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20 Feb 25. M-tron Industries, Inc. (NYSE American: MPTI) (“Mtron” or the “Company”), a defense electronics manufacturer with a “Made in the USA” ITAR approved footprint, reiterates its year end results will exceed previously reported expectations, and will outline its competitive position for the expected changes in the defense landscape.

On February 26th, 2025, the Company will be issuing preliminary fourth quarter and full-year 2024 financial results and will hold an investor call the next day on February 27th at 10:00 a.m. Eastern Time, to preview the strategic landscape, answer questions, and provide insights on the company’s direction forward.

In addition, the Company will present several important new value-building strategic initiatives that include:

• Strength in organic business lines driven by continued investment in new products
• its preliminary financial results for the fourth quarter and full fiscal year 2024 will be released after the close of market on Wednesday, February 26, 2025; and
• Michael J. Ferrantino, Jr., Chief Executive Officer, departs the Company to transition to the Connectivity Partnership

The Company also announced today that Cameron Pforr, current Chief Financial Officer of the Company, assumes the additional role of Interim Chief Executive Officer.

“We are delighted to announce Cameron’s new role in the next stage of development for Mtron’s shareholders and support him in his strengthening of the Company’s competitive position,” said Bel Lazar, Chairman of the Board of Directors of the Company.

“We have built a strong platform since publicly listing just over two years ago, including growth in EBITDA and product designs. In actively examining the opportunity landscape, many smaller American companies offer unique technologies that can develop traction in the defense and commercial markets and could benefit from Mtron’s resources, including its relationship network. I will be transitioning to a general partner role at an investment fund established to invest in connectivity solutions across software, hardware, and services,” said Mr. Ferrantino. “I am excited to continue to enhance value for MPTI shareholders with the Company’s strategic investment in the Connectivity Partnership.”

The leadership transition will be further detailed in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission (the “SEC”).

Rights Offering

Also announced today by the Company is an offering of subscription rights, which is offered to all shareholders of record as of 5:00 p.m. Eastern Time on March 3, 2025 (the “Record Date”), which rights will be transferable. The rights offering entitles stockholders as of the Record Date to one subscription right for each share of Company common stock.

Under the terms of the subscription rights offering, five (5) subscription rights can be exercised to purchase one (1) share of common stock. The subscription price has yet to be determined. More details of the rights offering are contained in a press release which is available on the Company’s website.

“The rights offering is a means of distributing value to stockholders, and further accelerates the plans for growth,” continued Chairman Lazar.

Plans for Growth

Mtron is positioning value to shareholders on multiple fronts, including its core organic efforts, corporate mergers and acquisitions, and the potential to benefit through a collective investment vehicle in its connectivity partnership. After its initial listing on the NYSE American just over two years ago, the Company is now strategically positioning its listed platform with an orientation towards corporate scale.

“This is an exciting time in the defense sector as the market shifts towards our strengths. We believe that Mtron, as a U.S.-based manufacturer of critical components and modules for aerospace and defense, is well positioned for changes that are expected to take place in the defense sector, including a shift towards spending in electronic warfare, autonomous vehicles, and Artificial Intelligence. The Company is NYSE American-listed and could serve as a going public platform for mergers with other business offering significant scale to shareholders. Regardless of politics, defense is a growth sector and there are a limited number of listed and nimble defense pure plays in the marketplace,” said Mr. Pforr.

As background, the Company formed a special committee in early 2024 to evaluate strategic alternatives. The committee engaged an investment bank to assist it in looking at a broad range of options to maximize value of shareholders. While not the focus, preliminary discussions surfaced with a number of larger companies interested in exploring an acquisition of the Company. The process also identified many alternatives, including attractive companies of all sizes that Mtron could acquire or merge with, in a variety of transaction structures, for long-term value creation for Company shareholders.

“Our products are a key component of many programs for both the US and allied nations and Mtron expects to benefit from both replenishment of U.S. stockpiles as well as increased European defense spending. The Company also benefits from the further integration of battlefield systems, and the importance of communications between systems, which is also increasing the role of electronic warfare. Additionally, as drone use increases and missiles reach hypersonic speeds, further innovation in radar and other systems is needed, which we excel at,” said Mr. Pforr. (Source: BUSINESS WIRE)

 

20 Feb 25. Naval Group charges rival ThyssenKrupp with selling out submarine tech. France’s Naval Group has criticized Germany’s ThyssenKrupp Marine Systems for hurting European submarine vendors by transferring technology to countries that later managed to build their own boats for export. TKMS “are champions at creating new competitors,” Guillaume Rochard, Naval Group’s head of strategy, partnerships and mergers, said at a round table in Paris to discuss France’s defense-industrial base earlier this month. “They’ve made extremely significant technology transfers to Turkey and Korea, two nations that are now in the submarine export market.” Naval Group and TKMS regularly face off on submarine contracts, and Rochard described the German firm as his company’s main competitor in conventional submarines. The executive said Naval Group is “very careful” regarding transfer of technology in order to not create or intensify competition, an approach he contrasted with that of TKMS.

TKMS denied careless sharing of submarine tech, in an emailed response to Defense News, saying the company “sets the benchmark for responsible technology transfer” in the naval industry.

The Germany company said in addition to securing its intellectual property, all sales are set up for customers to “commission and operate our products for any naval mission they need to perform and execute to defend their country.” The company said it couldn’t comment on specific projects due to their classified nature. The company’s naval industry mission “is well defined in the respective export control regulation on which each and every form of technology transfer is based upon,” the company said. “We at thyssenKrupp Marine Systems are always acting in full compliance with that.”

ThyssenKrupp won an order from Turkey in 2009 for six submarines with an air-independent propulsion system based on the company’s HDW fuel cell technology, to be built by Gölçük Naval Shipyards near Izmit. The first boat in the resulting Reis-class submarines entered service in August 2024. Turkey last month announced the start of construction of its first locally developed submarine, putting the country on track to become self-sufficient in the technology. France’s armaments directorate DGA will intervene on export deals to keep critical skills in the country, said Alexandre Lahousse, head of the defense industry directorate within DGA, during the round table talk in Paris. The official said export clients are demanding increasingly large offsets and greater degrees of program sharing in exchange for contracts.

“How do we ensure that what was a few percent before and now becomes large chunks, does not go against our defense industrial policy?” Lahousse said. “That’s a matter of dialogue with industry, but we also have flexible and lively discussions with international directorate colleagues to find a balance, which is that all critical skills, we will try to keep, those will be more like red lines.”

Lahousse added: “So we are going to restrict your freedoms a little more in this area, but it’s for a good cause, it’s so that we can maintain our strategic autonomy.”

ThyssenKrupp provided the design and major components for the Class 214 submarines for South Korea, built by Hyundai Heavy Industries and Hanwha Ocean, with the first two boats commissioned in 2008. (Source: Defense News)

 

20 Feb 25. Italy’s Leonardo beats 2024 guidance for revenue and orders. Italy’s Leonardo reported 2024 results on Thursday above or in line with the guidance it had set for the year as the state-controlled defence group presses on with its efforts to lead European consolidation in the sector. Leonardo’s orders, revenues, and cash flow were all above the guidance set, with its defence and security businesses offsetting the negative impact of its aerostructures and space units. Core earnings, or EBITA, were in line with its forecast. The group, whose shares have risen over 380% since Russia invaded Ukraine in February 2022, has taken on a proactive role in attempts to increase Europe’s weight in the defence business.

Chief Executive Roberto Cingolani is pushing for broader alliances and cooperation among defence manufacturers to face larger players in China and the U.S., at a time when investors are upbeat about defence spending outlook in NATO countries.

Leonardo’s results all beat a company-provided analyst consensus.

“The preliminary results demonstrate the economic, financial, and industrial strength of Leonardo, with a medium-term development outlook aligned with the objectives outlined in the industrial plan,” Cingolani said in a statement. (Source: Reuters)

 

20 Feb 25. Leonardo DRS Announces Financial Results for Fourth Quarter and Full Year 2024.

• Revenue: $981m for the fourth quarter and $3.2bn for the year
• Net Earnings: $89m for the fourth quarter and $213m for the year
• Adjusted EBITDA: $148m for the fourth quarter and $400m for the year
• Diluted EPS: $0.33 for the fourth quarter and $0.80 for the year
• Adjusted Diluted EPS: $0.38 for the fourth quarter and $0.93 for the year
• Bookings: $1.3bn for the fourth quarter and $4.1bn for the year (book-to-bill ratio of 1.3)
• Backlog: $8.5bn, up 10% from prior year
• Formalizes 2025 guidance
• Board of Directors declares a cash dividend and authorizes stock repurchase program

Leonardo DRS, Inc. (Nasdaq: DRS), a leading provider of advanced defense technologies, today reported financial results for the fourth quarter and full year ended December 31, 2024.

CEO Commentary “Our 2024 financial results exceeded our expectations. DRS delivered record bookings, mid-teens organic revenue growth, healthy adjusted EBITDA margin expansion and solid free cash flow generation. The DRS team’s focus on our customers and helping address their most challenging missions continues to generate remarkable outcomes for our shareholders. Our outstanding people, our agility and innovation combined with our differentiated technologies are foundational to both our growth and market leadership. We remain strategically focused on capitalizing on our momentum to drive continued growth,” said Bill Lynn, Chairman and CEO of Leonardo DRS.

Summary Financial Results

Revenue growth for the fourth quarter was up 6% compared to 2023. The year-over-year growth in Q4 was primarily driven by programs related to tactical radars, naval network computing, advanced infrared sensing and electric power and propulsion. Full year 2024 revenue growth was 14% over the prior year. Advanced infrared sensing, tactical radars, electric power and propulsion and force protection programs were the most significant tailwinds to growth for the full year.

Both Q4 and full year 2024 adjusted EBITDA growth was as a result of improved program execution including programs moving from development to production (namely Columbia Class), favorable program mix and operational leverage from increased volume.

Strong operating performance combined with decreased interest expense drove year-over-year net earnings and adjusted net earnings growth for the quarter. Similarly, full year 2024 net earnings and adjusted net earnings increased over the prior year due to solid operating performance and lower interest expense, somewhat offset by increased tax expense. The aforementioned trends also produced adjusted diluted EPS growth in the quarter and for the full year.

Cash Flow and Balance Sheet

Net cash flow generated by operating activities was $443m for the fourth quarter and $271m for the full year. Additionally, the company generated significant free cash flow in the fourth quarter of $416m and full year free cash flow was $190m.

At year end, the balance sheet had $598m of cash and $203m of outstanding borrowings under the company’s credit facility, which provides the company with sufficient financial capacity to deploy capital for growth and return capital to shareholders, while maintaining a healthy balance sheet.

Capital Deployment

DRS today announced that its Board of Directors declared a cash dividend of $0.09 per common share payable on March 27, 2025, to shareholders of record on March 13, 2025. We currently expect to continue paying quarterly cash dividends in the near future, but there can be no assurance as to those payments and their amount. Any future declarations of dividends and their record and payment dates are subject to the determination by the Board of Directors. The declaration of dividends and the amount thereof will depend on the company’s financial condition, results of operations, capital requirements, alternative uses of capital and other factors that the Board of Directors may consider at its discretion.

Additionally, the Board of Directors authorized a stock repurchase program for DRS to purchase up to $75m of its common stock, at its discretion, commencing in March 2025 through March 2027 (two years). Under the stock repurchase program, DRS may purchase shares of its common stock through various means, including open market transactions, block purchases, privately negotiated transactions or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The timing and actual number of shares repurchased are subject to market conditions and legal requirements. The program may be modified, discontinued or suspended at any time without prior notice.

Bookings and Backlog

DRS received $1.3bn in new funded contract awards during the fourth quarter and $4.1bn for the full year. Remarkable customer demand was evident across the company’s differentiated portfolio. Bookings in the quarter were driven primarily by demand for solutions related to electric power and propulsion, advanced infrared sensing, naval and ground network computing, tactical radars as well as airborne and intelligence sensing. For full year 2024, demand for the company’s electric power and propulsion, advanced infrared sensing, naval and ground network computing and force protection solutions contributed heavily to bookings. Additionally, the strong award volume translated to an increase in total backlog, which stood at $8.5bn at year end.

Segment Results

Advanced Sensing and Computing (“ASC”) Segment

ASC enjoyed healthy bookings for both the fourth quarter and full year 2024. Strong demand was diverse and balanced across the company’s advanced sensing and network computing portfolio.

ASC revenues increased in Q4 and for the full year. The growth in both periods was bolstered by programs related to advanced infrared sensing, tactical radars and naval network computing.

Adjusted EBITDA growth in Q4 was volume driven. Adjusted EBITDA and adjusted EBITDA margin increased for the full year due to improved program execution, favorable program mix and operational leverage from increased volume.

Integrated Mission Systems (“IMS”) Segment

for the fourth quarter and full year were primarily driven by strong demand for the company’s electric power and propulsion technologies.

The slight year-over-year decline of IMS revenue in the quarter was driven by program timing on force protection efforts. Full year 2024 growth was evident across the segment with strong contribution from force protection and electric power and propulsion programs.

Adjusted EBITDA and adjusted EBITDA margin growth in the fourth quarter was propelled primarily by improved profitability on the Columbia Class program. This trend was also evident for the full year. Additionally, adjusted EBITDA and margin benefited from operational leverage on higher volume.

2025 Guidance

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)

 

20 Feb 25. Investors scout for ‘hidden’ defence plays as rally broadens.

• Summary
• Companies
• Thyssenkrupp shares jump 20% on expected defence budget surge
• BofA Global Research sees TKMS as a ‘hidden’ defence stock
• Iveco and Thyssenkrupp catching up with broader aerospace and defence index

Investors are looking beyond the traditional defence stocks that have emerged as star performers in the European market for cheaper industrial companies poised to benefit from increased military spending in the region.

Shares in Thyssenkrupp whose operations range from making steel and car parts to trading materials and building fertiliser plants, jumped 20% on Monday, driven by an expected surge in defence budgets that could boost its warship division TKMS, which is due to be spun off this year.

The conglomerate has lost 40% of its value in five years, hurt by a lengthy and painful restructuring of its sprawling operations.

However, its defence assets, which include submarines, frigates and sensor and mine-hunting technology, are now being seen as a potential catalyst for growth.

BofA Global Research called TKMS a “hidden” defence stock, valuing it at half of Thyssenkrupp’s market capitalisation. Analysts at the U.S. investment bank noted that defence businesses are now among the most compelling equity stories in Europe. “We see deep value,” they wrote about TKMS.

The market’s recognition of underpriced defence assets could lead to a surge in share prices, driven by higher valuation multiples and earnings growth tied to rising defence spending.

Analysts also cited bus and truck maker Iveco Group and shipbuilder Fincantieri as beneficiaries if the defence rally broadens beyond pure plays, just as some questions emerge about the sustainability of Europe’s rally.

However, investors will need active stock-picking skills to capitalise on this trend, as these opportunities may lie beyond the main equity benchmarks that passive strategies track.

This is Crypto Weekly.

Thyssenkrupp is a mid-cap stock listed on the MDAX index, after tumbling out of the main DAX index, following a string of profit warnings and the slump in the share price.

Alberto Conca, chief investment officer at Swiss asset manager ZEST+LFG, believes many industrial companies, including those not directly involved in defence, could benefit indirectly from the military boom.

“This makes a lot of sense,” he said.

Iveco’s shares have rocketed since saying earlier this month it could spin off its IDV defence division this year. IDV posted a 10% operating profit margin last year, the only double-digit result from the firm’s industrial businesses.

Having lagged the broader aerospace and defence index since Russia invaded Ukraine three years ago, both Thyssenkrupp and Iveco are catching up fast. This year they are outperforming, having risen 53% and 68% respectively.

World defence companies trade at 25.8 times expected earnings, versus 18 times three years ago, per LSEG Datastream data. Iveco and Thyssenkrupp both trade around 8 times on the same valuation metric. ($1 = 0.9590 euros) (Source: Google/Reuters)

 

20 Feb 25. Pilatus delivers strong sales and order intake in 2024.

During the year, the company sold 96 PC-12 NGX, 51 PC-24 and six PC-21 aircraft.

Switzerland-based Pilatus Group has seen its total sales increase by 10.5% to SFr1.63bn ($1.8bn) and order intake soar by 44.9% to SFr2.19bn in 2024.

Orders received rose from SFr1.51bn in the prior year, while the company’s order book value grew from SFr2.32bn in 2023 to SFr2.91bn in 2024.

The aircraft manufacturer’s earnings before interest and taxes (EBIT) stood at SFr243m, marking a modest increase of 1.3% from SFr240m in 2023.

The company delivered a total of 96 PC-12 NGXs, including two leased aircraft, 51 PC-24s, and six PC-21s, reflecting a steady rise in demand for its aircraft models.

Pilatus board of directors chairman Hansueli Loosli said: “Despite the challenges, we achieved important milestones in 2024, with yet more portfolio development.

“We are pursuing targeted investment in our infrastructure and sustainability, and we continue to improve the terms of employment we offer our staff – whom we regard as our most important resource of all.”

In Government Aviation sector, Pilatus signed a contract with KF Aerospace, in partnership with SkyAlyne, to deliver 19 PC-21 training aircraft for the Royal Canadian Air Force’s Future Aircrew Training (FAcT) programme.

Additionally, the Netherlands opted to purchase eight PC-7 MKXs, reinforcing the demand for Pilatus’ advanced trainer aircraft.

In Business Aviation, the PC-24 Super Versatile Jet, featuring an extended payload and range, saw a successful market introduction.

The PC-12, one of the company’s flagship aircraft, became the most flown business aircraft in 2024 in the US.

Pilatus CEO Markus Bucher said: “Innovation, quality and precision are the driving forces behind our actions: Pilatus continues to grow, with over 3,000 full-time employees worldwide for the first time ever.

“Employees from 63 nations now contribute to the company’s success. Never before have so many apprentices been taken on as permanent employees. Improved terms of employment and a study which ranks Pilatus as the ninth best employer among 800 companies across Switzerland underline our attractiveness.”

Pilatus also continued its focus on sustainability, with its newly established Corporate Sustainability department outlining the Sustainability Strategy 2.0. The company invested in Synhelion, a spin-off of ETH Zurich, which develops solar energy-based CO₂-neutral jet fuel. Additionally, Pilatus maintained its commitment to sustainable infrastructure, as evidenced by the construction of the new Maintenance Hall at Buochs Airport and the Composites Competence Center in Ennetbürgen. (Source: airforce-technology.com)

 

20 Feb 25. Hanwha’s new global defense chief eyes aggressive expansion in every direction.

“We’ve been doing export for 15, 20 years, but it’s just been in recent years that we’ve really been reaching out to create global defense industrial base, creating global partnerships, partnerships in local countries,” Hanwha Global Defense President & CEO Michael Coulter told Breaking Defense.

On the job for less than two months, the new head of global defense business for Hanwha Aerospace has his sights set on helping to make the South Korean defense firm a major industrial player worldwide.

Just don’t ask him to prioritize one market over another.

“So to be a global leader we need position in the largest defense markets in the world … [the] United States, Europe, Middle East, Asia. So I would say you have to be focused on all of them,” Michael Coulter, who was appointed to the role in December, told Breaking Defense in an interview from Hanwha’s expansive floor space at IDEX 2025 here in Abu Dhabi.

We know a thing or two about UAS and we’ve got a record to prove it.

Encouraged in recent years by a more defense export-friendly government in Seoul, Coulter said Hanwha made significant strides before his tenure to go global, including major contract wins in Australia, Poland, Romania and Egypt. But he said the company now aims to use each as a springboard to more business in each region.

“We’ve been doing export for 15, 20 years, but it’s just been in recent years that we’ve really been reaching out to create [a] global defense industrial base, creating global partnerships, partnerships in local countries,” he said.

Coulter, who was at Leonardo DRS before joining Hanwha, described the US as a key market, but acknowledged the firm has a “modest” presence there so far. A 2023 rejection for the Optionally Manned Fighting Vehicle, he said, has not stopped the company’s “commitment” to the American military market, and there are discussions with the US Army about “various capabilities.” (Coulter did not identify any specifically, but Breaking Defense has reported that Hanwha’s howitzer was among those recently observed when Army officials went on a global evaluation tour.)

Naval systems could also be a significant opportunity for Hanwha in the US, as Coulter said there have been discussions with the Navy about leveraging Hanwha’s recent takeover of Philly Shipyard to eventually bolster the service’s fleet.

Coulter said Hanwha is keeping an especially close eye on Europe, where Russia’s 2022 invasion of Ukraine and the expected shift of US military support away from the continent under the Trump administration have spurred European nations to race to shore up their own capabilities.

“As European defense budgets increase, its important for us bring the strength of Korea but also to be European,” Coulter said. “So we are investing in partnerships and facilities and workforce in Europe.”

The deal with Romania in which Hanwha will build a facility to be a “production house for land force capability” is also meant to give the firm “really a domestic industrial base in Europe,” Coulter said. “We’re having similar conversations in Poland and in other countries in Europe as well.”

As for the Middle East, Hanwha took the opportunity at IDEX to bring in a full-sized K9 howitzer, showing publicly for the first time a version of the platform that used a Korean-built engine. The first Korean-made K9s are expected to go operational with the Egyptian military later this year, a Hanwha spokesperson told Breaking Defense, with locally produced versions expected in 2026.

Beyond Egypt, Coulter said there are “very active” conversations in the Gulf with Saudi Arabia and the United Arab Emirates. Regionally, he said, there’s “sincere” concern about the threat of ballistic missiles and therefore there’s an appetite for defenses against them — another investment area for Hanwha.

Finally in the Indo-Pacific region, Coulter highlighted Hanwha’s expected outsized presence in South Korea, but also its victories in Australia in competitive infantry fighting vehicle and howitzer programs. The Lucky Country could be, Coulter said, another springboard to larger markets.

“We’re producing those in Australia for use by the Australian military, but with an eye to being a global supplier out of a domestic presence in Australia,” he said. “So, very strong support from the Commonwealth for not just further capabilities in Australia, but then to using that hub in Australia as a global supply chain platform.”

But with all that said, Coulter said Hanwha is interested in expanding not just in a geographical sense, but a “functional” one too.

“And that means building up partnerships around the world, be those partnerships with militaries and governments, to partnerships with technology companies, to partnerships with industrial partners to grow capacity around the world,” he said. That kind of “functional growth,” Hanwha is “very focused on.” (Source: glstrade.com/Breaking Defense.com)

 

19 Feb 25. US Defense: Pentagon to Prepare for Cuts. Cost-cutting has come to the Pentagon. Reporting today suggests Defense Secretary Pete Hegseth has issued a memo to Defense Department officials to plan to cut ~8% from the Pentagon budget in each of the next five years. The memo reportedly instructs that 17 categories be insulated from these cuts, including nuclear weapons modernization (e.g., NOC, GD), missile defense (e.g., LMT, RTX), one-way attack drones and other munitions programs. Specific programs exempted include the Virginia-class submarine (GD) and Collaborative Combat Aircraft; the memo reportedly does not exempt the F-35 program (LMT). Secretary Hegseth has reportedly asked DoD officials to target savings from “excessive bureaucracy and spending on programs linked to climate change and diversity, equity and inclusion” (link). MS view: Assuming $877bn as a starting point for the DoD budget (current plan for FY26 per FY25 multi-year request), this cut would represent a ~$70bn reduction in planned spending next year. A cut to US defense spending of this magnitude has not been seen since the sequestration-era in FY13. While some of the exempted areas should provide a measure of relief for Primes, the mechanics and impact of these planned cuts are still to be determined. The most addressable portion of the US defense budget for Primes – Procurement + RDT&E – represents ~35% of the total DoD budget and may not be spared from cuts altogether. We note spending on Operation and Maintenance, which spans maintenance services, civilian salaries, operating military forces, training and education, and base operations support, among other areas, represents ~40% of the DoD budget annually and could see pressure. Overall, we note these proposed cuts appear at odds with GOP plans in Congress to boost defense spending levels (link). We continue to see risk for Defense Primes in the early DOGE Era. The dynamic global security backdrop and anticipated support for national security spending in Congress remain constructive for the sector, but the new administration’s signaled approach to government reform is injecting a wide range of uncertainty, in our view, informing our ‘in-line’ view on the sector (for more, see 2025 Outlook: Defense Uncertainty; Aftermarket Conviction).

 

19 Feb 25. Howmet: Growth and Execution Remain Robust; Increase PT to $155. We continue to view HWM as a high quality aerospace supplier that offers optionality for the aircraft OE ramp and benefits from commercial aftermarket trends. HWM also benefits from OE and spares growth in IGT power generation. 2025 outlook may prove conservative. Reiterate OW-rating; PT to $155.

Key takeaways

• We view the company’s 2025 outlook as conservative, similar to the onset of past years.
• We continue to view HWM as a high quality aerospace supplier that offers optionality for the aircraft OE ramp and benefits from commercial aftermarket trends.
• We see the potential for further margin expansion as commercial aerospace and defense aerospace volumes increase and execution remains strong.
• HWM benefits from OE and spares growth in IGT power generation (~7% of 4Q24 revenue) as further investment will be required to power AI and data centers.
• We reiterate our OW-rating and increase our PT to $155.

Incremental Organic Growth Opps Remain; Reiterate OW-Rating

After reporting 4Q24 earnings on February 13, 2025, HWM’s stock ended the day flat compared to the S&P 500 of up ~1%. We continue to view Howmet as a high quality aerospace supplier that offers optionality for the aircraft OE ramp and additionally benefits from the strong demand environment for commercial aftermarket today and in the coming years as the company pointed to continued growth in demand for spare engine parts. Additionally, HWM benefits from OE and spares growth in IGT power generation (~7% of revenue as of 4Q24) as further investment will be required to power AI and data centers (link). Howmet is well positioned in the supply chain given its offering of IGT turbine blades, which support GE Vernova, Siemens, Mitsubishi Heavy and Volvo. It is the market leader for these products with >50% market share, per company commentary.

Growth and margin results continue to surprise positively, providing potential upside to both our estimates and consensus estimates. We view the company’s 2025 outlook as conservative, similar to the onset of past years, setting up the potential for a beat and raise story throughout 2025. Additionally, Howmet’s balance sheet is a strength with 2025E net debt to EBITDA of 1.2x. Given the company’s continued growth, strong cash generation, and quality balance sheet, we see further upside driven by increased capital return to shareholders. Management execution remains best-in class as it has managed a volatile commercial aerospace backdrop and continued to expand margins and position the company for incremental growth opportunities. We reiterate our OW-rating and increase our PT to $155 from $125 as we factor in higher earnings and a higher multiple (39x 2026 P/E vs. 32x previously).

Outlook Has Proven to Be Conservative in the Past; 2024 Adj. EBITDA and Adj. EPS 16% and 25% Ahead of Initial Expectations

HWM provided 1Q25 outlook as well as 2025 outlook. The company expects 2025 revenue of $7.93bn – $8.13bn (vs. cons of ~$8.05bn), adj. EBITDA of $2.105bn – $2.155bn (vs. cons of ~$2.13bn), adj. EPS of $3.13 – $3.21 (vs. cons of ~$3.20), and FCF of $1.025bn – $1.125bn (vs. cons of ~$1.22bn).

HWM expects 1Q25 revenue of $1.925bn – $1.945bn (vs. cons of ~$1.92bn), adj. EBITDA of $515mn – $525mn (vs. cons of ~$492mn), and adj. EPS of $0.75 – $0.77 (vs. cons of ~$0.71).

Management noted that the outlook for commercial aerospace remains strong with rising OEM production rates, supported by strong demand and continued growth in engine spares demand. HWM expects continued growth in the defense aerospace and industrial end markets, with the commercial transportation market anticipated to be soft until 2H25.

HWM acknowledged that it has chosen to be conservative in its 2025 guidance and noted that there may be upside to its initial outlook. HWM’s conservatism is a result of potential narrowbody build rate changes, limited visibility, excess inventory comments from BA, and continued widebody supply chain challenges, per management. We note that HWM has historically been conservative when providing initial full-year guidance. Below we outline initial guidance vs. actual results for 2023 and 2024.

Updating Our Valuation Methodology as Growth and Margin Continue to Surprise to the Upside

Following Howmet’s strong quarter, we re-visit our valuation methodology for the company for four primary reasons:

1. Growth was much better than expected, up 12% in 2024 in spite of lower 737 MAX production. Runway for sustained growth remains clear from the commercial OE production ramp ahead for both narrowbody and widebody aircraft. Additionally, we expect engine spares demand across commercial aerospace to remain strong due to current aircraft OE supply shortfalls and durability concerns with new generation engines (spares up ~25% in 2024). The future introduction of engine durability upgrade kits for the LEAP-1A (approved), LEAP-1B, and GTF engines will provide additional upside given the higher amount of HWM content in the engine upgrades. Engine spares demand for Defense Aerospace provides an additional growth lever as F-35 usage increases and additional aircraft are delivered and reach the field. Further, HWM is well positioned for growth in IGT power generation as further investment will be required to power AI and data centers. HWM is the number one supplier of IGT turbine blades (>50% market share) to major customers GE Vernova, Siemens, Mitsubishi Heavy, and Volvo. HWM also benefits from demand for IGT spares, while margin within IGT is similar to that of aerospace.
2. Margins have expanded quicker than we expected, up 310bps in 2024. We see the potential for further margin expansion as commercial aerospace and defense aerospace volumes increase. Further, Howmet sits in a constrained area of the Aerospace and Defense supply chain which provides the potential for incremental pricing power as the company continues to deliver high quality products on-time to customers and wins incremental business. Management execution remains best-in class. We expect HWM to largely be able to pass through incremental costs from potential tariffs given its recent track record of passing through inflationary costs throughout the post-Covid time period.
3. Howmet’s business mix provides investors with an asset that takes advantage of the current dynamics facing the aerospace industry. HWM provides investors exposure to aerospace OE which allows them to participate in the unprecedented aircraft OE growth coming over the next few years. Additionally, HWM provides exposure to the engine aftermarket through engine spares allowing investors to also participate in the strong commercial aftermarket growth being realized today.
4. We see strong FCF generation paired with 2025E leverage of 1.2x providing for a great backdrop for capital return to shareholders. We estimate HWM will return ~$3.65bn in capital to shareholders from 2025E-2027E in the form of dividends and share repurchases, while also continuing to grow Capex to take advantage of organic growth opportunities.

Valuation Methodology

We arrive at our PT of $155 by placing a ~39x P/E multiple on 2026E EPS of $4.01. Since 2020, HWM’s EBITDA margin has expanded from 21.8% to 26.8% in 4Q24. As HWM’s margins expand, we expect multiples to expand as well. Additionally, growth remains robust as we estimate a 3-year revenue CAGR (2024-2027) of ~10% and adj. EBITDA CAGR of ~14%. Considering that HWM has proven itself to be a high quality supplier with exposure to strong secular themes, a strong balance sheet, and a best-in class management team, we expect the company’s multiple to trade at a premium versus the Aerospace and Defense cohort.

Model Changes

We update our model to incorporate 4Q24 results, the company’s 2025 outlook, and management commentary. We leave our 2025E-2026E revenue estimates largely unchanged and increase our 2027E revenue by ~60bps as we increase our growth estimate for IGT. We increase our adj. EBITDA margin in 2025E-2027E by 90bps, 110bps, and 120ps, respectively, as we factor in better than expected margin performance in Fastening Systems and Engineered Structures. We increase our adj. EPS estimates to $3.27 from $3.20 in 2025, $4.01 from $3.85 in 2026, and $4.58 from $4.41 in 2027.

 

19 Feb 25. Materion Corporation (NYSE: MTRN) today reported fourth quarter and full-year 2024 financial results, provided 2025 earnings guidance and announced a new mid-term profitability target.

Fourth Quarter 2024 Financial Summary

• Net sales were $436.9m; value-added sales1 were $296.1m
• Net loss of $48.8m, or $2.33 loss per share, diluted, versus net income of $19.5m, or $0.93 per share, in the prior year quarter; record quarterly adjusted earnings of $1.55 per share versus $1.41 in the prior year quarter
• Operating loss of $38.3m versus operating profit of $27.6m in the prior year quarter; record quarterly adjusted EBITDA2 of $61.5m versus $53.3m in the prior year quarter

Full-Year 2024 Highlights

• Net sales were $1.68bn; value-added sales were $1.10bn
• Net income was $5.9m, or $0.28 per share, diluted, versus $95.7m, or $4.58 per share, in the prior year period; adjusted earnings of $5.34 per share versus $5.64 in the prior year period
• Adjusted EBITDA of $221.2m, versus $217.7m in the prior year
• Achieved mid-term target of 20% adjusted EBITDA margin for the year, first time in company history
• Established new mid-term adjusted EBITDA margin target of 23% based on the Company’s prospects and performance expectations
• Secured several significant new business wins and customer partnerships further strengthening the organic pipeline
• Precision Optics transformation underway with appointment of new business president
• Completed sale of non-core large area targets business in Albuquerque, New Mexico

“The fourth-quarter and full-year results showcase the significant impact of our initiatives to enhance operational performance, streamline our cost structure, and optimize the Company’s footprint. I am extremely proud of our global team for their relentless efforts to serve our customers and drive improvements across Materion, even in the face of ongoing challenging market conditions,” said Jugal Vijayvargiya, President & CEO of Materion.

“2024 was a landmark year for Materion, as we achieved our mid-term target of 20% adjusted EBITDA margin for the first time in the Company’s history. Achieving this level of performance in soft market conditions gives us confidence to look ahead to what’s next, as our end markets strengthen, and we deliver on our organic initiatives while executing further operational improvements. With this in mind, we have established a new mid-term adjusted EBITDA margin target of 23%, delivering an additional 300 basis points of improvement over the next several years. We expect to deliver another year of strong performance in 2025, as a result of our improved operational performance, and strengthening market conditions as we move through the year.”

FOURTH QUARTER 2024 RESULTS

Net sales for the quarter were $436.9m, compared to $421.0m in the prior year period. Value-added sales were $296.1m for the quarter, up 2% from the prior year period primarily driven by strength in space & defense and improvement in semiconductor. This increase was partially offset by continued headwinds across automotive, industrial and energy.

Operating loss for the quarter was $38.3m and net loss was $48.8m, or $2.33 loss per diluted share, compared to operating profit of $27.6m and net income of $19.5m, or $0.93 per share, in the prior year period.

Excluding special items3 including a non-cash goodwill and intangible impairment in Precision Optics, adjusted EBITDA was a quarterly record $61.5m, or 20.8% of value-added sales, compared to $53.3m or 18.4% of value-added sales in the prior year period. This record adjusted EBITDA was driven by higher volume, favorable price/mix, strong cost management and operational performance.

Adjusted net income was $32.4m excluding acquisition amortization, or $1.55 per diluted share, compared to $1.41 per share in the prior year period.

FULL-YEAR 2024 RESULTS

Net sales for the year were $1.68bn, compared to $1.67bn in the prior year. Value-added sales were $1.10bn for the year, down 3% from the prior year due to weakness in several key end markets including industrial, energy and automotive. This decrease was partially offset by strength in space & defense and precision clad strip.

Operating profit for the year was $47.2m and net income was $5.9m, or $0.28 per diluted share, compared to operating profit of $136.4m and net income of $95.7m, or $4.58 per diluted share, in the prior year.

Excluding special items, adjusted EBITDA for the year was $221.2m, compared to $217.7m in the prior year. The increase was driven primarily by strong operational performance, cost management and improved mix driven by new business.

Adjusted net income was $111.8m excluding acquisition amortization, or $5.34 per diluted share, compared to $5.64 per diluted share in the prior year.

OUTLOOK

After a challenged macroenvironment in 2024, we remain cautiously optimistic about the market dynamics entering 2025, and are expecting mid-single digit top-line growth from our businesses, excluding precision clad strip. The precision clad strip inventory correction is expected to continue through 2025, returning to growth in 2026. Despite this impact, we expect earnings growth in 2025 from market outperformance, continued operational excellence, cost management and portfolio optimization actions. With this, we are guiding to the range of $5.30 to $5.70 for full year 2025 adjusted earnings per share, an increase of 3% from prior year at the midpoint. (Source: BUSINESS WIRE)

 

20 Feb 25. Rosebank Industries, the listed private equity vehicle established by former founders of FTSE listed British turnaround specialist Melrose, has said it is in discussions with US-based electrical engineering group Electrical Components International over a possible acquisition.  A deal to buy ECI, owned by private equity group Cerberus Capital Management, would be Rosebank’s first, since Simon Peckham and his Melrose colleagues set up Rosebank in 2024. The deal’s enterprise valuation is estimated to be about $2bn. Rosebank is expected to raise equity financing to fund the acquisition. Rosebank said ECI was “in line with Rosebank’s acquisition criteria and if it proceeds would be funded through a combination of a fully underwritten equity issue . . . and new debt facilities”. Peckham, chief executive, told the Financial Times: “We promised from the get go to pursue a number of acquisition opportunities and that’s exactly what we are doing.” He added that ECI was one of several targets Rosebank was looking at. “I’m confident at least one of those will come to fruition,” he added. Peckham and fellow Melrose co-founder and executive vice-chair Christopher Miller stepped down in 2023 before establishing Rosebank, which is backed by international investors including BlackRock, Norges and GIC. The executives are hoping to replicate the success of their previous industrial turnarounds that generated significant returns both for themselves and their backers. The two Melrose co-founders and another executive took the major share of a £180m bonus pot in 2024. Melrose was listed on London’s junior Aim-market in 2003 with the aim of turning around underperforming industrial businesses under a “buy, improve, sell” approach. It raised £13mn when it listed and went on to raise more than £10bn in equity and £17bn in debt to fund deals. The FTSE 100 group is now focused on the GKN aerospace business it acquired as part of its controversial £8bn takeover of the British engineer in 2018. Melrose demerged its automotive activities under the name Dowlais in 2023. Dowlais, which makes parts for vehicles, said in January it was in talks to be acquired by American Axle & Manufacturing in a cash-and-shares deal. Rosebank’s Aim-listed shares were temporarily suspended following the announcement of the ECI talks, which were first reported by Sky News. (Source: FT.com)

 

20 Feb 25. Airbus sees jet deliveries rising 7% in 2025, unveils new charges.

• Summary
• Companies
• Airbus reports 2024 earnings in line with market forecasts
• Delays A350 freighter by about a year to H2 2027
• Takes new Space charge of 300m euros
• Highlights risks on A400M military aircraft amid weak orders

Airbus (AIR.PA) flagged short-term production pressures and confirmed a delay to its A350 freighter as it predicted a 7% increase in deliveries to around 820 jets this year, while continuing to clean up troubled space and defence projects.

Europe’s largest aerospace group took a fresh charge of 300m euros ($312.84 m) for its troubled Space business, while highlighting potential risks to the long-term future of its slow-selling A400M military transport aircraft.

Airbus reported adjusted operating income of 5.35bn euros for 2024, down 8% and in line with expectations, including 2.56bn in the fourth quarter as it grappled with ongoing snags in its supply chains.

Annual revenues rose 6% to 69.23bn euros, of which 24.72bn were generated in the three months to December 31.

Analysts had on average expected fourth-quarter core operating profit of 2.6 bn euros on sales of 24.68bn, according to a company-compiled consensus survey.

Airbus, which delivered 766 jets last year, roughly in line with its target, has been facing industrial delays due partly to problems in the aerospace supply chain, which have also hampered the recovery of embattled U.S. rival Boeing (BA.N).

The world’s largest planemaker said the production ramp-up of A320 and A350 families faced short-term pressure due mainly to delays from U.S. supplier Spirit AeroSystems (SPR.N), which is in the process of being broken up between Airbus and its main customer Boeing. Airbus maintained all its medium-term output targets, however.

Airbus said it was delaying a new freighter version of its A350 wide-body jet by around a year to the second half of 2027, confirming a development delay previously reported by Reuters.

The English Premier League soccer giant on Wednesday reported a net loss of $7.8m

For 2025, Airbus forecast adjusted operating income to rise to about 7 bn euros, excluding any impact from threatened trade tariffs but including the integration of Spirit, in a sign that a final deal to absorb Airbus-related factories is close.

The France-based group is expected to take over two Spirit plants providing composite structural parts for the A350 and A220. It may also take over a smaller plant in Scotland if no alternative buyer can be found.

Airbus said the transaction would have a “broadly neutral” impact at the operating income level and weigh on free cashflow to the tune of “mid triple digit” millions of euros.

Airbus reported 4.46bn euros of free cashflow in 2024 and forecast around 4.5bn in 2025.

The company declared a 2 euro per share annual dividend, up 11% from the prior year, and said it planned to pay a 1 euro a share special dividend in 2025, on par with 2024.

SPACE AND DEFENCE

In Space, the latest charge brings to almost 2bn euros the amount provisioned in two years on loss-making satellite projects, which industry sources have linked mainly to the OneSat programme of reprogrammable satellites.

Such losses have spurred talks to create a new venture grouping Airbus satellite activities with those of Thales Alenia Space (TCFP.PA), (LDOF.MI) to counter the runaway growth of Elon Musk’s Starlink, though sources caution this may take some time.

Airbus also announced new charges of 121m euros for the A400M, which has been hit by chronic delays, partial order cancellations by European launch nations and slow exports.

Airbus said it was assessing the potential impact of the uncertainty over orders on future manufacturing levels.

Powered by the West’s largest turboprop engines, the A400M was commissioned in 2003 to give Europe an independent airlift capacity, rather than relying on the U.S.-built Lockheed Martin (LMT.N) C-130 or the now out-of-production Boeing (BA.N) C-17.

Industry sources say Airbus has enough orders to keep A400M assembly ticking over for about three years, but that time is running out for the European army plane barring a surge of new orders or reversals of budget cuts as Europe reviews defence spending under pressure from U.S. President Donald Trump. ($1 = 0.9590 euros) (Source: Reuters)

 

20 Feb 25. Airbus reports Full-Year (FY) 2024 results.

• 766 commercial aircraft delivered
• Revenues €69.2bn; EBIT Adjusted €5.4bn
• EBIT (reported) €5.3bn; EPS (reported) €5.36
• Free cash flow before customer financing €4.5bn
• 2024 guidance achieved
• Dividend proposals: dividend of € 2.00 per share; special dividend of € 1.00 per share
• 2025 guidance issued

Airbus SE (stock exchange symbol: AIR) reported consolidated Full-Year (FY) 2024 financial results and provided guidance for 2025.

“We achieved strong order intake across all businesses in 2024, with a book-to-bill well above 1, confirming the solid demand for our products and services. We delivered on our 2024 guidance in what was a testing year for Airbus,” said Guillaume Faury, Airbus Chief Executive Officer. “We refocused our efforts on key priorities, notably the production ramp-up and the transformation of Defence and Space. We continue to pursue profitable growth and our decarbonisation ambition. The 2024 financial results and the level of confidence we have in our future performance support our proposal for an increased dividend.”

Gross commercial aircraft orders totalled 878 (2023: 2,319 aircraft) with net orders of 826 aircraft after cancellations (2023: 2,094 aircraft). The order backlog amounted to 8,658 commercial aircraft at the end of December 2024. Airbus Helicopters registered 450 net orders (2023: 393 units), with a book-to-bill ratio above 1 both in units and value highlighting strong demand for the Division’s platforms. There was also good order intake for helicopter services. Airbus Defence and Space’s order intake by value increased to a record €16.7bn (2023: €15.7bn), corresponding to a book-to-bill of around 1.4. Fourth quarter orders included 25 additional Eurofighter military aircraft for Spain.

Consolidated order intake by value decreased to €103.5bn (2023: €186.5bn) with the consolidated order book valued at €629bn at the end of 2024 (year-end 2023: €554bn). The increase in the consolidated backlog value mainly reflects the Company-wide book-to-bill of above 1, and the strengthening of the US dollar.

Consolidated revenues increased 6% year-on-year to €69.2bn (2023: €65.4bn). A total of 766 commercial aircraft were delivered (2023: 735 aircraft), comprising 75 A220s, 602 A320 Family, 32 A330s and 57 A350s. Revenues generated by Airbus’ commercial aircraft activities increased 6% to €50.6bn, mainly reflecting the higher number of deliveries. Airbus Helicopters’ revenues increased 8% to €7.9bn, reflecting higher deliveries of 361 units (2023: 346 units), a solid performance across programmes as well as growth in services. Revenues at Airbus Defence and Space increased 5% year-on-year to €12.1bn, mainly driven by the Air Power business. Seven A400M military airlifters were delivered (2023: 8 aircraft), including the first for Kazakhstan.

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 – totalled €5,354m (2023: €5,838m).

EBIT Adjusted related to Airbus’ commercial aircraft activities increased to €5,093m (2023: €4,818m), with the positive impact from higher deliveries being partially reduced by investments for preparing the future.

The A320 Family programme continues to ramp up towards a rate of 75 aircraft per month in 2027. The Company is now stabilising monthly A330 production at around rate 4. Specific supply chain challenges, notably with Spirit AeroSystems, are currently putting pressure on the ramp up of the A350 and the A220. On the A350, the Company continues to target rate 12 in 2028 and is adjusting the entry-into-service of the A350 freighter variant which is now expected in H2 2027. On the A220, the Company continues to target a monthly production rate of 14 aircraft in 2026.

Airbus Helicopters’ EBIT Adjusted increased to €818m (2023: €735m), reflecting the higher deliveries, a solid performance across programmes and growth in services.

EBIT Adjusted at Airbus Defence and Space was €-566m (2023: €229m), reflecting charges of €1.3bn in Space programmes, including €0.3bn in the fourth quarter resulting from the completion of the in-depth technical review.

On the A400M programme, an additional update of the contract estimate at completion was performed and a net charge of €121m recorded, reflecting mainly updated assumptions regarding the new contract amendment with the launch nations and OCCAR and risk in the production plan. In light of uncertainties regarding the level of aircraft orders, the Company continues to assess the potential impact on the programme’s manufacturing activities. Risks on the qualification of technical capabilities and associated costs remain stable, with no major variation compared to 2023.

Consolidated self-financed R&D expenses were stable at €3,250m (2023: €3,257m).

Consolidated EBIT (reported) amounted to €5,304m (2023: €4,603m), including net Adjustments of €-50m.

These Adjustments comprised:

• €+101m impact related to the dollar working capital mismatch and balance sheet revaluation, of which €+247m were in Q4. This mainly reflects the phasing impact arising from the difference between transaction date and delivery date;
• €-121m related to the A400M, of which €-118m were in Q4;
• €+51m related to the gain on Airbus OneWeb Satellites, linked to the acquisition of the remaining 50% of the joint venture in Q1;
• €-40m related to the recently announced termination of the Airbus Beluga Transport business;
• €-41m of other costs including compliance and M&A, of which € -31 m were in Q4.

The financial result was €121m (2023: €166m), mainly reflecting the revaluation of certain equity investments and the evolution of the US dollar, partially offset by the interest result and the revaluation of financial instruments. Consolidated net income(1) was €4,232m (2023: €3,789m) with consolidated reported earnings per share of €5.36 (2023: €4.80).

Consolidated free cash flow before customer financing was €4,463m (2023: €4,532m), reflecting the strong performance in all businesses. Consolidated free cash flow totalled €4,461m (2023: €4,096m). The gross cash position stood at €26.9bn at the end of December 2024 (year-end 2023: €25.3bn), with a consolidated net cash position of € 11.8 bn (year-end 2023: €10.7bn).

The Board of Directors will propose the payment of a 2024 dividend of €2.00 per share (2023: €1.80 per share) and a special dividend of €1.00 per share (2023: €1.00 per share) to the 2025 Annual General Meeting taking place on 15 April 2025. The proposed payment date is 24 April 2025.

Outlook

As the basis for its 2025 guidance, the Company assumes no additional disruptions to global trade or the world economy, air traffic, the supply chain, the Company’s internal operations, and its ability to deliver products and services. The guidance excludes the impact of potential new tariffs on the Company’s business. The Company’s 2025 guidance includes the impact of the integration of certain Spirit AeroSystems work packages on its EBIT Adjusted and Free Cash Flow before Customer Financing, based on preliminary estimates and a closing assumption as of 1 July 2025.

On that basis, the Company targets to achieve in 2025:

• Around 820 commercial aircraft deliveries;
• EBIT Adjusted of around €7.0bn;
• Free Cash Flow before Customer Financing of around € 4.5 bn.

Preliminary assumptions of the impact of the integration of certain Spirit AeroSystems work packages:

• EBIT Adjusted: broadly neutral;
• Free Cash Flow before Customer Financing: mid triple digit negative;
• Net cash broadly neutral as the compensation to be received from Spirit AeroSystems will offset the FCF negative impact.

 

19 Feb 25. Global tensions drive Dutch insurer ASR Nederland to invest in defence. Dutch insurer ASR Nederland (ASRNL.AS) could invest up to 100m euros ($104.24m) per investment case in the country’s defence industry, its CEO said on Wednesday, responding to government efforts to bolster European defence.

The government has called for private capital to help build a stronger European arms industry, as the Ukraine-Russia war has underlined the threat to European security. At the same time, the U.S. administration, under the presidency of Donald Trump, has threatened to withdraw its support for European defence. The Netherlands’ second-largest insurer said in December it would consider investing in Dutch defence companies, ending a long-held policy of avoiding the sector as part of its efforts towards socially responsible investment.

“It depends on the opportunity and need. In some cases, it could be 50m. In other cases, it could be 100m,” ASR CEO Jos Baeten told Reuters when talking about investing in defence companies.

He said he was in close contact with the Dutch Ministry of Defence and mentioned the first investment in the area was a done deal, adding the company had asked not to be named.

“It would be naive to think we don’t need to invest further in our own defence,” Baeten said, adding Europe needed to stand together given “the way the new presidency of the U.S. is treating Europe”.

“France can’t do it on their own. Germany can’t do it on their own. The Netherlands can’t do it on their own,” he said. ($1 = 0.9593 euros) (Source: Google/Reuters)

 

18 Feb 25. Gilat Satellite Networks Ltd. (NASDAQ: GILT, TASE: GILT), a worldwide leader in satellite networking technology, solutions and services, today announced the formation of its new Defense Division, a strategic move designed to target the increasing demand for government and defense SATCOM solutions. Gilad Landsberg has been appointed President of Gilat’s Defense Division, bringing over 20 years of experience in the defense industry.

Gilat Defense provides secure, rapid-deployment SATCOM solutions tailored for military and HLS organizations, government agencies, and defense integrators, with a strong focus on supporting the U.S. Department of Defense (DoD) and allied forces worldwide. By unifying, under one umbrella, the expertise and technologies of Gilat, and the wholly-owned subsidiaries Gilat DataPath and Gilat Wavestream, the division delivers end-to-end solutions with multiple layers of communication redundancy, ensuring maximum operational availability. With a focus on innovation, the division leverages advanced technologies and flexible business models, to adapt to evolving defense requirements. Trusted by the U.S. DoD, NATO and global defense forces, Gilat Defense’s  field-proven solutions offer secure, high-performance connectivity, delivering reliable, battle-tested performance in the toughest environments to meet the critical SATCOM needs of modern defense communications.

Gilat Defense will be showcasing its solutions at the upcoming Satellite 2025 show in Washington, D.C., next to the Gilat Booth #2511. Visitors to the booth will have the opportunity to see a range of cutting-edge defense SATCOM solutions, including the newly launched GLT 1500 terminal, DataPath 2.6m antenna solution for tactical terminals and the US made Aquarius DS Family of products including Aquarius Pro DS and Aquarius E DS which are both compliant with FAR 889 and future DFAR 5949 regulations.

“With the launch of Gilat’s Defense Division, we are strengthening and enhancing our commitment to providing advanced SATCOM solutions that meet the evolving needs of modern defense operations,” said Gilad Landsberg, President of the Defense Division at Gilat Satellite Networks. “By combining technological innovation with a deep understanding of defense requirements, we are ensuring that military and government organizations have access to secure, resilient, and high-performance connectivity for mission success.”

 

19 Feb 25. BAE Systems is confident of meeting higher demand for weapons if governments were to increase their military spending targets, according to the head of Europe’s largest defence group.  BAE chief executive Charles Woodburn said the company would be “ready for” a surge in demand but needed clarity around longer-term guarantees on spending.  “It does feel like a paradigm shift,” he said, in reference to recent rearmament talks among European nations. Nato has also indicated that its members will agree to raise their defence spending target above the current 2 per cent of GDP at a summit in June.  “I am confident we can meet the demand provided we have clarity [around the demand signal],” said Woodburn.  The FTSE 100 group has been a beneficiary of higher defence spending since Russia’s full-scale invasion of Ukraine in February 2022, helping to propel profits and orders over the past year.  BAE on Wednesday reported 2024 results at the top end of market expectations, with underlying earnings rising 14 per cent to just over £3bn. Revenues were up 14 per cent at £28.3bn. BAE said it won orders worth £33.7bn during the year, taking its backlog to a record £78bn amid strong demand from government customers.  Woodburn said the company was watching developments in Europe closely. Defence executives have stepped up calls for greater consolidation of the continent’s fragmented industry amid increasing pressure from US President Donald Trump’s administration for Europe to pay for its own security. BAE already had a “strong European footprint” through its Swedish subsidiary, as well as its shareholdings in missile champion MBDA and role in the pan-European Eurofighter consortium, he said. Airbus chief executive Guillaume Faury recently called for greater collaboration between the UK and Europe on their rival programmes to develop new fighter jets and combat air systems. Airbus is working with Dassault Aviation on the Franco-German Future Combat Air System while BAE is in an alliance with Italy’s Leonardo and Japan’s Mitsubishi Heavy Industries. Woodburn said that while BAE was already in a strong team with Italy and Japan, there were “opportunities” for the two programmes to work together, notably on “unmanned” systems. He played down concerns about any potential impact on its US business under the new Trump administration. Trump has said he would seek to cut bns of dollars from the Pentagon budget and industry executives are already bracing themselves for disruption from a new breed of technology-led players. BAE, said Woodburn, had a strong portfolio in emerging technologies like drones, counter drones and artificial intelligence. The company believes it could play a role in a new missile defence shield project that Trump has said he wants the Pentagon to develop. “We are not sitting here fearful that somebody has something that we don’t have. We have a really strong portfolio that is very well-aligned to the US national defence strategy,” he said. For 2024, the company reported free cash flow of £2.5bn, significantly higher than expected because of a high level of advance customer payments towards the end of the year. The company said it would increase its full-year dividend by 10 per cent to 33p a share. Combined with £555mn in share buybacks, BAE returned £1.5bn to shareholders in 2024. Recommended News in-depthEU defence How Europe can defend itself without US help Orders were driven by contract wins for warships in Australia, its Swedish-made CV90 fighting vehicles and new munitions. BAE also benefited from new orders for the pan-European Eurofighter Typhoon aircraft from Spain and Italy. The company said its future business would be underpinned by work on the trilateral Aukus alliance between the UK, the US and Australia initially providing nuclear-powered submarines to Canberra, as well as the development of a new generation fighter jet.  The company expects its earnings to rise by between 8 and 10 per cent this year on sales up as much as 9 per cent. It is targeting cumulative free cash flow in excess of £5.5bn between 2025 and 2027. Shares in the company, which have more than doubled since February 2022, fell back slightly on Wednesday morning before recovering to £13.43 a share. (Source: FT.com)

 

19 Feb 25. BAE Systems plc Preliminary Results Announcement 2024.

Charles Woodburn, Chief Executive, said: “The results we’re reporting today reflect the outstanding efforts of our employees and continue our track record of strong top-line and earnings growth, free cash flow and orders.

“We’re supporting our customers around the world, while shaping our portfolio towards higher growth and strategically important markets. Across our business, we’re also investing in our people, facilities and technologies to drive efficiencies, boost capacity and increase our agility to deliver in a rapidly evolving environment.

“Based on the exceptional visibility of our record order backlog and sustainability of our value-compounding business model, we remain confident in the positive momentum of our business into the future.”

As defined by Group

• The 14%2 growth in sales and underlying EBIT reflects strong programme performance across all sectors and the benefit of M&A activities in the year, including the acquisition of Ball Aerospace (now Space & Mission Systems (SMS)) in February.
• Growth of 10%2 in underlying EPS reflects the increase in underlying EBIT, partially offset by the increase in underlying net finance costs incurred as a result of the $4.8bn (£3.8bn) debt finance raised in the year.
• Free cash flow was £2,505m, reflecting a high level of customer advances towards the end of the year and strong operational cash conversion. This was offset by higher capital expenditure and net finance costs.
• Our order backlog grew by 11% to a record £77.8bn, which included order backlog of £3.0bn related to SMS.

As derived from IFRS

• The growth in revenue of 14% reflects the same strong programme performance across the portfolio.
• Operating profit was up 4% as the growth in underlying EBIT was offset by the additional amortisation of intangible assets acquired with SMS.
• Basic EPS was up 6%, also reflective of the additional finance costs and amortisation of intangibles incurred as a result of M&A activities in the year.
• The increase in net cash flow from operating activities was driven by strong operational cash conversion.

Capital deployment

• The Board has recommended a final dividend of 20.6p, taking the total dividend for 2024 to 33.0p – an increase of 10% on last year. Subject to shareholder approval at the 2025 Annual General Meeting, the dividend will be paid

on 2 June 2025 to shareholders on the share register on 22 April 2025.

• During the year, the Company repurchased 43m of shares under our share buyback programmes, at a cost of £555m. Combined with dividends, the Group returned £1,492m to shareholders in the year ended 31 December 2024.
• In March, we successfully raised $4.8bn (£3.8bn) of debt finance following the $5.5bn (£4.4bn) acquisition of Ball Aerospace.

Delivering for our customers

Our continued focus on operational performance and contracting discipline enables our consistent delivery of critical capabilities and technologies for our customers worldwide. During the year, we secured £33.7bn of orders and made good progress executing on our long-term major programmes. Highlights included:

• we reached agreement with our international partners, Leonardo SpA and Japan Aircraft Industrial Enhancement Co Ltd (JAIEC), to form a new joint venture company, which will be accountable for the design, development and delivery of a next generation combat aircraft under the Global Combat Air Programme (GCAP), subject to regulatory approvals;
• under the AUKUS announcement, we were selected to deliver Australia’s new fleet of nuclear-powered submarines, alongside ASC Pty Ltd (ASC). In November, we also entered into an initial mobilisation arrangement with the Australian Government to progress its SSN-AUKUS programme together with ASC;
• we signed a contract, worth £4.6bn, for the delivery of the first three Hunter Class frigates in Australia, following which, we entered the construction phase and officially cut steel on the first ship at a ceremony at the Osborne Naval Shipyard in Adelaide, South Australia;
• continued strong demand for our combat vehicles and, building on an initial contract in May, our Hägglunds business received further orders in December, bringing the total value to approximately $2.5bn (£2.0bn); and
• multiple satellite launches with our systems on board for the US Space Force and NASA. We also completed testing and delivery of the primary scientific instrument for the Nancy Grace Roman Space Telescope to NASA’s Goddard Space Flight Center.

Investing in tomorrow

Alongside good operational delivery, we continue to invest in our people, research and development (R&D) and capital expenditure. Highlights included:

• we recruited around 2,300 new apprentices and graduates in the UK and, in the US our intern programme provided placement opportunities for nearly 500 interns;
• we opened our new state-of-the-art shipbuilding academy in Glasgow, UK, greatly enhancing our ability to develop and train our Naval Ships workforce and expanding on our established academies in Barrow-in-Furness and Samlesbury, UK;
• we made significant progress on the construction of our new ship build assembly hall in Glasgow, which we expect to be fully operational in 2025;
• we are investing more than £160m in our Hägglunds business, based in Sweden, in advanced manufacturing capabilities and a new customer test and acceptance centre to expand our production and delivery capabilities; and
• we have committed to investing £220m in an advanced technology factory in Rochester, UK, to support our UK-based Electronic Systems business, which is expected to deliver increased capacity through a more efficient and sustainable facility.

Shaping the portfolio

We continued to enhance our world class portfolio to strengthen our relevance in a rapidly evolving global threat environment. Highlights included:

• making excellent progress on integration activities within our new SMS business, with the bulk of our core systems and processes now transitioned;
• reducing our shareholding in Air Astana from 49% to 17%, following its Initial Public Offering (IPO) in February – with cash proceeds on disposal of £166m and a profit on disposal of £75m; and
• completing several smaller acquisitions in the UK during the year to strengthen our drone and counter-drone capabilities.

Group guidance3 for 2025

Guidance is provided on the basis of an exchange rate of $1.28:£1, which is in line with the actual 2024 exchange rate.

• interests c.£90m

Sensitivity to foreign exchange rates: the Group operates in a number of currencies, the most significant of which is the US dollar. As a guide, a 5 cent movement in the £/$ exchange rate will impact sales by c.£525m, Underlying EBIT by c.£75m and Underlying EPS by c.1.4p.

1. We monitor the underlying financial performance of the Group using alternative performance measures (APMs). These measures are not defined in International Financial Reporting Standards (IFRS) and therefore are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. The relevant IFRS measures are presented where appropriate. The purposes and definitions of non-GAAP measures are provided in the Alternative performance measures section on page 46.
2. Growth rates for sales, underlying EBIT and underlying EPS are on a constant currency basis (i.e. calculated by translating the results from entities in functional currencies other than pounds sterling for the year ended 31 December 2023 to pounds sterling at the average exchange rate of such currencies for the year ended 31 December 2024). The comparatives have not been restated. All other growth rates and year-on-year movements are on a reported currency basis.
3. While the Group is subject to geopolitical and other uncertainties, the Group guidance is provided on current expected operational performance. The guidance is based on the measures used to monitor the underlying financial performance of the Group.

 

19 Feb 25. BAE Systems expects sales to hit £30bn this year.

Future US growth could be muted, but other markets are set to accelerate

• Free cash flow outperformance
• Some uncertainty with US defence budget

BAE Systems’ (BA.) order backlog surged to a new record amid growing geopolitical tensions, as the defence business hiked its dividend by 10 per cent on a strong set of full-year numbers which beat guidance.  The top-line performance was driven by the maritime and platforms and services units, where sales were up 11 per cent and 13 per cent, respectively, and was boosted by the $5.5bn (£4.4bn) acquisition of Ball Aerospace in February. Underlying operating profit rose 14 per cent to £3.02bn. Free cash flow of £2.5bn, while flat against last year, was enhanced by higher-than-expected customer advances in the fourth quarter and came in almost £900m better than consensus.  The company brought in £33.7bn of orders in the year, a sum helped by significant orders for frigates in Australia, CV90 combat vehicles in Sweden and Denmark, and Typhoon aircraft in Spain and Italy. Its order backlog at the year end was a record £77.8bn, up 11 per cent on the 2023 position.  As with other European defence stocks, BAE Systems has gained from an increasingly uncertain political and defence backdrop as the new US administration pushes Nato states to significantly increase military spending. Vice President JD Vance’s speech at the Munich Security Conference has caused further angst in European capitals about reducing their reliance on America.  However, something to keep an eye on is potential knock-on effects from changes to the US defence budget, which could feasibly be cut to fund tax cuts. The company took 48 per cent of its sales from the US in 2024.  Net debt (excluding lease liabilities) rose by £3.9bn, which was driven by the Ball Aerospace purchase. The deal was partially funded by $4.8bn of debt raised during the year.  Annual guidance on a constant currency basis is for sales growth of 7-9 per cent, alongside underlying operating profit and earnings per share growth of 8-10 per cent. While management’s free cash flow target is only for £1.1bn, another end-of-year bump would not be a surprise and it raised its three-year guidance.  The shares fell slightly despite the robust results, but that must be seen in a context where they have risen by double-digits so far this year. BAE Systems trades on 17 times forward consensus earnings, which is appealing as Europe (including the UK) is forced to confront long-term underinvestment in defence. And investors must remember that the chunky order backlog is significantly higher when considering incumbent positions. Buy. Last IC View: Buy, 1,307p, 01 Aug 2024. (Source: Investors Chronicle)

 

18 Feb 25. VSE Corporation Announces Agreement to Sell Fleet Segment.

Divestiture Will Complete Strategic Portfolio Transformation to a Pure-Play Aviation Aftermarket Parts and Services Provider. VSE Corporation (“VSE” or the “Company”) (NASDAQ: VSEC), a leading provider of aftermarket distribution and repair services, announced today that the Company has entered into a definitive agreement to sell its Fleet business segment, Wheeler Fleet Solutions, to One Equity Partners (“OEP”) for up to $230 m in total consideration.

“OEP has a proven history of transforming industrial distribution businesses through strategic organic and inorganic investments that enhance operational performance, expand product capabilities, and extend geographic reach”

MANAGEMENT COMMENTARY

“The sale of our Fleet business is the final step in our strategic portfolio transformation, further simplifying and focusing our company, and strengthening our global leadership position as an aviation aftermarket parts and services provider,” said John Cuomo, President and CEO of VSE Corporation. “We entered 2025, laser-focused on our customers, supplier partners, growth, business integration and execution. We are deeply committed to delivering unparalleled value for our customers, suppliers, shareholders and employees as a higher-growth, higher-margin, pure-play company dedicated to supporting the global commercial, business and general aviation aftermarkets. This divestiture reaffirms our commitment to simplify our business and go-to-market strategy and solidifies our position as a leading provider of Aviation aftermarket distribution and repair services.”

Mr. Cuomo continued, “I am deeply appreciative and proud of our Wheeler Fleet Solutions team. Five years ago, we embarked on an ambitious customer diversification and transformation strategy focused on growing commercial and e-commerce business, while continuing to serve our long-standing customer, the United States Postal Service. During this time, we successfully diversified and grew the customer base and expanded product offerings, all while delivering industry leading service. The OEP team will provide a great home and support for this outstanding team and the next phase of this story.”

“OEP is excited to partner with the Wheeler Fleet Solutions team as we enter this exciting new chapter together. North America’s truck fleet industry continues to experience steady demand for parts and services, driven by technological advancements and evolving customer needs. With a 65-year legacy of delivering industry-leading quality and service, Wheeler Fleet Solutions is well positioned to accelerate its growth and success as an independent company,” said Ori Birnboim, Partner at OEP. “OEP has a proven history of transforming industrial distribution businesses through strategic organic and inorganic investments that enhance operational performance, expand product capabilities, and extend geographic reach,” added Steve Lunau, Partner at OEP. “We are committed to building on Wheeler Fleet Solution’s strong employee and customer centric culture, while driving continued development and growth.”

TRANSACTION OVERVIEW

VSE has entered into a definitive agreement to sell its Fleet Segment to OEP for a total consideration of up to $230 m, comprising a $140 m cash payment at closing, a $25 m seller note and up to $65 m in additional contingent earnout consideration. The transaction is expected to close in the second quarter of 2025, subject to customary closing conditions.

ADVISORS

Jones Day served as legal counsel and Jefferies, LLC acted as exclusive financial advisor to VSE Corporation with respect to the Fleet segment sale.

ABOUT VSE CORPORATION

VSE is a leading provider of aftermarket distribution and repair services. Operating through its two key segments, VSE significantly enhances the productivity and longevity of its customers’ high-value, business-critical assets. The Aviation segment is a leading provider of aftermarket parts distribution and maintenance, repair, and overhaul (MRO) services for components and engine accessories to commercial, business, and general aviation operators. The Fleet segment specializes in part distribution, engineering solutions, and supply chain management services catered to the medium and heavy-duty fleet market. For more detailed information, please visit VSE’s website at www.vsecorp.com.

ABOUT ONE EQUITY PARTNERS

One Equity Partners (“OEP”) is a middle market private equity firm focused on the industrial, healthcare, and technology sectors in North America and Europe. The firm seeks to build market-leading companies by identifying and executing transformative business combinations. OEP is a trusted partner with a differentiated investment process, a broad and senior team, and an established track record generating long-term value for its partners. Since 2001, the firm has completed more than 400 transactions worldwide. OEP, founded in 2001, spun out of JP Morgan in 2015. The firm has offices in New York, Chicago, Frankfurt and Amsterdam. For more information, please visit www.oneequity.com. (Source: BUSINESS WIRE)

 

18 Feb 25. Aerox® Aerospace Group, the parent company of aviation oxygen specialist companies Aerox® Aviation Oxygen Systems and Aerox® Fluid Power, today announced the acquisition of Medley, FL based Omnigas Systems, Inc, a provider of aftermarket services for aerospace oxygen and fire suppression systems catering to commercial aviation, business aviation, and military customers.

This strategic acquisition of Omnigas underscores Aerox‘s commitment to delivering comprehensive aviation oxygen solutions to the global aerospace industry.   Aerox® specializes in oxygen systems engineering and manufacturing for leading airframe manufacturers, Air Medical interiors manufacturers, and other oxygen system integrators.  The addition of Omnigas enhances Aerox‘s capabilities to support a broader in-service fleet and a wider range of oxygen system brands beyond Aerox® systems. “Our acquisition of Omnigas Systems leverages Aerox’s deep expertise and infrastructure in developing and manufacturing aviation oxygen systems for a global customer base.

We are excited to welcome the experienced Omnigas team into the Aerox® family of companies.” stated Scott E. Ashton, President and CEO of Aerox®.  “Omnigas Systems brings robust capabilities in both oxygen components and fire suppression systems service and repair, as well as hydrostatic testing.  We are confident that the integration of Omnigas will deliver exceptional value to our combined global customer partners.”  Omnigas Systems will continue to operate independently within the Aerox® Aerospace Group portfolio alongside Aerox® Aviation Oxygen Systems and Aerox® Fluid Power.  Omnigas will be re-branded as “Aerox® Omnigas MRO.”

This acquisition marks the fourth for Aerox® Aerospace Group, following the acquisition of Aerox® Aviation Oxygen Systems in 2020, Sky-Ox® Aviation Oxygen in 2022, and Fluid Power, Inc. in 2023.

Alderman & Company® served as exclusive financial advisor in the sale of Omnigas Systems to Aerox® Aerospace Group.

ABOUT AEROX AVIATION OXYGEN SYSTEMS®

Aerox® is a leading designer and manufacturer of aviation oxygen systems and accessories.  Since 1981 Aerox® has provided the aviation industry with innovative aerospace solutions for ensuring pilot wellness, alertness, and safety.  Aerox® offers a comprehensive oxygen systems product line including OEM  and STC installed oxygen systems, TSO-approved oxygen masks, PMA Oxygen Cylinders, and portable oxygen solutions.  Its newest oxygen system product is the Lighter than Air Walkaround Portable Oxygen kit, which has been selected for numerous airline cargo conversions.  https://www.aerox.com

ABOUT AEROX® OMNIGAS MRO

Aerox® Omnigas MRO is a premier provider of aftermarket services specializing in aerospace oxygen and fire suppression systems. With a strong presence in commercial aviation, business aviation, and military sectors, Aerox® Omnigas Systems delivers industry-leading solutions that ensure safety and reliability. The company offers a robust range of services, including hydrostatic testing, maintenance, repair, and overhaul (MRO) of oxygen components and fire suppression systems. Known for its commitment to quality and customer satisfaction, Aerox® Omnigas Systems consistently meets the stringent demands of the aerospace industry, making it a trusted partner for aviation customers worldwide. Learn more about Aerox® Omnigas MRO at http://www.aeroxomnigas.com

ABOUT AEROX® FLUID POWER, INC.

Founded in 1949, Fluid Power, Inc. began producing and overhauling high altitude, oxygen-breathing apparatus in support of the Armed Forces during the 1950-1953 Korean War.  Today, Aerox® Fluid Power (AFP) is one of the leading manufacturers of high-pressure, high-altitude oxygen breathing components and portable systems. AFP has been an approved prime contractor to the DLA and US Military for nearly 60 years and a qualified supplier to major airframe manufacturers, airlines, and leading systems integrators worldwide. Learn more about Aerox® Fluid Power at https://www.aeroxfluidpower.com

 

18 Feb 25. Serco goes all in on US defence – but will it pay off?

The outsourcing giant will need to stay on the right side of Elon Musk’s efficiency drive.

Serco (SRP) is making a bold push into US defence, snapping up Northrop Grumman’s (US:NOP) mission training and satellite ground network business, MT&S, for $327m (£260m) last month. Announced 10 days after Donald Trump’s inauguration and with consistent rhetoric about higher defence spending, the timing looks smart.

Once completed later this year, the FTSE 250 outsourcer’s largest acquisition in a decade will make defence its largest sector, representing about 40 per cent of its revenue. North America would bring in over $2bn in sales, and account for about half of its total operating profits.

The move comes on the heels of a $247m contract to support soldier fitness in the US Army and reinforces its pivot towards military contracting at a time of rising geopolitical tensions. “This is the sort of deal we’ve been expecting them to do for the last two or three years,” said Michael Connelly, analyst at Investec.

And given the tensions within Nato, a new contract to run UK military recruiting keeps Serco heavily involved on this side of the pond as well.

Serco has already made strides across the Atlantic, more than doubling sales and quadrupling operating profits since 2017. But this deal pushes it deeper into higher-growth areas of defence, such as space, exercise simulation and synthetic training. The latter, where soldiers train using virtual reality or equipment similar to flight simulators, is expanding at around 4 to 5 per cent a year – nearly twice the rate of the overall US defence budget, according to Berenberg.

Financially, the numbers stack up. Peel Hunt expects the acquisition to boost earnings per share (EPS) by 5 per cent in 2026, the first full year under its ownership. MT&S is also twice as profitable as Serco’s existing business, with 11 per cent margins compared with the group’s 5.6 per cent.

The added scale and technology capabilities should help the outsourcer win more bids in the pipeline, said analysts at Berenberg, and there’s even potential to roll out MT&S’s space and training expertise outside of the US. For example, management has flagged that the deal could strengthen its bid for a virtual training contract with the Ministry of Defence in the UK.

But back in the US, the military budget is growing – but so is scrutiny. Last week, newly confirmed defence secretary Pete Hegseth said the government should outspend the Biden administration on defence. “The president is committed, as he was in the first term, to rebuilding America’s military by investing,” he said.

At the same time, the Pentagon, an early target for the so-called Department of Government Efficiency (Doge) run by Elon Musk, is under pressure to prove every dollar is well spent. An audit has already started to uncover billions of dollars in wasteful spending within the defence department’s $850bn budget.

That raises questions about whether some government contracts could be on the chopping block, yet analysts have so far brushed aside concerns about the potential impact on Serco. “What they want to see is a more cost-effective set of defence forces. At the same time, they also want a bigger fleet, which is one of the areas where Serco excels in support,” said Robin Speakman, analyst at Shore Capital.

Some areas of spending are harder to cut than others. ‘Mission readiness’ remains a top priority for the Trump administration, and is seen as an efficient way to make military investments count. Virtual training, for example, offers obvious cost savings, allowing pilots to simulate missions without the expense of launching an aircraft.

An overlooked exposure

Defence is expected to become a greater proportion of Serco’s sales because of rising military budgets and lower immigration revenues. This shift could boost the stock, currently trading at 10.1 forward earnings, which is lower than the valuations given to more defence-focused companies. It’s well ahead of fellow outsourcer Capita (CPI), trading on five times, while Babcock (BAB) is ahead on 12 times.

Serco’s shares have struggled in recent months, weighed down by the loss of its long-running Australian immigration contract, an expected drop in UK asylum revenues and an annual £20mn hit from higher labour costs after the Budget. The looming retirement of chief executive Mark Irwin hasn’t helped sentiment either.

These setbacks have overshadowed some major wins, such as its new contract to run recruitment for the British Army, the Royal Navy, the Royal Air Force and Strategic Command, worth up to £1.5bn. The mandate is seen by some as a poisoned chalice, given Capita’s well-documented woes with its UK Army recruitment contract.

Still, with the contract not kicking off until early 2027 and a line-up of experienced partners in place, analysts expect a much smoother operation under Serco. “Never underestimate the impact of the ability that Serco has had to learn from the mistakes that Capita has been making for over half a decade now,” said Connelly.

Medicaid remains a wild card. A major chunk of Serco’s US government services revenue is tied to the programme, which could be cut or even dismantled under a second Trump term. For now, the market is watching cautiously. But if Serco can prove its pivot to US defence is more than just good timing, investors may start paying attention.

(Source: Investors Chronicle)

 

17 Feb 25. James Fisher strengthens APAC commitment with Japan entity.

• James Fisher launches new entity for long-term presence in Japan, reinforcing its commitment to the country.
• The move brings James Fisher’s expertise to the Japanese energy and defence industries, while driving innovation for the company’s maritime operations.
• This builds on successful in country partnerships including, in the offshore wind sector, the Joint Collaboration Agreement with Tokyo Gas Engineering Solutions (TGES).

James Fisher & Sons plc (James Fisher), a leading global provider of specialist services to the energy, marine and defence industries, today launches a new legal entity in Japan, reinforcing its long-term commitment to Japan and its footprint in North East Asia.

The move furthers James Fisher’s intention to bring its integrated offering and innovative, sustainable solutions to the country’s energy transition, maritime security and defence needs. The Group already has a partnership covering the offshore wind service industry, including a Joint Collaboration Agreement with Tokyo Gas Engineering Solutions (TGES).

With more than 200 employees across 12 locations in APAC, and operations in over 25 countries worldwide, James Fisher can use both its regional and global expertise to support Japan’s industrial ambitions more rapidly and efficiently.

Jean Vernet, CEO at James Fisher and Sons plc said:

“Japan’s ambitious modernisation plans are driving demand for advanced maritime technology, defence capabilities and renewable energy solutions. With a target of 10 GW of offshore wind by 2030, a significant increase in defence spending to 2% of GDP by 2027, and around 99% of its foreign trade moving by sea, it is making substantial investments across these critical areas.

“James Fisher’s expertise gives us a unique opportunity to support Japan’s evolving needs. Our long-term commitment to the Japanese market will grow in parallel with the country’s goals, ensuring we continue to contribute to its national strategy, while bringing a global perspective to complex challenges.”

James Fisher is dedicated to pioneering safe, trusted solutions for complex customer challenges. Through its core market sectors, it provides innovative solutions to enhance the global shift towards cleaner energy production, protect lives and assets in the most demanding environments, and leads the way in targeted coastal maritime shipping and global oil and natural gas ship-to ship transfer.

James Fisher will be exhibiting at Japan Wind Expo 2025, 19th – 21st February.

 

17 Feb 25. UK defence stocks soar ahead of European summit on Ukraine. UK weapons stocks have soared as European defence spending is expected to rise. Shares in UK weapons manufacturers have soared today as leaders from across the continent convene for an emergency meeting in Paris to discuss the war in Ukraine.

“We’re facing a generational challenge when it comes to national security,” said Prime Minister Keir Starmer before heading to the meeting, adding that he was “ready and willing” to deploy peacekeeping troops to Ukraine.

Before the meeting, Nato secretary general Mark Rutte said that members will have to boost their defence spending to “considerably more than three per cent” of GDP.

BAE Systems rose 6.8 per cent to the top of the FTSE 100 as the market digested the news.

The defence firm is set to report its full-year results on Wednesday. Panmure Liberum analyst Nick Cunningham expects future growth rates “in the high single-digit range in the UK, Europe and Australia, driven by rapid budget growth and strong export demand. “

BAE, the largest arms manufacturer in Europe, has already played a significant role in Ukraine.

FTSE 250 firms Chemring and Qinetiq jumped 10 per cent and five per cent, respectively on the news. In Europe, German defence giant Rheinmetall surged 10 per cent.

“Shares in defence companies had already rallied hard since Russia invaded Ukraine as investors took the view that the shocking events would spur governments around the world to fortify their own defences,” explained AJ Bell investment director Russ Mould.

“In terms of European geopolitics, it’s been a huge last few days with potentially large ramifications ahead, and maybe we’ll look back on them as a big catalyst to higher European defence spending,” said Deutsche Bank managing director Jim Reid.

“The UK has one of the higher defence spending numbers in Europe (as a per cent of GDP) but even there, defence spending makes up a much smaller share of the budget relative to the past,” he added.

“Rutte’s comments effectively confirm this line of thinking and have acted as another share price catalyst, even though markets had already priced in a stronger earnings environment for the sector,” added Mould.

(Source: City AM)

 

14 Feb 25. British-backed challenger to Musk’s Starlink plunged into turmoil. Eutelsat turns to France for funding as it battles steep losses and technology delays. A venture backed by British taxpayers that is attempting to compete with Elon Musk’s Starlink has been plunged into turmoil after a €873m (£728m) loss triggered a collapse in its share price. Eutelsat, a Paris-listed satellite business which includes the British state as a key shareholder, has turned to the French government for support as it hunts for fresh funding. It is grappling with delays to its technology and intense competition from Mr Musk’s space business. Shares in the company plunged by more than 19pc on Friday after Eutelsat reported steep losses, including a €535m impairment. The British state owns around 10pc of Eutelsat following a merger with OneWeb, a UK satellite company rescued under Boris Johnson’s government in 2020. The UK invested £400m to save the company from bankruptcy four years ago but the taxpayer stake is now worth €65m (£54m) after Eutelsat’s shares collapsed to just €1.40. At one stage, Eutelsat valued OneWeb at more than €3.4bn. Now, the combined companies are worth just €650m. Both the UK Government and French state have seats on the company’s board. The Anglo-French company is a key player in a European Union satellite network intended to rival Mr Musk’s Starlink space network, amid growing concerns about the reliability of the mercurial bnaire. The share price collapse has prompted Eutelsat to explore its options as it seeks to raise bns of euros to build a new generation of OneWeb satellites. Two industry sources told The Telegraph that Eutelsat had approached the French government about securing additional funding. In its financial results, Eutelsat said it was “actively working on a financing plan in line with its strategic road map and longer term leverage objective”. Eutelsat declined to comment further. On Friday, Eutelsat confirmed a boardroom clear-out with four directors resigning. Dominique D’Hinnin, the company’s chairman, also announced his intention to retire. Michel Combes, a director from Japan’s SoftBank, has joined the board. Eutelsat’s stock has been tumbling as the company buckles under intense pressure from Starlink, which has launched thousands of satellites to create a global broadband network. The French company’s business consists of a network of communications and TV satellites, while it also owns OneWeb, a network of 650 low-orbit satellites that competes directly with Starlink. However, OneWeb, which is based in London, has endured repeated delays in the development of its technology and on New Year’s Day suffered a 48-hour blackout, blamed on a glitch that failed to account for the fact that 2024 was a leap year. Eutelsat is a crucial player in Europe’s IRIS2 satellite project, which Brussels hopes will compete with Mr Musk’s Starlink and provide a sovereign rival. To develop the project, it needs bns more euros in financing. Sources said Saudi Arabian investors had considered a possible tie-up with the business as early as 2023. However, it is understood these talks did not extend beyond normal commercial discussions. OneWeb has a joint venture deal with Neom, a planned Saudi mega-city. (Source: Daily Telegraph)

 

14 Feb 25. Rheinmetall CEO sees faster growth as pressure on Europe to boost its defences mounts. German arms maker Rheinmetall (RHMG.DE) expects to keep growing even faster than earlier thought, its CEO said, given U.S. President Donald Trump administration’s calls on Europe to boost defence spending and take responsibility for its own security.

Trump has called on European allies to crank up defence spending to as much as 5% of GDP, though no NATO member right now is close to that threshold. German Defence Minister Boris Pistorius on Friday called the NATO defence spending target of 2% of economic output insufficient, urging changes to the EU’s Maastricht debt rules to give the alliance’s EU members more leeway in boosting military budgets. Asked about possible consequences for Rheinmetall (RHMG.DE) after Trump’s administration announced talks about a ceasefire in the Ukraine war and said Europeans needed to do more for their security, its CEO Armin Papperger said:

“For our company that means that we have to grow even more than previously thought.

“Trump has clearly said that Europe needs to grow up and the United States will not have to deal with European security,” Papperger told Reuters on the sidelines of the Munich Security Conference. (Source: Google/Reuters)

 

17 Feb 25. Etion Create and Nanoteq merge. Nearly ten years after the Reunert group acquired Nanoteq, and three years after acquiring Etion Create, the group announced the merger of the two business units. Etion Create and Nanoteq, both business units within Reunert’s Applied Electronics Segment, merged effective 1 October 2024, “marking a significant milestone in enhancing our offerings in cybersecurity while streamlining operational capabilities,” the group said. The announcement comes ahead of the joint participation of both entities at the IDEX 2025 exhibition in Abu Dhabi, United Arab Emirates, from 17 to 21 February.

“The merger will unlock significant growth potential by bringing together business development, financial, and technical acumen, while fostering greater innovation and operational efficiency; further aligning us to the Group’s strategy. The merged entity is well-positioned to continue providing world-class solutions across both local and global markets,” said Trevor Raman, the Segment CEO for Reunert Applied Electronics.

Etion Create and Nanoteq bring complementary strengths to the cybersecurity landscape. Reunert expanded its cybersecurity portfolio through the acquisitions of Nanoteq in 2016 and Etion Create in 2022. Etion Create, an original design manufacturer (ODM), has made significant contributions across the defence, cybersecurity, mining, industrial and rail sectors in South Africa and abroad. Following the merger, the consolidated entity will operate and trade under the Etion Create brand. Nanoteq employees will be retained following the fulfilment of all contractual obligations, ensuring a smooth transition even after the dissolution of Nanoteq, Reunert explained.

“This strategic integration within the Applied Electronics Segment is designed to consolidate our strengths in cybersecurity, augment our service offerings and advance our technological capabilities. By combining Nanoteq’s expertise in cryptographic solutions with Etion Create’s comprehensive cybersecurity experience, we are creating a unified, agile, and resilient entity that is better equipped to meet evolving market demands. The efficient use of complementary technologies and expertise will enhance sustainability and responsiveness in the industries that we serve,” said Petrus Pelser, the Managing Director of Etion Create.

“Etion Create’s focused expansion in the Middle East is underscored by our presence at the IDEX2025 exhibition, where we will be showcasing the CheetahNAV military vehicle navigation system designed for demanding environments. The CheetahNAV delivers superior situational awareness to vehicle crews and has already been sold to various countries in the region,” the company said.

Etion Create, formerly known as Parsec, operates across diverse sectors, including defence, aerospace, information security, mining, rail, and industrial industries. Nanoteq specialises in the design and development of cryptographic algorithms, protocols, tamper detection mechanisms, and full cryptographic systems. (Source: https://www.defenceweb.co.za/)

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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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