a portfolio company of The Veritas Capital Vantage Fund, L.P. (“Vantage Fund”), and leading provider of software defined radios (“SDR”) and space computing solutions for governments and enterprises, today announced the completion of its acquisition of CyberRadio Solutions (“CRS”), a business unit of G3 Technologies providing high-performance radio frequency (“RF”) products including tuners, downconverters, and signal generators supporting the most demanding defense and intelligence applications.

“Serving our customers is our highest priority, and joining the Epiq platform will enable CRS to benefit from increased scale and investment in R&D to continue leading-edge innovation”

Post this

Founded in 2011, CyberRadio’s mission is focused on developing open architecture high performance RF receiver and embedded signal processing platforms with industry leading RF performance, channel count, and tuning range up to 50 GHz. This complements Epiq’s focus on small form factor open architecture SDR modules and platforms where size, weight, and power are critical to enabling customer mission success. The expanded Epiq portfolio has coverage supporting maritime, land, air, and space domains, for a range of customer use-cases including remote sensing, drone detection, direction finding, and communications.

“CyberRadio Solutions’ team and product portfolio brings a new dimension to Epiq, where exceptional RF performance is a mission enabler, and we are thrilled to welcome them to our team,” said John Orlando, CEO and co-founder of Epiq Solutions. “Our customers can count on Epiq to be there with both products and technical expertise to enable their RF spectrum dominance challenges as they emerge in the coming years.”

“Serving our customers is our highest priority, and joining the Epiq platform will enable CRS to benefit from increased scale and investment in R&D to continue leading-edge innovation,” said Rob Diefes, President of CRS.

CRS will join the Epiq platform and continue operating out of Mount Airy, MD under its current leadership team led by President Rob Diefes.

Latham & Watkins LLP served as legal counsel to Epiq and Veritas. Miles & Stockbridge served as legal counsel to CRS, and Monument Capital Partners served as financial advisor to CRS. Financial terms were not disclosed.

About Epiq Solutions

Epiq Solutions develops cutting edge SDR products and processing solutions to enable spectrum dominance for maritime, land, air, and space domains. With more than 14 years serving government and commercial enterprise customers, and 20K+ devices fielded to date, Epiq Solutions is a trusted partner with proven heritage delivering open architecture products in radically small form factors where time-to-market, cost, and performance are critical for mission success. For more information, visit www.epiqsolutions.com.

About CyberRadio Solutions

CyberRadio Solutions delivers affordable, high-performance RF/Microwave SDRs with frequency ranges up to 50 GHz. For over a decade, CyberRadio has served the most demanding mission requirements for marquee government and commercial customers. CyberRadio offers mission-critical products with a range of applications including wireless signal collection and analysis, geolocation, electronic warfare, signals intelligence, spectrum monitoring, beam-forming, direction finding, and wideband recording.

About Veritas Capital

Veritas is a longstanding technology investor with over $40 bn of assets under management and a focus on companies operating at the intersection of technology and government. The firm invests in companies that provide critical products, software, and services, primarily technology and technology-enabled solutions, to government and commercial customers worldwide. Veritas seeks to create value by strategically transforming the companies in which it invests through organic and inorganic means. Leveraging technology to make a positive impact across vitally important areas, such as healthcare, education, and national security, is core to the firm. Veritas is a proud steward of national assets, improving the quality of healthcare while reducing cost, advancing our educational system, and protecting our nation and allies.

The Vantage Fund is a $1.8 bn fund targeting opportunities in the middle market. The Vantage Fund seeks to leverage the integrated platform, unique capabilities and demonstrated intellectual property of Veritas. For more information, visit www.veritascapital.com., (Source: BUSINESS WIRE)

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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Sponsored by SPX CommTech (TCI & ECS)

 

www.tcibr.com

 

www.enterprisecontrol.co.uk

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05 Apr 24. Hanwha Aerospace to focus on defense business after spinoff. Hanwha Aerospace Co., a South Korean defense company, said Friday it will focus on the defense and aviation business after spinning off two affiliates by September.

Hanwha Aerospace will spin off its two wholly owned units — artificial intelligence solutions firm Hanwha Vision and semiconductors equipment maker Hanwha Precision Machinery Co. — to be placed under Hanwha Industrial Solutions, which will be established soon, the company said in a statement.

“Through the business reorganization, the company (Hanwha Aerospace) aims to become a comprehensive defense solutions provider in global markets with a business portfolio that covers land, ocean and aerospace fields,” the statement said.

After the planned spin-off, Hanwha Aerospace will have defense solutions provider Hanwha Systems and shipbuilder Hanwha Ocean as affiliates, while Hanwha Precision and Hanwha Vision will be wholly owned by the new company.

Hanwha Corp., the de facto holding company of chemical-to-defense conglomerate Hanwha Group, will have a 33.95 percent stake each in Hanwha Aerospace and the new company. (Source: Google/Yonhap)

 

04 Apr 24. Austal leaves door ajar in takeover bid from Hanwha Ocean. Despite an initial rejection from Austal, South Korean firm Hanwha Ocean’s bid to buy out the Australian shipbuilder has some analysts pondering the benefits of such deal.

Jennifer Parker, a naval analyst at the National Security College within the Australian National University, told Defense News: “If you think about what Australia is trying to achieve with its continuous shipbuilding, think about the fact that a lack of Australian ownership is not a barrier for being a sovereign defense industrial base, then I think there’s a lot of opportunity.”

Yet one obstacle to a takeover is regulatory approval from authorities like Australia’s Foreign Investment Review Board (FIRB). In an April 2 press release, Austal said it was “not satisfied that these mandatory approvals would be secured.”

Hanwha Executive Vice President David Kim responded: “There is no foundation of the claim that the FIRB would reject Hanwha’s acquisition of the company.” The South Korean company has previously obtained the board’s approval for investments in Australian armored vehicles.

Domestic opportunities certainly abound. Australia’s recent surface combatant fleet review recommended three general-purpose frigates be built overseas and eight in Western Australia. Korea’s FFX-III frigate, which Hanwha Ocean is helping build, is one of four shortlisted designs.

Hanwha’s acquisition of Austal would increase the chances of swaying the competition in favor of that ship design, Parker noted.

Furthermore, announced last November, Austal has a pilot agreement with Australia’s Department of Defence to act as strategic partner in Western Australia. Already, Austal has landing craft and patrol boats in its order book.

Parker highlighted the Korean conglomerate’s desire for a Five Eyes foothold, a reference to the intelligence-sharing club of New Zealand, Australia, Canada, Britain and the United States. “I think that for Hanwha, who wants to get into the Five Eyes market, it sees that the industrial capacity of the U.S., Australia, New Zealand, Canada to build the ships they want is just not there.”

The prize of Austal USA, a supplier of U.S. Navy vessels, presumably enters Hanwha’s calculus, even if this subsidiary has relative autonomy from Austal Australia.

American shipbuilders might be reluctant about a Korean competitor appearing, but Parker wondered whether the U.S. should not be leaning more on South Korea for assistance in producing ships. “We know the U.S. industrial base is struggling to produce ships and submarines … so there’s opportunity there,” she argued.

Parker highlighted different ideas over what “sovereign” actually means when it comes to serving the Australian market. According to the government’s “Defence Industry Development Strategy,” released in February, Australian ownership is not critical to sovereignty. Apart from the public optics of a 36-year-old Australian company being sold, Parker said, “I can’t right now see any significant disadvantage to it.”

Additionally, it could signal to China that Australia is serious about relations with regional partners.

Leaving the door ajar, Austal said it “is open to further engagement if Hanwha is able to provide certainty on whether a transaction would be approved.” (Source: Defense News)

 

05 Apr 24. Adelaide tech company to set up in US after $4m funding boost.

Listed tech firm AML3D will establish a manufacturing hub in Ohio using the proceeds from a multi-million-dollar capital raise.

The company, which has developed a 3D printer that uses metal, will establish its US headquarters at the Ohio facility to position itself to “rapidly scale up its US employee base to meet the strong and growing demand in the US for advanced manufacturing technology solutions”.

The Ohio facility – which will be led by recently appointed President of US Operations Pete Goumas – will build AML3D’s advanced manufacturing systems and house the company’s US sales and operating functions.

The move follows a series of big moves from AML3D, including securing $11.9m of US Defence contracts in 2023.

AML3D managing director Sean Ebert said the company is noticing “surging demand in the US for [its] technology”.

The plans are backed by a $3.9m raise at 5 cents per share, which will see about 78 m new shares issued.

“The completion of this capital raising will provide the funds to establish a US manufacturing and US national sales team in Ohio to ensure we can take full advantage of this surging demand,” said Ebert.

“Our Ohio-based facility will offer greater support to the US Defence sector, ensure we are best positioned to continue to win US Defence contracts and have a springboard from which to enter the additional US manufacturing sectors we have targeted, including Marine, Oil & Gas and Aerospace.”

About $500,000 of the total funds raised will be invested in the AML3D’s software and technology to “maintain the company’s competitive advantage”.

This will include increasing the applications of its 3D printing solutions in support of the US Defence sector, and expanding its software development expertise.

“Our success to date has been built around AML3D’s market-leading Wire-Arc Additive Manufacturing solutions meeting the needs of the US Defence sector, particularly the US Navy’s submarine and industrial base,” Ebert said.

“The continued investment in our technology is designed to maintain that competitive advantage, to drive growth and create long-term value for our existing and new shareholders.”

The news comes after AML3D announced it had achieved AS9100D accreditation, meaning it can now design, develop and manufacture aviation, space and defence products.

“Having the ambition to target and then achieve AS9100D accreditation is a significant milestone for AML3D and is a great credit to the talent, expertise and dedication of our people,” Ebert said.

“It demonstrates our ability to deliver quality components into the aviation, space and defence sectors; enhances our credibility and reputation as a leading provider of advanced additive manufacturing solutions and positions AML3D as a highly competitive player in the Aerospace market.” (Source: Google/https://en.yna.co.kr/)

 

05 Apr 24. Japan space startup Astroscale aims for June listing. Space junk removal startup Astroscale is targeting a Tokyo listing as early as June, sources said, taking the high-profile venture public in a sector with out-of-this-world prospects and down-to-Earth risk.

The 11-year-old Japanese company spoke to overseas institutional investors in March to gather feedback before making a decision on a listing, said two people familiar with the matter, declining to be identified as the information is not public.

The lead managers are Mitsubishi UFJ Morgan Stanley Securities and Mizuho Securities, the people plus a third person said.

Founded by ex-government official Nobu Okada, Astroscale has won government backing in Japan, the U.S. and Britain as it develops technology to remove orbital junk such as disused satellites and spent rockets which are seen as a collision risk.

The firm considered going public last year but postponed due to factors including a mismatch over valuation, and may push it back again depending on investor feedback, one of the sources said.

Astroscale, which is also developing technology to extend the life of satellites, sees ispace (9348.T), opens new tab as one reference for a potential valuation. The moon explorer listed last year and is worth around $450 m after a recent share slide.

Astroscale did not reply to requests for comment by email and phone. Mitsubishi UFJ Morgan Stanley Securities and Mizuho Securities declined to comment.

RISK TOLERANCE

The government is fostering its space sector with backing for startups as well as industry heavyweights like Mitsubishi Heavy Industries (7011.T), opens new tab, as it works with the U.S. and competes with China.

It aims to double the size of the domestic space sector to 8 trillion yen ($53 bn) by early next decade.

In listing, Astroscale would follow in the steps of ispace as well as satellite imaging firm Institute for Q-shu Pioneers of Space (iQPS) (5595.T), opens new tab, whose share price has risen more than 700% since its December initial public offering.

“Space startups are booming and will be popular among retail investors” amid attention on space firms as governments offer backing to the sector, said analyst Kazumi Tanaka at DZH Financial Research.

However working out business forecasts for some is difficult, he said.

Though market sentiment is generally positive with the Nikkei share price average at near record highs, institutional investors look at the space sector critically due to the risk involved, one source said.

Last month’s explosion of the Kairos rocket from Japanese launch firm Space One underscored the dangers.

Tokyo-based ispace suffered failure with its Hakuto-R moon landing mission in April last year. It issued new shares last month to overseas investors and raised 8.4 bn yen, but only after halving the number of shares.

One foreign institutional investor who participated in the offering said the stock was not one to be held long term due to the unclear business outlook.

The investor has already sold the shares, they said.

“From the perspective of institutional investors entrusted with money and looking at market risk-return, ispace clearly exceeds their risk tolerance,” said one of the sources.

The price of ispace shares has fallen almost a third since the start of March and is trading below the 871 yen issue price.

“We are extremely proud of the confidence that both retail and institutional investors in Japan and around the globe have shown in ispace,” the company said in a statement, adding that it has a robust business plan with achievable goals.

A second ispace moon lander mission is scheduled to launch this year. The firm will start a NASA-sponsored moonshot in 2026. ($1 = 150.9000 yen) (Source: Reuters)

 

04 Apr 24. Shield AI to Acquire Australia-Based Sentient Vision Systems and Establish Shield AI Australia. Shield AI, Inc., the defense technology company building the world’s best AI pilot, has announced a definitive agreement to acquire Sentient Vision Systems (Sentient), an Australia-based leader in AI-enabled real-time situational awareness, pending customary closing conditions and regulatory approval.

Shield AI and Sentient Vision Systems will merge AI expertise and operational understanding to deliver superior intelligence surveillance and reconnaissance (ISR) capabilities for today’s rapidly changing defense and security environment.

The companies will merge AI expertise and operational understanding to deliver superior intelligence surveillance and reconnaissance (ISR) capabilities for today’s rapidly changing defense and security environment. In August 2023, the companies announced the joint development of a ViDAR-enabled wide area motion imagery (WAMI) solution called “Sentient Observer,” which Shield AI plans to fly this year.

“The combination of AI pilots, Sentient Observer, and teams of affordable drones like the MQ-35 VBAT will provide the same land and maritime domain awareness that today’s $40m and $180m Group 5 drones and crewed aircraft like the P-8 provide at a fraction of the price. The DoD has asked for an all-seeing eye over tens of thousands of square miles, 24/7, without the need for GPS or communication links. For Shield AI, Sentient Observer is the final piece of that puzzle. The DoD can begin augmenting and replacing their legacy solutions for a distributed, low cost, low risk solution that doesn’t break the bank if an aircraft is shot down,” said Brandon Tseng, Shield AI’s President, Cofounder, and former Navy SEAL.

“This acquisition unites Sentient’s ViDAR and our Hivemind AI pilot, creating the world’s most advanced AI-piloted ISR sensor package,” said Ryan Tseng, CEO and Cofounder of Shield AI. “Considering the imperative of covering vast maritime areas, especially in the Pacific, joining forces with Sentient was a strategic choice given their expertise in optical radar solutions. The integration of WAMI on V-BAT will revolutionize our offering, enabling Group 3-sized aircraft to perform tasks that previously required larger, costlier aircraft, significantly enhancing our customers’ operational capabilities.”

This news follows several significant milestones for Shield AI’s growth in the Australian market. In February, V-BAT received certification for Australian operations from Australia’s Civil Aviation Safety Authority (CASA). Shortly thereafter, in partnership with Shield AI’s Australian partner, Toll Aviation, the companies launched the inaugural Australian V-BAT training course.

“What stood out to us about Shield AI is that they are the only company in the world with an operational AI pilot, and therefore have the technological expertise and maturity to really deliver on the AI technology workstream underlined in AUKUS Pillar 2. The innovation breakthrough combining our computer vision AI-enabled ViDAR and Shield AI’s Hivemind will increase situational awareness, enabling quicker more effective decision making and help to save lives,” said Sentient’s CEO, Mark Palmer.

ViDAR is Sentient’s AI system, which uses an Electro-Optic or Infrared (EO/IR) sensor to detect and classify targets in the imagery stream that would be invisible to a human operator or to a conventional radar. Shield AI’s flagship product, Hivemind, is an AI pilot that enables teams of intelligent aircraft to operate and complete missions autonomously in high-threat environments, without the need for remote operators or GPS. Hivemind is an aircraft-agnostic autonomy stack similar to the self-driving technology found in cars. It has flown six aircraft, including quadcopters, the MQ-35A V-BAT, the F-16, and Kratos MQM-178 Firejet. Later this year, it will fly Kratos’ XQ-58 Valkyrie. Shield AI has accumulated more autonomous flight hours executing fighter jet maneuvers, like dogfighting, than any company in the world.

About Shield AI

Founded in 2015, Shield AI is a venture-backed defense technology company whose mission is to protect service members and civilians with intelligent systems. In pursuit of this mission, Shield AI is building the world’s best AI pilot. Its AI pilot, Hivemind, has flown jets (F-16; MQM-178 Firejet), a vertical takeoff and landing drone (MQ-35 V-BAT), and three quadcopters (Nova, Nova 2, iPRD). The company has offices in San Diego, Dallas, Washington, D.C., and abroad. Shield AI’s products and people are currently in the field actively supporting operations with the U.S. Department of Defense and U.S. allies. For more information, visit www.shield.ai. Follow Shield AI on LinkedIn, X, and Instagram.

About Sentient Vision Systems

Sentient Vision Systems specializes in passive, optical detection using wide area motion imagery. Sentient’s Artificial Intelligence (AI)-enabled sensor edge solutions better detect and identify small objects, on land, in the air and at sea. With more than 20 years of development in moving target indication, AI computer vision and machine learning, Sentient has deployed thousands of systems worldwide in the field of Intelligence, Surveillance, Search and Rescue, enhancing situational awareness decisions in real-time and helped saved lives. (Source: PR Newswire)

 

03 Apr 24. Airbus Ventures announces its investment in OROS Labs, an innovative thermal solutions company, which has raised $22m to support the company’s expansion in consumer, commercial, and government industries. This round of funding was led by Airbus Ventures, with participation from REI Co-op Path Ahead Ventures, Platinum Mile Ventures, Culper Ventures, Crumpton Ventures, Iron Gate Capital Advisors, Enlightenment Capital, CTK and the Goldwin Play Earth Fund, among others.

Solarcore® leverages the thermal properties of polymer aerogel, the world’s lowest thermally conductive solid, to revolutionize insulation for a multitude of applications – from structures and packaging to cold weather apparel. For aerospace and space in particular, thermal insulation materials and thermal management are operationally critical. By combining cutting-edge technology with innovative design, Solarcore® is setting a new standard for thermal efficiency, along with being durable, versatile and applicable to many different product categories.

“From our earliest exchanges with Michael and Rithvik, we were instantly attracted by OROS Labs’ potential to serve a wide array of dual-use applications. With the flexible design of its thermal product suite, Solarcore® represents the most versatile aerogel materials ever made,” remarks Nicole Conner, Airbus Ventures Partner. “We are proud to lead OROS Labs’ Series B round, and to bring the OROS Labs team into the Airbus Ventures portfolio.”

“The support from our investors in this Series B funding round strongly reflects our ambition to reinvent a field that has seen limited innovation,” said Michael Markesbery, co-founder and CEO at OROS Labs. “This investment opens doors for us to pursue strategic partnerships, bolster our manufacturing capabilities, scale our product offerings, and advance our research and development efforts to continue introducing groundbreaking materials to the market.”

“The confidence of our new investors, dedicated to strengthening our networks within the aerospace, defense and heavy industry verticals broadly, will help equip us with the expertise necessary to revolutionize the once stagnant thermal insulation category,” added Rithvik Venna, co-founder and COO at OROS Labs. “Bringing along our partners for this next phase of our strategic growth will be critical in advancing our team, products, and results.”

Solarcore® continues market expansion through key strategic partnerships with the U.S. Department of Defense and renowned consumer footwear brands, such as Merrell and L.L. Bean, showcasing the advantages of its technology across government and consumer industries. One example includes its new collaboration with the U.S. Department of Defense, where Solarcore® is set to transform the Army’s cold weather tactical shelters, offering enhanced heat retention, reduced weight, and improved efficiencies in transportation and setup. With the Defense Department investing bns annually in heating and cooling tactical shelters, the adoption of Solarcore® presents significant cost-saving opportunities, and operational and carbon footprint benefits.

Additionally, OROS Labs has recruited an incredible team of advisors and leadership, including Jim Ryan, former CEO and Chairman of WW Grainger; Mike Brown, former CEO of the Defense Innovative Unit; Happ Klopp, founder of The North Face; Hank Crumpton, CEO of Crumpton Global LLC and former head of the CIA’s National Resource Division; Rodney Faraon, Partner and Chief Creative Officer at Crumpton Global LLC; and Jeff Jordan, general partner at Andressen Horowitz.

Solarcore® has built an impressive leadership team, with deep experience in materials, innovation, business development and marketing from industry leading companies, including Teledyne FLIR, The North Face, icebreaker, Columbia Sportswear, Adidas, and more.

About OROS Labs®

OROS Labs is a materials technology company developing the most advanced thermal insulation on the planet. We took NASA’s well known Aerogel technology and patented ways to infuse into products that deliver best-in-class thermal efficiency.

About Airbus Ventures

Headquartered in Silicon Valley, with offices in Toulouse and Tokyo, Airbus Ventures is a fast-moving, early-stage venture capital company that independently funds and supports startups set to shift both the aerospace industry and our planetary system to a sustainable future. Airbus Ventures has helped aspiring innovators reach new dimensions of achievement since 2015. (Source: BUSINESS WIRE)

 

03 Apr 24. All smoke, no fire: Hanwha buyout of Austal appears dead in the water. West Australia-based naval and commercial shipbuilder Austal has poured cold water on an indicative offer by South Korean industrial powerhouse Hanwha Group to acquire its global business. The deal, subject to the appropriate due diligence and Foreign Investment Review Board (FIRB) approvals, was rejected by Austal in an official statement on 2 April.

“Hanwha’s indicative proposal is subject to numerous conditions, including due diligence, various regulatory approvals including Australia’s Foreign Investment Review Board (FIRB), the Committee on Foreign Investment in the United States (CFIUS) and the US Defense Counterintelligence and Security Agency, final approval of the Hanwha Board, the unanimous recommendation of the Austal Board and Austal shareholder approval,” Austal said in a statement on 2 April.

“The Austal Board, together with its advisers, has considered the indicative proposal in detail and engaged with Hanwha in relation to whether the transaction described in the indicative proposal would obtain the relevant regulatory approvals in Australia and the USA to enable it to proceed.

“At present, Austal is not satisfied that these mandatory approvals would be secured, however, the company is open to further engagement if Hanwha is able to provide certainty on whether a transaction would be approved.”

In addition, Austal raised concerns that the company’s position as the designer and builder of defence vessels for Australian and US navies under defence contracts would limit the prospect of approval.

In particular, it outlined the recent announcement by the Australian government on 23 November 2023 that Austal and the Department of Defence had executed a memorandum of understanding to negotiate a Strategic Shipbuilding Agreement, under which Austal would be appointed as the Commonwealth’s strategic partner for vessels to be constructed in Western Australia.

David Kim, executive vice-president at Hanwha, said the company is respectful of the FIRB regulatory approval process and is confident in its ability to obtain FIRB approval for the transaction.

Hanwha stated that a recent media report, which stated concerns that the Australian government would not grant permission of the sale of Austal because it carries out defence contracting work for the Australian government, is baseless.

Matt Thistlethwaite, Assistant Minister for Defence, Assistant Minister for Veterans’ Affairs and Assistant Minister for the Republic, speaking to ABC’s Afternoon Briefing on 2 April, said ministers had been issued advice regarding the possible sale.

“I have taken some advice on this, and the advice is that we shouldn’t be commenting on it at this stage,” he said.

“A potential transaction between two corporations, and it’s not appropriate for me to comment on that at this stage.

“I will say that Austal is an Australian-based company that produces very, very high quality and reliable military hardware, and indeed, domestic shipping as well.

“I think that it’s a testament to the skill and competence that we have here in Australia. Austal produced the Admiral Class and Cape Class patrol vessels for Australia.

“They’ve produced the littoral combat vessels for the United States military. And I think it’s a classic example of why we have every confidence in Australian industry being able to deliver on the government’s very ambitious surface fleet combat program and, of course, AUKUS into the future.

“Of course, we want to make sure that we maintain sovereign capability here in Australia in all facets of military design and delivery of important projects and hardware into the future. And that’s simply not confined to this particular company. That’s something that we hope is a characteristic of Australian defence and industry moving forward.” (Source: Defence Connect)

 

03 Apr 24. Pensacola-based Paradigm Parachute & Defense announced its successful acquisition of ASR-Pioneer assets on 3 April 2024. The USD 2.25m (EUR 2.08m) acquisition includes all assets from Airlift Technologies International, Strong Enterprises, and ASR-Pioneer’s Mississippi-based operation. The acquisition totalled three quarters of all assets of ASR-Pioneer.

“This is an exciting time of innovation and growth for Paradigm Parachute & Defense,” Paradigm co-CEO Aaron Nazaruk was quoted as saying in a company press release. “The combined expertise of our four companies allows us to enhance our product range with an expanded portfolio of state-of-the-art defence technologies and personnel and cargo parachute systems, while also driving innovation through shared research and development efforts.”

The strategic acquisition positions Paradigm Parachute & Defense at the forefront of the defence and aerospace parachute industry. Airlift Technologies International is known as the only full original equipment manufacturer globally for the Type V Airdrop Platform System, which is a standard in heavy-duty airdrop platforms used in low-velocity airdrops worldwide. The company holds contracts with the US government that include an indefinite-delivery contract from the Army Materiel Command’s Army Sustainment Command.

Strong Enterprises, meanwhile, is described by Paradigm as “a cornerstone of the personnel and military parachute and safety equipment industry [that] brings a wealth of expertise and technology to the fast-growing Paradigm organisation”.

“We are thrilled to welcome these legacy companies with a history of high-quality, proven systems and cutting-edge innovation to the Paradigm family,” said Paradigm co-CEO Alexander Alvarado. “Our combined teams will expand our support of both legacy and next-generation parachute system development, leading to advanced solutions in aerospace safety and defence.” (Source: Google/ESD)

 

02 Apr 24. Australia’s Austal rejects Hanwha takeover bid over approval concerns. The shipbuilder cited its defence contracts in the US and Australia as a point of concern regarding regulatory approval of the proposed acquisition.

Australian shipbuilding and marine technology company Austal has rejected a takeover bid by South Korea’s Hanwha Ocean, citing uncertainty over the approvals of Australian and US regulatory bodies of the acquisition.

Austal confirmed receipt of the “unsolicited” bid, worth A$1.02bn ($662m), after reports in the media but said that it was particularly concerned about gaining approvals relating to its role as a partner to the Australian and US navies.

The company particularly noted a recently signed memorandum of understanding (MOU) with the Australian Department of Defence relating to a Strategic Shipbuilding Agreement that highlighted a desire to keep naval shipbuilding in the country.

A statement from Hanwha said: “Austal is a national asset and thus can only be sold to companies within the AUKUS alliance countries (US-UK-Australia).

“But South Korea maintains a close military cooperation relationship with the U.S. and Australia, including conducting numerous joint exercises, as it is an important ally of both countries.”

Despite the Austal board’s initial rejection of Hanwha’s bid, the company also said that it was open to further engagement with the South Korean manufacturer on the idea, if it was able to provide stronger certainty that the acquisition would be approved.

David Kim, executive vice president at Hanwha said the firm was confident it would gain approval.

“There is no foundation of the claim that the Foreign Investment Review Board (FIRB) would reject Hanwha’s acquisition of the company,” he said.

“Hanwha has already obtained FIRB approval for prior investments in Australia and has a proven track record of investment in Australia’s defence industrial base, being the contracted supplier of infantry fighting vehicles, self-propelled howitzers and ammunition resupply vehicles with significant investment in a Geelong manufacturing facility that employs local workers,” Kim added.

However, a regulatory filing by Hanwha revealed that no further discussions were currently underway despite efforts to engage with the board and Austal’s management.

The takeover bid comes son after Austal began preparing to also enter the UK market, signing an MOU with Harland & Wolff to pursue shipbuilding opportunities in the country such as the Border Force vessel replacement programme. (Source: naval-technology.com)

 

02 Apr 24. Terran Orbital Corporation (NYSE: LLAP) (“Terran Orbital” or the “Company”), a leading manufacturer of satellite products primarily serving the aerospace and defense industries, today announced that it received a notice from the New York Stock Exchange (the “NYSE”) on March 29, 2024 stating that the Company has regained compliance with the minimum stock price continued listing standard set forth in Section 802.01C and will be removed from the NYSE’s noncompliant issuers list. The Company previously received a noncompliance notice from the NYSE because the average closing price of the Company’s common stock was less than $1.00 per share over a consecutive 30 trading-day period ended October 18, 2023. On March 28, 2024, the Company’s common stock closed above $1.00 and had an average closing share price of at least $1.00 over the prior 30 trading-day period.

 

02 Apr 24.  Curtiss-Wright Corporation (NYSE: CW) today announced that it has completed the acquisition of WSC, Inc. for approximately $34m in cash. WSC is a leading provider of state-of-the-art simulation technology that supports the design, commissioning, and reliable operation of commercial nuclear power generation and process plants worldwide with an installed base of over 225 plant simulators. WSC generated sales of approximately $15m in 2023 and is expected to be accretive to Curtiss-Wright’s adjusted diluted earnings per share in its first full year of ownership, excluding first year purchase accounting costs, and produce a strong free cash flow conversion rate in excess of 100%. The acquired business will operate within Curtiss-Wright’s Naval & Power segment.

“The acquisition of WSC increases the breadth of Curtiss-Wright’s portfolio of advanced commercial nuclear technologies utilized in the modernization of existing power plants and design of new power plants such as Advanced Small Modular Reactors,” said Lynn M. Bamford, Chair and Chief Executive Officer. “The combination of WSC’s solutions, including their simulation and digital twin capabilities, with Curtiss-Wright’s digital safety systems and advanced condition monitoring technology, will benefit our customers developing advanced reactors as well as those optimizing any power or process plant designs. The acquisition also supports Curtiss-Wright’s financial objectives for long-term profitable growth and strong free cash flow generation.”

WSC’s proprietary 3KEYMASTER™ simulation platform is used in their nuclear full scope simulators that are mandated by the Nuclear Regulatory Commission (NRC) and remain integral to reactor operator training and licensing. Simulation assisted engineering tools optimize the design and commissioning of plants, to include Advanced Small Modular Reactors (ASMRs), by creating a digital twin of plant components and systems to reduce risk, accelerate delivery, and improve quality at a lower cost. In 2023, WSC was awarded a contract by TerraPower to support the design and development of the Natrium sodium fast reactor, and continues to contribute to the development of other leading ASMR platforms. In addition, generic simulators are used at universities, regulatory agencies, training centers and plants to offer classroom-based training on the operation of nuclear plants under normal and abnormal conditions. WSC’s simulation capabilities have also proven beneficial for U.S. Navy nuclear design agencies and shipyards to enhance the design process of nuclear systems and components for aircraft carriers and submarines. WSC, which was founded in 1995 and employs approximately 45 people, maintains operations in Frederick, MD.

 

03 Apr 24. HENSOLDT completes acquisition of ESG. Major growth opportunities for national champion in defence electronics. Sensor solutions provider HENSOLDT has completed the acquisition of ESG Elektroniksystem- und Logistik-GmbH, which was agreed last year, with effect from 2 April 2024 after receiving all official approvals. ESG is a leading platform- and manufacturer-independent system integrator as well as an established technology and innovation partner for defence and security. The acquisition adds strong design and system integration capabilities to HENSOLDT’s product and solutions business and creates a national champion in defence electronics.

HENSOLDT CEO Oliver Dörre emphasises: “The acquisition of ESG fits perfectly into our overall strategy and accelerates the development of HENSOLDT as a solution provider for defence and security. By combining the highly complementary capabilities of HENSOLDT and ESG, we are taking a decisive step towards becoming a leading European provider of seamlessly integrated solutions. This step accelerates our international growth and opens up excellent development opportunities for ESG through capital market access.”

Christoph Otten, Managing Director of ESG, also emphasises the many opportunities: “The deal gives ESG the backing of a financially strong listed company and access to international markets. As part of complete solutions, we can develop our excellent capabilities as a system integrator, technology and innovation partner even better.”

Founded in 1967, ESG is a manufacturer-independent system integrator and technology and innovation partner for defence and public safety. The company develops, integrates, supports and operates highly complex, security-relevant electronic and IT systems in the fields of defence and security. ESG has established itself as a leading German systems house and plays a key role in important current and future programmes such as FCAS (Future Combat Air System) and the F-35. The company employs around 1,400 people in Germany, the Netherlands and the USA and generated sales of around 330m euros in 2023.

 

02 Apr 24. Firestorm Labs, a California-based drone manufacturer heavily leveraging 3D printing technology, has raised $12.5m in seed investment led by Lockheed Martin Ventures and prominent defense investors – including Decisive Point, Silent Ventures, 645 Ventures, Overmatch VC, BVVC, Marquee Ventures, Cubit Capital, IronGate, Backswing Ventures, The Veteran Fund, Feld Ventures, Beyond Capital, and RedCat.

“Firestorm is excited to announce this latest round of funding that will propel the company forward to shape the rapidly evolving needs of a UAS-dominated battlefield and a defense industrial base ripe for revolutionary manufacturing models,” said Dan Magy, CEO of Firestorm Labs. “Our investors understand the pressing need for delivering technologies quickly and with the interoperability that today’s warfighters demand, and we are thrilled to welcome Lockheed Martin Ventures partnership in this mission.”

Bringing best-in-class engineering capabilities from the commercial advanced manufacturing space, Firestorm’s xCell line allows for its proprietary, 3D printed, interconnected, and interchangeable airframe component technology to be manufactured at the edge – an approach that will fundamentally change the nature of warfare.

“We are a new approach to an emerging global challenge,” said Chad McCoy, Co-Founder and Chief Strategy Officer of Firestorm Labs. “There is a clear need within the defense technology sector to build faster and less costly systems, and simply throwing money at the issue won’t change the outcome. We found that coalescing a deep operational understanding of warfighter needs, combined with aerospace pragmatism, and a new rapid manufacturing model, allows us to stand out in a very crowded market. The goal is to create a completely new category that shakes up legacy timelines and cost.”

Firestorm has already won a range of US Department of Defense contracts, both for its modular drones and the xCell manufacturing product line. This new capital will enable Firestorm to scale its team and production to meet growing demands for its products. (Source: Google/https://www.voxelmatters.com/)

 

02 Apr 24. DefendTex enters discussions to acquire Brazil’s Avibras. DefendTex has announced that it has entered into negotiations with Brazil’s Avibras Indústria Aeroespacial for a potential acquisition, enabling the economic and financial recovery of the Brazilian technology provider.

It is hoped that the acquisition will ensure that the company can maintain its manufacturing facilities in Brazil and resume operations as soon as possible, the companies outlined in a recent statement.

Avibras has supported clients in the aerospace, defence, electronics, vehicles, and aeronautical sectors for over 60 years.

Local Australian company DefendTex delivers capabilities spanning guided weapons, energetics, rocket manufacturing, and loitering munitions.

“Avibras Indústria Aeroespacial and DefendTex hereby announce that they have been engaged in advanced discussions to facilitate a potential investment aimed at the economic and financial recovery of Avibras, with the goal of maintaining its manufacturing facilities in Brazil, resuming operations as soon as possible, and ensuring the fulfilment of contractual obligations with the Brazilian government and other clients,” the companies said in a statement.

“Both companies are committed and diligently working to finalise the specific terms and conditions of the investment and will keep the market informed.”

In 2023, the Brazilian government confirmed that it was deploying troops to the Venezuelan border, as Venezuela announced that it would look to invade neighbouring Guyana.

The threats emerged as 95 per cent of Venezuelan voters supported the government’s claim to Guyana’s Essequibo region. (Source: Defence Connect)

 

02 Apr 24. Investors hope GE spinoff will defy poor track record of breakups. As General Electric (GE.N), opens new tab completes its $191.9bn breakup, bullish investors are betting it will defy the lacklustre share price performance that has followed many corporate spinoffs over the last few decades.

Shares of GE were up nearly 37% this year as of Monday and stood near a seven-year high.

On Tuesday, the company’s energy spinoff – whose businesses include wind turbine production and powering data centers – began trading under the name of GE Vernova (GEV.N), opens new tab. GE Aerospace, which makes engines for commercial and military aircraft, kept the GE ticker symbol. Investors who held GE as of March 19 received one share of GE Vernova for every four shares of GE they owned.

Shares in Vernova were up around 3.8% on Tuesday, while GE’s shares were up 1.2%.

While spinoffs are typically designed to unlock value, many have been followed by unremarkable share price performance. A Bain & Co study of more than 350 spinoffs between 2000 and 2020 showed that spinoffs generated an average total investor return – defined as equity appreciation plus dividend yields – of 5.1% a year over the three years after the split. That compares to an average annual 8.7% total return for the S&P 500 during the same time frame.

“You don’t get multiple expansion for free in this type of transaction, you have to earn it,” said Jeff Haxer, a partner at Bain who led the study.

Spinoffs underperformed in the three-year timeframe for a broad range of reasons, including a loss of synergies that had helped the parent company control costs or maintain margins, Haxer said. The firm looked at spinoffs that created companies with a market value of more than $1 bn, including Baxter’s spinoff of its Baxalta biopharma business and Kraft’s spinoff of its snack business into Mondelez International (MDLZ.O), opens new tab.

Whether GE’s latest spinoff will meet a similar fate remains to be seen. GE in 2021 said it would split into three companies focused on aerospace, healthcare and energy, part of CEO Larry Culp’s plan to unlock value and make capital allocation more transparent to investors.

Its healthcare business, GE HealthCare Technologies (GEHC.O), opens new tab, was spun off in January 2023 and has so far bucked the broader trend. The company’s shares are up nearly 50% since it broke off, while the parent company’s shares have risen almost 170%.

Some investors are betting the company’s latest spinoff will see similar success.

Jason Adams, portfolio manager of the T Rowe Price Global Industrials Fund, said GE’s aviation business puts it in the top tier of global industrial companies.

GE Aerospace has been a cash cow for the Boston-based company, with some analysts estimating its market value at more than $100 bn after the spinoff.

At the same time, the new GE Vernova could see growth due to the increasing consumption needs of data centers that will power generative artificial intelligence, Adams said.

“Aerospace was a better known entity and its growth outlook better understood, but I think Vernova has been more recently discovered by the investment community and that’s what has been behind the pop in (GE’s) the stock this year,” said Adams, who plans to be a shareholder in both companies.

Vernova last month said it expects to clear a massive backlog in offshore wind equipment over the next two years, signaling improved market conditions for the beleaguered sector, which has faced hefty writedowns as soaring inflation, interest rate hikes and supply chain issues increased project costs.

Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, said the remainder of GE is now a better pure play on aviation. He expects its multiples to improve from a current 22 times trailing earnings as investors get a clearer look at its earnings growth and balance sheet, separate from GE’s power business.

“The aviation business is humming along on all cylinders,” said Tentarelli, who owns GE and plans on holding onto his Vernova shares.

Whether the deal becomes a net positive for investors will likely hinge on the growth of the renewable business for GE Vernova, said Chris Snyder, an analyst at UBS. He has a buy rating on both companies, with a target price of $154 for GE and $37 for GE Vernova.

Of the analysts covering GE, 13 now have a buy or strong buy and 5 have a hold, according to LSEG.

“GE is taking share and has pricing power,” Snyder said, while the rising demand for energy due to AI data centers is making him “increasingly positive on the prospects for GE Vernova.” (Source: Reuters)

 

02 Apr 24. General Electric completes spin off of aviation engines business, launching GE Aerospace. The breakup of General Electric into three new companies signifies a new age for one of the two major US aviation engine manufacturers. American industrial behemoth General Electric today completed the spin off of its aviation and energy businesses, launching GE Aerospace as a standalone company. The event is the final step in the long-awaited break up of General Electric into three individual companies, first announced in 2021, and signifies a new age for one of the two major US aviation engine manufacturers, with its defense engines unit making up about $9 bn of GE Aerospace’s $32bn portfolio. GE Aerospace CEO Larry Culp, who has led General Electric since 2018, rang the opening bell on the New York Stock Exchange this morning, celebrating GE Aviation’s transition into a publicly traded company alongside the energy spinoff GE Vernova. GE Health Care launched last year.

“Building on a century of learning and carrying forth GE’s legacy of innovation, GE Aerospace moves forward with a strong balance sheet and greater focus to invent the future of flight, lift people up, and bring them home safely,” Culp said in a statement.

General Electric’s aerospace unit has remained largely steady even as the company floundered following the 2008 financial crisis, which forced the US government to bail out its GE Capital banking unit.

While commercial engines — particularly the CFM56 LEAP engine it produces with French engine maker Safran and is used in Boeing 737 MAX and Airbus A320neo narrowbody planes — will continue to make up the backbone of the company, its Defense and Propulsion Technologies unit “are very well positioned given lively defense spending trends over the next decade,” Culp said during a March investors day.

GE Aerospace produces the propulsion plants for military planes such as the  F-15EX, F-16, E-7 Wedgetail and T-7 training jet, as well as helicopter engines for the UH-60 Black Hawk, AH-64 Apache and CH-53K King Stallion.

The company expects mid- to high-single digit growth for its defense unit in 2024, driven by increased engine shipments, and sees strong interest from international customers like Japan and South Korea for GE engines to power homegrown combat aircraft currently in development, executives said at the investors day.

Although the Pentagon has decided not to replace the F-35’s Pratt & Whitney-made propulsion plant with a new model, another major defense opportunity could be on the horizon as the US Air Force continues development of advanced engines for its Next Generation Air Dominance (NGAD) fighter jet.

Last summer, Air Force propulsion chief John Sneden told reporters the service plans to fund Next Generation Adaptive Propulsion (NGAP) prototypes from both GE Aerospace and Pratt & Whitney instead of cutting one competitor early in 2024. The winner of the NGAP competition will power the NGAD fighter jet.

Culp said in March that the GE Aerospace would be willing to continue to put company money into its advanced XA100 engine, thought to be the basis of its NGAP design, “if and when that’s required to progress the technology developments.” (Source: Google/Breaking Defense.com)

 

31 Mar 24. Thales acquires UAE-based start-up AstraUTM – further UTM company consolidation likely. “I am thrilled to announce that our startup has been acquired by Thales, a leader in aerospace, defence, transportation and security industries,” writes Asam Khan, CEO AstraUTM, in a Linkedin post. “Joining forces with Thales opens up an exciting new chapter for us. It enables us to accelerate our growth, broaden our offerings, and leverage powerful synergies to enhance our services. Thales shares our dedication to unbridled, lightening innovation, and I have the utmost confidence that this partnership will take our mission to new heights.”

Astra UTM, headquartered in Dubai, also has offices in Finland and Portugal.  In October 2021 Thales announced it has signed an agreement with Fintraffic Air Navigation Services to implement the initial UTM-centric services in Finland. Astra UTM has delivered the Situational Awareness and Briefing Facility systems for Fintraffic ANS’s Digital Business Platform which is a collaborative initiative under Traffic Management Company Fintraffic Ltd.

Apart from Fintraffic, AstraUTM’s client base includes:

• The Dubai Civil Aviation Authority (DCAA), who chose AstraUTM as the primary metropolitan drone registration, tracking and alerting system.
• ENAV S.p.A – Italy; the AstraUTM platform was used as a Beyond Visual Line of Sight (BVLOS) solution, and included pilot and drone registration, centralized flight applications and evaluation, live flight tracking and monitoring.
• The Directorate General of Civil Aviation (DGCA) and Airports Authority of India (AAI) – India has established the project for conducting experimental BVLOS operations of drones in India, and AstraUTM is one of the final seven consortiums selected as participants.
• Deployed in a 425km corridor in the remote wilderness of Northern Alberta, Airmarket is using AstraUTM to facilitate trials in the oil and gas industry, in conjunction with the Petroleum Technology Alliance of Canada (PTAC), as well as one of North America’s leading energy infrastructure companies, by providing drone based Sensing Data Services.
• During Expo2020 Dubai implemented AstraUTM for the entire six month duration of the event, and tasked the AstraUTM team with the responsibilities of drone traffic management as well as managing all low level airspace activities on site, such as fireworks, drone light shows, skydiving, hot-air balloons, falconry, kites, and light shows.
• The AstraUTM solution is a key component of drone delivery trials that are being conducted by Aerocivil Colombia in the city of La Ceja, Colombia.

“Interesting move,” said Philip Butterworth-Hayes, editorial director of Unmanned Airspace. “Thales is a major integrator with its own UTM offering, which comes with a major-integrator price tag. In developing its strategy of offering ATM and UTM-as-a-service to air navigation service providers worldwide, it needs a software-based, agile provider of services which is exactly what Astra-UTM is. I would expect to see the other major integrators – including Leonardo and Indra – make similar moves. We are still in the pre-commercialisation phase of UTM and the business case for providing services rather than infrastructure remains elusive. It will be much easier for the majors to partner with start-ups than downsize their own offerings.” For more information: https://www.linkedin.com/feed/update/urn:li:activity:7180080433324318720/

(Source: www.unmannedairspace.info)

 

01 Apr 24. RTX cyber and intel business becomes Nightwing following sale. The cybersecurity and intelligence division RTX sold has now become a business known as Nightwing. Word of the standalone company comes months after RTX disclosed a $1.3bn arrangement in quarterly financial documents. An RTX spokesperson on April 1 told C4ISRNET the deal had gone through and that Nightwing was “not connected” to the defense contractor. The spokesperson did not name the buyer. Reuters previously reported it as private equity firm Blackstone. Nightwing’s leadership features RTX alumni, including John DeSimone, Steve Worley, Timothy Zentz, Jon Check, Lori Scherer and Ron McDermott. The company bills itself as “40 years in the making.”

“Nightwing may be a new name, but we’re no amateurs,” its website reads. “Previously part of a leading Fortune 100 company, we became independent in 2024.”

RTX is the second-largest defense contractor in the world when ranked by defense-related revenue. The Virginia-based company earned $39.6bn in defense revenue in 2022 and $41.9bn in 2021, according to the Defense News Top 100 list. (Source: C4ISR & Networks)

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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Sponsored by SPX CommTech (TCI & ECS)

 

www.tcibr.com

 

www.enterprisecontrol.co.uk

 

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01 Apr 24.  The chief of Germany’s largest military contractor Rheinmetall has urged European countries to ditch their preference for national champions and build bigger, more specialised defence groups to compete with US rivals. Armin Papperger also said in an interview that if Europe wanted closer defence collaboration, countries needed to specialise in different types of military technology. “It does not make a lot of sense if we, say, pick the second- or third-best technology because one nation wants that” for nationalistic reasons, he told the Financial Times. “That is the most difficult discussion they are having at government level.” “We need big companies in Europe,” added the 61-year-old Bavarian. Efforts by EU leaders to beef up defence co-operation have been stymied by the industry’s fragmentation. European arms companies compete against each other, military budgets are controlled at national level and individual countries are keen to maintain control of strategic supply chains, plants, jobs and technological edge. One example of successful cross-border co-operation is Europe’s biggest missile maker MBDA, which is owned by the UK’s BAE Systems and European aeronautics group Airbus, which each hold a 37.5 per cent stake, with the balance held by Leonardo of Italy. Europe’s rush to re-mobilise its armies has been a boon to companies such as Rheinmetall, which also makes infantry fighting vehicles, combat drones and the smoothbore gun that sits on the Leopard 2 tank. The Düsseldorf-based company founded in 1889 did business with Russia until the German government withdrew its export licence in 2014 following the Kremlin’s annexation of the Ukrainian peninsula of Crimea. Since Russia’s full-scale invasion of Ukraine in 2022, Rheinmetall’s share price has surged more than fivefold and the company expects to have a backlog of orders from Nato members and its allies worth €60bn by the end of 2024. Papperger last month sold shares worth almost €5m — just over 6 per cent of his total holdings in the company. Rheinmetall has revived its ambitions to further consolidate the region’s sprawling defence industry.

Last year, the company completed the €1.2bn takeover of its Spanish rival Expal, which cemented its leading position in the munitions supply chain. On March 18, it agreed to buy Reeq, a Dutch maker of unmanned ground vehicles used for combat, for an undisclosed sum. A loud and controversy-prone figure in an industry that typically operates under the radar, Papperger, who also called for the EU to consider an equivalent to Israel’s Iron Dome defence system, is bullish on Germany’s military reawakening, or “Zeitenwende” as Chancellor Olaf Scholz has called the country’s epochal shift since Russia’s war on Ukraine. A text message from defence minister Boris Pistorius was now enough for Rheinmetall to decide to increase production, Papperger told German newspaper Der Spiegel earlier this year. While other German defence contractors have complained about the lack of concrete orders from Berlin, Papperger said Rheinmetall had been able to boost capacity quickly — the company will next year produce 700,000 rounds of artillery shells compared with 70,000 a year before in 2022 — thanks to investments in new production lines before war returned to Europe. “I always thought that life is dangerous and that the world is dangerous,” said Papperger, who has been with Rheinmetall since 1990. “That’s why we invested early,” he added, pointing to investments in Hungary, Australia and the UK. Recommended EU defence Is Europe battle-ready? Localising and growing production capacity in many countries was important for future orders, he added. “You have to give something back to the countries . . . this is what I discuss at the moment with prime ministers.” If Donald Trump became US president again, “the pressure will be higher” on Germany, said Papperger, but the race to rebuild the country’s military strength would continue regardless of who ended up in the White House. “The US focuses more on the Asia-Pacific area than on Europe,” he said. Were the “very risky situation” in the region to spark a full-blown armed conflict, “the US will focus on Asia, and then Europe will be totally alone”. In recent decades, European leaders had taken it for granted that the US would come to the continent’s rescue in case of a military threat but “that will no longer happen”, Papperger said. The US — where Republican lawmakers have blocked military aid to Ukraine — had sent a “very clear message”, which was “we do no longer pay for you”. But US defence capabilities faced their own challenges, with Papperger singling out growing political polarisation. “A big task for the next US president will be to bring the two parties more together. It’s bad if the biggest economy in the world — and the biggest defence power — is a split nation.” (Source: FT.com)

 

02 Apr 24.  Hanwha Group launches bid for Austal. South Korean industrial powerhouse, Hanwha Group has officially submitted an indicative offer to acquire West Australia-based naval and commercial shipbuilder Austal and its global business.

Importantly, the deal would only proceed subject to the appropriate due diligence and Foreign Investment Review Board (FIRB) approvals empowering Austal to leverage the experience, skills and business opportunities associated with being linked to a global business like Hanwha Group.

David Kim, Executive Vice President at Hanwha stressed that the company is respectful of the FIRB regulatory approval process, but is confident in its ability to obtain FIRB approval for the transaction, saying, “There is no foundation of the claim that the Foreign Investment Review Board (FIRB) would reject Hanwha’s acquisition of the company.

The South Korean powerhouse already has a sizeable presence in Australia and would bring a range of advantages to the shipbuilder, while Hanwha believes that the rationale and proposal presented to be “highly competitive” and in line with the Australian Government’s broader strategy to develop Australia’s defence industrial base and supporting workforce.

These factors include:

• Enhancing and strengthening the Australia-South Korea alliance: Hanwha is a known entity and respected ally to both Australia and US defence leaders with a strategic presence in the Indo-Pacific. Hanwha’s acquisition of Austal would build upon the countries’ alliances and support Australia’s national security as a partner and ally, building upon a series of relationships between key defence and security partners.
• Supporting government priorities: The deal is aligned with Australian government objectives outlined in the Independent Analysis of Navy’s Surface Combatant Fleet, where Hanwha’s capabilities and investment would accelerate delivery of critical programs and allow Australia to keep sovereign shipbuilding capabilities in Henderson, WA.
• Austal Value: Hanwha has more than 50 years of experience in shipbuilding, which would expand Austal’s growth potential and accelerate innovation (e.g. steel shipbuilding, production automation, Smart Shipyards, autonomous technology) while unlocking Austal value with increased investment and efficiencies.
• Building long-term partnerships: Hanwha is a long-term partner with the intent to invest in the business along with the workforce and communities it supports, while bringing stability to the company with long-term partnership at the forefront of decision making. With a focus on local jobs, community partnerships and economic development, Hanwha is an ideal partner for stable long-term growth compared to other ownership models.

“Hanwha has already obtained FIRB approval for prior investments in Australia and has a proven track record of investment in Australia’s defence industrial base, being the contracted supplier of infantry fighting vehicles, self-propelled howitzers and ammunition resupply vehicles with significant investment in a Geelong manufacturing facility that employs local workers,” Mr Kim explained.

Hanwha believes an Austal acquisition would benefit numerous stakeholders, including governments, shareholders, employees, and communities and is planning to go through all the proper processes towards a successful sale.

(Source: Defence Connect)

 

02 Apr 24.  Hanwha a ‘credible buyer’ for shipbuilder Austal. South Korea’s Hanwha Group says it is a “credible buyer” and has made a “highly competitive” offer for Austal despite the ASX-listed naval shipbuilder rejecting a $1 billion takeover proposal from the defence and aerospace conglomerate.

Austal told investors it had declined to give Hanwha access to non-public information for due diligence because it was “not satisfied” that the bid would secure the necessary approvals from defence agencies in Australia and the United States.

Hanwha acquired control of Daewoo Shipbuilding and Marine Engineering this year. Getty

The Australian Financial Review’s Street Talk column first revealed Hanwha’s interest in Austal in July. Austal operates five shipyards in the US, Australia, the Philippines and Vietnam. JPMorgan and Poynton Stavrianou are working for Austal.

“There is no foundation of the claim that the Foreign Investment Review Board would reject Hanwha’s acquisition,” David Kim, Hanwha’s executive vice president, said on Tuesday. “Hanwha has already obtained FIRB approval for prior investments in Australia and has a proven track record of investment in Australia’s defence industrial base.”

Hanwha would also require approval from defence agencies in Australia and the US.

Street Talk has previously reported that New York’s JF Lehman & Company, which specialises in investing in complex and regulated sectors, has also been interested in Austal, as has Cerberus Capital Management, a $US60bn ($88bn) alternative asset investor. Former treasurer Joe Hockey’s Bondi Partners has also previously expressed interest in putting together a consortium of investors to take Austal private.

Despite the rejection of Hanwha’s offer, Austal shares rose more than 10 per cent on Tuesday and were trading 23¢ higher in the afternoon at $2.43.

Austal a ‘known entity’

Hanwha’s bid for Austal comes as the company aggressively expands into shipbuilding. Last year it acquired a controlling interest in Daewoo Shipbuilding & Marine Engineering, one of South Korea’s three major shipbuilders, for $US1.49bn. Daewoo Shipbuilding subsequently changed its name to Hanwha Ocean.

In a statement, Hanwha said it had made the takeover offer for Austal because it was a “known entity” and the acquisition would “build upon the countries’ alliances and support Australia’s national security as a partner and ally”.

“Hanwha believes an Austal acquisition would benefit numerous stakeholders, including governments, shareholders, employees and communities and is planning to go through all the proper processes towards a successful sale,” it said.

Malcolm Davis, a senior analyst at the Australian Strategic Policy Institute, said he did not think Hanwha’s purchase of Austal would present a national security risk.

“Obviously, there will be some concerns about an Australian company being taken over by a foreign national, that’s understandable. But Hanwha is probably able to ensure Austal’s future,” Dr Davis said. “South Korea is not a hostile power, it’s a friendly partner, which we’re working with ever more closely.”

But Austal said it rejected the bid after assessing “the potential for shareholder value creation, competition concerns and a potential purchaser’s ability to ultimately complete a transaction (which would include necessary government approvals).”

“This latter consideration is particularly relevant in relation to the proposal from Hanwha, given Austal’s position as the designer and builder of defence vessels for the Australian and US navies and ownership clauses associated with defence contracts,” it told investors on Tuesday, adding some contracts required “a commitment to ensuring continuous naval shipbuilding in Australia”.

In December, Austal won a near $1.3bn contract to design and build three medical ships for the US Navy, taking its order book to more than $11 billion. It is also expected to benefit from a large pool of work that will be available as part of the AUKUS defence pact between Australia, the US and the United Kingdom.

The Australian National University’s Jennifer Parker, a former naval warfare officer, said it would be “detrimental to Australia to have a complete foreign takeover of our major shipbuilding company”. “But Hanwha is interesting in terms of the ability of the Koreans to very quickly build up one of the biggest shipbuilding industries in the world,” she said.

“It would be unlikely for the government to support a complete takeover of Austal because of that commentary in the last six months, and it probably wouldn’t be in our interest, but some sort of relationship between the two would be really interesting.”

Andrew and Nicola Forrest own 19.6 per cent of the stock through their private Tattarang investment vehicle and have installed former Australian rear admiral Lee Goddard, the chief executive of the Australian Missile Corporation, as their representative on the Austal board. Dr Forrest declined to comment. (Source: Google/https://www.afr.com/)

 

01 Apr 24.  Cyberlux Corporation (OTC: CYBL) Releases 2023 Annual Report of Financial and Operational Results.

The Company reports the results for its Unmanned Aircraft Solutions, Datron Military Communications, and Special Activities Business Units

Cyberlux Corporation (OTC: CYBL), a leading provider of innovative defense technology systems, announced that the Company achieved a record Cash Flow quarter for the period ended December 31, 2023.

Cyberlux Corporation CEO Mark Schmidt commented on the results: “2023 proved to be a noteworthy year with the strategic restructuring of all Cyberlux business units. The reorganization sharpened our focus on core Department of Defense (DoD) activities and capitalized our strengths in Unmanned Aircraft Technology (UAS) and military communications. This initiative aimed to streamline operations and enhance the company’s ability to deliver high-quality products and services to our customers. As a direct result of this strategic realignment, the company achieved immediate success by adding a combined +$105m in booked revenue, with +$80m in UAS, +$20m in Datron Military Communications (DMC), and +$5m in Special Activities (SA). Cyberlux has positioned itself for sustained growth and continued leadership in the defense industry for 2024 and beyond.”

Financial highlights for 2023:

• Completed the acquisition of Datron system which provided a provider of communications solutions to government, militaries, and industrial users globally. Datron has a long history of product development and manufacturing quality products and has the infrastructure to support such activities.
• Secured a $79m contract with US DoD to supply Cyberlux K8 Unmanned Aircraft Systems. Cyberlux received $39m up front cash upon signing the contract, shipped $15m of product during 2023, and are still holding $23m in advance payments at December 31, 2023.
• Divested three foreign subsidiaries, which will significantly simplify Cyberlux’s business operations, financial statement, and income tax reporting. The company reported the operations of these subsidiaries as a discontinued operation in the 2023 and 2022 financial statements.
• Improved financial and accounting capabilities with the hiring of a Fractional CFO, an outsourced accounting and tax firm and the systems/capabilities of the Datron team.
• Finished the 2023 year with $3m of cash.
• Undertook the reconciliation of equity and debt transactions from the company books to the transfer agent records. Cyberlux is in the process of having share certificates issued by its transfer agent to match the shareholder agreements, as required.
• Completed reconciliations of Cyberlux’s prior accounts, which resulted in a restatement of the 2022 revenue to $5m.

Amidst a transformative year in 2023, the company has boldly refocused its operations, strategically divested certain assets, secured a substantial sales order from the DoD and welcomed the acquisition of Datron World Communications. With the advice and counsel of EisnerAmper, the company was able to exercise advantageous tax treatments. Cyberlux stands resolute in its commitment to growth and sustainability. Management remains steadfast in their confidence that the performance in 2023 lays a solid foundation for continued success well into the future. (Source: BUSINESS WIRE)

 

01 Apr 24. Sypris Reports Fourth Quarter Results.

Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported financial results for its fourth quarter and full-year ended December 31, 2023.

HIGHLIGHTS

• Consolidated revenue for the quarter increased 16.9% and 23.7% for the full year driven by double digit expansion of shipments across both segments.
• Revenue for Sypris Electronics increased 25.2% and 42.7% for the quarter and full year, respectively, reflecting the continued growth in demand from customers serving the markets for Electronic Warfare, Aircraft and Missile Avionics, and Subsea Communications.
• Revenue for Sypris Technologies increased 10.8% and 12.5% for the quarter and full year, respectively, resulting from increased demand from customers serving the Commercial Vehicle, Specialty Automotive and Energy markets.
• During the quarter, Sypris Electronics announced that it had received two multim-dollar follow-on contract awards from a U.S. global defense contractor for the full-rate production of advanced integrated electronic warfare and communications avionics system modules for one of the largest Government DoD programs. Sypris also received releases for the first year of production with shipments scheduled to continue into mid-year 2025.
• Sypris Electronics also announced a follow-on award from a U.S. DoD prime contractor for a secure communications infrastructure program. Sypris will produce and test the embedded circuit card assemblies that will perform certain cryptographic functions for the Army Key Management System. Production is expected to begin in 2024.
• Subsequent to quarter end, Sypris Technologies received an award to supply specialty high-pressure closures for use in a large international liquified natural gas project. The closures will be integrated into the filtration systems of the carbon capture and storage facilities of the project. Production is expected to be completed during 2024.
• The outlook for 2024 remains positive, with revenue now expected to increase 10-15% year-over-year, reflecting the continued momentum of new contract awards and strong backlog across many of the Company’s markets. We expect gross profit to increase 20-25% for 2024, while gross margin is forecast to expand 150-175 basis points on a year-over-year basis.

“We continued to expand across all segments of our business during the fourth quarter. Material shortages and the disruptions associated with new program launches are abating, and our focus is clearly on meeting the growing demand of our customers,” commented Jeffrey T. Gill, President and Chief Executive Officer.

“The backlog in excess of $110m for Sypris Electronics is expected to support revenue growth through 2024 and beyond. Customer funding has already been secured for a portion of these key programs, which enables us to procure inventory under multi-year purchase orders to mitigate future supply chain issues.

“Overall demand from customers serving the automotive, commercial vehicle, sport utility and off-highway markets has remained solid. We continue to invest in new equipment, maintain or upgrade existing assets, and drive continuous improvement initiatives to add capacity and support more cost-efficient operations in the future.

“Orders for our energy products remain positive, with open quotes outstanding on several large projects. Additional opportunities for growth may exist with new projects globally in support of increasing LNG demand. We are also actively pursuing applications for our products in adjacent markets to further diversify our industry and customer portfolios.”

Fourth Quarter and Full-Year Results

The Company reported revenue of $34.7m for the fourth quarter ended December 31, 2023, compared to $29.7m for the prior-year comparable period. The Company incurred a net loss of $1.1m, or $0.05 per diluted share, compared to net income of $0.1m, or $0.01 per diluted share, for the prior-year period.

For the full-year 2023, the Company reported revenue of $136.2m compared with $110.1m for the prior year. The Company reported a net loss of $1.6m, or $0.07 per share, for 2023 compared with a net loss of $2.5m, or $0.11 per diluted share, for the prior year.

Sypris Technologies

Revenue for Sypris Technologies increased to $19.0m in the fourth quarter of 2023, compared to $17.2 m for the prior-year period, due to steel price increase pass-throughs. Gross profit for the fourth quarter of 2023 was $3.1m, or 16.3% of revenue, compared to $2.2 m, or 12.9% of revenue, for the same period in 2022. Gross profit for the fourth quarter of 2023 was favorably impacted by a customer payment for negative material surcharges and foreign exchange impacts on its contract with Sypris Technologies, offset by production inefficiencies driven by volatile customer demand schedules.

Sypris Electronics

Revenue for Sypris Electronics increased to $15.7m in the fourth quarter of 2023 compared to $12.5m for the prior-year period. Gross profit for the fourth quarter of 2023 was $1.3m, or 8.1% of revenue, compared to $2.4m, or 18.9% of revenue, for the same period in 2022. Gross profit and gross margin for 2023 were negatively impacted by ramp-up costs on two major programs.

Outlook

Commenting on the future, Mr. Gill added, “While challenging supply chain conditions and new program launches impacted our 2023 results, demand from customers serving the automotive, commercial vehicle and sport utility markets remains positive. Similarly, demand from customers in the defense and communications sector continues to be robust, while the outlook for the energy market continues to move in the right direction.

“Our healthy backlog, new program wins, and long-term contract extensions are expected to support continued revenue and earnings growth during 2024. We now expect revenue to increase 10-15% year-over-year as a result of the combined strength of our backlog for Sypris Electronics and increasing orders for our energy products. We also continue to expect to achieve gross margin expansion in the range of 150 to 175 basis points with gross profit forecast to increase 20-25% in 2024.”

About Sypris Solutions

Sypris Solutions is a diversified manufacturing and engineering services company serving the defense, transportation, communications, and energy industries. For more information about Sypris Solutions, visit its Web site at www.sypris.com. (Source: BUSINESS WIRE)

 

01 Apr 24. Terran Orbital Reports Record 2023 Financial Results.

• Record 2023 revenue of $135.9m up 44% year-over-year
• Record 2023 gross profit of $8.6m improved $25.8 m over prior year
• Manufacturing 78 satellites for Lockheed Martin for Space Development Agency programs
• Signed over $2.7bn in new awards in 2023 representing more than 360 satellites
• Introduced seven new standard bus designs, spanning multiple size classes of satellites
• Launched new Responsive Space Initiative to deliver standard buses in 30 days, with integrated payloads in 60 days
• Commissioned new 50 Tech facility and broke ground on Goodyear expansion facility
• $71.7 m cash balance as of December 31, 2023

Terran Orbital Corporation (NYSE: LLAP) (“Terran Orbital” or the “Company”), a leading manufacturer of satellite products primarily serving the aerospace and defense industries, today announced financial results and operational highlights for the three and twelve months ended December 31, 2023.

Full Year 2023 Financial Highlights

• Generated record revenue of $135.9m up 44% year-over-year
• Gross profit of $8.6 m compared to $17.3m loss in 2022
• Adjusted gross profit(1) of $19.4m compared to $2.2m loss in 2022
• Net loss of $151.8m improved from a net loss of $164.0 m in prior year

Marc Bell, Co-Founder, Chairman, and Chief Executive Officer of Terran Orbital said, “I am pleased to report our company’s strong results for 2023. Our revenue growth and gross margin improvement affirm the strength of our strategy and execution. The future of space is responsive, and Terran Orbital is well-positioned to capitalize on this growing market segment. We’re focused on sustainable growth, achieving profitability, and delivering solutions that meet evolving customer needs. Terran Orbital isn’t just keeping pace with disruption, we’re at the forefront, shaping the future of the space economy through responsive space.”

Results for the Fourth Quarter and Full Year 2023

Revenue for the fourth quarter of 2023 was $31.6m, compared to $31.9m for the same quarter in 2022, and $135.9m for the full year, up 44% over the prior year. The increase in annual revenue was primarily due to the continued and increased level of progress made in satisfying our customer contracts and reflects the ongoing favorable impact from significant contract wins and modifications in recent periods. Revenue for 2023 was negatively impacted by an estimated $6.1m of EAC adjustments on certain firm fixed price programs. EAC represents the total estimated cost-at-completion and is comprised of direct material, direct labor and manufacturing overhead applicable to a performance obligation.

Cost of sales for the quarter was $32.1m compared to $42.7m in the same period in the prior year, and $127.4m for the full year, compared to $111.5m for the prior year. The increase in cost of sales for the full year was primarily due to an increase of $25.8m in direct and indirect program costs and $2.5m in depreciation and amortization, partially offset by a decrease of $6.8m in share-based compensation expense, $3.9m loss reserve, and $2.1m in scrap and obsolete materials and services. Cost of sales for the full year included an estimated negative impact of $2.1m due to EAC adjustments on certain programs and non-recurring changes in estimates related to inventory.

Gross (loss) profit was $(0.5)m for the quarter, compared to $(10.8)m in the same period in the prior year, and $8.6m for the full year, compared to $(17.3)m for the prior year. Excluding share-based compensation and depreciation and amortization included in cost of sales, Adjusted Gross (Loss) Profit(1) was $2.2m for the quarter, compared to $(7.3)m for the same period in the prior year, and $19.4m for the full year, compared to $(2.2)m in the prior year. EAC adjustments negatively impacted gross profit and Adjusted Gross Profit by an estimated $4.0 m during 2023.

Selling, general, and administrative expenses were $27.2m for the quarter, compared to $27.6m for the same period in the prior year, and $117.5m for the full year, compared to $111.9m for prior year. The increase for the full year was primarily driven by increases in salaries and wages, research and development expenses, business development expenses, depreciation and amortization, and other operating costs, partially offset by a decrease in share-based compensation expense and accounting, legal, and other professional fees.

Net loss was $42.8m in the quarter, compared to a net loss of $33.0m for the same period in the prior year, and $151.8m for the full year, compared to $164.0m for the prior year. The improvement in annual net loss was driven by the net positive impact of the items noted above as well as the absence of debt extinguishment in 2023, partially offset by the change in the fair values of warrant and derivative liabilities and higher interest expense in 2023.

Adjusted EBITDA(1) was $(20.6)m for the quarter 2023, compared to $(26.1)m in the same period in the prior year, and $(77.4)m for the full year, compared to $(69.5)m for the prior year. The decrease in Adjusted EBITDA for the full year was primarily due to an increase in selling, general, and administrative expenses as a result of our growth initiatives, partially offset by an increase in Adjusted Gross Profit.

Capital expenditures totaled $23.1m in 2023, up from $22.5m in 2022.

Balance Sheet and Liquidity

As of December 31, 2023, Terran Orbital had $71.7 m of cash on hand and approximately $313.8m in gross debt obligations. The Company’s debt included $16.9m in connection with an obligation under one of its PIPE investment subscription agreements, which is payable in cash or equity at the Company’s option, subject to certain limitations.

Backlog

Backlog represents the estimated dollar value of executed contracts, including both funded (firm orders for which funding is authorized and appropriated) and unfunded portions of such contracts, for which work has not been performed. The unfunded portion of enforceable contracts is accounted for as variable consideration and is reported at our estimate of the most likely amount to which the Company is expected to be entitled. Although backlog reflects business associated with contracts that are considered to be firm, terminations, amendments or contract cancellations may occur, which could result in a reduction in our total backlog.

Our backlog totaled $2.7bn as of December 31, 2023, of which $2.4bn is related to Rivada Space Networks, compared to backlog of $170.8m as of December 31, 2022.

(1) Non-GAAP financial measure. Definitions of the non-GAAP financial measures used in this press release and reconciliations of such measures to their nearest GAAP measures are included below.

2023 Milestones

Launched 12 satellites into space, including:

• Runner-1 for ImageSat International
• Tantrum for Lockheed Martin
• 10 satellites for Space Development Agency’s Tranche 0 Transport Layer

Awarded $2.7bn in new contracts, including:

• 300 satellites for Rivada Space Networks
• 36 satellites for Lockheed Martin for the SDA Tranche 2 Transport Layer Beta
• 16 satellite constellation from new customer
• Contract with Axient to supply satellites for the Air Force Research Laboratory
• European Space Agency award for proximity operations and in-orbit servicing

Executing on expansion plans:

• Completed 50 Tech’s 60,000 sf addition to our existing manufacturing facility
• Increased clean room space ten-fold
• Completed our new printed circuit board assembly (PCBA) facility
• Completed our new module testing facility, over 2,500 modules built
• Expanded internal harness capability, delivered over 2,200 harnesses to programs
• Installed new large shaker table, TVAC chamber and shock testing facility
• Increased robotic assembly from module to panel (vehicle sub-assembly) level
• Broke ground on new 94,000 sf satellite assembly facility, anticipated to take possession in second quarter of 2024

Winning industry accolades

• Time Magazine’s TIME 100 Most Influential Companies 2023
• Fast Company’s Most Innovative Companies of 2023
• Business Intelligence Group’s BIG Award for Business, Small Business of the Year 2023
• Octane High Tech Awards, Best Large Disruptor / Innovator 2023
• Office of the Secretary of Defense’s Patriotic Employer Award 2023

About Terran Orbital

Terran Orbital Corporation is a leading manufacturer of satellite products primarily serving the aerospace and defense industries. Terran Orbital provides end-to-end satellite solutions by combining satellite design, production, launch planning, mission operations, and on-orbit support to meet the needs of the most demanding military, civil, and commercial customers. Learn more at www.terranorbital.com.(Source: BUSINESS WIRE)

 

28 Mar 24. Honeywell Acquires Italy’s Civitanavi for Autonomous Operations. The combination of Honeywell and Civitanavi Systems’ high-precision inertial navigation and stabilization solutions will provide new opportunities for customers to enable autonomous operations.

Honeywell is set to acquire Italy’s Civitanavi Systems, a provider of high accuracy inertial navigation and stabilization systems.

The acquisition is expected to further strengthen Honeywell’s capabilities to help customers create autonomous operations in aircraft and other vehicles.

Honeywell will initiate a voluntary tender offer to acquire all outstanding shares of Civitanavi for a purchase price of €6.30 per share in cash, at an equity value of approximately €200 m at closing.

Together with Civitanavi, Honeywell will be able to offer a broader set of technologies to its customers across the globe, whether they are traditional operators seeking to increase the autonomous capability of their existing fleets or are new entrants in the Advanced Air Mobility space.

Civitanavi’s product offerings of inertial navigation, geo reference and stabilization systems will complement technologies in Honeywell’s existing navigation and sensors business. Civitanavi specializes in high-performance Fiber Optic Gyro technology that Honeywell has not previously offered in its navigation portfolio.

“By integrating Civitanavi’s inertial technologies and sensors across Honeywell’s existing commercial, military, space and industrial platforms, our customers across the globe will now have access to a more robust portfolio of aerospace navigation solutions in support of their journey toward autonomous operations,” said Honeywell Aerospace Technologies President & CEO Jim Currier.

“With this acquisition, we will be able to immediately expand our offerings to customers in the European Union through Civitanavi’s navigation solutions, a capability we intend to further build out in the near-term. We look forward to adding this critical technology to our portfolio to help accelerate the growth of our Aerospace business. We are excited to welcome Civitanavi’s talented workforce as our newest Honeywell Futureshapers,” Currier added.

(Source: https://www.defenseadvancement.com/)

 

27 Mar 24. A new deal means Melrose can put past failures behind it. When we looked at Dowlais Group’s (DWL) annual figures, it brought home why the decision was taken to cleave the automotive business away from Melrose Industries (MRO). The much-touted turnaround specialist fell to an operating loss due to a goodwill impairment linked to the carrying value of its powder metallurgy division. But it wasn’t so much the loss in isolation, but the realisation of the managerial challenge posed by Melrose’s original £8.1bn acquisition of the GKN engineering group in 2018.

Melrose was not a conglomerate in the strictest sense, but its experience with GKN ties in with the narrative that more focused companies tend to perform better. Yet when you look at an organisation such as, say, Amazon (US:AMZN), you’re left with the impression that the conglomerate model may be evolving rather than disappearing altogether.

Melrose inherited around £629mn-worth of lossmaking contracts when the deal was struck, but what management couldn’t have foreseen was the strain on automotive supply chains brought about by a global semiconductor shortage, to say nothing of the grounding of civil aviation fleets in response to the pandemic. It’s notoriously difficult to fight a war on two fronts, but Melrose, which had established a reputation for unlocking cash from acquired businesses, often through stringent inventory management, found that operational efficiencies will only take you so far in the face of a ‘black swan’ event.

It’s worth remembering that Melrose was one of London’s Aim’s early success stories. By the time of the hostile GKN takeover, it had completed a succession of M&A deals that were notable for the rapid turnaround in the financial performance of the acquired entities, culminating in the 2016 deal to acquire Nortek, a ventilation equipment manufacturer, for £2.2bn. Within two years, Nortek had booked a 52 per cent increase in adjusted operating profits, achieving its original three-to-five-year targets well ahead of time. Unfortunately, matters then swiftly moved beyond management’s control, although it could be argued that private equity was poised to take a leading position in terms of M&A strategies anyway.

It’s curious to note that the Melrose split may have an antecedent in 1996 when Hanson ended its time as a diversified conglomerate by splitting into four separate listed companies: Hanson, Imperial Tobacco, The Energy Group and Millennium Chemicals. So much for nostalgia. At any rate, Melrose is a slightly different beast from the late Lord Hanson’s creation. The stripped-down, aerodynamic version of Melrose is now finding favour with the sell-side, as civil aviation volumes revert to the growth model. In a recent note, analysts at UBS increased its sum-of-the-parts valuation from 690p to 770p a share, citing “uniquely attractive aftermarket economics and platform exposures” when set against “original equipment manufacturers and suppliers with greater programme/margin risk”.

The analysts also make the point that the well-publicised issues with Boeing’s (US:BA) 737-Max aircraft will probably exacerbate constraints linked to the supply of new aircraft, thus providing support for aftermarket volumes. In its best upside scenario, UBS gives a potential valuation of 1,000p a share, representing a 50 per cent premium on the current share price.

Secular trends are now moving in Melrose’s favour. And even the 737-Max controversy has provided a potential unexpected fillip. There was further positive news midway through this month, when it was revealed that GKN Aerospace had cemented its long-term partnership with engine manufacturer Safran SA (FR:SAF), after signing a long-term agreement to expand its support for the LEAP (Leading Edge Aviation Propulsion) engines. The contract centres on parts production for the Leap 1A variant for the Airbus A320neo aircraft. It’s also expected that it will produce components for the LEAP 1B for the Boeing 737-Max aircraft in the future.

Analysis from the International Air Transport Association shows that the civil aviation market has moved out of the recovery phase, with revenues now 15 per cent in advance of pre-pandemic levels despite relatively slow growth in cargo volumes. Passenger flight numbers are estimated to rise to 4.71bn this year, a 4 per cent increase on 2019. And after three years of losses, airlines’ net profit hit $23.3bn, edging towards the adjusted 2019 rate. North America and Europe have led the way, which is significant given that much of the projected growth in flight numbers is expected in the Asia-Pacific and Middle Eastern markets.

Beyond the post-pandemic recovery, the structural growth of the civil aviation cycle is working in Melrose’s favour, aided by the fact that management no longer must contend with quite so many moving parts. A last word from analysts at Peel Hunt who believe that shareholders stand to benefit from additional share buybacks, with “organic potential and balance sheet optionality” generating “further substantial upside”. (Source: Investors Chronicle)

 

27 Mar 24. Big Technologies’ growth slows as it loses key surveillance contract.

The company might struggle to protect its impressive profit margins as growth slows

• Colombian contract ends
• Management says it still has a strong pipeline of potential customers

Surveillance software company Big Technologies (BIG) saw revenue growth slow from last year as it faces headwinds around contract timing.

Ironically, given the name, the problem with a company this small is that it is dependent on relatively few contracts. Last year, revenue grew 33 per cent due to an eight-year contract signed with the New Zealand department of correction. However, this wasn’t backed up with significantly larger contract wins this year.

The company is forecasting “short-term headwinds” to sales and profits in 2024 due to the ending of a contract in Colombia. This is a customer the company has been serving for a number of years, so it calls into question how essential the product offering is.

One strength of the company is its 70.7 per cent gross margin. However, this did fall from 72.5 per cent from the prior year due to more inventory provisioning. If the Colombia contract sets a precedent that the tracking product isn’t entirely essential, then other customers might start trying to negotiate down the prices.

Management did say it has a strong pipeline of future work and expects to return to growth in 2025. The concern is that Big is still trading on a FactSet consensus forward price/earnings (PE) ratio of 18, which is expensive for a company that is seeing growth slow quickly.

We have questioned how unique the technology is and whether Big would be able to protect its margins moving forward. The slowdown this year has backed up these concerns. It will take consecutive periods of accelerated growth to change our minds. Move back to sell. Last IC View: Hold, 247p, 29 Mar 2023. (Source: Investors Chronicle)

 

27 Mar 24. Rafael concludes a record year: ended the year 2023 with a record in sales of about 14bn NIS, a record in new orders amounting to about 30bn NIS and a net profit of 588m NIS.

Rafael Advanced Defense Systems Ltd. publishes today (Wednesday) its financial results for 2023, as approved by the company’s board of directors:

• A 21% increase in the volume of the company’s sales, which amounted to NIS 14,043m, compared to NIS 11,586m in 2022.
• An 85% increase in the volume of orders received by the company in 2023 – NIS 29,864m compared to NIS 16,104m in 2022.
• An unprecedented backlog of orders amounting to 52,416m NIS, a 47% increase compared to the backlog of 2022 (35,636 bn NIS) which is 3.6 years of sales.
• Net profit of 588m NIS, an increase of 17% compared to the net profit in 2022.
• Gross profit of 2,928m NIS, an increase of 19% compared to the corresponding year.

As mentioned above, Rafael’s order backlog reached an all-time high, with a 47% increase over 2022 – 52.416m NIS – driven by orders from both domestic and international markets. The volume of orders in 2023 increased by approximately 85%, totaling 29.864m NIS, with 57% of the orders coming from international customers (17.072 m NIS) and the remaining 43% from Israel (12.792m NIS).

The fourth quarter of 2023 was exceptional in terms of activity, with Rafael receiving orders totaling 14.514 m NIS, with over 61% of these orders being international, following the completion of large export deals. Sales volume in the fourth quarter stood at 4.594m NIS, a 19% increase compared to the corresponding quarter last year. Rafael notes a slight decrease in the gross profit margin compared to 2022 due to fluctuations during the “Swords of Iron War.”

Rafael Chairman, Dr. Yuval Steinitz: “We conclude 2023 as a record-breaking year in professional and business activity at Rafael. In its vision and mission, Rafael functions as a significant pillar in the security of the State of Israel. This year this vision was practically brought to fruition with some of the most advanced technological and operational breakthroughs. Even before the “Swords of Iron War”, whose effects on the company’s reports will be seen mainly in 2024, Rafael realized important opportunities in various countries in the world with huge deals such as the historic sale of the “David’s Sling” to Finland, the sale of Spike missiles to Greece, and more. I would like to take this opportunity to thank, on behalf of myself and the board of directors, the outgoing CEO of Rafael, Maj. Gen. Yoav Har-Even, for 8 years of leadership and significant work in the company. On behalf of the board of directors and the management, I would of course like to thank the Rafael employees and their families for their dedication and professionalism.”

Rafael CEO, Yoav Tourgeman: “Alongside our extensive life-saving activity in Israel, Rafael continues to operate globally with a diverse product portfolio, maintaining economic strength and commercial resilience. Rafael makes a crucial contribution to the IDF and the entire security establishment, with a wide range of advanced capabilities and systems resulting from significant investments in research and development. Above all, we rely on a high-quality human resource base, enabling us to meet the challenges and goals ahead. We expect to bring onboard approximately 2,000 new employees this year. While Rafael faces a challenging year in terms of performance and deliveries, I am confident that our proven operational experience, combined with cutting-edge innovation and excellent market positioning globally, will enable us to continue delivering the most significant value proposition to our customers.”

 

26 Mar 24. Czech gunmaker Colt CZ sells Vista Outdoor stake after rejected bid. Czech gunmaker Colt CZ Group (CZG.PR), opens new tab said on Tuesday it had sold all its shares in U.S. sporting and outdoor products group Vista Outdoor (VSTO.N), opens new tab after a rejected bid last year, as it turned focus to its planned acquisition of another group.

Colt CZ also reported on Tuesday revenue rose 1.8% year-on-year in 2023 to 14.86bn crowns ($638.5m), helped by a record fourth quarter and the start of a recovery in the U.S. market.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell 9.4% to 3.05bn crowns last year, in line with the company’s outlook. The company proposed an unchanged 30 crown per share dividend.

Colt CZ is forecasting revenue to rise up to 19.8% on a standalone basis and by up to 48.1% when factoring the expected contribution of its planned acquisition of Czech small-calibre ammunition maker Sellier & Bellot.

If the deal completes as expected by mid-2024, revenue should reach a range of 20.0bn to 22.0bn crowns and adjusted EBITDA should be in a range of 4.3bn to 4.7bn crowns in 2024.

The $820m deal for Sellier & Bellot has taken focus off a cash-and-stock merger offer to Vista rejected last November.

Investment firm MNC Capital has since made a bigger offer while Vista remains in the process of selling its sporting goods business to privately held Czech defence and civil manufacturing firm Czechoslovak Group (CSG) in a deal preceding any offer.

“Once we saw our bid was topped we decided there was no further logic to hold the stake,” Colt CZ Chief Executive Jan Drahota said, adding the last shares were sold this week. “As of today we don’t have any more shares.”

Colt CZ disclosed in October 2023 it held a 2.4% stake in Vista Outdoor and it and connected reporting persons had a stake exceeding 5%. On March 12, it said the stake had fallen below 5% and that Colt CZ’s stake was 1.9%. (Source: Reuters)

 

26 Mar 24. Smiths Group announces record orders and a change at the helm.

• A surprise change as Keel departs
• £100mn in new share buybacks

Shares in Smiths Group (SMIN) have flatlined over the past 12 months, but the market reacted positively after the engineering group announced £100m in new share buybacks, together with organic revenue growth of 3.9 per cent at the half-year mark. The group also announced that Roland Carter is taking over as chief executive following Paul Keel’s surprise decision to step down from the top job. Carter, a long-termer at the group, formerly headed up the Smiths Detection unit.

Indeed, Smiths Detection, alongside the John Crane business, were the major contributors to top-line growth, delivering growth rates of 8.9 and 12.7 per cent, respectively. Operating leverage on higher sales volume resulted in margin expansion at John Crane, and it would be reasonable to expect that matters could improve further given that investment in automation at the business unit has been a corporate priority.

Management points out, with some justification, that the interim results must be seen in context against a strong comparator in 2023, but perhaps the most pleasing aspect was the 16.5 per cent hike in the order book, with double-digit order growth across the largest business units. Order growth at Smiths Interconnect rebounded during the second quarter after a stuttering start to the accounting year, while performance at Flex-Tek was held in check by softness in the US construction market. Management anticipates that the latter business will return to growth in the second half.

Operating profit at £246m rose by 5.3 per cent on an organic basis, with an accompanying 20 basis point increase in the underlying margin. Return on capital was heading in the right direction, which is doubly positive given a 5.6 per cent increase in capital expenditure through the period.

Improved housekeeping, particularly in relation to working capital management, saw operating cash conversion rise to 26 percentage points to 89 per cent, while free cash flow generation more than doubled to £112m. The group ended the period with net debt equivalent to a manageable 0.9 times cash profits, even allowing for the buyback.

Conditions are expected to improve in key markets such as aerospace, security and energy, although the timing of interest rate retracement – an important consideration – remains open to question. The asking price of 16 times consensus earnings is about par from an historical perspective, but reaffirmed guidance of organic revenue growth within the medium-term target range of 4-6 per cent, underpinned by “record order books”, along with the prospect of margin expansion, is enough to justify our long-term interest. Buy. Last IC view: Buy, 1,650p, 26 Sep 2023. (Source: Investors Chronicle)

 

26 Mar 24. HENSOLDT achieves strong growth in the 2023 financial year. Company publishes 2023 annual report. The HENSOLDT Group continued its profitable growth trajectory in the 2023 financial year and met its most recent, more precise forecast. Investments in defence and security as a result of the ongoing geopolitical tensions worldwide were reflected in increased demand at HENSOLDT, particularly for reconnaissance, surveillance and self-protection systems. The company is thus consolidating its position as one of the leading companies in the European defence electronics market. (balance sheet press release dated 22 February 2024). The 2023 Annual Report, which is now available, provides an overview of the main pillars on which this success is based.

In its annual report, HENSOLDT looks ahead and beyond its own company: The report documents the role HENSOLDT technology plays in the air defence of cities such as Kyiv and Odessa. It shows how HENSOLDT is already developing the products of tomorrow and what role artificial intelligence will play in this. The company also gives start-ups the opportunity to increase the dynamics in the defence industry – the FCAS Accelerator is a first example of this. In addition, HENSOLDT’s journey from a manufacturing company to a series manufacturer will be outlined. To counter the shortage of skilled labour, HENSOLDT is also breaking new ground in recruiting.

The designated CEO Oliver Dörre has been gaining an overview of the company and its various locations since the beginning of 2024. He summarises his impressions of the first few months in the annual report. He will take over as CEO when Thomas Müller leaves the company on 1 April 2024.

The sustainability report also provides insights into the HENSOLDT ESG Strategy 2026, as the company prepares for the Corporate Sustainability Reporting Directive (CSRD) and aims to achieve climate neutrality by 2035. In line with the sustainability goals, the 2023 Annual Report is only available online for the first time (https://annualreport.hensoldt.net/en/).

 

26 Mar 24. Elbit Systems Ltd. (“Elbit Systems” or the “Company”) (NASDAQ and TASE: ESLT), the international high technology defense company, reported today its consolidated results for the fourth quarter and full year ended December 31, 2023.

Backlog of orders at $17.8bn; Revenues of $6.0bn; Non-GAAP net income of $299m; GAAP net income of $215m;

Non-GAAP net EPS of $6.70; GAAP net EPS of $4.82

In this release, the Company is providing US-GAAP results as well as additional non-GAAP financial data, which are intended to provide investors a more comprehensive view of the Company’s business results and trends. For a description of the Company’s non-GAAP definitions see page 7 below, “Non-GAAP financial data”. Unless otherwise stated, all financial data presented is US-GAAP financial data.

Management Comment: Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented:  “Elbit Systems is committed to supporting the increased requirements of the Israel Ministry of Defense as well as maintaining our commitments to all our customers around the world.

The significant increase in the order backlog in 2023 highlights the relevance of Elbit Systems’ portfolio of advanced technological and operationally proven solutions that provide a competitive edge to our customers around the world.

The acceleration in revenue growth reflects the successful implementation of our operational transformation plan, as we increase capacity to convert a growing backlog into revenues.

In 2023, we continued our efforts to focus our portfolio on the end markets that are most relevant.

I would like to express my appreciation to our employees that have demonstrated significant resilience in challenging times. In view of Elbit Systems’ growth and our ability to address multiple challenges, including the current conflict, I am confident in our ability to realize our potential.”

 

25 Mar 24. Boeing CEO Dave Calhoun to step down in wake of ongoing safety problems. Boeing CEO Dave Calhoun said Monday he intends to leave the beleaguered company by the end of the year in a major shakeup of the company’s leadership. Boeing’s chairman and the head of the commercial airplane unit are also leaving.

Boeing’s chairman, Larry Kellner, will not stand for re-election as a board director. The board has elected former Qualcomm CEO Steve Mollenkopf to succeed him.

The company also announced that Stan Deal, CEO of Boeing Commercial Airplanes, is retiring. Stephanie Pope, Boeing’s chief operating officer since January, is taking his place effective immediately.

Boeing has been buffeted by more than five years of problems with its airplanes, including two fatal crashes of the 737 Max in 2018 and 2019 that killed 346 people, and most recently a door plug that blew out of the side of an Alaska Airlines 737 Max in January, leaving a gaping hole in the side of the plane. The problems have led to multiple groundings for safety issues and more than $31 bn in cumulative losses.

In a letter to Boeing employees Monday, Calhoun called the Alaska Airlines incident “a watershed moment for Boeing.”

“The eyes of the world are on us,” he said in announcing his departure plans. “We are going to fix what isn’t working, and we are going to get our company back on the track towards recovery and stability.”

The decision to leave was “100%” his choice, Calhoun said in an interview on CNBC Monday morning.

But Calhoun has become the focus of many who are critical of the way Boeing has been run in recent decades and the string of safety and quality issues.

“He’s the very best CEO that Airbus has ever had,” said Richard Aboulafia, managing director at AeroDynamic Advisory and a leading aerospace analyst, recently referring to the advantages gained by Boeing’s main rival during his tenure running Boeing.

His departure also comes in the face of widespread criticism of the company by CEOs of many of the world’s major airlines Boeing depends upon to buy its planes. CEOs of numerous airlines had asked to speak directly to the Boeing board last week, which Calhoun tried to characterize Monday as a normal process, even if it’s rare for customers to speak directly to directors.

As to why Calhoun decided to stay on through the end of the year rather than leave immediately, he told CNBC: “We have another mountain to climb. Let’s not avoid what happened with Alaska Air. Let’s not avoid the call for action. Let’s not avoid the changes that we need to make in our factories.” (Source: CNN)

 

22 Mar 24. Cohort vs Chemring: who wins in a troubled world? Fresh from a contentious electoral triumph, Vladimir Putin has rejected President Macron’s recent plea for a ceasefire in Ukraine during the Paris Olympics. The war has been raging for a little over two years, much longer than many would have initially anticipated, yet we don’t appear to be any closer to a resolution.

Indeed, political will, rather than Ukraine’s determination to resist Russian aggression, could shape events through the northern summer. At the time of writing, the latest aid bill, which provides financial support for Ukraine, is struggling to pass through US Congress, although European Union (EU) members recently agreed to provide another €5bn (£4.3bn) for military aid as part of the trading bloc’s formal assistance fund. The Financial Times notes that the continued political wrangling on Capitol Hill has meant that US defence contractors have been unable to exploit the boom in global military spending, at least in comparison with their European counterparts.

Matters have certainly been more positive closer to home. Figures provided by the House of Commons Library show that the UK is one of the leading donors to Ukraine, alongside the US and Germany, having pledged almost £12bn in overall support since February 2022. Security assistance provided by the US since the start of the conflict has topped the $75bn (£59bn) mark. Naturally, the scale of this contribution will rise significantly if the disputed bill eventually gains Congressional support.

There have been further signs that European countries have become more willing to double-down on their support, not least because of Sweden’s entry into the Nato alliance earlier this month.

For now, the war in Ukraine has placed a sizeable drain on both European and US arms stockpiles. The UK is still providing both lethal and non-lethal weaponry and equipment, although doubts have been raised as to whether the Ministry of Defence has been able to ensure adequate replenishment levels. This was borne out by disquiet among Conservative MPs after Jeremy Hunt’s failure to prioritise defence spending in the recent spring Budget.

We can say, however, that there will be little talk of any “peace dividend” in the years to come even if, by some miracle, hostilities cease in Ukraine – or even Gaza for that matter.

Armed conflict on this scale always informs future defence procurement decisions, but events in Ukraine have challenged many strategic assumptions, especially in relation to land-based warfare. The lessons learned will probably become clearer through the evolving nature of contract awards in the years to come, providing a secondary benefit for defence contractors, or at least those with the flexibility to respond to changes on the ground.

For the moment, however, the replenishment issue takes centre stage. UK defence contractor Chemring (CHG) has revealed that its Norwegian subsidiary, Chemring Nobel, had received €66.7mn from the EU as part of a €513mn funding round to boost ammunition production capacity. The bloc is looking to increase its annual output of shells to 2mn by 2025 to help counter the shortage in Ukraine. In addition, the Norwegian government has granted NKr428mn (£32mn) to bolster Chemring Nobel’s production capacity. Demand for the group’s countermeasures and energetics offerings is also on the rise, accounting for around 72 per cent of the record £756mn order intake in 2023.

We outlined the investment case for Hampshire-based Chemring in March 2023, since when the share price has crept up by a third. One of its UK stablemates, Cohort (CHT), has matched that appreciation rate, but it may now offer superior upside despite the health of Chemring’s order backlog and best-in-class book-to-build ratio.

Cohort reported a top-line increase of 22 per cent in its latest interim update, but its orders outstripped sales fulfilment by around a third. The balance sheets of both companies are in good trim, but Cohort trades at a sizeable discount to its UK rival based on their respective enterprise value to sales multiples. Admittedly, it does come up short of Chemring in terms of free cash flow yield, although research from Peel Hunt indicates that this will reverse during this year and next.

Cohort tends to rely on incremental contract awards as opposed to big-ticket affairs, but its order cover at the time of its interim release stood at a healthy 95 per cent. As if to bear this out, its Chess Dynamics subsidiary has just been awarded a £15.7mn contract from BAE Systems Maritime Australia to supply its Sea Eagle surveillance systems for the Australian navy’s Hunter-class frigates. Chief executive Andy Thomis notes that the contract “enhances the visibility of future revenues” – a worthwhile consideration for investors even if Putin unexpectedly breaks out the olive branch. (Source: Investors Chronicle)

 

25 Mar 24. Airbus to acquire INFODAS and strengthen its cybersecurity portfolio. Airbus Defence and Space has entered into an agreement to acquire INFODAS, a Cologne-based, German company that provides cybersecurity and IT solutions in the public sector including for defence and critical infrastructures. The transaction is subject to the customary regulatory approvals and is expected to be finalised before the end of 2024.

This acquisition supports Airbus’ strategic ambition to strengthen its cybersecurity portfolio for the benefit of its European and global customers. With exponential cyber threats, along with the increasing digitalisation and connectivity of its products and systems, cybersecurity is a pivotal component of Airbus’ development. Over the last years, the group has continuously developed its cybersecurity capabilities and expertise, ensuring the best possible protection for its products, operations, customers, and ecosystem, including major programmes such as the Future Combat Air System (FCAS).

INFODAS is a company with around 250 employees and annual revenues of about 50 m euros. Besides its headquarters in Cologne, INFODAS has additional offices in Germany in Berlin, Bonn, Hamburg, Munich and Mainz. The company has been certified by the Federal Office for Information Security (BSI) as an IT security service provider in the areas of information system auditing, consulting and penetration tests. The INFODAS’ SDoT Security Gateway product family is approved for classification levels up to secret. The products are also certified in accordance with Common Criteria and have other country-specific certificates.

 

22 Mar 24. MBDA expects orders, revenue in Italy to dip this year after new records in 2023. The Italian unit of European missile maker MBDA expects the number of new contracts and revenue to slip this year after seeing record high orders in 2023, its managing director said on Friday.

MBDA’s Italian order portfolio last year rose by just over 40% to 4.5bn euros ($4.87bn). New contracts almost doubled, for the second year in a row, to 2.3bn euros from 1.18bn euros the previous year, according to a presentation slide.

“This year we expect order volumes and revenues to be slightly below the levels of 2023 – hard to repeat given the record highs – but to still be significant,” Italy’s Managing Director Giovanni Soccodato said.

As world geopolitical tensions rise, global military spending is surging and the market for missiles and missile defence systems are forecast to grow.

“Looking ahead, from the solid base that has been created, it is extremely meaningful to prepare the future,” Soccodato told reporters, explaining that although contracts this year would not be as significant in terms of numbers they would concern products that would be key for the company’s future development.

The group is owned by France’s Airbus (AIR.PA), opens new tab and Britain’s BAE Systems (BAES.L), opens new tab, both with a 37.5% stake, and by Italy’s Leonardo (LDOF.MI), opens new tab, with the remaining 25%.

It has been frequently cited as a successful example to follow as more pan-European alliances in the defence sector are needed to take full advantage of military budgets in a more efficient and less fragmented way.

Earlier this month, MBDA reported that the consortium as a whole generated revenue of 4.5bn euros in 2023, with new orders rising to 9.9bn euros. The company’s total order portfolio is now worth 28 bn euros.

Soccodato said containing costs was particularly important at a time when traditional players like MBDA face aggressive competition from new players from countries such as South Korea and Turkey. ($1 = 0.9245 euros) (Source: Reuters)

 

22 Mar 24. The future of UK aircraft manufacturer, Britten-Norman, has been secured thanks to the sale of the business and assets, after its future was hanging in the balance just one month ago.

Joint administrators were appointed on Thursday 21st March 2024 to five companies within the group, being B-N Group Ltd, Britten-Norman Ltd, Britten-Norman Aircraft Ltd, BN Defence Ltd and BN Daedalus Ltd (‘the Companies’).

Britten-Norman Aerospace Limited

Following their appointment, the Joint Administrators of the Companies sold 100% of the share capital of Britten-Norman Aerospace Limited to Shelton Bidco Limited, an investment vehicle established by a group of financial investors led by 4D Capital Partners.

Immediately thereafter, the business and assets of the Companies were then acquired by Britten-Norman Aerospace Limited.

For the avoidance of doubt, Britten-Norman Aerospace Limited is not in any insolvency process.

UK aircraft manufacturer

Based on the Isle of Wight, Britten-Norman is a designer and original equipment manufacturer of aircraft, including the Islander, Trislander and Defender 4000, which are typically used in aerial surveys, air ambulance services, surveillance, law enforcement and security.

The business has operated for more than 60 years and has distributed its aircraft to over 100 countries. It also provides aircraft support services including field servicing and pilot training.

Shelton Bidco Limited has also acquired the share capital of the firm’s US entities BN Aircraft Sales Inc and Britten-Norman Inc.

Transfer of all 117 staff

The transactions secure the sale of the business and assets of the group and the transfer of all 117 staff to Britten-Norman Aerospace Limited across its head office and manufacturing site on the Isle of Wight, hangars in Lee-on-Solent, its design and engineering site in Southampton and sales office in London.

Pole: We’re proud to have secured a future for the business

Chris Pole, Managing Director at Interpath Advisory and joint administrator of the Companies, said,

“Britten-Norman is an important part of the UK aerospace industry that has a long track record of supplying world-renowned aircraft. We’re proud to have secured a future for the business and enable the management team to build on that heritage with fresh investment.

“Crucially, the deal also enables the transfer of all staff and the ability to secure precious manufacturing and engineering capability in the UK.” (Source: News Now/https://onthewight.com/)

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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Sponsored by SPX CommTech (TCI & ECS)

 

www.tcibr.com

 

www.enterprisecontrol.co.uk

 

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22 Mar 24. Forcit Group and DA-Group have signed an agreement whereby DA-Group sells the naval mine technology to Forcit Group. The acquisition comprehends the DA-Group’s naval mine technology business, including staff competence, technology, intellectual property rights, patents, etc.

This is a strategic step for DA-Group, which aims to focus its activities in particular on electronic warfare business and demanding space technology and industry solutions and products. DA-Group updates its strategy and continues to bringing new high-tech solutions and services to the market.

The acquisition is a strategic step for Forcit Group, that further strengthens Forcit Defence’s position as a supplier of total Defence systems for area denial on land and at sea. With this step forward Forcit Group will bring together under one roof the advanced knowledge and technology related to insensitive munitions, mechanics, electronics, and software for relevant Defence applications.

“DA-Group and Forcit have had successful cooperation in the field of underwater Defence. This acquisition is a significant leap for Forcit and will enable us to further innovate and stay in the frontline of development of advanced influence sea mine systems. With the new and strengthened team, we are well positioned to be the global technology leader and preferred partner for sea denial systems”, says Joakim Westerlund, CEO at Forcit Group.

Sami Kotiniemi, CEO at DA-Group points out that “The cooperation with Forcit has been fruitful and the close cooperation with Forcit will continue after the transaction.”

 

21 Mar 24. Why Seraphim’s shares have gone into space.

With Nvidia (US:NVDA) shares continuing to soar, the rewards of backing AI plays have started to show in the funds space. Microsoft (US:MSFT) and Nvidia backer Manchester & London (MNL) is already sitting on some impressive returns so far in 2024, even if its bets seem a tad punchy.

But it’s not MNL or one of the technology funds topping the charts when it comes to recent performance. MNL shareholders are up to the tune of around 20 per cent so far this year, but that’s eclipsed by Seraphim Space (SSIT). Shareholders are sitting on an enormous 80.2 per cent total return for 2024 as of 18 March. If we look at returns generated since the shares hit their last low point on 17 November, the gains come to more than 110 per cent.

What’s going on? Seraphim, which is predominantly invested in private ‘spacetech’ companies, has certainly been a beneficiary of the rally that has lifted growth investments. For context, shareholders took a bath to the tune of 64 per cent in 2022, and would still be down by around 40 per cent had they invested at the trust’s initial public offering (IPO) in the summer of 2021.

But the portfolio has enjoyed some progress. Its recent half-year results notes that ICEYE, a Finnish microsatellite manufacturer and the trust’s biggest holding, has become profitable on an Ebitda level at least. Elsewhere, D-Orbit, a space logistics and transportation specialist and the fund’s second-biggest holding, saw its fair value rise by a fifth after a €100mn funding round.

Beyond that, the trust has highlighted the fact that companies representing some 60 per cent of the portfolio by fair value have indicated they expect to have sufficient cash to reach profitability. There has also been an emphasis on the ‘judicious’ selection of companies that warrant additional capital, given that the trust has limited cash reserves.

Like other trusts with a preference for early-stage companies, such as Chrysalis (CHRY) and even Scottish Mortgage (SMT), the hope for Seraphim is that portfolio companies see their fundamentals improve but also benefit from a less savage interest rate environment. There’s also an argument that the trust’s shares still look cheap, trading as they are on a discount of around 35 per cent to portfolio NAV.

Having said that, I would extend some scepticism when shares rise so aggressively in such a short time, and Stifel analysts did downgrade the trust to a neutral rating earlier this year after its ‘rocketing’ returns.

The discount, for one, has almost halved from around 60 per cent at the turn of the year, and some might worry about whether the heavy momentum behind the shares might falter or turn. It’s also worth noting that discounts can reflect plenty of problems, be it questions about the reliability of valuations on illiquid assets or the specialist nature of a trust’s sector of focus.

Like some of its peers the trust also has some chunky position sizes, with 20.2 per cent in ICEYE, 14.4 per cent in D-Orbit and 10.7 per cent in All.space, which aims to develop an antenna capable of connecting to any other satellite. That brings risks, and reminds us caution is warranted as the shares go stratospheric. (Source: Investors Chronicle)

 

21 Mar 24. Dowlais hit by £449m impairment. The specialist engineer is struggling with its powder metallurgy division.

• £50m buyback announced
• Revenues expected to flatten this year

Specialist engineer Dowlais (DWL) has been dragged into a £450m operating loss by a major goodwill impairment. The group – which was spun off from Melrose Industries (MRO) last year – has reported a £449m impairment charge relating to its powder metallurgy division, following a review of its medium-term prospects. The group was further hampered by £120m of restructuring costs in the automotive business.

The powder metallurgy business is clearly under pressure, with revenue edging up by just 2.4 per cent to £1.0bn and adjusted operating margins dipping from 9.4 per cent to 9.2 per cent. The market underperformance was attributed to electric vehicle transition headwinds, engine downsizing and the impact of auto worker strikes in the US. A new divisional chief executive has now been appointed.

Elsewhere, however, the business is performing strongly. The bigger automotive division grew sales by 5.1 per cent to £4.4bn and boosted its adjusted operating margin by a whole percentage point to 6.9 per cent. This pushed the group’s total adjusted operating profit – which excludes the goodwill impairment and other one-off costs – up by 6.6 per cent to £355m.

Management certainly seems to be feeling confident, announcing a full-year dividend of 4.2p and a share buyback of up to £50m.

The outlook for 2024 is mixed. Current industry forecasts imply a slight decline in global light vehicle production this year, and Dowlais is expecting revenues to stay flat. A “modest” reduction in the first half is due to be offset by an improvement in the second half, as a result of several new programme launches. Internal improvements are expected to boost margins and free cash flow, however.

In the longer term, the global automotive market is expected to grow, with a forecast increase in global light vehicle production of 5 per cent between 2023 and 2028. Meanwhile, 2023 was the automotive division’s best ever year for new business wins. For now, however, there are too many one-off costs and unresolved issues within the metallurgy business for us to feel confident enough to buy in. Hold. Last IC View: Hold, 122p, 12 Sep 2023. (Source: Investors Chronicle)

 

19 Mar 24. Mindflow secures €5m to pioneer the Future of Work with Autonomous AI Agents in Cyber & IT Operations.

Mindflow raised €5M in a seed funding round with Auriga Cyber Ventures, Nauta Capital, Thales and Olivier Pomel (co-founder Datadog).

Mindflow aims at empowering any IT practitioner to leverage AI & automation so that they never have to work on any mundane boring task ever again #futureofwork.

Mindflow will expand its R&D team to develop the next generation of Generative AI models: Large Action Models (LAMs) to delegate mundane tasks to AI agents.

The rise of AI Agents that can execute tasks on their own

Mindflow is announcing €5m in funding in a seed round with Auriga Cyber Ventures,

Nauta Capital, Thales and Olivier Pomel, Co-founder of Datadog. This is a key milestone for Mindflowin its journey to redefine Cyber and IT operations through AI-powered automation.

Mindflowʼs investors not only secured robust financial backing but also invaluable insights and guidance from key figures in the IT, cybersecurity & tech ecosystem.

“From the moment I saw Mindflow’s platform, I knew it was a game-changer. Its ability to automate complex processes effortlessly is truly impressive. And with the integration of Gen-AI Large Action Models, the potential is beyond extraordinary“, says William Lecat, Partner at Auriga Cyber Ventures.

“We are convinced that multi-bn-dollar tech companies will emerge in the enterprise automation space made of AI agents and we are fully committed to being at the forefront of this race.” asserts Paul-Arthur Jonville, Co-founder & CEO.

Mindflow addresses the need for hyperautomation across IT & Cybersecurity teams

The IT & Cyber landscape is grappling with talent shortages, a rise in complex cyber alerts, and a surge in tool usage, with large companies averaging 473 tools—a 26% yearly increase (Gartner). This complexity results in an overwhelming task and alerts volume, diverting valuable human intellect to monotonous tasks.

Cybersecurity experts dedicate 30% of their time to tasks AI could automate, amidst a global shortfall of 3 m talents needed in the industry.

Thus, automating operations has become critical.

Mindflowʼs intuitive no-code automation & orchestration platform already makes it extremely easy to build, adjust, and monitor automation flows, for technical and non technical users. Major companies including Auchan, Colas, Thales, Elior and Doctolib already utilize Mindflow to automate phishing detection and neutralization, security incident response, vulnerability identification, CMDB management, IAM and employee offboarding processes…

“We have never encountered a platform like Mindflow, that allows SOC & IT teams to automate such a wide range of use cases so easily. The platform has almost no limits and can adapt to any environment”, adds Eric Lexcellent, Security Operations Director at Doctolib.

Enable the focus on high-value human expertise by automating mundane tasks

These funds will be allocated to augment its existing R&D team, already staffed with top-tier engineers and AI PhDs, by bringing in additional AI experts dedicated to advancing its cutting-edge AI capabilities and make the best of Gen-AI’s next big thing: Large Action Models (LAMs).

According to Gartner, “we are moving from what machines can do for us to what machines can be for us. Machines are evolving from being our tools to becoming our teammates. Gartner predicts that by 2025, Gen-AI will be a workforce partner for 90% of companies worldwide.”

Large Action Models (LAMs) are developed to understand complex human goals expressed in natural language, translate these intentions into actionable steps and respond in real time.

Beyond language comprehension, LAMs are also capable of learning to engage and perform actions within the whole information system, an area where Mindflow is setting the pace with an unfair advantage: a catalog of 600+ product integrations covering 100 000 actions.

The infusion of advanced LAMs technologies further elevates the platform’s capability to build autonomous AI agents, capable of executing specific tasks, under human supervision, allowing for an almost complete delegation and operational efficiency.

“Mindflow will create a new text-to-actions experience. Simply prompt what you wish to accomplish, and our AI handles the tedious parts, managing tasks across your tools and bringing in human approval for critical decisions. It’s all fully auditable to keep things transparent and compliant. It’s designed to let you focus on what truly matters.”

says Fabrice Delhoste Co-founder & CTO.

About Mindflow:

Founded in 2021, Mindflow is a revolutionary no-code enterprise automation platform designed to redefine how SecOps, ITOps, and CloudOps teams work. Its unique third-party tool integration capability enables Mindflow to be the organization’s automation backbone.

Imagine being able to automate complex workflows without writing a single line of code. Mindflow makes this possible. It connects seamlessly with a myriad of tools – from cybersecurity and IT vendors to communication channels like Slack, Microsoft Teams, and email systems. It supports cloud providers like AWS and Azure, ticketing systems such as ServiceNow, and even AI tools like OpenAI and Mistral.

The beauty of Mindflow lies in its simplicity and power. Teams with minimal programming skills can now automate repetitive tasks, saving time and focusing on high-value work. Whether it’s incident response, infrastructure monitoring, or employee onboarding, Mindflow turns these processes into efficient, automated flows in hours or days, not weeks.

With Mindflow, your team can achieve unparalleled efficiency and innovation in enterprise automation.

Our distinctions:

• Station F’s Future 40 (2023)
• 2nd place in “Most Innovative Solutions” category at Cybernight by Republik IT
• Mindflow is the European Cybersecurity Startup of the Year by European cyber Security Organisation (ECSO) (2023)
• Jury’s prize by Forum International de la Cybersécurité – FIC 2022
• Rothschild & Co Tech Night 2022: Mindflow won the “Most Promising Tech Startup of The Year” award.
• Les Assises de La cybersécurité 2022: Mindflow was selected by the Jury as one of the best startups.

With the support of:

• France 2030 – Critical Innovative Cyber Solution
• Digital Europe – Uptake on Innovative Cyber solution

 

20 Mar 24. Terra Drone enters US market with largest shareholding of Aloft Technologies. Japanese drone services company Terra Drone has announced an investment in US airspace management company Aloft Technologies. The investment makes Terra Drone the largest shareholder in Aloft, with Aloft becoming an affiliate company of Terra Drone. In addition, the board of directors of Aloft has appointed Yuki Ueno, Terra Drone’s executive officer in charge of domestic and international Unmanned Aerial System Traffic Management (UTM) business, to the Aloft board.

The partnership also marks Terra Drone’s official entry into the US, which is considered the world’s largest market for drones and AAMs. Together with Aloft and Unifly, a Belgium-based UTM provider that became a Terra Drone subsidiary in July 2023, Terra Drone is positioned to contribute to the development of the UTM ecosystem on a global scale, says the press release.

Compared to Japan, there are approximately 2.4 times as many registered drones and 62 times as many registered manned aircraft in the US. Additionally, a number of US companies are developing and manufacturing drones and UAMs. In July 2023, the FAA released an implementation plan “Innovate 2028” providing the steps it and others will need to take to safely enable advanced air mobility operations in the near term.

“The integration of UTM systems is pivotal for the expansion, scalability, and sustainability of global drone operations,” stated Jon Hegranes, Founder and CEO of Aloft. “Our collaboration with Terra Drone positions us at the forefront of this evolution, offering us the unique opportunity to harmonize operational standards and leverage technology to enhance the efficiency and reach of drone flights on an international scale.” For more information visit: www.terra-drone.net (Source: www.unmannedairspace.info)

 

18 Mar 24. Light hybrid vehicles in the portfolio: Rheinmetall acquires Dutch startup REE. Rheinmetall has acquired the Dutch startup REEQ, thereby expanding its vehicle portfolio to include innovative light hybrid vehicles. At the beginning of March 2024, the technology group’s Dutch subsidiary Rheinmetall Defence Nederland B.V., which is part of the Vehicle Systems Division, acquired 100% of the shares in the Dutch start-up REEQ. Rheinmetall is thus expanding its portfolio of lightweight tactical vehicles and also taking the step towards hybrid technology with a fully electric drivetrain in a military vehicle. Both parties have agreed not to disclose the purchase price.

With its vehicles, REEQ has developed a new generation of mobility that combines tactical transport with a mobile energy source (microgrid) and is fully prepared for autonomy. The technology was developed and is produced in the Netherlands.

Currently, REEQ’s vehicle portfolio consists of an Unmanned Ground Vehicle (UGV), a side-by-side buggy and a quad, all three with exactly the same fully electric drive train. Through the acquisition of REEQ, Rheinmetall is able to serve the Dutch and European market in the field of light tactical mobility, both manned and unmanned, in combination with a microgrid solution. Rheinmetall’s industrial strength and the innovative power of a start-up complement each other. Within the Rheinmetall Group, REEQ retains its status as a start-up in the field of development. The further development and series production of these vehicles will also take place in the Netherlands.

With this acquisition Rheinmetall is responding to the many calls from Dutch politicians and defense leaders to contribute with industrial strength and specialization to the operational user and strengthening of the defense industry. With the development and production from the Netherlands, the strategic autonomy and the Dutch position in the field of military electrification and autonomy in the international defense industry has also been strengthened.

Located in the city of Ede, Rheinmetall Defence Nederland B.V. is part of the Vehicle Systems Division and is a wholly owned subsidiary of Rheinmetall Landsysteme GmbH. Rheinmetall AG is one of the world’s leading technology enterprises.

REEQ is a Dutch start-up and has been in existence since 2018. In that year REEQ carried out a first innovation project regarding electromobility in the military sector on behalf of the Dutch Ministry of Defence. In later years, REEQ has developed further in this field of experience.

 

19 Mar 24. After careful consideration of all aspects of a potential acquisition of ATOS’ BDS (Big Data and Security) business line, Airbus (stock exchange symbol: AIR) has decided it will no longer pursue discussions with ATOS about this potential transaction.

 

15 Mar 24. Bodycote launches £60m buyback.

• Free cash flow up by 46 per cent
• £60m buyback kicked off

Bodycote (BOY) managed revenue growth of 6 per cent before energy surcharges despite “a mixed end market picture”, particularly in the second half of the year.

Its higher-margin specialist technologies business outperformed, achieving sales growth of 12 per cent. This is the sixth year in a row that it has outgrown the heat treatment side of the business and it now comprises around a third of the group’s revenue. Its greater contribution lifted the company’s headline operating margin, excluding energy surcharges, from 16.1 per cent to 17.3 per cent.

Outgoing chief executive Stephen Harris told investors that Bodycote “should continue to keep this journey going”. It has a medium-term target of reaching a margin above 20 per cent, and Harris argued the company’s “natural margins should be in the low-20s”.

The higher profit was converted into cash, with free cash flow increasing by 46 per cent to £122.5m, and even after spending £28mn on expansionary capex it finished the year with net cash (excluding leases) of £12.6mn. Although the completion of its acquisition of Indiana-based Lake City Heat Treating for £52m in January means it now has net debt of £40m, the amount of cash it is generating has allowed it to kick off a £60m buyback after a deal for a second US business, Stack Metallurgical Group, was abandoned.

The company expects to “deliver further progress” this year, even on the assumption that global industrial production remains flat. Analysts at HSBC think it will pick up and forecast an 8 per cent increase in Bodycote’s earnings per share to 52.1p. The shares trade on a forward price/earnings (PE) ratio of 12.5 times, below their five-year average of 15 times. Buy. Last IC view: Buy, 578p, 18 Jan 2024 (Source: Investors Chronicle)

 

18 Mar 24. Strategic changes coming at Denel, new CEO affirms. Tsepo Monaheng, Denel’s first permanent chief executive in more than three years, appraised “valued stakeholders” via an 8 March communication of “important and strategic structural changes” underway at the State-owned defence and technology conglomerate.

Monaheng, selected from 67 applicants, returned to Irene, Centurion-headquartered Denel this month (March) following a stint at SAFCOL (SA Forestry Company Limited), another State-owned enterprise (SOE) overseen by Public Enterprises Minister, Pravin Gordhan. Ahead of moving to the Pretoria East headquartered natural resources SOE he was chief executive of Denel Dynamics, whose core business, as per the Denel Group website, includes tactical missiles, precision guided weapons, unmanned aerial vehicle systems and space solutions.

Since Danie du Toit exited the chief executive suite in August 2020 just short of two years in office, Denel has been under the stewardship of acting/interim chief executives including Talib Sadik, William Hlokoane and Michael Kgobe. The interim CEO period also saw former chief executive Riaz Saloojee, seemingly sacrificed on the altar of State Capture in the Gupta years, return as chief restructuring officer in May 2022.

Monaheng’s stakeholder communication, seen by defenceWeb, has it the SOE is “migrating” to a new operating model to reflect “proven proficiencies” in the aerospace, guided weapons, landward and integrated systems (ISS) capability domains.

The Denel brand, Monaheng assures stakeholders, remains intact, after which he lists the four rationalised and consolidated trading entities that will revitalise and ensure long term sustainability for the group.

They are: Denel Aerospace, the former Denel Aeronautics and Denel Overberg Test Range (OTR); Denel Guided Weapons, the former Denel Dynamics; Denel Landwards, a consolidation of Denel Land Systems (DLS), Denel PMP, Denel Vehicle Systems (DVS) OMC and Mechatronic business units; and Integrated System Solutions (ISS). This “expands Denel’s level 4, 5 and 6 integration diversifying the ISS military system integration capability into the civil security realm”.

Facilities-wise there are no changes with Denel personnel and equipment remaining at its Centurion and Ekurhuleni campuses as well as Tshwane in Gauteng and Overberg, Bredasdorp, in the Western Cape province.

The new operating model, according to the new CEO, is designed to ensure efficient operations and “optimal service” for customers. At the same time, rationalisation of the corporate office and support services aims to “ensure dynamic leadership” of an “efficient delivery model”.

“The re-organisation will strengthen governance which is crucial to the revitalisation of Denel’s vision as the credible State-owned strategic partner for innovative defence, security and related solutions across our markets, locally and globally,” Monaheng wrote, adding transition to the new operating model was underway.

Almost coinciding with Monaheng’s arrival, Denel is on the hunt for a chief financial officer with a recruitment advertisement seeking a person to, among others, “develop a group finance strategy” based on the Denel corporate plan. Closing date for applications for the position held by Carmen le Grange, as per the last published Denel annual report (2019/20), is 31 March. (Source: https://www.defenceweb.co.za/)

 

18 Mar 24. Embraer Announces Results. (B3: EMBR3, NYSE: ERJ). The company’s operating and financial information is presented, except where otherwise stated, on a consolidated basis in United States dollars (US$) in accordance withIFRS. The financial data presented in this document as of and for the quarters ended December 31, 2023 (4Q23), September 30, 2023 (3Q23), and December 31, 2022 (4Q22), are derived from the unaudited financial statements, except annual financial data and where otherwise stated.

2024 GUIDANCE (does not consider EVE)

REVENUE AND GROSS MARGI

Consolidated revenue of US$5,269m in 2023 represented an increase of 16% yoy, and it was explained by Defense & Security (25%), Commercial Aviation (20%), Executive Aviation (13%) and Services & Support (12%). Total revenues were within the US$5.2 to US$5.7 bn guidance range for the year.

• Executive Aviation revenues reached US$1,408m, 13% higher yoy mainly explained by an increase in volumes. The gross margin dropped from 23.4% to 19.4% yoy because of product mix (proportionally more medium rather than light jets) and one-time tax benefits.
• Defense & Security revenues were US$516m, 25% higher yoy driven by higher C-390 volumes. Reported gross margin of 20.8% in 2022 versus 16.6% in 2023 was due to product mix and baseline adjustments of current contracts in accordance with the percentage of completion calculation methodology.
• Commercial Aviation revenues totaled US$1,847m, 20% higher yoy because of higher deliveries and product mix. Reported gross margin decreased from 10.5% in 2022 to 8.0% in 2023 due to product mix, higher freight (E2 airframes ramp-up) and one-time tax benefits.
• Services & Support revenues equaled US$1,418m, 12% higher yoy because of market growth. Reported gross margin of 28.0% in 2022 declined to 26.7% in 2023 due to services mix (more contribution from MRO and services) and one-time tax benefits.

ADJUSTED EBIT

The company’s reported results for 2023 are summarized in the table below.

In 4Q23, adjusted EBIT was US$181.7m while adjusted EBIT margin was 9.2% if we exclude the above special items. Meanwhile, in 2023, adjusted EBIT was US$350.0m and adjusted EBIT margin was 6.6%, and increase of US$79.7 m yoy because of higher volumes across all business units and other operational income (taxes efficiencies in 2023 and higher corporate expenditures in 2022).

NET INCOME (LOSS)

Net income (loss) attributable to Embraer shareholders and income (loss) per ADS were US$192.6m and US$1.0487 per share in 4Q23, compared to US$22.9m and US$0.1247 in 4Q22. If we exclude extraordinary effects, adjusted net income was US$77.6m for the quarter compared to US$43.2 m a year ago, and represented an 80% increase. In 3Q23, EVE development costs began to be capitalized as intangible assets as the program reached sufficient maturity.

¹ADJUSTED NET INCOME – US$m

¹ Adjusted Net Income (loss) is a non-GAAP measure, calculated by adding Net Income attributable to Embraer Shareholders plus Deferred income tax and social contribution for the period, in addition to adjusting for non-recurring items. Under IFRS for Embraer’s Income Tax benefits (expenses) the Company is required to record taxes resulting from unrealized gains or losses due to the impact of changes in the Real to US Dollar exchange rate over non-monetary assets (primarily Inventory, Intangibles, and PP&E). The taxes resulting from gains or losses over non-monetary assets are considered deferred taxes and are presented in the consolidated Cash Flow statement, under Deferred income tax and social contribution. Adjusted Net Income (loss) also excludes the net after-tax special items.

DEBT & LIABILITY MANAGEMENT

Embraer net debt without EVE declined to US$781m in 4Q23, compared to US$1,357m qoq and US$1,033m yoy. The significant positive free cash flow generated in the quarter helps explain the sequential improvement in the company’s net debt position, as explained below.

The average loan maturity increased to 4.6 years in 4Q23, compared to 3.4 years yoy. The term structure of loans was 96% in long-term contracts and only 4% in short-term ones. The cost of United States dollar-denominated loans was 6.33% p.a. in 4Q23, or the same as in 3Q23, while the cost of Brazilian real-denominated loans decreased to 7.11% p.a. in the quarter, compared to 10.85% in the previous one.

CAPEX

Net additions to total PP&E were US$87.3m in 4Q23, versus US$47.8m in 4Q22. Of the quarterly total, CAPEX amounted to US$59.6m, while additions of pool program spare parts reached US$30.3m, and were partially offset by US$2.6m of PP&E sales proceeds. The sequential increase in PP&E is related to growth in services training, maintenance and Executive Aviation. In 2023, the company invested a total of US$219.4m in net additions to PP&E and US$194.6m in R&D without EVE. In 3Q23, EVE development costs began to be capitalized as intangible assets as the program reached sufficient maturity.

WORKING CAPITAL

Work-in-progress inventory decreased US$417.1m qoq because of the greater number of 4Q23 deliveries, which was partially mitigated by growing contract liabilities (PDPs and deferred revenue), and supported solid cash flow generation towards year-end.

TOTAL BACKLOG

The company’s backlog rose by US$1.2bn yoy and reached a US$18.7bn total in 2023 – the highest number recorded over the past 6 years. Services & Support were the highlight with a US$3.1bn backlog, or US$400 m higher yoy and the highest level ever recorded. Meanwhile, Executive Aviation ended the year with a book-to-bill in excess of 1.3:1 and a US$4.3 bn backlog, or US$400 m higher yoy. In Defense & Security, South Korea was in the spotlight with the victory of the C-390 Millennium. Last, but not least, Commercial Aviation ended the year with a book-to-bill in excess of 1.1:1.

Embraer delivered 75 jets in 4Q23, with 49 executive jets (30 light and 19 medium), 25 commercial jets and 1 military C-390. In 2023, Embraer supplied 181 aircraft, an increase of 13% yoy when the company delivered 160 units. The company continues to face supply chain delays which have negatively impacted 2023 deliveries.

EXECUTIVE JETS

Executive Aviation delivered 30 light and 19 medium jets, totaling 49 aircraft in 4Q23 and 115 in 2023, an increase of 13% compared to the same period in 2022, when 102 jets were delivered.

The business unit continued its positive sales momentum with sustained demand across its entire product portfolio and strong customer acceptance in both retail and fleet markets. The Phenom 300 was the most delivered light jet for the 12th consecutive year and the most delivered twin-jet for the 4th consecutive year.

Embraer announced a Praetor 600, equipped with the capabilities to undertake a wide range of flight inspection tasks, was delivered to South Korea’s Flight Inspection Services Center. This is the first Praetor 600 in the country.

DEFENSE & SECURITY

In Asia, South Korea announced Embraer’s C-390 Millennium as the winner of the Large Transport Aircraft (LTA) II public tender to provide new military transport aircraft. The country is the C-390 Millennium’s 7th customer and the 1st in the region. The contract includes an undisclosed number of aircraft, as well as a services & support package that includes training, ground support equipment and spare parts.

In the Middle East, the MoU between Embraer and SAMI is geared towards expanding the operational footprint of both companies in the Kingdom of Saudi Arabia, with a focus on promoting the capabilities of the C-390 Millennium aircraft and delivering support to the kingdom’s Ministry of Defense. SAMI and Embraer will work to establish several capabilities in the country including maintenance, aircraft final assembly, mission system integration and training activities.

In Europe, Embraer and the Netherlands Industries for Defence & Security (NIDV) signed a Memorandum of Understanding (MoU) with the aim of jointly exploring opportunities in line with the Netherlands Defense Industry Strategy, with a primary focus on the C-390 Millennium and the A-29N Super Tucano.

Finally, in October, the 1st KC-390 Millennium of the Portuguese Air Force (FAP) entered service. The aircraft includes standard NATO (North Atlantic Treaty Organization) equipment, and since then it has demonstrated the same exceptional level of productivity as recorded by the Brazilian Air Force’s fleet.

COMMERCIAL AVIATION

Embraer delivered 25 commercial jets in 4Q23, and 64 aircraft in 2023, or 12% higher than in the previous year.

In North America, Porter Airlines exercised its purchase rights to place a firm order for 25 Embraer E195-E2 passenger jets, which added to its 50 existing firm orders. Porter will use the new aircraft to extend its award-winning service to destinations throughout the continent. The deal, valued at US$2.1 bn at list price, entered our backlog in 4Q23, and increased the airline’s firm orders with Embraer to 75 aircraft, with 25 purchase rights remaining.

In Asia, Embraer’s E190-E2 and E195-E2 attained type certification from the Civil Aviation Authority of Singapore (CAAS). The aircraft are the world’s quietest and most fuel-efficient single-aisle aircraft. Scoot, the low-cost subsidiary of Singapore Airlines, should begin to operate the E190-E2 in 2024.

Last, but not least, in Europe, the E195-E2 received certification for Steep Approach into London City Airport from EASA (European Aviation Safety Agency). This achievement is a significant development, which allows airlines to operate the E195-E2 at London City Airport (LCY), known for its challenging approach and short runway. Together with the E190-E2, which received Steep Approach certification in 2021, both members of the E2 family are now approved for operations from LCY.

SERVICES & SUPPORT

Services & Support reached a significant milestone in the Commercial Aviation segment in 4Q23 with the advancement of the program to convert passenger aircraft to freighters, which marked the beginning of a new phase with the unveiling of the new livery and the start of ground testing.

The business unit continued to accelerate its expansion and it has doubled the capacity for executive jet maintenance services in the United States. The expansion will support the continuous growth of its customer base through the addition of 3 Executive Aviation Maintenance, Repair, and Overhaul (MRO) facilities in Dallas Love Field, TX, Cleveland, OH, and Sanford, FL.

Embraer-CAE Training Services (ECTS) announced a strategic expansion of its training capacity with the introduction of 2 Phenom 300 flight simulators. The main objective of our joint venture remains to meet the growing demand for executive jet training in the North American and European markets, and reinforces our commitment to our Executive Aviation customers.

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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Sponsored by SPX CommTech (TCI & ECS)

 

www.tcibr.com

 

www.enterprisecontrol.co.uk

 

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14 Mar 24. Kopin Corporation Reports Financial Results for the Fourth Quarter and Full Year 2023.

Kopin Corporation (Nasdaq: KOPN), a leading provider of application-specific optical solutions for defense, enterprise, industrial, and consumer products, today reported financial results for the fourth quarter and full fiscal year ended December 30, 2023.

Company Highlights

• Fifth consecutive quarter of positive book-to-bill with greater than $55m of orders for 2024 as of January 2024
• Paused production in Westborough manufacturing facility in the fourth quarter of 2023 for additional automation and retooling in anticipation of greater 2024 demand, impacting fourth quarter 2023 revenue
• New branding and website unveiled in January 2024
• Expect 2024 revenue growth of at least 20% compared to 2023
• Continued OLED fabrication transition to U.S. DoD approved facilities
• Announced Software Defined, AI enabled NeuralDisplay™ Architecture

“2023 was a transitional year for Kopin, successfully evolving from a leading provider of microdisplay solutions to becoming an application-specific optical solutions provider,” said Michael Murray, Kopin’s Chief Executive Officer. “This shift was underscored in the fourth quarter and into 2024 with additional partnerships and multiple new and follow-on orders, supported by strong new and existing customer engagement and satisfaction. Performance and outlook were supported by our fifth consecutive quarter of positive book to bill, marking a new record for orders.

“We saw continued positive momentum with follow-on orders in the fourth quarter, including a $6.0m follow-on order for a Thermal Weapon Sight Program. This follow-on order is a testament to our responsiveness and reliability in delivering weapon sights and targeting products in this fast-changing global environment, and the improvements in our manufacturing processes and equipment. Combined with a $20.5 m contract for new thermal weapon sight configuration and several other orders in the first quarter of 2024, the increase in demand would potentially triple our thermal weapon sight production volumes in fiscal year 2024, as compared to 2023.

“As a result of our strong order book, we plan for a significant production increase in 2024. As we discussed in our third quarter of 2023 financial results call, to ensure we execute on this anticipated production ramp in 2024, we took additional steps and extended our planned 2023 holiday shut down period to improve production flow for long-term profitability. These preparations included a temporary pause in production to retool, adding new automation, and clean our manufacturing facilities at the end of the fourth quarter, which had an impact on the quarter’s revenues.

Mr. Murray concluded: “We start 2024 with a strong order book, new customer engagements and positive internal morale, strengthening Kopin for significant and sustainable revenue growth needed to achieve profitability. We have increased our 2024 order cover with higher prices on several key programs and believe there are opportunities for additional follow-on orders and several new customer development orders which we expect to receive soon. Our sales funnel is strong and our increased emphasis and resources focused on business development are paying off. As we look forward, our foundation of innovation paired with our core capabilities serve as the bedrock for our progression into application-specific optical solutions and advanced software-defined AI-enabled microdisplays. We believe Kopin is well positioned to deliver these exciting new technologies and deliver long-term growth for our shareholders.”

Fourth Quarter Financial Results

Total revenues for the fourth quarter ended December 30, 2023, were $8.6m, compared to $12.2m for the fourth quarter ended December 31, 2022. Product revenues for the fourth quarter ended December 30, 2023, were $6.8m, compared to $8.7m for the fourth quarter ended December 31, 2022. The decrease in product revenues was a result of lower defense and industrial product revenues, which decreased by $0.9m and $0.6m, respectively, year over year. In the fourth quarter of 2023, funded research and development revenues decreased by $1.6m due to the completion of certain programs.

Cost of Product Revenues for the fourth quarter of 2023 was $7.2m, or 106% of net product revenues, compared with $8.9m, or 103% of net product revenues, for the fourth quarter of 2022.

R&D expenses for the fourth quarter of 2023 were $2.2m compared to $4.7m for the fourth quarter of 2022. The decrease in R&D expense is attributable to a decrease in funded research and development expense as certain programs were completed and lower internal expense related to OLED development.

SG&A expenses were $5.9m for the fourth quarter of 2023, compared to $4.9m for the fourth quarter of 2022. The increase was primarily due to legal fees associated with our litigation.

Net Loss Attributable to Kopin for the fourth quarter of 2023 was ($6.5)m, or ($0.06) per share, compared with Net Loss Attributable to Kopin of ($6.2)m, or ($0.07) per share, for the fourth quarter of 2022.

Full Year 2023 Financial Results

Total revenues for the year ended December 30, 2023, were $40.4m, compared to $47.4m for the year ended December 31, 2022. Product revenues for the year ended December 30, 2023, were $25.9m, compared to $32.4m for the year ended December 31, 2022. The decrease in product revenues was a result of lower defense, industrial and consumer product revenues, which decreased by $2.2m, $3.4m, and $0.9m, respectively, year over year. Revenues from the sale of products for defense declined due to lower revenues from thermal weapon sight applications which were partially offset by higher revenues from avionic applications. Revenues from industrial applications declined to lower revenues for products for 3D automated optical inspection (3DAOI) due to continued weakness in the Chinese 3D automated test market and lower revenues from industrial headset applications. Consumer revenues declined in 2023 as compared to 2022 due to lower sales of OLED displays for consumer applications. In the full year 2023, funded research and development revenues decreased by $0.9m due to decreased funding for new display technology development for U.S. defense programs and OLED display development, which was partially offset by increased funding for armor vehicle targeting system and medical headset development.

Cost of Product Revenues for 2023 was $25.0m, or 96% of net product revenues, compared with $32.6m, or 100% of net product revenues in the prior year. Cost of product revenues decreased as a percentage of revenues in 2023 as compared to 2022 primarily due to increased sales of higher margin products for defense applications in 2023 versus 2022 and decreased sales of lower margin products for defense applications in 2023 versus 2022. The Company also implemented several programs and hired additional employees to improve manufacturing quality and efficiency.

R&D expenses for 2023 were $10.8m compared to $18.7m for 2022, a 42% decrease year over year. The decrease in R&D expense as compared to the prior year was seen in both funded and internal R&D. Funded R&D expenses were $7.2m for 2023 as compared to $10.3m for 2022, a 30% decrease, primarily due to the completion of contracts for defense programs awarded prior to 2023. Internal R&D expenses were $3.6m for 2023 as compared to $8.4m for 2022, a 57% decrease, primarily due to decreased OLED development.

Selling, General and Administration (SG&A) expenses were $21.8m for 2023, compared to $18.0m for 2022. SG&A for 2023 increased as compared to 2022 primarily due to an increase of approximately $5.0m in legal and professional fees and $1.0m in non-cash stock-based compensation, partially offset by a $1.3m decrease in compensation and benefits.

Net Loss Attributable to Kopin Corporation for the year 2023 was $19.7m, or $0.18 per share, compared with Net Loss Attributable to Kopin Corporation of $19.3m, or $0.21 per share, for the year 2022.

Net Cash Used in Operating Activities for 2023 was approximately $15.3m. Kopin’s cash and equivalents and marketable securities were approximately $17.9m at December 30, 2023 as compared to $12.6m at December 31, 2022. In the first quarter of 2024 the Company sold 3.1m shares of its common stock for gross proceeds of $7.5m under its At The Market (ATM) program.

All amounts above are estimates and readers should refer to the Form 10-K for the fiscal year ended December 30, 2023, for final disposition as well as important risk factors. (Source: BUSINESS WIRE)

 

14 Mar 24. J.F. Lehman & Company Completes Acquisition of Mission Microwave.  J.F. Lehman & Company (“JFLCO”), a leading middle-market private equity firm focused exclusively on the aerospace, defense, maritime, government and environmental sectors, is pleased to announce that an investment affiliate has acquired Mission Microwave Technologies, LLC (“Mission” or the “Company”).

Founded in 2014 and headquartered in Cypress, CA, Mission is a leading provider of Solid-State Power Amplifiers (SSPAs) and Block Upconverters (BUCs) to the satellite communications market. The Company’s X, Ku and Ka Band units support critical ground-based, airborne, maritime and space-based applications for government and commercial customers that require high efficiency, reliability and performance. Utilizing advanced gallium nitride (GaN) transistors, unique power combining technology and novel full-system designs, Mission provides the industry’s most efficient, lightweight, and compact high-power devices.

“Since its founding, Mission has rapidly established a market leading position with a product portfolio critical to the performance of satellite communications across a range of applications, from commercial broadband network gateways to mobile tactical terminals deployed in the battlefield. We are excited to partner with the Mission team to build on the Company’s exceptional reputation for innovation and technological leadership, particularly with respect to satisfying high power and/or high frequency requirements in size, weight and power (SWaP) efficient packages,” said Steve Brooks, Partner with JFLCO.

Mike Friedman, a Managing Director with JFLCO added, “Mission represents an excellent fit with our established investment strategy given its strong positioning with blue-chip customers, differentiated technical performance and proprietary product portfolio across a diverse and expanding array of end markets. We are looking forward to supporting the Company’s continued product development and growth initiatives as Mission further positions itself to capitalize on an extremely compelling market opportunity.”

JFLCO is partnering with Mission’s prior majority shareholders (affiliates of GaAs Labs LLC), founders and management, who will remain material shareholders in the business and continue to lead Mission as the Company pursues the next phase of its growth.

Francis Auricchio, Co-Founder, President, and CEO of Mission commented, “JFLCO represents the perfect partner to support the next stage of our Company’s evolution.  JFLCO offers a unique combination of deep industry knowledge and relationships, commercial and operational expertise, and substantial capital we will leverage to accelerate our growth, product portfolio expansion and further advance our technological leadership.  The entire Mission team is excited to continue to deliver innovative solutions to our customers’ complex and ever-changing challenges under JFLCO’s sponsorship.”

Debt financing in support of the transaction was led by Barings and co-led by PennantPark and SMBC.

Jones Day provided legal counsel to JFLCO. King & Spalding provided government contracts, defense security and international trade advice to JFLCO. KippsDeSanto & Co. served as financial advisor to Mission, and Phillips Lytle provided legal counsel to Mission and its majority equity holders.

 

11 Mar 24. Magellan Reports Results. A summary of Magellan’s business and significant updates. Magellan is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries, controlled entity and joint venture, Magellan designs, engineers and manufactures aeroengine and aerostructure components for aerospace markets, including advanced products for defence and space markets, and complementary specialty products. The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services.

Magellan operates substantially all of its activities in one reportable segment, Aerospace, which is viewed as one segment by the chief operating decision-makers for the purpose of resource allocations, assessing performance and strategic planning. The Aerospace segment includes the design, development, manufacture, repair and overhaul, and sale of systems and components for defence and civil aviation.

Business Update

On December 19, 2023, Magellan announced an agreement with the Canadian government for the provision of LUU-2 illumination flares for the RCAF. The $39m, four-year contract commences in 2024 and involves the manufacture, assembly and delivery of LUU-2 flares from Magellan Aerospace, Winnipeg’s propellant plant in Manitoba, Canada.

For additional information, please refer to the “Management’s Discussion and Analysis” section of the Corporation’s 2023 Annual Report available on www.sedarplus.ca.

2. Results of Operations

A discussion of Magellan’s operating results for the fourth quarter ended December 31, 2023

The Corporation reported revenue in the fourth quarter of 2023 of $223.6m, a $30.5m increase from the fourth quarter of 2022 revenue of $193.1 m. Gross profit was $23.8m in the fourth quarter of 2023 compared to a gross loss of $0.9m in the same quarter of the prior year. Net loss for the fourth quarter of 2023 was $0.3m in comparison to a net loss of $20.8m for the fourth quarter of 2022. (Source: Google/https://www.morningstar.com/)

 

12 Mar 24. Teledyne to Acquire Valeport. Teledyne Technologies Incorporated (NYSE:TDY) (“Teledyne”) announced today that it has entered into an agreement to acquire Valeport Holdings Limited and its affiliates (“Valeport”). Valeport, founded in 1969 and headquartered in Totnes, United Kingdom, designs and manufactures underwater sensors for environmental, energy, construction and defense applications. Terms of the transactions were not disclosed.

Valeport provides complementary underwater sensors including sound velocity probes, current and flow meters, and conductivity, temperature and depth sensors. Valeport also provides multi-parameter profilers which can also measure turbidity or cloudiness, or include fluorometer sensors to detect chlorophyll levels.

“We are delighted that Valeport will join Teledyne Marine and expand our technology offerings,” said George Bobb, President and Chief Operating Officer of Teledyne. “Through more than 20 acquisitions and ongoing collaboration, Teledyne Marine brings imaging, instruments, interconnects, acoustics, and complete subsea vehicle technology together to provide total solutions to our customers.”

“Our family is very proud of where we have brought Valeport so far, but the time is right for the next phase of its journey, and I am so pleased that this will be as a part of Teledyne Marine and excited about the prospect of working with the rest of the Teledyne group to bring our customers an even greater range of excellence,” said Matt Quartley, Managing Director of Valeport. (Source: BUSINESS WIRE)

 

14 Mar 24. Seraphim Space Investment Trust plc, the world’s first listed SpaceTech investment company, announces its interim results for the six month period ended 31 December 2023.

• £5.7m deployed in the period, across three new investments and three follow-on investments.
• Portfolio valuation up £10.6m to £198.0m, driven by additional investments, unrealised fair value net gains and a small unrealised FX gain.
• Main driver of underlying fair value increase was D-Orbit, reflective of a transaction that reached a conditional completion post period. This has been balanced by reductions in the fair value of other companies.
• 82% of the portfolio by fair value has a robust cash runway, with 60% fully funded based on latest projections from the companies’ management teams and 22% funded for 12 months or more from 31 December 2023.

Mark Boggett, Chief Executive Officer, Seraphim Space Manager LLP, said: “The period has marked continued strong performance for SSIT’s portfolio as well as the wider SpaceTech ecosystem, reflecting the strong fundamentals that are driving ever-growing traction for top-performing SpaceTech companies. Record numbers of SpaceTech VC investments have been closed during recent quarters, with the last six months having seen a notable recovery in levels of growth funding rounds, an encouraging sign for prospects in 2024.

These trends are reflected in SSIT’s portfolio, which has continued the positive cadence of fundraising. Eight companies closed new funding rounds during the period, once again with the majority of these rounds being led by new investors, a healthy indicator given generalist investors are spoilt for choice in terms of investment opportunities given the wider downturn in the VC market.

Although mindful of the difficulties some companies may face in accessing additional capital, overall, we remain positive about the prospects for the portfolio in 2024 and we are satisfied that SSIT continues to have the cash reserves required to meet the near-term funding needs of the portfolio. This has enabled us to deploy a modest amount of capital into a handful of new investments, capitalising on the current favourable investor conditions.”

 

12 Mar 24. Defense Unicorns Announces $15m U.S. Space Force Strategic Funding Increase. Defense Unicorns, a veteran-owned startup providing open-source software and Artificial Intelligence (AI) capabilities for National Security systems, announced a $15m U.S. Space Force Strategic Funding Increase (STRATFI) in partnership with Program Executive Office Assured Access to Space (AATS). Defense Unicorns’ focus is to accelerate and scale secure software solutions to increase the launch capacity of the Space Launch Deltas and meet the increasing demand for federal and commercial launch operations.

“The launch capacity of the nation continues to skyrocket. To hit this demand, the nation needs to rethink how we manage our secure access to space,” said Jeff McCoy, Co-Founder of Defense Unicorns. “Defense Unicorns is honored to help and support the Space Force as they transform the nation’s space capabilities.”

STRATFI was established to offer qualified small businesses with promising technologies up to $15 m in funding to scale and deliver strategic capabilities to the United States Air and Space Force.

“AATS serves as America’s gateway to space, and we are keen on attracting top-tier talent from the defense industrial base to digitally transform our spaceports. This will enable us to keep pace with the rapid expansion of the US launch industry,“ said Major Jason Lowery, Chief Technology and Innovation Officer for the Assured Access to Space PEO. “The achievements of Defense Unicorns have caught our attention, and this STRATFI demonstrates our commitment to collaborating with outstanding companies. We are not only ready but eager to engage with innovative firms that can contribute to our mission.”

Defense Unicorns’ open-source technologies provide a comprehensive Unicorn Delivery Service (UDS) solution to accelerate software and AI capability delivery to any environment. Software delivery for national security has unique challenges: diverse infrastructures, limited or no access to the Internet, integration at scale, cyber security compliance, and system operators who are trained in mission effects, not IT. Defense Unicorns’ UDS solves these hurdles to make secure software delivery easy, empowering mission operators wherever their mission lives.

Unicorn Delivery Service (UDS) offers:

Artificial Intelligence for National Security: a suite of generative AI capabilities to accelerate understanding complex mission data and enable decision advantage.

Software Factory: a fully portable and pre-configured software development platform that accelerates delivery into any production environment, including cloud-based, on-prem, disconnected, or otherwise egress-limited.

Your App Your Environment: delivers requested cloud-native application, needed by the mission operators for success, into the specific environment.

These capabilities are supported by a suite of open-source projects Defense Unicorns has created. These include:

• Zarf: A tool that enables continuous software delivery on disconnected networks.
• LeapfrogAI: A self-hosted generative AI platform designed for environments that are disconnected or with limited processing and storage.
• Pepr: A tool that manages and modifies resources in a Kubernetes cluster via easy-to-read and write configuration modules.
• Lula: A tool that provides real-time insight into deployed software configuration and compliance to help accelerate and maintain accreditations.

AATS is preparing for the future challenges of space launch operations. Anticipating a significant surge in launch demands and the imperative for robust cyber defense mechanisms, modernizing the software and IT infrastructure becomes paramount. Defense Unicorns will amplify the efficiency and adaptability of space launch operations to ensure operational solutions are not only agile, but are also portable to any environment, from cloud to on-premises. With Defense Unicorns, AATS is poised to achieve seamless operational integrations, rapid deployments, and enhanced mission readiness. (Source: BUSINESS WIRE)

 

14 Mar 24. ArmorWorks Enterprises Announces Acquisition of Fox Valley Metal-Tech.  ArmorWorks Enterprises, LLC (“ArmorWorks”), a portfolio company of Littlejohn Capital, LLC, announced today the acquisition of Fox Valley Metal-Tech, Incorporated (“Fox Valley”), a provider of complex, precision metal fabrications for use on naval ships, submarines, combat vessels, and other critical defense applications.

Founded in 1989 and based in Green Bay, WI, Fox Valley specializes in complex metal fabrications primarily for the U.S. Department of Defense (“DoD”), as well as commercial industries. The company manufactures custom electrical enclosures and consoles, components and fabrications for military trailers, radar systems as well as watertight doors and hatches. Fox Valley actively supports leading defense industry companies, and its precision components and fabrications are incorporated on the latest naval platforms such as the Ford-class aircraft carrier and Columbia-class submarine, amongst others. The company has a state-of-the-art 185,000 square foot facility that enables it to meet the highest of quality standards. For more information, visit www.fvmt.com.

Kevin Dahlin, Chief Executive Officer of ArmorWorks, commented, “Fox Valley’s components meet the Navy’s stringent requirements, and combine unique fabrication, machining, precision welding, and painting/finishing capabilities to provide customers with a vertically-integrated manufacturing solution in compliance with the highest U.S. military standards. Fox Valley’s fabrications are trusted on high priority naval programs amid a historical fleet expansion, and we look forward to supplementing our existing business with the addition of Fox Valley’s superior products.”

Angus Littlejohn III, President of Littlejohn Capital, said, “Fox Valley’s focus on mission-critical Naval systems instantly propels ArmorWorks into a broader segment of the DoD. The acquisition also adds impressive manufacturing capabilities in the Midwest expanding the geographic reach of ArmorWorks. Fox Valley is a trusted partner to the defense industry, and we are proud to add this company as an integral part of ArmorWorks as they continue to protect the military personnel who defend our country.”

Steve Corbeille, Co-Founder and Chief Executive Officer of Fox Valley, added, “Fox Valley has built its business and reputation over the past 25 years by developing products whose standards are designed to withstand the harshest conditions. Fox Valley will continue to thrive and better serve its customers as part of a larger organization within ArmorWorks.”

KAL Capital served as exclusive financial advisor to Fox Valley.

About ArmorWorks

Founded in 2001, ArmorWorks is a leading provider of specialized military survivability products. Its innovative technology is used to develop high performance products for the U.S. military forces and commercial industries, including composite and steel armor systems, blast attenuating seating, maximum-security enclosures and advanced door systems for the military and nuclear industries. A majority of ArmorWorks’ business is with the DoD, including all services, as well as many defense and commercial Original Equipment Manufacturers. For more information, visit www.armorworks.com. (Source: PR Newswire)

 

13 Mar 24. MBDA held its annual press conference in Paris today, 13 March. The company’s CEO shared the Group results for 2023 together with some insight into tackling future challenges in the face of growing demand in a complex international context.

Eric Béranger, CEO of MBDA, said, “MBDA was created out of a need for greater European cooperation, a fundamental component of its DNA. The company grew to become a worldwide leader in its field. The challenge now is to keep on adapting to an evolving environment, while continuing to foster cooperation, notably at the European level. To be battle-ready when asked to answer the new demands of our customers, their armed forces and their allies. To help ensure their sovereignty in a global environment where force is challenging international rights more and more.”

In 2023, major domestic contracts signed included the order of Aster missiles for France and Italy, Akeron MP and Mistral 3 for France, Enforcer – which entered serial production at the end of 2023 – for Germany, CAMM-ER for Italy, the evolution of Sea Viper for the UK and Mistral 3 for Spain. At export, MBDA booked significant orders in Europe, notably with major contracts for CAMM in Poland and Sweden, and the mid-life refurbishment of SCALP missiles for Greece.

The events unfolding last year on the international scene proved again the need for fully comprehensive defence solutions and a multi-layered Air Defence, for which cooperation successes like Aster or CAMM missiles are revealing instrumental. Current theatres of conflict in the world are also revealing new warfare trends like the use of drones. A trend MBDA identified early on and created Sky Warden, its flagship solution addressing the full range of unmanned aerial systems threats.

With the threats evolving rapidly, innovation and preparation for the future remain priorities at MBDA. To be ready to face new threats and be present in new domains of conflict. The future of deep strike is progressing, with Italy joining France and the UK in the development of FC/ASW. MBDA is leading Hydis², a consortium involving 14 European countries developing Aquila, to face the emergence of hypersonic effectors. Not forgetting AI solutions applied to Collaborative combat, which Orchestrike, MBDA’s Collaborative Combat Effectors demonstration, has shown. The company also took major steps with directed energy weapons. DragonFire in the UK, the Laser Weapon Demonstrator (LWD) in Germany and Cilas in France. Finally, Space, a new domain where there is a need to safeguard strategic assets and have the ability to complete missions from Earth. Hence, MBDA’s recent participation in the AsterX exercise.

To remain a trusted partner of its customers, MBDA continues to anticipate and adapt swiftly. That is why the company is ramping-up its production, with significant increases in the production rates of  Akeron MP, Aster, Brimstone, CAMM, Enforcer, Exocet, MICA and Mistral while also investing in the future. MBDA also uses all leverage at its disposal at a European level, having always supported the European Commission and the European agenda for Defence, and now welcoming the European Defence Industrial Strategy and its future implementation.

From 2023 to 2028, MBDA is investing an unprecedented 2.4bn euros at Group level, and planning to hire more than 2,600 new people in 2024.

Figures at a glance:

• Total revenues in 2023 were €4.5bn
• Order intake at a new record total of €9.9bn
• Backlog reaching €28bn

 

13 Mar 24. MBDA books record orders amid European air-defense rush. Pan-European missile maker MBDA booked record orders in 2023, as countries across the region scrambled to beef up their air defenses in response to Russia’s invasion of Ukraine.

The company’s order intake rose 10% to a record €9.9bn (US$10.8bn) last year, Chief Executive Officer Eric Béranger said at a press conference here on March 13. The order book stood at €28 bn at the end of December, from €22.3bn a year earlier.

“We saw in our orders in 2023 how much air defense is important for countries,” Béranger said. He said air defense will again be important this year. “It’s really a major topic for our governments, and we see that this is the area where we’re asked to accelerate, we’re asked to increase volumes.”

MBDA orders have nearly doubled from 2021, before Russia invaded Ukraine, and 70% of last year’s orders were for air defense. The war in Ukraine has driven home Europe’s need to protect itself against everything from drones to ballistic missiles, with German Chancellor Olaf Scholz setting up the European Sky Shield Initiative and Poland spending bns to modernize its air defenses.

Russia had launched nearly 7,400 missiles and 3,700 Shahed drones against targets in Ukraine as of December, since the start of its invasion in February 2022, according to news reports citing Ukraine’s air force.

In response to the evolving security situation in Europe, France has repeated called on MBDA to speed up its missile production, particularly of the Aster air-defense missiles, used by the French, Italian and British navies, as well as the Franco-Italian SAMP/T air-defense system.

MBDA plans to triple monthly production rate for the CAMM family of missiles between 2022 and 2026, and increase production of Aster by 50% over the period. The company is targeting cutting the time between an Aster order and delivery to 18 months by 2026, from 42 months before 2022.

Aster “was developed in an era where time was not important,” Béranger said. He said the big change after February 2022 “is that suddenly, brutally, time matters.”

MBDA is looking at its entire portfolio to cut delivery times, starting with air-defense products. Legacy issues for Aster production include components that cross the Alps “many times,” something the company would organize differently if it was creating the production line today, the CEO said. MBDA is a joint venture between Airbus, BAE Systems and Leonardo.

MBDA is doubling production capacity at its site in Bolton, U.K., is creating a second final assembly line for CAMM-ER in Italy, and is doubling the site of its final assembly line in France. The company plans to invest at least €2.4bn over the next five years to expand production capabilities.

The company plans to quadruple monthly throughput of the Mistral short-range air-defense missile between 2022 and 2025, and increase production of the Akeron anti-tank missile 2.5 times.

“All of this is work in progress, and I perfectly understand the impatience of our customers,” Béranger said.

MBDA plans to hire more than 2,500 people this year, after hiring around that number in 2023, and integrating the new hires is the main challenge, rather than recruitment, according to the CEO. The company currently employs around 15,000 people.

Last year’s biggest order came from Poland, with a deal worth more than €2bn to supply missiles for the country’s PILICA+ program, and a French-Italian order for Aster in early 2023 worth more than €1bn, according to Béranger. The CEO said 76% of last year’s orders came from European countries other than the five MBDA considers its home market – the U.K., France, Italy, Germany and Spain.

Loitering munitions are a new and growing segment, and MBDA has an ability to integrate explosive charges that can transform dual-use drones into weapon systems, according to Béranger. The CEO said that is not a widespread competence, and the missile maker is working with small and medium-sized drone companies to offer joint products.

“MBDA is not intending to become a drone manufacturer, it is not our job, but creating and offering to our customers weapon systems based on loitering munitions, using drones, this is something where we are very legitimate,” the CEO said.

The company is in talks with Europe-based Organisation for Joint Armament Cooperation about the hypersonic interceptor project Hydis2, and Béranger said he expects to sign a contract with OCCAR within weeks. The CEO said the move will go beyond the matter of providing a demonstrator, and go into “programmatic considerations.”

MBDA is not currently facing any supply-chain shortages, but is stockpiling special grades of iron, as well as titanium and electronic components, something it already started doing in response to the Covid-19 pandemic. Béranger said the company has 80 tons of specific types of iron stocked, compared to requirements of 4 to 5 tons, and has enough titanium for several thousand missiles. (Source: Defense News Early Bird/Defense News)

 

13 Mar 24. Comtech Appoints John Ratigan as Interim Chief Executive Officer. Comtech (NASDAQ: CMTL) (the “Company”) today announced that its Board of Directors has appointed John Ratigan, Chief Corporate Development Officer (“CCDO”), as interim Chief Executive Officer, effective immediately. Mr. Ratigan succeeds Ken Peterman, who has been terminated as President and CEO and will cease to serve on the Board. Mr. Peterman’s termination was for conduct unrelated to Comtech’s business strategy, financial results or previously filed financial statements.

Mr. Ratigan, a former Chief Executive Officer, is an accomplished executive who brings over three decades of experience and senior leadership expertise across the global satellite technology sector. He has an extensive background in satellite communications, as well as a deep familiarity with Comtech, having spent ten years at EF Data Corp. prior to its acquisition by Comtech in July 2000, driving significant revenue growth over the course of his tenure. As CCDO at Comtech, Mr. Ratigan has proven himself an instrumental member of the executive team, identifying and optimizing market shifts currently underway and executing on the Company’s One Comtech strategy.

In addition, the Board has elected current Board member Mark Quinlan as Chair of the Board.

“The Board is committed to upholding the highest standards of ethical and professional conduct,” said Mark Quinlan, Chair of the Comtech Board. “The Comtech Board remains committed to our strategy and mission of serving the complex and secure connectivity needs of the government and commercial sectors. We are fortunate to have a leader of John’s caliber leading Comtech’s talented organization at this important moment as we continue to deliver mission-critical solutions to our global customer base. With our commitment to innovation and competitive market position, Comtech is well positioned to capitalize on the significant growth opportunities ahead.”

“As a leading global provider of next-generation 911 systems, secure wireless technologies and satellite communications, Comtech is at the forefront of innovative trusted connectivity solutions,” said Mr. Ratigan. “I look forward to working closely with the leadership team and the Board as we continue successfully executing on One Comtech, building on the Company’s recent momentum and creating value for shareholders, customers, partners, employees and other stakeholders.”

The Board will initiate a search for a permanent successor and intends to retain a leading executive search firm to assist in the process.

The Company expects to report its financial results and file its Form 10-Q for the quarter ended January 31, 2024, on March 18, 2024.

About John Ratigan

Before joining Comtech in November 2023 as the Company’s first Chief Corporate Development Officer, Mr. Ratigan served as CEO and President of iDirect Government, LLC and as an Executive Committee Member of ST Engineering iDirect, Inc. During his tenure, he grew iDirect Government to over $100m in annual revenue and spearheaded the acquisition of GlowLink Communications Technologies, Inc. and its unique interference mitigation technology (CSIR), which helped the company become the largest provider of Time Division Multiple Access (TDMA) SATCOM capabilities. Earlier in his career, Mr. Ratigan ran East Coast operations for Fairchild Data Corporation and EF Data Corp., which is now a part of Comtech. During his time at EF Data, he was instrumental in helping the company grow from $20 m to $120 m in revenue in under eight years. Prior to that, Mr. Ratigan held the position of Senior Vice President of North and South American sales for the start-up BroadLogic Network Technologies, Inc. He began his career in the United States Senate working for Senator Bill Armstrong (R-Colorado) and held multiple sales positions with the Xerox Corporation as a member of the legal sales team.

Mr. Ratigan holds a Bachelor of Science in Marketing from the University of Maryland.

 

14 Mar 24. Rheinmetall expects both sales and profit margins to keep growing this year, as the German defence contractor declared itself a winner amid the “changing threat situation in Europe”. The world’s largest maker of artillery ammunition on Thursday said 2024 sales were expected to reach a record €10bn, compared with €7.2bn the previous year. Operating margins were likely to reach 14 to 15 per cent, the company said, up from 12.8 per cent in 2023. “A new decade in security policy has begun,” said chief executive Armin Papperger. “It is very important to us to do all we can to help Ukraine in its fight for survival,” he added.  Papperger has emerged as one of the loudest voices in the European defence industry that — after decades of having been largely shunned by investors because of ethical concerns — is now booming amid growing political fear over Europe’s borders. The Düsseldorf-based company last year completed the takeover of its Spanish rival Expal, cementing its position as the most important provider of 155mm shells, which are in high demand from Ukraine’s military as it fights the Russian invasion. In 2023, Rheinmetall’s sales grew 12 per cent to a record €7.2bn — slightly lower than expected, which the company said was due to some of its deliveries having been postponed into 2024. Operating profits rose by 19 per cent to a record €918mn. Rheinmetall’s strong growth makes it an outlier in the wider German industrial landscape, which has suffered following the energy crisis unleashed by the loss of cheap Russian gas. The group said that its civilian business, which includes car parts and baggage handlers for airports, recorded only “slight” revenue growth last year, adding that sales grew “primarily in business with military customers”. Recommended MBDA Missile Systems UK must play a role in EU’s defence strategy, urges European missile maker’s chief Aside from ammunition — for which Rheinmetall last year signed multiyear contracts with the Bundeswehr worth €4.6bn as well as with Ukraine for €1.7bn — the company also sold combat vehicles, military trucks and drones. The war in Ukraine in 2022 prompted German chancellor Olaf Scholz to announce a Zeitenwende — a turning point in history — that meant Europe’s largest economy would abandon its decades-long pacifist policy in the wake of the second world war and rebuild its military powers. Germany’s defence minister Boris Pistorius has repeatedly called on the country’s once slumbering defence industry to rapidly build capacity — something that Rheinmetall and other mainly private companies such as Krauss-Maffei Wegmann and the maker of the Taurus missile system, MBDA Deutschland, have argued can only be done following concrete orders. In February, Rheinmetall started building a new munitions factory in Lower Saxony. On Thursday, the company said it had a record order backlog worth €38.3bn. Event details and information Future of Retail(Source: FT.com)

 

14 Mar 24. Rheinmetall is on track for success: another all-time earnings high, new record order backlog.

Fiscal year 2023

• Consolidated sales grow by 12% to €7,176m
• EBIT before purchase price allocation stands at €968m
• Operating result improves by 19% to a new record figure of €918m
• Group’s operating margin increases to 12.8% after 12.0% in the previous year
• Another all-time high in the Rheinmetall backlog of €38.3bn, increase of 44% (previous year: €26.6 bn)
• Dividend proposal of €5.70 per share, after €4.30 in the previous year

Outlook for 2024: Strong sales growth and increasing profitability

• Rheinmetall forecasts strong sales and earnings growth in fiscal 2024
• Consolidated sales expected to increase to a level of around €10 bn
• Operating margin guided between 14% and 15% for the Group

Düsseldorf-based Rheinmetall AG is benefiting from the ongoing upswing in the defence sector and is continuing its growth trajectory. The technology group closed fiscal year 2023 with record earnings and order backlog figures.

In times of a changed threat situation in Europe, the Group is the focus of customer interest as a supplier of state-of-the-art defence technology. Numerous major orders from the German armed forces and other armed forces have been contracted, particularly in the areas of ammunition, combat vehicles and air defence. Rheinmetall has also become an important partner for Ukraine, helping with extensive deliveries from the entire product portfolio, from tactical vehicles and ammunition for Gepard anti-aircraft tanks to mobile field hospitals.

Consolidated sales increased primarily in business with military customers. As a leading supplier to land forces, Rheinmetall is meeting the significant increase in demand from military customers in the short and medium term, particularly in the land domain – for example for combat vehicles, military trucks and ammunition, but also for drones and in the field of digitalization. In the civilian business, however, the Group is recording only slight sales growth.

In view of the security policy environment, Rheinmetall is forecasting continued strong sales and earnings growth for fiscal 2024. For the first time in the Group’s history, the forecasted sales volume is expected to reach the €10bn mark.

Armin Papperger, CEO of Rheinmetall AG: “A new decade of security policy has begun. In this situation, we at Rheinmetall are grateful to be able to make a decisive contribution to restoring our country’s ability to defend itself. We are sparing no effort in order to fulfill this task of national importance. We are investing massively, building new plants and significantly increasing our personnel.”

Armin Papperger: “In the past fiscal year, we achieved record sales and earnings. In terms of EBIT before purchase price allocations, we are close to the threshold of €1bn. We are proud of this achievement, which is based on innovation, technological expertise and, above all, the performance of our employees. The course is set for further growth and increasing profitability.”

“In everything we do, our primary goal is to be a capable partner to the German Bundeswehr and the armed forces of our allies and friends and thus, above all, to serve peace in Europe. It is a matter close to our hearts to do everything we can to support Ukraine in its fight for survival. We are fully committed to this responsibility.”

Group’s profits soar with rising sales – Rheinmetall backlog climbs to around €38bn

In fiscal 2023, the Rheinmetall Group generated consolidated sales of €7,176m. Compared with the previous year’s sales of €6,410 m, this is an increase of €766m or 12%. As there were deadline adjustments for deliveries in individual projects, some sales were postponed to 2024. Consolidated sales for 2023 therefore fell short of the forecast, which had anticipated sales in a range of €7.4 bn to €7.6 bn for the year.

Taking into account exchange rate and M&A effects, sales growth amounted to 11.9%; adjusted for these effects, it was 10.6%. The international share of consolidated sales in the year under review was around 76%, after 71% in the previous year.

Fiscal 2023 was once again characterized by significant sales increases in Vehicle Systems and Weapon and Ammunition. Both benefited in particular from rising demand as a result of the turning point triggered by the war in Ukraine. On August 1, 2023, the operational activities of Expal Systems became part of the Rheinmetall Group. With the significantly expanded production capacities available as a result, particularly in the field of artillery, mortar and medium-caliber ammunition, Rheinmetall has further expanded its position as an important supplier to the NATO armed forces.

Electronic Solutions and Sensors and Actuators were also able to increase their sales levels once again compared with the previous year. Sales in Materials and Trade remained roughly at the previous year’s level.

On December 31, 2023, the Rheinmetall backlog stood at €38.3bn, a new high, after €26.6bn in the previous year. This figure includes binding orders (order backlog) and orders from framework contracts (frame backlog) as well as the nominated backlog of the Group’s civilian business.

The consolidated operating result (EBIT before special items) climbed by 19% to a record level of €918 m and thus increased at an above-average rate compared with the sales growth achieved. This significantly exceeded the previous year’s figure for consolidated operating earnings (EBIT before special items) of €769 m, which was the highest earnings figure in the company’s recent history. The Group’s operating margin reached 12.8%, exceeding the previous year’s figure of 12.0%.

Including special items, reported EBIT was €897m and thus around €160m above the previous year’s figure of €738m. In fiscal 2023, positive special effects totalling €49m and special effects from purchase price allocations amounting to -€70m had to be taken into account.

Earnings after taxes increased to €586m and exceeded the previous year’s figure of €540m by 9%. After deduction of earnings attributable to non-controlling interests of €51m (previous year: €66m), earnings attributable to the shareholders of Rheinmetall AG were €535m, compared with €474m in the previous year. This results in earnings per share from continuing operations before purchase price allocations of €10.96 (2022: €14.65).

On this basis, a dividend payment for fiscal 2023 of €5.70 per share will be proposed to the Annual General Meeting on May 14, 2024, compared with €4.30 in the previous year. This equates to a payout ratio in relation to earnings per share (continuing operations) before purchase price allocation of 38.9% (previous year: 39.2%).

The operating free cash flow generated in the Rheinmetall Group in fiscal 2023 amounted to €356m or 5.0% of sales. It was therefore within the strategic target range of 4% to 6% of sales. After € 151m in the previous year, the operating free cash flow of €356m improved significantly in the reporting period.

Vehicle Systems: Significant increase in sales and operating result

In fiscal 2023, Vehicle Systems generated sales of €2,609m with its military wheeled and tracked vehicles. Compared with the previous year’s sales of €2,270m, this is a significant increase of around 15%.

Considerable sales contributions were particularly made by the delivery of Lynx infantry fighting vehicles to the Hungarian armed forces and ring swaps in the context of the Ukraine war. In addition, swap body trucks and other logistics vehicles from the HX, TGS and TGM series were delivered to customers in the UK, Australia, Norway and Sweden. As in the previous year, a considerable share of sales was generated through deliveries as part of a major Australian order for tactical vehicles, which involves the production of 211 Boxer wheeled armoured vehicles.

The historical turning point or “Zeitenwende”, which was proclaimed by Chancellor Scholz in Germany in February 2022, was reflected particularly clearly in the order situation.

At €7,144m, Vehicle Systems’ share of the Rheinmetall nomination was more than four times that of the previous year 2022, when €1,564 m was booked. The largest individual items here were a joint framework agreement for airborne vehicles for the German and Dutch armed forces worth over €1 bn and an order from the US for the XM30 infantry fighting vehicle program worth around €700 m. Other major new orders included the second lot of Puma infantry fighting vehicles commissioned by the German government and a Leopard 2 upgrade for Norway.

The operating result improved by around €63m to a total of €324m in 2023. The positive development is the result of the sales ramp-up from the aforementioned orders and strict cost management. At 12.4%, the operating margin exceeded the previous year’s figure of 11.5% thanks to a better product mix.

Weapon and Ammunition: High demand leads to record order intake level

Weapon and Ammunition generated sales of €1,756m with its weapon system and ammunition activities in the year under review. Measured against the previous year, this represents an increase in sales of €397m or 29%. In addition to Germany, significant growth impetus came from other NATO states in Eastern Europe and from Ukraine.

Weapon and Ammunition’s share of the Rheinmetall nomination reached a new record level of €8,238m, more than doubling the previous year’s figure of €4,979m. Two multi-year framework agreements for tank ammunition (€3.2bn) and artillery ammunition (€1.4 bn) with the German customer particularly stand out here, as well as direct orders from Ukraine with a volume of around €1.7bn. Outside Europe, another important sales success was achieved with a rapid fog protection system for the Australian navy.

The operating result for Weapon and Ammunition rose by €106 m or around 36% to approximately €403 m in fiscal 2023, mainly due to the higher sales volume (previous year: €297m). The operating margin increased slightly from around 22% (2022) to 23% in the year under review, which is primarily due to cost optimization measures and a more profitable product mix.

Electronic Solutions: Increased sales and operating margin

Electronic Solutions generated sales of €1,318m in the field of defence electronics in fiscal 2023, exceeding the previous year’s figure by 13% (previous year: €1,164m). A significant contribution to this growth in sales came from a major order placed in fiscal 2022 for the delivery of Skynex air defence systems for a European customer. Other relevant sales were generated from the share in the major projects for Lynx infantry fighting vehicles for Hungary, Puma infantry fighting vehicles for the German armed forces, Boxer wheeled armored vehicles for Australia and the delivery of combat helmets for a major order placed by the German armed forces in the previous year.

The Rheinmetall Nomination for Electronic Solutions climbed to a record €2,183 m in fiscal 2023 (previous year: €1,724 m). This represents growth of approximately 27%. The largest individual orders relate to Skynex air defence systems for two customer countries with a total value of around €700 m and to the supply of electronic components for the Puma infantry fighting vehicle of the German armed forces. The follow-up order for a drone system for the German armed forces for medium-range reconnaissance was also reflected in the order book.

At €150m, the operating result was 24% above the previous year’s figure (2022: €121m). The operating margin rose from 10.4% in the previous year to 11.4% in the year under review thanks to successfully completed major orders.

Sensors and Actuators: Slight sales growth

Despite a challenging market environment in civilian business, Sensors and Actuators increased its revenue. In the year under review, sales grew by 3% or €39m to €1.421m.

Particular contributions to this came from components and systems for the electrification of drive systems, including orders for fuel cell drives, and the development of innovative technologies throughout the value chain of the hydrogen economy, which is expected to make a decisive contribution to the energy transition.

The Air Management product area increased its sales significantly by 9% compared with the previous year. Sales of electric gas pumps on the Chinese and North American markets as well as sales of exhaust gas recirculation systems and exhaust flaps for both the light- and heavy-duty segments were the main contributors to this. The Electrification and Digitalization business unit achieved an increase thanks to successful sales of oil and water valves. By contrast, the Thermal Management business unit recorded a slight decline in sales of -2%.

At €2,720 m, booked business in fiscal 2023 was slightly below the previous year’s level of €2,770 m, corresponding to a decline of around 2%. In 2023, orders were acquired for high-voltage water pumps in electric vehicles and several orders for fuel cell applications in the passenger car sector as well as water pumps in the field of Industrial Technology, which will further advance the transformation.

Sensors and Actuators achieved an operating result of €69m in fiscal 2023, falling short of the previous year’s figure by € 26m. The operating margin declined to 4.8% in 2023 (previous year: 6.8%).

Materials and Trade: Sales and operating result at previous year’s level

At €737m, Materials and Trade maintained the previous year’s sales level (previous year: €742m) despite adverse effects in the IT area. The unit, which supplies plain bearings and structural components and operates the global aftermarket business, was affected by an IT attack in the second quarter of 2023, which had a noticeable impact on sites in Germany and abroad.

The Trade business unit once again showed a very good year-on-year sales performance, increasing sales by 4% or €18m. The business unit achieved higher sales in the sales regions of Europe, South America and Asia in particular. In the Bearings business unit, sales declined by 8% or €24m year-on-year. In the Castings unit, the passing on of lower material prices, significantly reduced tonnage and a change in the sales mix had a negative impact and led to a year-on-year decrease in sales. In business with plain bearings, by contrast, there was a slight volume-driven increase in sales compared with the previous year.

Booked business in Materials and Trade came to €760m in the reporting period and with an increase of 1% was slightly above the previous year’s level.

Materials and Trade achieved an operating result of €66m in fiscal 2023, on a par with the previous year. At 8.9%, the operating margin was also at the previous year’s level.

Rheinmetall Group forecast for 2024: Strong sales growth with rising high margins

Based on the current market outlooks, the Rheinmetall Group expects significant growth in sales and anticipates a rising operating margin combined with an improved operating result in fiscal 2024.

The Rheinmetall Group’s annual sales are expected to rise to a level of around €10bn in fiscal 2024 (sales in fiscal 2023: €7.2 bn).

Based on this sales forecast and taking into account holding costs, Rheinmetall is expecting to see an improvement in the Group operating result and a Group operating margin of 14% to 15% (margin in fiscal 2023: 12.8%).

 

12 Mar 24. What to make of BATM’s strategic review.

The technology group is focusing on its core cyber security, network solutions and diagnostics activities, but investors should wait before getting excited again

• Full-year cash profit up 12 per cent to $9.3m
• Adjusted pre-tax profit up from $2.8mn to $4.8m
• Potential for M&A activity and divestments

Technology group BATM Advanced Communications (BVC:19.25p) is undergoing a corporate reorganisation, restructuring non-core activities and prioritising its core cyber security, network solutions and diagnostics activities.

As part of the new strategy, the directors have engaged investment banks in both Israel and the US to explore corporate activity to add to the group’s capabilities, and to secure attractive terms for disposals.

BATM closed the 2023 financial year with net cash of $31.7m after deducting $4.5mn of lease liabilities and $4.6m of bank debt, so has ample firepower available for acquisitions. It is also scaling up sales and marketing functions.

In the short term, the increased investment will impact profit, hence why analysts at house broker Shore Capital reined in their 2024 cash profit estimate from $13.5mn to $9.4mn. This implies a flat performance year on year. However, analyst Robin Speakman notes that there is scope for “better forecast outcomes and so upgrades are also real and high from this point”.

Bearing this in mind, the group’s cyber division secured $32.4m of new orders in 2023, increased revenue 76 per cent to $10.3m and quadrupled cash profit to $2.4m, or a quarter of the group total. One of the orders from a long-standing defence department customer was for BATM’s latest high-performance encryption platform. The $26mn contract will be delivered over the next five years, and the directors expect to receive further orders for the technology in the current year.

Moreover, BATM is ramping up its high-margin edge computing and network function virtualisation software product suite, Edgility. Having been awarded two five-year orders with a leading provider of emergency connectivity services in North America to support critical public infrastructure, BATM’s management expects to receive further orders from the client as it’s rolled out across other US states and the Asia-Pacific region. The product is also undergoing evaluation and successful proof-of-concept trials with leading network operators and systems integrators. In 2023, the group’s networking division (which includes Edgility) quadrupled cash profit to $1.7m.

Diagnostics division offers growth potential

Admittedly, the group’s diagnostic division reported 9 per cent lower annual cash profit of $3m on flat revenue of $33.3m. However, adjust for Covid-19 product sales, which boosted the 2022 result, and divisional revenue increased by a fifth.

Interestingly, BATM’s directors highlight strong interest in two new molecular diagnostics instruments. The first provides laboratory clients with an integrated, compact, cost-effective nucleic acid detection system based on the real-time polymerase chain reaction (PCR) method. The second helps automate the manual library preparation process for an advanced technology used for DNA and RNA sequencing and variant/mutation detection.

In addition, BATM has been strengthening its distribution operations and conducting a sales and marketing campaign for diagnostic clients who have been awarded government funding. It should lead to tenders, which management is confident of winning orders from.

Of course, firm orders will be needed for investors to warm to the investment case once again, having seen analysts’ 2024 earnings expectations materially lowered since the interim results (‘Contract wins mean this cyber stock is now a buy’, 29 August 2023). Valued on eight times cash profit to enterprise valuation of $75m, and 10 per cent below book value, the rating is about right for now. Hold. (Source: Investors Chronicle)

 

11 Mar 24. MTI is a smart play on the defence spending boom.

This technology group is rated on a single-digit earnings multiple even though it is delivering double-digit profit growth, and offers a 6.1 per cent dividend yield

• Annual pre-tax profit up 12 per cent to $4.8m
• EPS rises 9 per cent to 4.58¢
• Net cash of $8.1m (9.2¢)

The latest results from Israel-based MTI Wireless Edge (MWE:40p) highlight the benefits of diversification as growth from the technology group’s antennae and water management systems units more than mitigated a weaker performance from its electronics division.

The antennae business sells ‘off the shelf’ flat and parabolic antennas as well as custom-developed antenna solutions to a range of commercial and military customers. Buoyed by a sharp rise in military sales, divisional operating profit surged from $0.3m to $0.8m. Current events around the world suggest that requirements for military equipment will continue to grow in the coming years as western governments increase their defence budgets, too. Moreover, the conflict in the Middle East has triggered an increase in demand that should lead to higher stock levels of all military equipment being maintained by the Israeli government going forward. Defence-related work now accounts for 44 per cent of group sales.

Strength from the military side of the business more than offset a slight dip in revenue from MTI’s 5G backhaul antenna solutions due to slower installation rates in certain markets. However, as soon as 5G is rolled out in India (a key market), the requirement for MTI’s products will be substantial. Also, the group’s automatic beam steering antenna solution that adapts to any small movements caused by different climate conditions is now entering into production after successful testing by key original equipment manufacturers (OEMs).

A climate change winner

MTI offers investors exposure to the themes of climate change and water conservation through wireless water management systems, too. Water scarcity is a real global problem. Last year, the UN Water Conference reported that global fresh water demand will outstrip supply by 40 per cent by 2030. This level of challenge underlines the importance of water conservation and the solutions that MTI offers customers (agriculture, municipal authorities and commercial entities), which can reduce water usage by 30 per cent.

In addition, MTI has been expanding its services beyond efficient water usage across public parkland and green open spaces, having recently completed a project to monitor and partially control 40 urban fountains for a municipality in Israel. It could become a valuable future revenue stream for a division that increased operating profit by 8 per cent to $2mn last year.

Admittedly, contract delays at two loss-making projects led to profits reversing at MTI’s electronics division. However, the directors report that increased defence spending by governments is creating a strong market environment to operate in, partially from the Israeli defence forces and partially from international markets via the Israeli systems houses. To this end, MTI’s electronics division has been completing several design wins for both new and existing customers. It augurs well for future sales. House broker Shore Capital expects divisional operating profit to bounce back 25 per cent to $1.95mn in 2024 and contribute to 9 per cent higher group operating profit of $5.1mn (£4mn).

On this basis, MTI is rated on seven times 2024 operating profit to enterprise valuation of £28.4m. A 6.1 per cent dividend yield and a £0.5mn expansion of the share buy-back programme are also supportive. Trading around the level of my last buy call (‘MTI boosted by defence spending and offers 6% yield’, 15 August 2023), MTI’s shares rate a buy.

(Source: Investors Chronicle)

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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Sponsored by SPX CommTech (TCI & ECS)

 

www.tcibr.com

 

www.enterprisecontrol.co.uk

 

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08 Mar 24. Darktrace upgrades forecasts as it slowly wins back market confidence.

• Revenue and margin guidance improved
• Strong cash generation leaves it with healthy balance sheet

Given the consistent revenue growth Darktrace (DARK) has achieved over the past few years, it looks a lot cheaper than it used to.

The weakness in its share price is because of a sell note written by Peel Hunt a few years ago questioning its total addressable market size and a short-seller’s report published by Quintessential Capital questioning the quality of its revenue.

However, since then, EY has conducted an audit of Darktrace and cleared it of concerns, and the cyber security company has just delivered another strong set of results. In the six months to December 2023, annual recurring revenue (ARR) was up 24.4 per cent year on year. Meanwhile, net cash flow from operations rose 142 per cent to $65.6mn.

The company has increased its full-year revenue and adjusted cash profit (Ebitda) margin guidance. It is now forecasting full-year revenue growth of between 23.5 per cent and 25 per cent, which is 0.5 per cent higher. More significantly, it is expecting an adjusted Ebitda margin of no less than 21 per cent, up from the previous range of between 18 per cent and 20 per cent.

A tweak to the way it pays its sales team means free cash flow conversion will drop to between 50 per cent and 60 per cent. It is now paying its commission all up-front, rather than half at the beginning of the contract and half at the end. However, Darktrace expects it to switch back to 100 per cent conversion next year once this is worked through.

Admittedly, last year it was revealed that cash flow conversion was temporarily lower due to “net settlement of tax obligations” but it expects it to adjust back. So, it has history in making ‘temporary’ adjustments that impact cash flow.

Another slight concern is that R&D spending has dropped in absolute terms by 7.4 per cent from $25.7mn to $23.8mn, and as a percentage of revenue it is a little below what you want from a software business.

Ultimately, there aren’t that many businesses with 25 per cent top-line growth and decent cash conversion. Meanwhile, it is inevitable that demand for cyber security services will increase in demand as artificial intelligence (AI) lowers the cost of attacks.

There is potential value here, but we just like a set of results with no adjustments. Stick to hold, for now.

Last IC View: Hold, 253p, 6 Sep 2023. (Source: Investors Chronicle)

 

07 Mar 24. BigBear.ai Announces Close of Pangiam Acquisition, $54m of Incremental Cash Proceeds, Net Loss of $21.3m in Q4 2023, and Second Consecutive Quarter of Positive Adjusted EBITDA in Q4 2023 Financial Results.

• Announced successful close of Pangiam acquisition in an all-stock transaction, combining facial recognition, image-based anomaly detection and advanced biometrics with BigBear.ai’s computer vision capabilities.
• Approximately $54m of cash proceeds, before fees, related to warrants exercised in the first quarter of 2024, bringing additional liquidity and strengthening the Company’s balance sheet.
• Net loss of $21.3m in the fourth quarter of 2023, an improvement of $8.6m as compared to a net loss of $29.9m for the fourth quarter of 2022.
• Second consecutive quarter of positive adjusted EBITDA at $3.7m.
• 2H 2023 cash flow positive, first time since public company debut in December 2021.
• 2024 Revenue outlook provided of $195 – $215m.

BigBear.ai Holdings, Inc. (NYSE: BBAI) (“BigBear.ai” or the “Company”), a leader in AI-powered decision intelligence solutions, today announced financial results for the fourth quarter and full year ended December 31, 2023, released 2024 revenue guidance and issued an investor letter that has been posted to the Investor Relations section of the Company’s website.

BigBear.ai CEO Mandy Long said, “As we close out FY 2023, I am proud of the work that we have done as a company to solidify BigBear.ai’s foundation. We entered the year in a different position than many other companies that are playing a role in the transformative potential of artificial intelligence. After joining in October 2022, I spoke openly about needing a foundational year to overhaul our operating structure, wind down contracts that did not meet our business objectives, reset the strategic priorities of BigBear.ai, and manage uncertainty in a volatile macroeconomic and geopolitical environment. In short, we had to do the hard work to get our house in order.​ We stand here in early 2024 knowing that we did what we said we would do. With the completion of the Pangiam acquisition and incremental cash proceeds of $54M from warrants exercised in Q1 2024, we are well positioned for healthy growth in the year ahead.”

Kevin McAleenan, former CEO of Pangiam, has been announced as President, and will play a critical role in leading the business combination. “Together, we will be able to deliver broader capabilities and more value to our customers and partners. The combined company is positioned to be a breakout leader, with both a proven track record of innovating in our target markets and developing cutting-edge products. We couldn’t be more excited about the future.”

Financial Highlights

• Revenue grew 0.5% to $40.6m for the fourth quarter of 2023, compared to $40.4m for the fourth quarter of 2022.
• Gross margin of 32.1% in the fourth quarter of 2023, an increase from 29.2% in the fourth quarter of 2022, driven by improved Federal margins on our largest fixed price contracts coupled with mixing out of lower margin work such as EPASS that completed in July 2023.
• Net loss of $21.3m for the fourth quarter of 2023, which includes $9.4m of non-cash expense related to the change in the fair value of warrants that were issued in 2023, and $6.1m of equity-based compensation expense, compared to a net loss of $29.9m for the fourth quarter of 2022, which included $18.3m of non-cash goodwill impairment charges and $2.6m of restructuring charges.
• Non-GAAP Adjusted EBITDA* of $3.7m for the fourth quarter of 2023 compared to $(2.5) m for the fourth quarter of 2022, primarily driven by gross margin improvement and continued focus on operating expense reductions.
• SG&A of $18.2m for the fourth quarter of 2023 compared to $15.6m for the fourth quarter of 2022, primarily driven by an increase in equity-based compensation.
• Recurring SG&A* has been reduced from $16.1m in the fourth quarter of 2022 to $12.3m in the fourth quarter of 2023, a net improvement of $3.8m.
• Ending cash balance of $32.6m as of December 31, 2023 compared to $12.6m as of December 31, 2022.

New Developments

• BigBear.ai announced a successful close of its acquisition of Pangiam Intermediate Holdings, LLC (Pangiam), a leader in Vision AI for the global trade, travel, and digital identity industries. This strategic move, finalized on February 29, 2024, accelerates and evolves BigBear.ai’s mission to create clarity for the world’s most complex decisions in three markets: national security, supply chain management, and digital identity. The combined entity will create one of the industry’s most comprehensive Vision AI portfolios, combining facial recognition, image-based anomaly detection and advanced biometrics with BigBear.ai’s computer vision and predictive analytics capabilities.
• On February 27, 2024, BigBear.ai entered into a warrant exercise agreement whereby an existing accredited investor elected to exercise approximately 8.9m warrants, generating approximately $20.6m of gross proceeds, prior to fees, for the Company. In connection with the warrant exercise, BigBear.ai issued 5.8m new warrants with an exercise price per share equal to $3.78, which are not exercisable for six months.
• On March 4, 2024, BigBear.ai entered into a warrant exercise agreement whereby an existing accredited investor elected to exercise approximately 13.9m warrants, generating approximately $33.2 m of gross proceeds, prior to fees, for the Company. In connection with the warrant exercise, BigBear.ai issued 9.0m new warrants with an exercise price per share equal to $4.75, which are not exercisable for six months.
• In December 2023, BigBear.ai announced a partnership with Amazon Web Services Professional Services (AWS ProServe). AWS ProServe customers will be able to access the power of BigBear.ai’s ProModel AI-driven warehousing solutions, including optimized facilities design, streamlined process workflows, efficient staffing models, arrival and departure scheduling, and strategic resource allocation, among other enhancements. Read more: Press Release
• In December 2023, the US Army announced an extension of the GFIM Phase 2 Prototype. During the initial Phase 2 period, BigBear.ai laid the groundwork for a modernized force structure system. The team successfully navigated the complexities of the U.S. Army’s requirements, and this extension will see the continuation of that partnership as the project moves towards operationalizing the prototype within the cARMY cloud. Read more: Press Release
• In October 2023, BigBear.ai was invited back to participate for the third time with the Navy’s AI Task Force at its annual Naval Exercise, Digital Vanguard. BigBear.ai’s leading computer vision capabilities were on display again, showing the power of AI integrated into the Navy’s existing systems where BigBear.ai demonstrated object detection from Full Motion Video (FMV), and descriptive and predictive analytics. Following this, the US Navy has again selected BigBear.ai to participate in an upcoming naval exercise to demonstrate its data and AI orchestration capabilities. The exercise is scheduled to take place in California in the second half of this year (2024).
• In the fourth quarter of 2023, BigBear.ai responded to the National Institute of Standards and Technology’s (NIST) public comment letter concerning guidelines for auditing AI systems and models, synthetic content labeling, and global technical standards development. BigBear continues to provide thought leadership, aiding in the important discussion of shaping future AI standards.
• BigBear.ai exhibited at the Association of the United States Army annual meeting & exposition in October of 2023. BigBear.ai demonstrated its latest solutions in Intelligent Automation, Contested Logistics, and Computer Vision.
• BigBear.ai’s CTO, Ted Tanner Jr., spoke at MIT’s 5th annual workshop focused on AI for National security. Ted’s panel focused on both the needs for AI in the Defense space as well as the challenges posed by AI and how to continue to safeguard the nation during the evolution of this technology. Ted was joined by panelists from NASA Goddard Space Flight Center, NSA, Georgetown University, and OSD R&E.
• BigBear.ai CTO, Ted Tanner Jr., spoke on the state of the union of the AI industry as the keynote speaker at the inaugural State of Tech Dinner, Charleston Digital Corridor in Charleston, SC.

Financial Outlook

The following information and other sections of this release contain forward-looking statements, which are based on the Company’s current expectations. Actual results may differ materially from those projected. It is the Company’s practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, changes in law, or new accounting standards until such items have been consummated, enacted, or adopted. For additional factors that may impact the Company’s actual results, refer to the “Forward-Looking Statements” section in this release.

For the year-ended December 31, 2024, the Company projects:

• Revenue between $195m and $215m
• The projections include the results of Pangiam after the acquisition date of February 29, 2024

(Source: BUSINESS WIRE)

 

06 Mar 24. Indra seeks to lead consolidation in Spanish defense industry.

Spain’s Indra Sistemas SA said it will focus on its defense and aerospace businesses as part of a new 2030 strategy, seeking to become an international player at a time of increased military spending by European NATO members.

Indra plans to lead consolidation of the Spanish defense industry, Chairman Marc Murtra told analysts during a March 6 presentation in Madrid. He cited the U.K.’s BAE Systems, France’s Thales and Italy’s Leonardo as examples of national defense champions that consolidated their home markets.

European countries have boosted defense spending since Russia’s invasion of Ukraine in 2022 to strengthen their militaries after decades of cost cutting. Purchases of defense equipment by NATO’s European members will rise 7% to 8% a year through 2030, with total procurement of as much as €950bn (US$1trn) over the period, Indra forecasts.

“Europe is entering a new major defense investment cycle after more than 30 years, characterized by a significant shift in focus towards technology, a greater share of defense systems and the expansion of multi-domain capabilities,” Murtra said.

Indra seeks to transform its businesses from national to international, and become “the Spanish multinational of reference” in defense and aerospace, the chairman said. The company wants to become the Spanish coordinator in European land, air and cyberspace programs, and the main defense-system integrator in its home market.

The company has announced a number of cross-border deals in its defense business this year, including a radar joint venture with the Emirati defense-technology company Edge Group, and agreements with Thales and Lockheed Martin to jointly work on defense systems.

The EU has been pushing for consolidation and joint projects in the defense industry, with fragmentation and duplication between national markets estimated to waste billions of euros. The EU’s executive branch on Tuesday proposed a €1.5bn plan to boost defense production and promote joint military projects among member states.

Indra is already involved in multinational European projects including the Future Combat Air System, the Eurofighter Typhoon and the A400M freighter.

“Some of our NATO allies within Europe, such as the U.K., Italy and France, have already made significant strides in consolidating defense and aerospace sectors,” Murtra said. “This process is crucial to achieve strategic autonomy in Spain, and to guarantee its influence at the global scale. With our strong positioning and capabilities, we aspire to lead the Spanish national ecosystem in less than 10 years.”

Spain’s defense budget is expected to outpace Europe, rising 11% to 12% a year to reach a target of 2% of GDP by 2030, Indra projects.

The company expects its defense sales to grow 42% organically over the next three years to €1.1 bn, excluding the contribution from acquisitions. Defense currently accounts for about a fifth of the company’s revenue.

Indra projects overall sales of €6 bn in 2026, including €700 m added through mergers and acquisitions. The company plans tol allocate more than 75% of its acquisition spending to defense and aerospace, with a focus on Spain, Western Europe, the Middle East and North America.

The company said it will concentrate M&A activity in its defense business on bolstering capabilities in the land domain, developing home markets in Western Europe and strengthening its business in sensors, avionics and counter unmanned aerial systems, or C-UAS.

Indra is simplifying its defense-product portfolio, moving more than 100 customized products into six technology categories, including radar, electronic defense, as well as command, control, computing and intelligence, or C3I.

Space division

The company is also setting up a new space division that will serve the defense and air-traffic management segments, with a goal of €1 bn in revenue by 2030. Indra wants to become a tier-one European player participating in the continent’s main space programs, Murtra said.

“Space is a segment that is becoming more and more relevant in Europe to guarantee its strategic autonomy and sovereignty over communications,” Murtra said “Satellite communications are becoming mission critical for governments in both both defense and non-defense applications.”

Indra will seek one or more shareholders for its information-technology business Minsait, though Murat said he plans to keep a “significant stake” in the unit, because of synergies with the defense and aerospace businesses.

 

07 Mar 24. Dassault Aviation Group surges forward despite supply chain challenges. The defence player shows resilience amidst production delays and geopolitical turmoil. Dassault Aviation Group, a defence and aviation company, has demonstrated resilience and growth in a year marked by global instability and supply chain disruptions.

The company’s latest financial release for 2023 reveals a mixed picture. Adjusted net sales stood at €4.8bn ($5.2bn), down from €6.9bn in the previous year. However, adjusted net income reached €886m, representing 18.5% of net sales. This achievement shows Dassault Aviation’s ability to navigate turbulent times and deliver results.

One key highlight of the company’s performance is its backlog, which stands at €38.5bn as of December 31, 2023. This backlog, driven primarily by the commercial success of the Rafale aircraft, reflects a demand for Dassault Aviation’s products and services despite the challenging operating environment.

In fiscal year 2023, Dassault Aviation solidified the Indo-French collaboration by adding 18 Rafale fighter jets to Indonesia’s order backlog. This development follows the initial procurement agreement of 42 aircraft in 2022. Furthermore, Croatia joined the Rafale club as it received its first of 12 Rafale multirole combat aircraft.

Dassault Aviation SA occupies 5.6% of the European military fixed-wing aircraft market, anticipating earnings of $15.1bn. Dassault Aviation SA is also set to account for the highest revenue over the forecast period in the African market, with anticipated earnings of $15.9bn, as per GlobalData’s global military fixed-wing aircraft market intelligence.

The financial results emphasised the strategic importance of ongoing defence contracts and the company’s commitment to meeting delivery commitments.

The company’s focus on sustainability has also been evident in its efforts to decarbonise its processes and products. Dassault Aviation’s commitment to using Sustainable Aviation Fuel (SAF) in its Falcon aircraft demonstrates its dedication to reducing carbon emissions and mitigating environmental impact.

In the face of ongoing geopolitical tensions and economic uncertainties, Dassault Aviation Group’s performance is a testament to its resilience and adaptability. As it looks ahead to 2024, the company remains focused on meeting customer demands and continuing its growth trajectory in the defence sector. (Source: airforce-technology.com)

 

07 Mar 24. Melrose gets engine arm firing. Division’s adjusted operating profit reports 10.3 percentage point improvement.

• Civil engines aftermarket volumes increase by 40%
• £500m buyback set to complete by September

Melrose Industries (MRO) remains “nicely on track” to deliver on the ambitious target set last year to double profits twice between 2022-2025, according to chief executive Peter Dilnot.

The first half of this mission has been achieved, with the company growing adjusted operating profit to £390mn in 2023, from £147m a year earlier. This improvement was largely driven by its engines business, where the operating margin jumped to 26 per cent, from 15.7 per cent year on year.

This was partly due to higher volumes, with the civil engines aftermarket increasing by 40 per cent as engine flying hours picked up. The scope of work done during engine shop visits has broadened and there was also “positive pricing” momentum. But Dilnot argued that business improvements have played their part, such as the rationalisation of sites from 12 to nine.

Performance at its structures arm also impressed, with the operating margin jumping to 5.1 per cent, up from 1.3 per cent earlier.

And although the industry continues to grapple with supply chain strains, demand remains healthy, leading the company to lift guidance for 2024 by 6 per cent.

The shares slipped by 2 per cent, but given a 73 per cent gain over the previous 12 months some profit-taking was understandable. And a share price of 22 times forecast earnings is well above its five-year average.

In this instance, though, historic valuations aren’t very useful given the major changes that have taken place. Management remains confident the improvement story has further to run, and with the bulk of a £500m buyback announced last year due to complete by September, we think Melrose’s prospects remain bright. Buy.

Last IC View: Buy, 534p, 7 Sep 2023. (Source: Investors Chronicle)

 

07 Mar 24. Melrose Industries PLC (“Melrose” or the “Group”), the aerospace focused Group, today announces its audited results for the year ended 31 December 2023.

Key messages

• 2023 adjusted1 operating profit more than doubles to £420 m (pre-PLC costs) and ahead of guidance
• 2024 adjusted1 operating profit guidance upgraded by 6% (pre-PLC costs)
• Engines margin to reach target 28% in 2024, one year early and on track for >30% post 2025
• Positive earnings momentum across industry leading businesses, 2025 targets de-risked
• Engines’ future RRSP net cash inflow grows to c.£22bn as a result of GE contract

Financial highlights3

• Revenue of £3.35bn, 17% growth over last year (13% including businesses being exited)
• Adjusted1 operating profit (pre-PLC costs) of £420m versus initial guidance of £350m and most recent £405m. Margins grew by more than 600bps to 12.5%
• Adjusted1 operating profit of £390m, up 164% on the prior year, a margin of 11.6%. Statutory operating profit of £57m (2022: loss of £270m)
• Adjusted1 diluted EPS of 18.7p, compared to 4.1p in 2022, an increase of over 4 times. Statutory diluted EPS of 0.1p (2022: loss of 16.3p)
• Free cash flow1 better than expectations
• Net debt1 of £572m, representing leverage1 of 1.1x, better than our guidance, including a share buyback cost of £93m
• Full year dividend of 5.0 pence including final dividend of 3.5 pence per share recommended

Strategic highlights

• Successful transition to pureplay aerospace business with clear growth trajectory
• Significant delivery of restructuring and repricing actions, ahead of our plan and de-risking 2025 targets. Engines to reach 28% adjusted operating margin, one year early, and on track to >30% post 2025
• Wide-ranging new agreement with GE covering a series of engines including GEnx with higher aftermarket RRSP entitlement; RRSP expected net cash inflow up by 10% to c.£22bn (assuming US$ = 1.25)
• Good operational progress with 23% improvement in cost of poor quality and £40m reduction in arrears, despite industry supply chain issues
• Substantial investment of c.£120m in Research and Development including government and customer funding. In 2023 we committed to invest £50m targeted to expand our unique additive fabrication capacity during the next couple of years
• Substantial progress in achieving Group sustainability targets, with new more stretching targets set

Divisional highlights3

Engines

• Engines revenue growth of 16% to £1.19bn with adjusted1 operating profit up 92% to £310m and adjusted1 operating margin up to 26%
• Engines aftermarket growth of 34% driven by recovering flying hours and the Group entering the lucrative aftermarket ‘sweet spot’ supporting an above market performance
• Strong progress on growth initiatives, including increasing capacity and 23% increase in revenue in aftermarket repair

Structures

• Structures revenue growth of 18% to £2.16bn (12% including businesses being exited). Adjusted1 operating profit of £110m with margins increasing to 5.1% from 1.3% in 2022
• The ramp-up in Civil OEM shipments resulted in 28% growth. Defence repricing and portfolio work progressed well with 42% of core work now sustainably priced
• Significant progress on restructuring and portfolio rationalisation with two non-core plants closed in 2023 and further exits underway

Demerger of GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen

• The demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen divisions from Melrose into Dowlais Group plc successfully completed on 20 April 2023

Upgraded guidance for 2024 full year (assuming US$ = 1.25 average exchange rate for the year)

• Revenue between £3.6bn and £3.75bn, growth tempered by ongoing sector-wide supply chain issues
• Aerospace adjusted1 operating profit (pre-PLC costs) between £550m and £570m, 6% above our prior guidance at the midpoint, driven by ongoing operating margin improvement with Engines on track to deliver 2025 margin targets of 28% in 2024
• Aerospace adjusted1 EBITDA of between £710m and £730m
• Central costs at £30m, up £5m to reflect a non-cash LTIP charge
• As expected, cash generation limited by ongoing restructuring in 2024 and previously announced GTF issues; increasing free cash flow is expected in 2025 and beyond, driven by RRSPs

Peter Dilnot, Chief Executive Officer of Melrose Industries PLC, today said:

“Melrose Aerospace has delivered record results in 2023, ahead of upgraded guidance driven by strong operating margin progression in both divisions. The Group is well positioned to deliver continued growth and margin improvement supported by positive end markets and excellent operational momentum. We have upgraded guidance for 2024 and are confident about unlocking significant further potential of the business going forward.”

Notes

1.Described in the glossary to the Preliminary Announcement and considered by the Board to be a key measure of performance

2. Results for the year ended 31 December 2022 have been restated for discontinued operations and the one for three share consolidation where applicable

3.Like-for-like growth is calculated at constant currency against 2022 results and excludes businesses being exited

 

06 Mar 24. VSE Corporation Announces Fourth Quarter and Full Year 2023 Results. VSE Corporation (NASDAQ: VSEC; “VSE”, or the “Company”), a leading provider of aftermarket distribution and repair services, announced results for the fourth quarter and full year 2023.

MANAGEMENT COMMENTARY

“We completed 2023 with outstanding fourth quarter and full year financial results,” said John Cuomo, President and CEO of VSE Corporation. “Our businesses once again delivered strong above-market revenue growth and improved profitability. Our Aviation segment reported record revenue and Adjusted EBITDA driven by strong program execution, an expansion of our distribution product lines and repair capabilities, and contributions from recent acquisitions. Our Fleet segment continued to diversify its customer base and reported record revenue, driven by strong growth in commercial sales and solid contributions from legacy customers. I want to thank the VSE team for delivering yet another year of outstanding performance.”

Mr. Cuomo continued, “VSE enters 2024 well positioned for a successful year, supported by robust end-market activity and bolstered by new business wins and recently announced strategic actions and acquisitions. 2024 is a year of growth and execution as we focus on acquisition integration, implementation of new programs, entry into new geographies, and the continued execution of our strategic transformation plan. Our unwavering commitment to our employees, customers, and suppliers, sets our businesses apart and will continue to fuel our success in 2024 and beyond.”

“VSE completed 2023 meeting previously shared expectations, capping another great year of above market revenue growth and increased profitability. Our Aviation and Fleet segments delivered record revenue and improved profitability while generating $43m of operating cash flow and $30 m of free cash flow in the second half of the year. We will build on this strong foundation in 2024 with new investments in recently awarded contracts, the integration and launch of newly acquired businesses, and the recently announced acquisition of Turbine Controls, Inc.,” said Steve Griffin, Chief Financial Officer. “Our 2024 guidance reflects the compelling opportunities across both of our business segments where our differentiated go-to-market strategy positions us to deliver above-market revenue growth, improved profitability, and a strong return on capital.”

FOURTH QUARTER 2023 RESULTS(1)

(As compared to the Fourth Quarter 2022)

• Total Revenues of $235.3m increased 37%
• GAAP Net Income of $12.8m increased 62%
• GAAP EPS (Diluted) of $0.82 increased 32%
• Adjusted EPS(2) (Diluted) of $0.85 increased 31%
• Adjusted EBITDA(2) of $31.4m increased 46%

FULL-YEAR 2023 RESULTS(1)

(As compared to the Full-Year 2022)

• Total Revenues of $860.5m increased 29%
• GAAP Net Income of $43.2m increased 62%
• GAAP EPS (Diluted) of $3.04 increased 46%
• Adjusted EPS(2) (Diluted) of $3.31 increased 45%
• Adjusted EBITDA(2) of $113.8m increased 45%

(1) From continuing operations

(2) Non-GAAP measure, see additional information at the end of this release regarding non-GAAP financial measures

STRATEGIC UPDATE

• TURBINE CONTROLS ACQUISITION: VSE entered into a definitive agreement to acquire Turbine Controls Inc. (“TCI”), a leading provider of aftermarket maintenance, repair and overhaul (“MRO”) support services for complex engine components, as well as engine and airframe accessories. VSE will acquire TCI for a total consideration of approximately $120 m, comprising $110m in cash and $10m of common shares of the Company, subject to working capital adjustments. The acquisition is expected to close in the second quarter of 2024, subject to customary closing conditions.
• FEDERAL AND DEFENSE DIVESTITURE: VSE announced the sale of substantially all of its Federal and Defense segment (“FDS”) operating assets. The FDS sale was completed in two separate transactions with two buyers for a total cash consideration of $44.0m, which included $10.0m as an estimated net working capital adjustment (subject to post-closing adjustments). Associated with the sale of FDS, VSE will cease use of the one remaining non-core FDS facility by the second quarter of 2024. During the first quarter of 2024, the Company is expecting to record one-time transaction expenses between $6 and $8 m, including non-recurring fees and costs in support of these transactions and employee severance and benefit related expenses. Additionally, the Company is expecting to record a $6m non-cash charge including an impairment related to the asset not included in the sale.
• CORPORATE COST RESTRUCTURING: The Company is considering a corporate restructuring plan and headquarters relocation, which could result in certain adjustments to the Company’s consolidated financial statements ranging between $18 to $23m throughout 2024 depending on the resolution of certain contract and leasing agreements. The Company’s evaluation may include a facilities consolidation strategy to sublease, early terminate, or abandon its headquarters, and would be designed to reduce centralized corporate costs.
• FLEET SEGMENT STRATEGIC REVIEW: VSE initiated a process to explore and evaluate strategic alternatives involving the Fleet segment. The Company has not set a definitive timetable for the completion of the review, and there can be no assurances that it will result in a transaction.

BALANCE SHEET OPTIMIZATION

In December 2023, the Company amended and extended its credit agreement, providing for an increase of approximately $122m on its term loan and an extension of the maturity date by one year to October 2026.

SEGMENT RESULTS

Aviation segment revenue increased 43% year-over-year to a record $153.7m in the fourth quarter 2023. The year-over-year revenue growth was attributable to strong program execution on new and existing distribution awards, an increase in maintenance, repair and overhaul (“MRO”) activity, and contributions from the acquisition of Desser Aerospace. Aviation distribution and repair revenue increased 41% and 49% respectively, in the fourth quarter versus the prior-year period. The Aviation segment reported operating income of $18.8m in the fourth quarter, compared to $12.3m in the same period of 2022. Segment Adjusted EBITDA increased by 52% in the fourth quarter to $23.9m, versus $15.8m in the prior-year period, driven by strong execution on distribution programs, MRO market share gains, improved pricing and product mix, increased operating leverage, and contributions from the Desser Aerospace acquisition. Adjusted EBITDA margin was 15.6%, an increase of approximately 90 basis points compared to the prior year.

Fleet segment revenue increased 26% year-over-year to $81.6m in the fourth quarter of 2023. Revenue from commercial customers increased 72% on a year-over-year basis, driven by strong growth in e-commerce fulfillment and commercial fleet sales. Commercial revenue represented approximately 52% of total Fleet segment revenue in the fourth quarter, compared to 38% in the prior year period and represented the first quarter in segment history of greater than 50% of revenue from Commercial customers. Revenue from the United States Postal Service (USPS) declined approximately 3% on a year-over-year basis in the fourth quarter, driven by mix of fleet vehicles within the installed base. The Fleet segment reported operating income of $9.0m in the fourth quarter, compared to $5.6 m in the same period of 2022. Segment Adjusted EBITDA increased 24% year-over-year to $9.8m, while Adjusted EBITDA margin was 12.0%, a decline of 20 basis points versus the prior-year period, primarily driven by customer and product mix.

FINANCIAL RESOURCES AND LIQUIDITY

As of December 31, 2023, the Company had $216m in cash and unused commitment availability under its $350m revolving credit facility maturing in 2026. As of December 31, 2023, VSE had total net debt outstanding of $422m and $114m of trailing-twelve months Adjusted EBITDA. The Company generated $20m and $(41)m of Free Cash Flow for the fourth quarter and full year 2023, respectively.

GUIDANCE

VSE is reaffirming its full year Aviation segment guidance:

• Aviation segment full year 2024 revenue growth of 24% to 28%, as compared to the prior year.
• Aviation segment Adjusted EBITDA margin expected to be between 15% and 16%.

As previously updated, VSE Fleet segment guidance is as follows:

• Fleet segment full year 2024 revenue growth of 13% to 17%, as compared to the prior year.
• Fleet segment Adjusted EBITDA to increase 8% to 12%, as compared to the prior year. (Source: BUSINESS WIRE)

 

06 Mar 24. Italy’s Fincantieri in talks to buy Leonardo’s Wass unit. Italian shipbuilder Fincantieri (FCT.MI), opens new tab is in talks with Leonardo (LDOF.MI), opens new tab to buy the defence group’s submarine unit Whitehead Alenia Sistemi Subacquei (Wass), newspapers reported on Wednesday, sending Fincantieri’s shares up more than 7%.

The acquisition would have a value of between 200m and 300m euros ($217m-$326m), Corriere della Sera and financial daily Il Sole 24 Ore reported.

At the request of Italian market regulator Consob, Fincantieri issued a statement saying it would evaluate strategic opportunities that were in line with its latest business plan and created value for shareholders.

It made no direct reference to any specific deals.

A move by Fincantieri would be part of the group’s broader strategy to grow through acquisitions and focus more on the defence sector, which in its last results accounted for less that 25% of its revenues.

It would also strengthen its position in the underwater sector, which the group recently identified as a key area for growth.

The state-controlled shipbuilder is considering a capital increase of some 400m euros to finance the deal, Il Messaggero said, adding the group was being advised by JPMorgan, Intesa Sanpaolo and Bnp Paribas on the matter.

A Leonardo spokesperson declined to comment on the reports.

Broker Banca Akros welcomed the potential deal as positive, saying it believed Wass could be valued at between 168m and 225m euros.

Fincantieri’s Milan-listed shares closed up more than 7% at 0.509 euros.

Milano Finanza first reported on Saturday that Fincantieri was considering a large acquisition and that it was examining either a recapitalisation or a convertible bond to do so. Leonardo, also controlled by the Italian state, has been trying to find a buyer for Wass, which designs and builds underwater defence systems such as torpedoes and sonars, for years, but put a decision on hold after the war in Ukraine. (Source: Google/Reuters)

 

06 Mar 24. Spain’s Indra sees revenue, profit soaring on European defence spending. Spanish defence and technology company Indra (IDR.MC), opens new tab said on Wednesday it expects higher defence spending in Europe will boost its revenue and profitability over the next six years.

The company expects earnings before interest, taxes, depreciation and amortisation (EBITDA) to soar to more than 750 m euros ($814 m) in 2026 from 446 m euros in 2023, on a rise in revenue to 6 bn euros from 4.34 bn last year.

It sees a further rise in revenue to 10 bn euros by 2030.

Indra said increased spending by European countries on modernising defence systems, as well as the new wave of digitalisation led by artificial intelligence, cloud computing and cybersecurity would provide opportunities for growth.

The radar systems manufacturer aims to grow within the European military sector, where it competes with the likes of France’s Thales (TCFP.PA), opens new tab and Italy’s Leonardo (LDOF.MI), opens new tab.

Indra will set up a new space company and include its mobility business in tech unit Minsait with the entry of strategic partners, Indra’s Chief Executive Jose Vicente De los Mozos said while presenting the company’s strategy to 2030.

Spanish media have reported that private equity funds are condsidering buying a stake Minsait, which generated about half of Indra’s revenue last year.

Asked about a potential sale of Minsait, Chairman Marc Murtra said Indra would keep a “significant” stake in the unit in such an event.

The company expects Minsait’s revenue to rise 5% to 3.64bn euros in 2026.

Indra, which is 28%-owned by the Spanish government, said it plans to invest 3.1 bn euros in technology development by 2030, partly financed by asset disposals.

Since the company intends to focus on space, Murtra said it could also make an acquisition in the industry. One potential target is a stake in satellite operator Hispasat, partly owned by state-controlled grid operator Redeia (REDE.MC), opens new tab. (Source: Reuters)

 

08 Mar 24. TT Electronics’ strong cash flow looks cheap.

The new CEO’s push to focus on operational improvements gives the company a healthy free cash flow yield.

• Dividend increased
• Margin expected to improve again next year

TT Electronics (TTG) is continuing its recovery and, with its share price falling, the free cash flow yield is starting to look appealing.

The electronics component company brought in new chief executive Peter France last year to get the business back on track. The main focus is on improving its thin margins, and in the year to December the operating profit margin expanded 100 basis points to 8.6 per cent.

Most of the margin expansion came from the power and connectivity divisions, which grew revenue by 10 per cent and its adjusted operating profit margin by 330 basis points to 8.4 per cent. Meanwhile, the highest-margin global manufacturing solutions business saw revenue fall 7 per cent.

Management is intent on simplifying the business, including the recent sale of businesses in Cardiff, Hartlepool and Dongguan. It is now guiding that the operating margin will hit 10 per cent in 2024.

Given this improved profitability forecast, broker Numis is forecasting that adjusted earnings per share (EPS) will rise to 19.5p in 2024, which leaves TT Electronics trading on a forward price/earnings (PE) ratio of just 7.2. Given the strong cash conversion, TT Electronics looks even cheaper on a cash flow basis, trading on forward free cash flow yield of 9.7 per cent.

Management has delivered on its promises so far, so it feels safe to accept its 10 per cent operating margin forecast. It is not going to grow revenue rapidly, but with a 10 per cent cash flow yield and a decent balance sheet, it looks worth the price. It has also shown it is happy to return cash to shareholders with the dividend rising 8 per cent. Recovery buy. Last IC View: Hold, 157p, 04 Aug 2023. (Source: Investors Chronicle)

 

07 Mar 24. TT Electronics plc, a global provider of engineered electronics for performance critical applications, today announces full year results for the 12 months ended 31 December 2023.

Key highlights from the results:

1. Free cash flow of £23.9m with cash conversion at 92%
2. Leverage reduced to 1.7x, with more expected in 2024
3. Leverage reduced to 1.5x pro forma, following the divestment announced earlier this week
4. Margin improvement – Adjusted Group operating margin up 110 bps to 8.6% (8.9% excluding pass-through)
5. Full year revenue up 3% year-on-year at constant currency
6. Adjusted operating profit growth of 16%
7. Excellent business development success, with 37 significant contract awards delivering c. £250m of potential lifetime revenues
8. Total dividend increase of 8% to 6.8p, reflecting strong performance and positive outlook

Outlook

8. Mindful of wider macro environment but TT is well-aligned with global mega trends, driving demand from high-growth markets
9. Strength and level of visibility in order book, which is H2 weighted, underpin confidence for the FY
10. Focus on improved operational execution driving continued earnings growth
11. On track to deliver 10% operating margin in 2024
12. Strong free cash flow generation and a continued reduction in leverage expected

Peter France, TT Electronics’ Chief Executive Officer, commented:  “2023 was a year of strong operational and financial progress. The Group has delivered against the priorities that were set for the year: strong free cash generation has led to further reduction in leverage, and our strong order book was converted into double-digit operating profit growth, with good operating margin progression supported by a recovery in our P&C business. I was delighted to join TT as CEO last October. TT is a strong business with robust fundamentals, talented people and market leading technologies. It is well-aligned with global megatrends, driving demand from our high growth end markets. We have the foundations from which to accelerate the execution of our strategy aimed at delivering sustainable disciplined growth, improved margins and a strong balance sheet. I see considerable opportunity to unlock further value in the business by strengthening operational execution, expanding and optimising our routes to market and by enhancing product innovation. A first step in driving improved margins and simplifying the portfolio is the recently announced sale of our businesses in Cardiff, Hartlepool and Dongguan.  I look forward to sharing more detail of my plans as part of our Capital Markets presentation on 9 April. Based on the strength and level of visibility in our order book, current end market activity and operational improvement initiatives that are underway, while mindful of the wider macro environment, we are on track to deliver a 10% operating margin in 2024.”

 

06 Mar 24. Shares of the Italian shipbuilder Fincantieri were sharply higher in Milan trade, getting a boost from reports it is in advanced talks to acquire Wass, an underwater weapon and sensor producer owned by Italian defence and aerospace group Leonardo.

At 0910 GMT, Fincantieri shares were up 4.21% to 0.495 euros while Leonardo was down 0.48% to 20.61 euros. The benchmark FTSE MIB index was 0.43% higher at 33,289.78 points.

According to Italian media reports, an eventual deal would not include Oto Melara, a naval gun producer also owned by Leonardo in which Fincantieri is rumored to have been interested in the past. Analysts at the broker Equita noted that Fincantieri’s interest for Wass has been known for some time, with an acquisition in line with its plans to increase its defence business, which currently represents 40% of revenue.” For Leonardo, Wass represents a small business unit within the defence division for which updated figures are not available,” Equita added. “In the event the rumors are confirmed we believe that the sale could make strategic sense, pending an understanding of what the financial resources will be used for.” For the broker Intermonte, the acquisition of Wass would fit with Fincantieri’s strategy of bolstering its naval/military business and an agreement with Fincantieri would essentially lead to a division of underwater activities and those above sea level between Leonardo and Fincantieri.

Generally speaking, Intermonte analysts note that the European defence plan announced yesterday involves limited funds and comes with no particular new developments. However, the target to increase procurement with European companies from a current 20% to 50% in 2030 is potentially worth over 100 bn euros per year in increased spending with European firms, they said. (Source: Google/https://www.borsaitaliana.it/)

 

05 Mar 24. Inaugural Oregon UAS Accelerator Cohort is Open for Applications. The Oregon UAS Accelerator has announced the opening of applications for its inaugural cohort, commencing June 3rd and concluding on September 10th with the Pendleton Investor Roundup. Participants can extend their stay at the Pendleton UAS Test Range until the end of 2024 to continue testing their innovation.

Entrepreneurs and innovators with solutions ready for testing are invited to apply, with applications closing at 5:00 pm on Sunday, March 31st. Key requirements for participation include maintaining a presence in Oregon throughout the program, active involvement of the founder, and at least one team member dedicated to the solution full-time during the Accelerator’s programming from June 3rd to September 10th.

The Accelerator offers a comprehensive support system for innovators, including access to development space, subject matter experts, launch and recovery sites, and capital introductions. Innovators will also benefit from the UAS-friendly environment and diverse testing landscapes provided by the Pendleton UAS Range. In collaboration with Business Oregon and the Pendleton UAS Range, the Accelerator aims to expedite the commercialization process for Unmanned Aerial Systems (UAS) technologies, positioning Oregon as a premier hub for UAS innovation.

There is an informational webinar on the Accelerator on Tuesday, March 5th, 2024 at 11:00 PT. Registration can be found here.

“The Oregon UAS Accelerator represents a strategic initiative to harness Oregon’s competitive advantages and propel the state to the forefront of UAS development in the United States,”

said Steve Chrisman, Economic Development & Airport Director.

“We offer UAS innovators incredible support to accelerate their commercialization process.”

Chrisman also stated that the Request for Qualifications (RFQ) for the permanent Executive Director position is available on the Accelerator website. He underscored the pivotal role of the Executive Director in overseeing all facets of the Accelerator’s operations.

“This position presents an extraordinary opportunity to nurture the next wave of UAS innovators, fostering an environment where the companies can flourish and achieve commercial success.”

About the Oregon UAS Accelerator

The Oregon UAS Accelerator is an initiative to facilitate innovation in the Unmanned Aircraft Systems (UAS) market. With generous funding from Business Oregon, the Accelerator provides innovators access to flight testing, workspace, partners, facilities, range staff, financial support, and mentorship opportunities. The Accelerator aims to establish Oregon as the nation’s premier destination for UAS development and integration. (Source: UAS VISION)

 

04 Mar 24. AeroVironment Announces Fiscal 2024 Third Quarter Results. AeroVironment, Inc. (“AeroVironment” or the “Company”) reported today financial results for the fiscal third quarter ended January 27, 2024.

Third Quarter Highlights:

• Record third quarter revenue of $186.6m, up 39% year-over-year
• Third quarter net income of $13.9m and adjusted EBITDA of $28.8m, increases of $14.6m and $5.1m, year-over-year, respectively
• Funded backlog of $462.8m as of January 27, 2024

“Once again, AeroVironment has delivered outstanding results, including a record for third quarter revenue that’s nearly 40% above the same period last fiscal year,” said Wahid Nawabi, AeroVironment chairman, president and chief executive officer. “Solid bottom-line results, fueled by record demand and strong operating execution, have us on track for our best year ever. In addition, the Company continues to show tremendous growth in the Loitering Munition Systems segment, which delivered record revenue in the quarter.

“With the increased global demand for our solutions, strong backlog and growing pipeline, AeroVironment remains well positioned for continued growth. As such, we are raising and narrowing our fiscal year revenue guidance for 2024 to between $700m and $710m, and we continue to anticipate double-digit revenue growth in fiscal year 2025.”

FISCAL 2024 THIRD QUARTER RESULTS

Revenue for the third quarter of fiscal 2024 was $186.6m, an increase of 39% as compared to $134.4m for the third quarter of fiscal 2023, reflecting higher product sales of $64.7m, partially offset by lower service revenue of $12.5m. From a segment standpoint, the year-over-year increase was due to revenue growth in Loitering Munitions Systems (“LMS”) of 140% and Unmanned Systems (“UMS”) of 23%, partially offset by a decrease in MacCready Works (“MW”) of 13%.

Gross margin for the third quarter of fiscal 2024 was $67.3m, an increase of 48% as compared to $45.5m for the third quarter of fiscal 2023, reflecting higher product margin of $20.1 m and higher service gross margin of $1.7m. As a percentage of revenue, gross margin increased to 36% from 34%, primarily due to an increase in the proportion of product revenue to total revenue, partially offset by an unfavorable product mix. Gross margin was favorably impacted by a decrease in depreciation charges for in-service assets of $5.3m related to the closure of COCO site locations during fiscal year 2023. Gross margin was negatively impacted by $4.0m of intangible amortization expense and other related non-cash purchase accounting expenses in the third quarter of fiscal 2024 as compared to $3.3m in the third quarter of fiscal 2023.

Income from operations for the third quarter of fiscal 2024 was $14.3m as compared to $4.6m for the third quarter of last fiscal year. The increase year-over-year was primarily due higher gross margin of $21.8m, partially offset by increases in research and development (“R&D”) expense of $9.0m and selling, general and administrative (“SG&A”) expense of $3.1m.

Other income, net, for the third quarter of fiscal 2024 was $0.9m, as compared to other loss, net of $5.4m for the third quarter of last fiscal year. The increase in other income, net was primarily due to increases in net unrealized gains on investment holdings and interest income and a decrease in interest expense.

Provision for income taxes for the third quarter of fiscal 2024 was $1.3m, as compared to a benefit of $(0.5)m for the third quarter of last fiscal year. The increase in provision for income taxes was primarily attributable to an increase in income before income taxes.

Net income attributable to AeroVironment for the third quarter of fiscal 2024 was $13.9m, or $0.50 per diluted share, as compared to net loss attributable to AeroVironment of $(0.7)m, or $(0.03) per diluted share, in the prior-year period, respectively.

Non-GAAP adjusted EBITDA for the third quarter of fiscal 2024 was $28.8m and non-GAAP earnings per diluted share were $0.63, as compared to $23.7m and $0.33, respectively, for the third quarter of fiscal 2023.

BACKLOG

As of January 27, 2024, funded backlog (defined as remaining performance obligations under firm orders for which funding is currently appropriated to us under a customer contract) was $462.8m, as compared to $424.1m as of April 30, 2023.

FISCAL 2024 — OUTLOOK FOR THE FULL YEAR

For fiscal year 2024, the Company now expects revenue of between $700m and $710m, net income of between $51m and $55 m, Non-GAAP adjusted EBITDA of between $122m and $127m, earnings per diluted share of between $1.86 and $2.00 and non-GAAP earnings per diluted share, which excludes amortization of intangible assets, other non-cash purchase accounting expenses and equity securities investments gains or losses, of between $2.69 and $2.83.

The foregoing estimates are forward-looking and reflect management’s view of current and future market conditions, subject to certain risks and uncertainties, including certain assumptions with respect to our ability to efficiently and on a timely basis integrate acquisitions, obtain and retain government contracts, changes in the timing and/or amount of government spending, react to changes in the demand for our products and services, activities of competitors, changes in the regulatory environment, and general economic and business conditions in the United States and elsewhere in the world. Investors are reminded that actual results may differ materially from these estimates. (Source: BUSINESS WIRE)

 

05 Mar 24. Thales posts higher profit, tackles weak telecom satellite market. France’s Thales (TCFP.PA), opens new tab on Tuesday reported an 11% underlying increase in 2023 operating profit and 8% higher sales, buoyed by a rebound in the civil aerospace market, while becoming the latest group to feel pressure in the competitive space business.

The company posted a record 2.132bn euros ($2.31bn) operating profit – topping 2bn euros for the first time since before the pandemic in 2019 – and sales of 18.428bn euros, while its operating margin stood at 11.6%, up 0.6 percentage points.

Analysts were on average expecting 2023 operating profit of 2.107bn euros on sales of 18.177bn, according to a company-compiled consensus.

Thales, which supplies civil and military radar and digital identity systems, said its order intake was fractionally higher than the year before at 23.132 bn euros.

For 2024, Thales predicted like-for-like sales growth of 4% to 6% to reach between 19.7 bn and 20.1bn euros. It predicted an operating margin of 11.7% to 12% and said new orders would continue to outstrip revenues.

The company also flagged it would cut about 1,300 jobs at Thales Alenia Space amid “structurally weaker demand” in commercial telecoms, and that these workers would be redeployed within the group. Some 1,000 of the affected jobs are in France.

CEO Patrice Caine said there would be no forced departures as Thales tries to keep skills in-house.

The move comes as the market for large satellites in geostationary orbit – once representing some 20 satellites a year – now stands at around 10 a year, Caine said. Traditional satellite firms face growing competition from the rapid growth of constellations of small satellites.

“So the market has more or less been divided in half … and we have to re-adapt; there’s no mystery,” he told reporters.

The business affected by the changes represents about one-third of Thales Alenia Space, equivalent to 700 m euros in turnover, or 4% of the group’s total, he said.

The shake-up comes weeks after Airbus, Europe’s other major producer of large satellites, unveiled a fresh charge for its troubled space business.

Caine also confirmed in the call that the company is not interested in buying all or parts of BDS, the cybersecurity branch of ailing French IT company Atos that industry peer Airbus offered to buy for 1.5bn to 1.8 bn euros.

Atos was thrown into new uncertainty last month after talks with Czech bnaire Daniel Kretinsky over the sale of another part of the business – that would have provided urgently needed cash – collapsed.

“Our position has been unchanged for months and months”, Caine said, adding that Thales had already made other acquisitions in the cybersecurity sphere including that of Imperva. “We are concentrating on those subjects, so no change”. ($1 = 0.9216 euros) (Source: Reuters)

 

05 Mar 24. Thales Announces Results.

• Order intake1: €23.1bn, slightly down 2% (+0.2% on an organic basis2)
• Sales: €18.4bn, up 4.9% (+7.9% on an organic basis)
• EBIT3: €2,132m, up 10.2% (+10.9% on an organic basis)
• Adjusted net income, Group share3: €1,768m, up 14%
• Consolidated net income, Group share: €1,023m, down 9% due to an exceptional expense linked to the transfer of risk relating to pension obligations in the United Kingdom to a third party
• Free operating cash flow3: €2,026m, 115% of adjusted net income, Group share
• Dividend4 of €3.40, up 16%
• Non-financial performance: Thales achieved or over-achieved all its 2023 targets
• 2024 objectives:
• Book-to-bill5 above 1
• Organic sales growth of between +4% and +6%, corresponding to sales of between €19.7bn and €20.1bn
• EBIT margin between 11.7% and 12%
• Cash flow generation target: conversion ratio of adjusted net income to free operating cash flow close to 100% in 2024

Thales’s Board of Directors (Euronext Paris: HO) met on March 4, 2024 to review the 2023 financial statements6.

“Once again this year, Thales has achieved remarkable performances.

​Our excellent sales momentum continued in 2023, with the order intake once again exceeding €23bn and the order book reaching an all-time high.

​Organic growth in sales was higher than expected at 7.9%, driven in particular by the dynamism of the civil aeronautics activities.

​This strong growth resulted in an even stronger EBIT improvement, which grew by nearly 11%, reflecting the quality of the Group’s business model and of its operating leverage.

​Finally, Thales once again generated high levels of cash, in excess of €2bn.

​These results reflect the trust our customers place in us, the commitment of our employees and the excellence of our technologies. I would like to thank all our teams for their contribution and dedication.

​Building on these strengths, the Group worked hard in 2023 to prepare for the future.

​In this regard, two major acquisitions will enable us to further strengthen our offers in key markets. Cobham Aerospace Communications in avionics, and Imperva in cybersecurity will provide Thales with very high added value technological bricks that are strongly complementary with our current portfolio of solutions.

​Preparing for the future also means setting ever-more-ambitious CSR goals. The year 2023 marked the end of an extremely positive cycle in which we achieved or exceeded all our multi-year objectives and obtained recognition from leading non-financial rating agencies. We will announce our new ambitions in this area in the second half of 2024.

​Finally, preparing for the future means continuing to increase our R&D investments so we can continue to develop our skills and technologies, which are our greatest asset.

​We are therefore looking ahead to 2024 with optimism, confident in the quality of our fundamentals, the strength of our positioning and the importance of our contribution to the major societal challenges of our time.” ​Patrice Caine, Chairman and Chief Executive Officer

Key figures

In accordance with standard IFRS5, the financial data for the “transport” operating segment for 2022 and 2023 have been classified under “discontinued operations” following entry into exclusive negotiations with Hitachi Rail with a view to disposing of this business.

Order intake for the 2023 financial year was slightly down 2% compared with 2022 at €23,132m but rose by 0.2% on an organic basis (i.e. at constant scope and exchange rates). As a reminder, in 2022 the Group benefited from signing a major contract for the supply of 80 Rafale aircraft to the United Arab Emirates. Sales momentum remained strong in 2023, with continued robust demand in the Defence & Security segment and a significant recovery in Aeronautics, particularly in aftermarket sales. The Group won a major £1.8 bn contract with the UK Ministry of Defence to ensure the long-term availability and resilience of Thales equipment on the UK fleet – the MSET (Maritime Sensor Enhancement Team) contract. At December 31, 2023, the consolidated order book stood at €45bn, a new all-time high, up more than €4.5bn year-on-year.

Sales reached €18,428m, up 4.9% from 2022 in total change, and up 7.9% in organic change, driven in particular by strong momentum in civil aeronautics activities.

For 2023, the Group posted EBIT7 of €2,132m (11.6% of sales), compared to €1,935m (11.0% of sales) in 2022, up 10.2% in total change, and 10.9% in organic change.

At €1,768m, adjusted net income, Group share7 was up 14% compared to 2022.

Consolidated net income, Group share amounted to €1,023 m, down 9% from 2022. This fall was due to a non-recurring expense of £349 m recorded in 2023 for the implementation of insurance coverage for its obligations under the Thales UK Pension Scheme as part of the agreement entered into with Rothesay in December 2023 concerning the transfer of these obligations.

The free operating cash flow7 stood at €2,026m compared to €2,527m in 2022. The conversion ratio of adjusted net income, Group share to free operating cash flow was 115% (162% in 2022). This once again exceptional performance reflects the excellent order intake, phasing effects on cash inflows related to contract execution, and continued progress in the action taken since 2020 under the “CA$H!” initiative.

In this context, the Board of Directors decided to propose the payment of a dividend of €3.40 per share, corresponding to a payout ratio of 40% of the adjusted net income, Group share, per share, an increase of 16% compared to 2022.

Order intake

Order intake for the 2023 financial year totaled €23,132m, slightly down by 2% from 2022 in total change, but up 0.2% at constant scope and exchange rates10. For the third consecutive year, the order intake was more than 20% higher than sales (book-to-bill). Thebook-to-bill ratio was 1.26 (compared to 1.34 in 2022) and 1.31 excluding the Digital Identity & Security business, where the order intake is structurally very close to sales.

Thales signed 25 large orders with a unit value of over €100m, representing a total of €7,764m:

• 3 large orders booked in Q1 2023:
• The order of satellites for the Italian earth observation constellation IRIDE
• The order of a new tranche of the I-HAB module for the lunar orbital station
• The order of a submarine subsystem for a military customer.
• 6 large orders booked in Q2 2023:
• The order of an autonomous robotic vehicle for an In Orbit Servicing demonstration mission, on behalf of the Italian Space Agency (ASI)
• Three amendments to the contracts related to the Galileo European navigation satellites
• The order of a sensor suite and Above-Water Warfare System for the new Belgian and Dutch frigates
• An order linked to the production of Aster anti-air defence missiles for France
• The order by Indonesia of 13 GM400 Alpha radars and a Skyview Air Command and Control System
• An amendment to the contract for the supply and support of CONTACT next-generation tactical radios for the French Army.
• 3 large orders booked in Q3 2023:
• An order for the ground mission segment and technical engineering support for the Galileo 2nd Generation program (G2G)
• A contract for the mid-life upgrade of the French and Italian Horizon class frigates
• An export contract for the mid-life extension of a multifunctional radar system for a military client.
• 12 large orders were booked in Q4 2023 in addition to the £1.8 bn MSET contract in the United Kingdom mentioned above:
• A contract with SOGITEC for the supply of simulation systems for the Emirates’ Rafale pilot training center
• A contract to install next-generation in-flight entertainment systems on Emirates’ future Boeing 777X fleet
• A contract for the supply of payloads for navigation satellites to a country in Asia
• Notification by the French Defence Procurement Agency (DGA) of the fifth production phase of the Rafale program, for the supply of 42 aircraft intended for the French Air and Space Force
• A contract for the installation of the TACTICOS combat management system, sonars, air-surveillance and fire-control radars and 360° infrared sensor for the Polish Navy’s MIECZNIK Frigate program
• Entry into force of the second tranche of the order placed by Indonesia in 2022 for the purchase of 42 Rafale aircrafts (18 aircrafts)
• A contract for the financing by the DGA of one of the development phases of the Rafale program to the F4 standard (covering certain functionalities of the RBE2 radar and the SPECTRA electronic warfare suite) and the development of the future RBE2 XG radar intended for the Rafale F5 standard
• An agreement with the Swedish Defence Materiel Administration (FMV) for the delivery and installation of SMART-L Multi Mission Fixed (MM/F) long-range radars
• The next phase in the renewal of several French Armed Forces radars and the order for a new Aerospace Operations Command and Control System under stage five of the SCCOA program
• A new contract under the French military telecommunications program Syracuse IV for the supply of “On-The-Move” satcom stations to be integrated into SCORPION armored vehicles (GRIFFON and SERVAL)
• A contract under the SCORPION/EBMR program (France’s multi-role armored vehicle program) for the supply of on-board electronics for new vehicles ordered from the temporary consortium comprising Nexter, Arquus and Thales
• A new amendment to the aeronautical component of the CONTACT contract (complete digital tactical and theater communications) with the DGA.

At €15,368m, order intake with a unit value of less than €100m was stable against 2022 with an increase of 0.1%, despite the transfer of IoT activities to Telit as of December 31, 2022, for a total of €374m.

Geographically11, order intake in mature markets rose sharply to €18,683m (+17% at constant scope and exchange rates), benefiting in particular from the MSET contract in the United Kingdom. Order intake in emerging markets amounted to €4,449m, down 37% at constant scope and exchange rates, with a high basis for comparison in 2022 due to the Rafale contract in the United Arab Emirates.

Order intake in the Aerospace segment totaled €5,592m compared to €5,892m in 2022 (‑5% at constant scope and exchange rates). This decrease reflects two contrasting trends. On the one hand, strong sales activity in aeronautics activities (avionics and in-flight entertainment (IFE)), linked to a 32% increase in order intake in the civil aftermarket and the IFE Emirates contract mentioned above. On the other hand, while Thales Alenia Space recorded new commercial successes in observation (IRIDE, I‑HAB) and navigation (Galileo), it did not record any new large orders in commercial telecommunications. At December 31, 2023, the segment’s order book stood at €9.3bn, up 2% from 2022.

At €14,139m compared to €13,959m in 2022, order intake in the Defence & Security segment set a new record (+2% at constant scope and exchange rates). The book-to-bill ratio was 1.44, above 1.2 for the fifth consecutive year. This high level is explained by the recording of 17 contracts of more than €100m, including the MSET contract. The segment’s order book consequently reached a new record at €35.2bn (up 14%), corresponding to 3.6 years of sales, strengthening visibility for the years ahead.

At 3,342m, order intake in the Digital Identity & Security (DIS) segment was structurally very close to sales as most business lines in this segment operate on short sales cycles. The order book is therefore not significant.

Sales

Sales for the 2023 financial year totaled €18,428m, compared to €17,569m in 2022, up 4.9% in total change and 7.9% in organic terms (at constant scope and exchange rates13), driven particularly by the Aerospace segment.

Geographically14, sales growth was stronger in mature markets (+10.6% on an organic basis), which posted double-digit growth, particularly in France, the United Kingdom and North America, while emerging markets posted a slight decline in organic growth of -1.2%.

Sales in the Aerospace segment totaled €5,211m, up 10.7% from 2022 (+11.7% at constant scope and exchange rates). As for the order intake, momentum in this sector was mixed:

• Organic growth in all avionics activities was above 20%, despite a decline in sales for the microwave tubes business. Civil aviation activities were particularly strong (organic growth of more than 30%), with the original equipment business benefiting from an increase in aircraft manufacturers’ production rates, while aftermarket sales were driven by the recovery in air traffic;
• Sales in the space segment were stable compared to 2022. OEN (Observation, Exploration and Navigation) activities posted a high-single digit increase in sales over the year, but commercial telecommunications (which account for one-third of sales in the Space segment) were affected by delays in the execution of several contracts due mainly to supply difficulties with the propulsion system. In addition, an overall fall in demand impacted the market for geostationary communications satellites in 2023.

Sales in the Defence & Security segment totaled €9,796m, up 7.0% from 2022 (+7.5% at constant scope and exchange rates). This growth reflects the gradual increase in our production capacity as well as the dynamism of many product lines, in particular intelligence, surveillance and reconnaissance systems, critical information systems, integrated systems for airspace protection, surface radars, surface ship systems and cyber defence solutions. The Group had a record order book of nearly €35.2 bn (3.6 years of sales) at end-December 2023 to support its growth in the coming years.

At €3,347m, sales in the Digital Identity & Security sector increased by 4.1% at constant scope and exchange rates (down 7.5% in total change following the transfer of IoT activities to Telit as of December 31, 2022). As expected, the second half of the year recorded a slight dip of 2.2% in organic growth compared to the second half of 2022, with two contrasting trends:

• High-single digit organic growth in digital activities (DIS segment excluding EMV payment cards[1] and SIM cards), mainly corresponding to cybersecurity solutions and biometrics,
• Negative high-single digit organic growth against a high basis for comparison for EMV and SIM cards in the second half of 2022, with the decision having been made to preserve the profitability of these activities.

[1] Europay Mastercard Visa.

Results

For 2023, the Group posted EBIT15 of €2,132m, or 11.6% of sales, compared to €1,935m (11.0% of sales) in 2022.

The Aerospace segment recorded EBIT of €371m (7.1% of sales), compared with €235m (5.0% of sales) in 2022. The rise in the sector’s EBIT margin was driven by the avionics segment, where the margin was back to pre-covid level thanks to both positive volume and price effects. As mentioned above, the space segment is experiencing delays in the execution of several telecommunications contracts, mainly due to supply difficulties relating to the propulsion system. This accentuated the negative impact of inflation on the profitability of the space segment, which recorded an EBIT margin at break-even at December 31, 2023. ​

In the Defence & Security segment, EBIT stood at €1,251m, compared to €1,179m in 2022 (+7.3% at constant scope and exchange rates). The margin for this sector was 12.8%, compared to 12.9% in 2022.

At €508m (15.2% of sales), EBIT in the Digital Identity & Security sector continued to grow sharply in absolute value and margin (+3.2 points), benefiting from the improved commercial margin arising from strong pricing, the impact of cost improvement plans and a scope effect (transfer to Telit of the IoT cellular product business as of December 31, 2022).

Excluding Naval Group, unallocated EBIT was stable at -€89m compared with -€93m in 2022, including, like last year, the reallocation of certain costs following the classification of Transport as a discontinued operation.

Naval Group’s contribution to the Group’s EBIT amounted to €91m in 2023, compared with €119m in 2022, which had recorded €45m in non-recurring income related to the compensation agreement signed between Australia and Naval Group in 2022.

At €2m compared with -€50m in 2022, net financial interest mainly benefited from higher average cash level than in 2022, which was invested at higher interest rates. Other adjusted financial income and expenses16 (-€37m in 2023 versus -€34m in 2022) were stable. The deterioration in the adjusted financial expense on pensions and other long-term employee benefits16 (-€76m versus -€35 m in 2022) reflects the sharp increase in discount rates, which was partially offset by the decrease in commitments.

At €105 m compared with €90m in 2022, the adjusted net income, Group share, from discontinued operations reflects the strong operating performance of the Transport business and the reduction in the costs incurred to separate this activity from the rest of the Group in anticipation of its disposal.

As a result, adjusted net income, Group share16 was €1,768m, compared to €1,556m in 2022, after an adjusted income tax charge16 of -€370m compared to -€331m in 2022. At 20.1% in 2023 compared to 20.6% in 2022, the effective tax rate was stable.

The adjusted net income, Group share, per share16 amounted to €8.48, up 15% from 2022 (€7.35).

Consolidated net income, Group share amounted to €1,023m, down 9% from 2022. As mentioned above, this decrease was explained by a non-recurring expense of £349m recorded in 2023 following the agreement entered into to insure all obligations under the Thales UK Pension Scheme.

Financial position at December 31, 2023

Free operating cash flow17 amounted to €2,026m compared to €2,527m in 2022. It included a contribution of €1,968m from continuing operations and €57m from discontinued operations. The conversion ratio of adjusted net income, Group share to free operating cash flow was 115% (162% in 2022). As in 2022, this once again exceptional performance reflects the excellent order intake, phasing effects on cash inflows related to contract execution, and continued progress in the action taken since 2020 under the “CA$H!” initiative.

The net balance of acquisitions and disposals of subsidiaries and affiliates amounted to -€3,464m. Under its acquisition strategy, the Group completed two acquisitions in 2023:

• Tesserent (on October 1, 2023), one of the leading cybersecurity players in Australia and New Zealand with sales of around €110 m in 2022 (see press releases of June 13, and October 4, 2023);
• Imperva (on December 4, 2023, earlier than expected), a leading cybersecurity company specialized in data and application security based in the United States and generating sales of around $500m in 2022 (see press releases of July 25, and December 4, 2023).

In 2024, the Group anticipates the completion of two transactions: the acquisition of Cobham Aerospace Communications (in accordance with the terms described in the press release published on July 25, 2023) and the sale of the Transport activity to Hitachi Rail.

As part of the share buyback program covering a maximum of 3.5% of the capital announced in March 2022, 3,458,535 shares were repurchased during 2023, i.e. 1.6% of the share capital, for €461m. As of February 23, 2024, the Group had purchased 6,903,364 m shares since the start of the program, representing 3.2% of the share capital. This program will end by March 31, 2024 at the latest.

At December 31, 2023, net debt amounted to €4,000 m compared with €35 m at December 31, 2022. This increase reflects the impact of acquisitions and disposals for €3,464m (€453m in 2022), the exceptional contribution in connection with the transfer of pension obligations in the United Kingdom described above, including insurance costs for a total of €1,078m (€95m in 2022), the distribution of €634m in dividends (€563m in 2022), new lease liabilities for €166m (€199m in 2022), and the share buyback program.

Equity, Group share amounted to €6,830 m compared with €7,174m at December 31, 2022. This decrease takes into account an actuarial expense of €267m relating to the discounting of net pension obligations.

Non-financial performance

In line with its corporate purpose of “Building a future we can all trust”, Thales has set itself an ambition in terms of Corporate Social Responsibility (CSR): to contribute to a safer, greener and more inclusive world. First, the Group will seek to maximize the contribution of its portfolio of solutions to the planet and society. Secondly, Thales has set itself ambitious targets on four main priorities:

• The fight against global warming
• Strengthening inclusion and diversity
• The permanent implementation of the best standards in terms of ethics and compliance
• Strengthening the health and safety at work of employees

Target quantitative objectives for 2023 were set for each of these priorities in 2019 and strengthened in 2021. Progress is measured and published annually. These indicators have also been included in the compensation of all employees eligible for variable compensation (more than 60% of the workforce). Thales achieved or over-achieved all its 2023 targets.

As regards the fight against global warming, operational CO2 emissions18 for FY 2023 were down 20% compared to 2022. This achievement was the result of the reduction in energy consumption (down 14% between 2018 and 2023 and 4% between 2022 and 2023) thanks to efforts to reduce energy use and improve energy efficiency and the increased use of renewable energies. Renewable electricity accounted for 90% of electricity purchases in 2023, compared with 75% in 2022. As a result, the drop compared to 2018 was -52%, well ahead of the 2023 target (-35%).

The implementation of eco-design best practices has also been stepped up, with 100% of new product developments integrating an eco-design approach in 2023, in line with the target set.

The Group also pursued its commitment to work alongside suppliers with the highest emissions to define emission reduction trajectories that are aligned with and based on jointly approved action plans.

With regard to the strengthening of diversity, at the end of 2023, 87% of the Group’s management committees included at least three women, compared with 76% at the end of 2022 and 49% at the end of 2018. The improvement continues while the target of 75% in 2023 was reached one year ahead of schedule. Women accounted for 20.4% of the highest levels of responsibility19 at the end of 2023, which is in line with the 20% target (compared to 19.4% at the end of 2022 and 16.5% at the end of 2018). The achievement of these objectives was based on the launch of a new action plan in July 2023 integrating a new partnership strategy with the educational community and a series of initiatives aimed at implementing an inclusive culture within the Group and supporting women’s careers. Examples of initiatives include communications on gender diversity through the “Women in Tech” campaign and the renewal of the “Women Inspiring Women” program to disseminate portraits of female role models within Thales.

In the area of ethics and compliance, the Group is focusing on team training and certification. As a result, in 2023 as in 2022, 100% of potentially exposed employees, i.e. more than 8,000 people, were trained in the fight against corruption. In March 2021, Thales received ISO 37001 “anti-bribery management systems” certification for its main French subsidiaries. This certification was extended to Canada and the United States in 2023, after the United Kingdom and the Netherlands in 2022.

The frequency rate of workplace accidents20 (down -37% compared to 2018) is also better than the target set for 2023 (-30%). This reflects the enhancement of the workplace safety culture through specific action plans including the deployment of proactive approaches and the analysis of risk situations.

Thales’ CSR policy was increasingly acknowledged by its stakeholders in 2023. The Group obtained the “Platinum” rating from Ecovadis (companies among the top 1% best performers in terms of CSR), the CDP awarded it an “A” rating for its climate policy, and the SBTi validated its CO2 reduction objectives through to 2030. Thales also joined the CAC SBTi 1.5 index in April alongside the best-performing listed companies in terms of climate change.

Details of all action plans and associated metrics can be found in the non-financial performance statement that will be included in the 2023 Universal Registration Document scheduled for publication at the end of March 2024.

The Group will announce its new ESG roadmap through to 2030, with new medium-term objectives for non-financial performance, in the second half of 2024.

Proposed dividend

The Board of Directors decided to propose to the shareholders, who will convene at the Annual General Meeting on May 15, 2024, payment of a dividend of €3.40 per share. This corresponds to a payout ratio of 40% of the adjusted net income, Group share, per share.

If approved, the ex-dividend date will be May 21, 2024, and the payment date will be May 23, 2024. This dividend will be paid fully in cash and will amount to €2.60 per share, after deducting the interim dividend of €0.80 per share paid in December 2023.

Outlook

The medium-term outlook for all of the Group’s major markets remains very robust. After a very strong year in aeronautics in 2023, the original equipment business should again be driven by the expected continued ramping-up of commercial aircraft production. Air traffic should also continue to rise, fostering further growth in the aftermarket, though at a slower pace than in 2023, which benefited from a catch-up effect. The space segment benefits from favorable growth prospects for most of its activities, in particular observation, exploration, navigation, military telecommunications and services. However, the commercial telecommunications business is facing challenges due to structurally weaker demand. For this reason, the Group is announcing a project of an adaptation plan at Thales Alenia Space concerning around 1,300 jobs, including 1,000 in France, which will be redeployed within the Group, with no forced departure. Those redeployments will take place over 2024 and 2025, in consultation with employee representative bodies. Over the same period, 7,000 recruitments are planned in France to address the expected strong growth in the Group’s other business segments. This plan should restore sustainably the profitability of the space business with the objective of an EBIT margin of around 7% in the medium term while maintaining the skills needed to pursue commercial opportunities. Accordingly, the Aerospace segment should record organic growth in sales, but at a slower pace than in 2023.The announced increases in the military budgets of the Group’s major customers are continuing to drive demand in the defence sector. As a leading player in its various activities and with a geographical presence aligned with the most dynamic markets, the Defence & Security segment has an order book that is unprecedented in the Group’s history. This segment will continue to grow in 2024 while maintaining an EBIT margin that is among the highest in the sector (around 13%).

Lastly, the DIS global business unit has an exceptional positioning in cybersecurity and digital identity. Its cybersecurity business was considerably strengthened in 2023, allowing Thales to offer the most comprehensive offering in data, applications and identity security. After seeing its growth normalize in 2023 following a very strong year in 2022, organic growth should continue in 2024, in line with that recorded in 2023. The margin should further improve compared with the 2023 level of 14%, taking into account the transfer of cybersecurity services activities from the Defence & Security segment.

One of Thales’ main priorities in 2024 is to successfully complete the integration of the two structuring acquisitions, namely Imperva and Cobham Aerospace Communications (the closing of which is scheduled for the first half of 2024). These two activities will significantly strengthen the Group’s business portfolio.

In response to this buoyant environment, the Group is continuing to invest to ramp up its production capabilities. Net operating investments are expected to further increase, reaching around €720m in 2024, after €622m in 2023. Recruitment will remain strong in 2024 (around 8,500 recruitments planned after 10,900 in 2023 and 12,000 in 2022). This reflects the higher retention rate, which has returned to pre-Covid levels, and will be accompanied by the strengthening of skills development actions for engineers who have recently joined the Group.

Moreover, the Group will continue to monitor closely the persistent tensions in its supply chain.

Assuming there are no new major disruptions in the global economy, in the health context, or in the global supply chains, Thales has set the following targets for 2024:

• As in 2023, a book-to-bill ratio above 1;
• Organic sales growth of between +4% and +6%, corresponding to sales in the range of €19.7bn to €20.1 bn21;
• An EBIT margin between 11.7% and 12.0%, up 10 to 40 basis points from 2023.

Based on the outlook for 2024, particularly in terms of order intake and advance payments to be received, the Group sets its cash conversion ratio22 target at close to 100% of adjusted net income, Group share.

 

04 Mar 24. Blacklake Group Announces the Acquisition and Expansion of Sentinel, a Global Risk and Intelligence Advisory Firm. Blacklake Group is pleased to announce the acquisition and expansion of Sentinel, a global risk and intelligence advisory firm focused on solving complex security problems on behalf of multinational corporations, critical institutions, and high-profile clients.

Today’s world faces an ever-increasing level of global threats and risks requiring specialized and diverse skill sets, professional networks, intelligence capabilities, and operational expertise not traditionally integrated into organizations.

Sentinel’s unparalleled expertise and risk-based methodology is augmented by cutting edge proprietary intelligence technologies that allow individuals and organizations to better manage their risk profile. Sentinel offers its clients tailored, actionable, and discreet guidance to better navigate today’s risk environment, anticipate and mitigate emerging threats, and identify potential market challenges.

Founded in 2017, Sentinel established itself in the boutique advisory space and has expanded its executive leadership team post-acquisition. Sentinel is led by former senior executives from private industry and premiere law enforcement and intelligence agencies in the world, who have protected some of the most high-profile people, corporations, and institutions and overseen complex investigative and intelligence operations on a global scale.

OUR LEADERSHIP

CHARLES MARINO | Founder | Chief Executive Officer | Former Supervisory Special Agent, US Secret Service

Charles Marino served as a Supervisory Special Agent in the United States Secret Service (USSS) during three Presidential administrations, ensuring individual and family safety around the world. He also led the San Francisco Field Office, overseeing the 1,300-member Electronic Crimes Task Force to effectively investigate complex financial and cyber-crimes. Marino was assigned as the senior law enforcement advisor to former DHS Secretary Janet Napolitano, overseeing the implementation of numerous well known homeland security programs, including the National Terrorism Advisory System (NTAS) and the “If You See Something, Say Something” national campaign.

JOE BONAVOLONTA | Managing Partner | Former Special Agent in Charge, Boston Field Office, Federal Bureau of Investigation

Joe Bonavolonta is a former Senior Executive and 27-year veteran of the Federal Bureau of Investigation (FBI) with extensive leadership, operational, and investigative experience across multiple disciplines, to include criminal, counterterrorism, counterintelligence, and cyber operations. After assignments in New York City, New Jersey, and Washington D.C., Bonavolonta held a series of senior leadership positions, including as Section Chief within the FBI’s Human Resources Division, Employee Development and Selection Program, Deputy Assistant Director of the FBI’s Counterintelligence Division, and as the Special Agent in Charge of the Boston Field Office, where he led all FBI operations throughout Maine, New Hampshire, Massachusetts, and Rhode Island. Bonavolonta also served as the Chairperson of the Special Agent in Charge Advisory Committee.

RICK PERISTERE | Managing Partner | Former Senior Intelligence Executive & Chief of Staff to the Director and Deputy Director, Central Intelligence Agency

Rick Peristere is a former Senior Executive and 24-year veteran of the Central Intelligence Agency (CIA) and the US Department of State with extensive leadership experience and deep regional expertise driving analysis and global operations. Peristere held a series of senior leadership positions in Washington and overseas, including as Chief of Staff to the Director of CIA, the Chief of Staff to two Deputy Directors of CIA, the Deputy Assistant Director of CIA for the Western Hemisphere, and as senior US Embassy official in Paris, France.

MARK SULLIVAN | Senior Advisor | Former Director, US Secret Service

Mark Sullivan served as the 22nd Director of the United States Secret Service from May 2006 until March 2013. Mark began his career as an entry level field Special Agent, ultimately serving in a variety of leadership roles. Sullivan was responsible for the protection of the President, Vice President, former Presidents, their families, other Government leaders and visiting Heads of State. Sullivan also oversaw the Secret Service investigative mission in the areas of intelligence, cyber, financial crimes, and fraud.

LANCE HAMILTON | Senior Advisor | Former Senior Intelligence Executive, Directorate of Operations, Central Intelligence Agency

Lance Hamilton is a former Senior Intelligence Executive, Operations Officer and 32-year veteran of the CIA with extensive overseas experience in leading U.S. counter-terrorism, counter-intelligence, cyber, and personnel protection operations. Hamilton served as Chief of Station (COS) for three of CIA’s flagship Stations in the Middle East, South-East Asia, and Eastern Europe; and led the U.S. Intelligence Community’s world-wide operations against the threat of Weapons of Mass Destruction (WMD). Hamilton’s private sector contributions are focused on risk management, analysis of global threats, intelligence, and physical and cyber security.

STACY AGUILAR | Operations Manager |

A seasoned Global Event and Project Management Professional, Stacy’s expertise spans various facets of the sports industry, encompassing her pivotal roles in international competitions and football development initiatives with FIFA, Concacaf, and the United States Soccer Federation. Her career has been marked by diverse accomplishments within professional sports, from spearheading the development and execution of credential and access management at the prestigious Chase Center in San Francisco, the home of the Golden State Warriors, to overseeing the implementation of crucial COVID-19 protocols for Major League Baseball. Her contributions as an assigned match coordinator and venue coordinator for Concacaf matches, coupled with her instrumental role in team services operations for the United States Soccer Federation, underscore her multifaceted experience and commitment to excellence within the sports realm. (Source: BUSINESS WIRE)

 

04 Mar 24. Safran acquires 3D Metal Forming (3DMF).

• A global leader specialized in high energy hydro forming of metal parts

Safran Nacelles completed the acquisition of 3DMF, a company specialized in High Energy Hydro Forming (HEHF) of metal parts. This innovative manufacturing process reinforces Safran Nacelles’ capacity to develop and produce parts for nacelles and engines, including nozzles and air inlet lips. HEHF is also an enabling technology for manufacturing Monolithic Integrated Structures from thick plate.

Located in the Netherlands, 3DMF manufactures prototype and series parts mainly for the aerospace industry. The manufacturing process developed by the company enables to produce a very high-quality finished product which can be large and of various thicknesses, and offers dimension and precision characteristics that are above current standards.

As of today, 3D Metal Forming is a wholly-owned subsidiary of Safran Nacelles.

“We are delighted to integrate the 3DMF team in Safran Nacelles. Acquiring this new expertise enables us to enhance our technology portfolio and consolidate our position as a reference aerospace player in the development and manufacture of nacelles. This acquisition will notably enable the design and production of high-tech performance-enhancing parts for our customers, improving the performance of future generation propulsion systems” stated Vincent Caro, CEO of Safran Nacelles. (Source: ASD Network)

 

03 Mar 24. DroneShield Ltd (ASX:DRO) (“DroneShield” or the “Company”) has been added into the S&P/ASX All Ordinaries Index. The addition was announced by S&P Dow Jones Indices, a division of S&P Global, on 1 March 2024, with effect prior to the open of trading on 18 March 2024, as a result of March quarterly review.

Oleg Vornik, DroneShield CEO, commented: “DroneShield continues its rapid progress, having established its position as a pioneer and global leader in the rapidly expanding counterdrone sector. Last week, we have announced record 2023 performance with $55m revenue and $9m profit after tax, our first profitable year. We are well positioned for 2024 and beyond, with a $510m pipeline and $30m contracted backlog.”

“This most recent news of addition into the All Ordinaries Index, as our market capitalisation and daily liquidity continue to rapidly rise, is expected to be further highlight our story to a number of institutional and retail shareholders, adding to the existing base of over 11,000 existing investors in DroneShield.”

 

04 Mar 24. Boeing supplier Senior posts profit jump, boosts dividend.

• summary
• Companies
• Raises annual dividend by 77%
• 2023 profit jumps 91%
• expects 2024 performance in line with expectations

British aerospace engineer Senior (SNR.L), opens new tab raised its dividend on Monday after 2023 profits nearly doubled, buoyed by an increase in civil aircraft production rates and robust demand in the land vehicle markets.

“We have achieved a diversified position across key civil and defence aircraft platforms and are benefiting from increasing aircraft build rates which we expect will lead to higher sales in 2024 and beyond,” CEO David Squires said in a statement.

It forecast its 2024 performance to be in line with its estimates, as Boeing, one of its top customers, had asked suppliers to maintain production of 737 MAX plane parts at previously agreed levels.

The Federal Aviation Administration (FAA) has given Boeing 90 days to develop a comprehensive plan to address “systemic quality-control issues” after restricting it from ramping up the production rate of 737 MAX planes from the current 38 planes a month.

“If you look at last year, for much of last year, the manufacturing rate was 31 per month. So in the worst case scenario, if they didn’t go above the rate of 38 this year, there’s still growth for the suppliers,” Squires told Reuters in an interview.

The company’s adjusted pre-tax profit jumped 91% to 38.3 m pounds ($48.5 m) for the year ended Dec. 31.

Senior proposed an annual dividend of 2.3 pence, up 77%.

Demand at its Flexonics division, which makes fluid conveyance and thermal management components for vehicles and power and energy applications, continued to normalise to more typical levels, the company added.

“Much of our product is either coming from North America or Europe, so we don’t have to go through the Red Sea… So far, not a big impact for us,” Squires said regarding any impact from disruptions to shipping via the Red Sea. ($1 = 0.7897 pounds) (Source: Google/Reuters)

 

04 Mar 24. US defence contractors are missing out on a global military boom that has boosted their European counterparts’ share prices as legislative deadlock in Washington creates government spending uncertainty. Shares in the biggest military contractors to the Pentagon have shed most of their gains after Russia’s full-scale invasion of Ukraine two years ago. Lockheed Martin has lost 10 per cent in the past year and RTX, formerly known as Raytheon, has declined by 9 per cent. By contrast, shares in Leonardo of Italy have jumped 91 per cent, while those of Germany’s Rheinmetall have rallied 78 per cent. The underperformance of the US groups’ stocks comes as spending at the Pentagon, as well as the rest of the US government, is frozen at last year’s levels because Congress has yet to pass the 2024 budget. “I’ve never seen anything like this, the chaos,” said Byron Callan, managing director of research group Capital Alpha Partners. “It’s really a very chaotic environment in Washington right now.” Many US defence companies boast record order books; at the leading six groups the backlog was up 9 per cent to $508bn last year. Despite this, uncertainty over future government commitments has held back companies’ valuations, analysts said. Lawmakers have less than a month — until March 22nd — to pass the 2024 defence budget. Both congressional chambers passed a stop-gap budget that President Joe Biden is expected to sign soon in order to avoid a partial government shutdown. The Pentagon is expected to unveil its 2025 budget request this week, but under the stop-gap measures it cannot start new procurement programmes and ongoing programmes will slow down. The undersecretaries of the Army, Navy and Air Force last week warned that ongoing military modernisation efforts would be harmed if Congress failed to pass a defence spending bill. “These are production rate increases, new starts — both in programmes for acquisition as well as military construction projects that we cannot start,” Army under secretary Gabe Camarillo told reporters. The Biden administration’s additional spending package of nearly $60bn for Ukraine is also on hold. This includes $20bn to replenish US weapons stocks and $13.8bn to allow Kyiv to re-arm through the purchase of weapons and munitions from the US defence industrial base. “As much as the mantra, ‘the world is a more dangerous place’ is back — well, it’s not being heard in Congress,” said Callan. US contractors lead the list of the world’s largest defence companies by revenue, according to the Stockholm International Peace Institute’s latest ranking. The US government is a significant part of their businesses, accounting for 86 per cent of Northrop Grumman’s revenues and nearly three quarters of Lockheed’s sales in 2023. The US defence sector faces further questions about its prospects if Donald Trump is re-elected as president in this year’s election in November. A weaker commitment to Nato could damp American defence exports while European governments, already under pressure to spend more on defence and bolster their own capabilities, would have to ensure more of their money goes to domestic contractors. Callan said there was “still a question about the long-term growth and competitiveness of these [US] companies if Trump is re-elected”. US defence contractors are also struggling with labour shortages, inflationary pressures and fresh concerns over fixed-price contracts. Northrop Grumman said in January it would take a $1.2bn charge against the new B-21 Raider bomber that it is building for the US Air Force due to rising costs on the contract it won in 2015. The “monster” charge has “reawakened worries that the defence sector signed up for more risk than was prudent”, said Robert Stallard, analyst at Vertical Research Partners. (Source: FT.com)

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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