BUSINESS NEWS

28 Feb 19. Small Jets For Big Swarms: Kratos Buys Turbine Tech Company.

“These are engines that would fit on your tabletop,” said Kratos exec Stacey Rock. “We don’t want hundreds of ‘em, we want thousands [of drones] to overwhelm the threat.”

Eager to expand its drone and missile business for the coming era of swarm warfare, defense contractor Kratos just acquired a controlling interest in a small Florida firm that’s developing small, affordable, but highly efficient jet engines.

“These are engines that would fit on your tabletop and would go into things even smaller than a Predator,” said Stacey Rock, who’ll head the new Kratos Turbine Technologies division. “And this small jet engine market is growing: If you look at the systems that are coming out over the next five years, here’s hundreds of millions of dollars [of work]. We don’t want hundreds of ‘em, we want thousands… to overwhelm the threat.”

Sure, the $60m deal is just a blip on the radar of titans like Lockheed Martin. And the engines in question produce at most 1,000 pounds of thrust, enough to power a modest drone or a large missile — like the Tomahawk or JASSM. For perspective that’s less than 3 percent of the power of a jet fighter like the F-35. But small can be beautiful, especially in an era of warfare where speed, stealth, and precision may win more battles than massed force.

What matters here is the quality of the technology, not the quantity. Kratos’s acquisition, formerly Florida Turbine Technologies — about 250 employees led by a husband-and-wife pair of engineers — embodies three big trends for the Pentagon: small business innovation, customizable, modular manufacturing, and 3D printing.

3D printing, aka additive manufacturing, has gone from buzzword to trend to widespread reality in a range of fields, with even elementary school kids now designing and printing simple plastic models. 3D printing things with moving parts, however, is much harder. 3D printing components of jet engines, which must endure ferocious force and heat, is hardest of all. But that’s exactly what KTT is doing, and the technique is critical to making their engines produce enough power with the small size and low cost required to realize the US military’s vision of large fleets of effectively expendable drones, too numerous for enemies to track them all, let alone shoot them down.

One example: KTT is 3D printing “unique bearing designs” — details undisclosed, but they’d be impossible to build with normal techniques — that should eliminate the need for oil in turbochargers. That would allow for a less complicated engine that’s easier to maintain and less likely to break down. KTT is also 3D printing much lighter recuperators — basically, systems that save energy by capturing heat from the exhaust, which would otherwise be wasted, and recycling it to warm incoming air for easier combustion.

Now, caveat emptor: Florida/Kratos Turbine Technologies is developing these engines; they haven’t perfected them yet. So Kratos is taking a risk on a promising but unproven technology. If it pans out, however, Kratos will have a big advantage: Not only will they be able to build their own engines in-house — currently the only major component of their drones they have to outsource — their engines will also be more fuel-efficient than those from competitors, allowing for longer range per pound of aircraft.

The other attraction of this technology is that KTT isn’t developing an engine. They’re developing a family of engines. If this works — and again, that isn’t certain — they’ll have a common core that can easily be customized for different applications by adjusting the inlets, compressors, combustion chamber, exhaust nozzles, and so on. You want a long-range reconnaissance drone that can slowly circle over a target area for hours, then do it again tomorrow and the day after and the day after that? Or maybe a missile that only makes one trip, one way, in its entire life but has to make it really fast? The same basic tech could be tweaked to do either.

That kind of customization was unheard of in the era of mass production, when America was the arsenal of democracy. But this flexible, adaptable approach is exactly what the Defense Department wants as it struggles to keep up with rapidly changing technologies, tactics, and threats. Instead of building thousands of identical drones, you could build dozens of variants, each tailored to the mission and target.

There are limits to the Kratos jets’ adaptability. They can’t scale up to power fighter planes, nor can they scale down so far as to replace the tiny propeller engines powering mini-drones and quadcopters. And there are limits to the company’s ambitions. They expect to remain a subcontractor to larger firms like Lockheed, Raytheon, or Dynetics, for which they’re building the Gremlin air-launched drone. But if Kratos can get the engine technology to deliver as promised, their small drones could have a big impact on future battlefields.(Source: glstrade.com/Breaking Defense.com)

01 Mar 19. Thales and Gemalto reach agreement with the antitrust division of the United States Department of Justice. As announced by the United States Department of Justice (“DoJ”), Thales and Gemalto confirm today that they have reached an agreement with the Antitrust Division of the DoJ that will allow the companies to proceed with the Offer. Consistent with commitments already made to the European Commission and other regulatory authorities, the agreement requires the divestiture of Thales’s general purpose hardware security modules (GP HSM) business.

01 Mar 19. Austal enjoys strong results on back of $5.2bn order book. Western Australia-based Austal has grown revenue and EBIT by more than 30 per cent and delivered strong operating cash generation of more than $100m for the six months ended 31 December 2018. The half-year result was driven by continuing improvements across the company’s US Navy shipbuilding programs, as well as greater throughput in commercial ferry contracts and, importantly, significant growth across Austal’s US support business. Austal generated $851.5m revenue across its shipyards, with Australasia making up 20 per cent of revenue – reflecting the benefit of investments made to expand capacity across the segment.

Austal chief executive David Singleton welcomed the strong results, saying, “Austal has delivered strong revenue and earnings in the half but what is even more pleasing is what lies beneath those headline numbers.”

Austal expects FY2019 group revenue of about $1.9bn (assuming that the USD/AUD exchange rate continues at the current level) in line with the company’s update on 4 February 2018. FY2019 US shipbuilding margin is projected to be in the range of 7-8 per cent.

The expected revenue growth in the second half of FY2019 is not anticipated to result in a proportionate increase in FY2019 H2 earnings as previously advised, given that a significant portion of that revenue will be from early stage procurement and production for new vessel designs or existing designs that are undergoing material modifications or upgrades (particularly the LCS and EPF programs), and profit has been recognised at a lower level for revenue generated during those phases of construction.

“We were awarded contracts for four additional LCS following a competitive tender process, bringing the total number of ships currently under construction or scheduled to be built to 47 and valuing our order book at a record $5.2bn, up more than 54 per cent from a year ago,” Singleton added.

The level of cash generation in the first half has been strong but includes a number of progress payments and a reduction of working capital, which has skewed the full-year performance into the period.

Singleton said the significant increase in work won during the first half of the financial year – both across US Navy shipbuilding programs and support work – drove growth in FY2019 and is positioning the company well beyond this.

“With a record $5.2bn order book, Austal has secured work out to 2025 that provides a strong foundation to grow the business further. We are also seeing the benefit of a lower exchange rate that is enhancing our revenue and earnings in Australian dollars, whilst making Austal more competitive in winning new commercial vessels and defence exports,” Singleton said.

Austal has shipyards in Australia, the US and the Philippines, and service centres worldwide, which for 30 years have designed and constructed in excess of 300 vessels for over 100 operators in 54 countries.

Austal’s capabilities and strong reputation for quality shipbuilding grew from its early success in the development of high speed passenger and vehicle passenger ferries, offshore and wind farm vessels. Locally, Austal has employed 6,000 Australians over the past 30 years, with 888 staff employed around the country, while the company has employed 10,000 people internationally over the same period. (Source: Defence Connect)

28 Feb 19. Rolls-Royce opts for prudence over competition. Rolls-Royce (RR.) confirmed that it has withdrawn from a competition to power Boeing’s planned mid-market aircraft because it couldn’t be sure it would meet the proposed timetable. Management may have been reluctant to commit capital and resources, as the aerospace giant is still addressing technical issues on the Trent 1000 engine which Boeing employs on its Dreamliner 787 series. The additional inspections, repairs and redesigns meant the group increased the exceptional charge on the Trent 1000 to £790m, while another £186m covered issues connected with the Trent 900, ergo the closure of Airbus’ A380 production line.

The adjustments meant the group tabled a reported loss for 2018, though the share price held up as underlying figures were ahead of market expectations. Underlying operating profit of £616m was double that of the prior year, partly a reflection of an improved showing in the civil aerospace business, achieved despite increase in negative contract accounting adjustments. The group also noted a 17 per cent increase in the defence order backlog, while Power Systems recorded a 15 per cent hike in underlying revenue on the back of increased long-term service agreements.

Mid-way through last year, the group sold its L’Orange business, part of Power Systems, to Woodward Inc for €673m (£575m), effectively reducing the group’s net debt position to a £611m net cash surplus. Free cash flow came in at £568m against £259m at the end of 2017 – management is confident the group will be generating at least £1bn by 2020.

The accounting practices of Rolls-Royce have attracted comment down through the years, particularly regarding revenue recognition, so the introduction of IFRS 15 – a related accounting standard – impacted accumulated losses to the tune of £4.44bn, sending shareholder funds into negative territory.

JPMorgan Cazenove gives adjusted EPS of 27.6p, rising to 39.9p in 2020.

IC View: Jet engine makers operate at the limits of modern engineering and material science, so the kind of problems encountered with the Trent 1000 are hardly unique. Pratt & Whitney, one of Rolls-Royce’s chief rivals, has struggled with production issues for its latest geared turbofan engine. The test is how efficiently (and quickly) firms can respond, so the decision to sit-out the Boeing competition can be viewed as prudent. Total costs linked to the Trent 1000 issue through 2017-22 are now being pitched £100m in advance of earlier estimates, but reputational damage is the primary consideration. We remain neutral while this plays out. Hold.

Last IC View: Hold, 961p, 18 Feb 2019 . (Source: Investors Chronicle)

01 Mar 19. Rheinmetall with strong rise in operating earnings: €92m surge in profits to €492m.

– Consolidated sales grow by 4.3% to €6,148m

– Consolidated operating earnings up 23% at €492m

– Automotive operating earnings lifted to €26m and operating margin to 8.9%

– Defence increases operating earnings to €254m – operating margin climbs to 7.9%

– Order backlog at Group level reaches new record of €9,055m

Rheinmetall, the Düsseldorf technology group, in fiscal 2018 increased sales in both sectors in line with the recently published guidance, exceeding the company forecasts on the operating earnings margin.

Rheinmetall is reporting consolidated sales of €6,148m for the past fiscal year. This is growth of €252m or 4.3% compared to the previous year’s figure of €5,896m. When adjusted for currency effects, the growth amounts to 6.1%. Both sectors again contributed to the growth in sales at the Group.

Operating earnings (EBIT before special items) reached a new high in fiscal 2018 at €492m. This is growth of €92m or 23% compared to the previous year’s figure of €400m. Including positive special items of €26m net, reported EBIT amounts to €518m. Special items resulted from restructuring costs at two Defence locations (€-7m) and from real estate transactions (€+33m) at the Berlin site and in connection with a former production facility in Hamburg.

The Rheinmetall Group increased its operating margin to 8.0% in fiscal 2018, compared to 6.8% in the previous year. The most recent forecast, which targeted an operating margin clearly above 7%, has therefore been surpassed.

The order backlog for the Group rose to a new high of €9,055m as of December 31, 2018. This is growth of €2,119m or 31% compared to the previous year’s figure of €6,936m.

Armin Papperger, Chief Executive Officer of Rheinmetall AG: “With partially considerable growth in sales and earnings, we continue to follow our healthy growth trajectory in fiscal 2018. We believe we are in a very good position to succeed on the global growth markets with our issues of mobility and security and to keep increasing the business volume. In Defence, we are in an ideal position to serve the growing demand from armed forces with our products and services. In the Automotive sector, we are a more important partner than ever for international manufacturers who want to advance the modernization of drive technologies – both in conventional drive systems and electromobility. With our Clean Emission Technology, we are making valuable contributions to help automotive manufacturers meet even stricter emissions limits in the future.”

Automotive grows despite declining market development

The Automotive sector continued to develop positively in fiscal 2018, with key figures exceeding those of the previous year. In a declining market environment, the sector boosted its sales by 2.4% and increased revenue to a new high of €2,93m (previous year: €2,861m). When adjusted for currency effects, the growth amounted to 4.2%. According to the latest market data, however, global automotive production saw a slight decline of 1% in 2018. The Automotive sector’s growth is driven by increased sales in all three of its divisions.

The sector sales figures do not include the contributions from the joint ventures in China, which increased their sales by 3.2% to €872m, while automotive production in China declined by 3.7%. In local currency, the increase was 5.7%. The wholly owned subsidiaries in China, which are included in Automotive sales, increased their revenue by €4 m to €131m.

The Automotive sector’s operating earnings reached €262m in the past fiscal year (previous year: €249m). The sector’s operating margin increased accordingly in the reporting period, rising from 8.7% in the previous year to 8.9% in 2018.

Defence significantly increases earnings and posts record order backlog

The Defence sector’s business performance – especially the order intake – is increasingly characterized by the significantly increased demand in the military sector and by Rheinmetall’s successful positioning in major markets around the globe. In 2018, the sector generated sales of €3,221m. This equates to growth of 6.1% or €185m compared to the previous year’s figure of €3,036m. When adjusted for currency effects, the growth amounts to 7.9%.

The sector’s order intake increased much more significantly, reaching nearly twice the previous year’s figure. In fiscal 2018, Defence posted orders worth €5,565m, after €2,963m in the previous year. This is growth of €2,602m or 88%, which resulted primarily from two high-volume orders for the Australian armed forces.

The order backlog for Rheinmetall Defence therefore increased equally significantly to a new record of €8,577 m, which equates to growth of 34% after €6,416m in fiscal 2017.

The sector also clearly increased its earnings in 2018. The operating earnings reached €254m in the year under review, surpassing the previous year’s figure by €80m or 46%. Net of non-recurring expenses of €7m, which were incurred for capacity adjustments at two sites of the Electronic Solutions division, the sector’s reported EBIT amounts to €247m.

Rheinmetall Defence’s operating margin rose to 7.9% in fiscal 2018, after 5.7% in the previous year. Rheinmetall will release the final business figures and the outlook for fiscal 2019 on March 13, 2019.

28 Feb 19. HEICO Corporation Subsidiary Acquires Decavo, LLC. HEICO’s 7th Acquisition in the Past 12 Months. HEICO Corporation (NYSE:HEI) (NYSE:HEI.A) today announced that its Flight Support Group acquired 80.1% of Decavo, LLC (“Decavo”) in an all cash transaction. HEICO stated that it expects the acquisition to be accretive to its earnings within the year following the purchase. Further financial terms and details were not disclosed.

Hood River, Oregon-based Decavo designs and produces complex composite parts and assemblies incorporated into camera and related sensor assemblies and UAV airframes used in demanding defense and civilian applications.

Decavo employs approximately 40 team members in Hood River, Oregon and was founded in 2009. Decavo’s expertise includes engineering and manufacturing complex composites with unique structural and electromagnetic interference characteristics.

Decavo’s two co-founders, Phil Nies and Blake Richards will retain ownership in Decavo. Mr. Nies will assume the role of President, while Mr. Richards will remain in a senior advisory and shareholder role. Decavo will continue to operate in its current location, and no staff turnover is expected.

Laurans A. Mendelson, HEICO’s Chairman & Chief Executive Officer, and Eric A. Mendelson, HEICO’s Co-President and CEO of its Flight Support Group, jointly noted, “Decavo has demonstrated the ability to creatively engineer and manufacture composite products in response to exacting requirements. Phil and Blake have grown Decavo by being highly responsive to their customers, many of whom are located in the Hood River region. Decavo has excelled at responding technically and with turn times that have fostered exceptional growth. We are thrilled to have Phil and Blake and the entire Decavo team join the HEICO family.”

Phil Nies and Blake Richards, Decavo’s co-founders, jointly commented: “We wanted to associate with a larger organization that can provide financial and other resources to allow us to focus on engineering, design and manufacturing as well as develop our team. HEICO was our first choice, as we found a partner who would ensure that our team enjoys continued stability and resources offered by the HEICO organization.” (Source: BUSINESS WIRE)

26 Feb 19. Australia’s TAE Aerospace acquires two US firms. Australian company TAE Aerospace has acquired two companies in the US in line with its strategy to expand its profile in North American aerospace and defence markets.

Andrew Sanderson, TAE Aerospace’s CEO, revealed to Jane’s at the 2019 Avalon Airshow that the company has recently completed the acquisitions of Kansas City-based Propulsion Controls and the Copperstate Turbine Engine Company (CTEC), which is headquartered in Phoenix.

The two companies are now wholly owned subsidiaries and lead TAE Aerospace’s operations in the US. Sanderson said the acquisitions were secured through cash investments, but he did not disclose the value of the deals. (Source: Google/IHS Jane’s)

28 Feb 19. Dassault Aviation eyes growth for 2019 as 2018 profits rise. France’s Dassault Aviation forecast higher net sales for 2019 and more orders of planes as it posted a rise in annual sales and profits that lifted its shares. The maker of Rafale warplanes and Falcon business jets said its 2018 operating profits had surged 87 percent from the previous year to 669m euros (572m pounds), while net sales rose 4.3 percent to 5.08bn euros. Adjusted net profits rose 66 percent to 681m euros.

Analysts were on average expecting operating income of 463m euros on sales of 4.952bn, according to Eikon Refinitiv data.

Dassault Aviation shares rose around 4 percent in early session trading, among the top performers on Paris’ SBF-120 index.

Dassault Aviation, in which Airbus has a 9.9 percent stake, said it planned to deliver 45 Falcon and 26 Export Rafales in 2019.

Dassault Aviation increased its dividend to 21.2 euros from 15.3 euros last year. (Source: Reuters)

26 Feb 19. Teijin to Acquire Renegade and Expand Carbon Fiber Intermediate Material Business for Aerospace Applications. Teijin Limited announced today that it has agreed to acquire Renegade Materials Corporation (Renegade), a leading North American supplier of highly heat-resistant thermoset prepreg for the aerospace industry. Renegade will become a wholly-owned subsidiary of Teijin. The shares of Renegade will be purchased by Teijin Holdings USA Inc., the Teijin Group’s holding company in the United States. The acquisition is anticipated to be completed this spring after customary closing conditions have been satisfied including receipt of regulatory approvals. Teijin will benefit from Renegade’s well-established proprietary technologies and solution capabilities in heat-resistant thermoset prepregs to expand its business in aerospace field including next-generation aircrafts’ engine parts. Renegade’s products will reach wider markets thanks to Teijin’s expertise in carbon fibers and intermediate materials as well as its large product lineup and global sales network. Global marketing initiatives will be supported by Teijin’s carbon fiber business, including Teijin Carbon Fibers, Inc., which plans to launch a new carbon fiber production facility in South Carolina by the end of FY 2020, Teijin Carbon America, Inc., a carbon fiber sales base in Tennessee, and Teijin Carbon Europe GmbH, a core company of the carbon fiber business in Europe.

Teijin is strengthening its carbon fiber and intermediate materials businesses to solidify its position as a leading provider of solutions for aerospace applications. Teijin is targeting annual sales in this field in excess of USD 900m by around 2030.

Renegade’s heat-resistant thermoset prepregs are well trusted by U.S. and European aircraft manufacturers and aircraft engine suppliers. The company was established in 1993 as a resin manufacturer and launched its thermoset prepreg business for aerospace applications under the Renegade brand in 2007. Headquartered in Miamisburg, Ohio, Renegade offers specialized knowhow in highly heat-resistant resins and provides unique thermal-cycle resistant prepregs incorporating highly heat-resistant polyimide resin made from low-toxicity raw materials.

Teijin is increasingly emphasizing strong, lightweight, high-performance materials that offer environmentally sensitive solutions for improved fuel efficiency. Teijin is focusing its carbon fiber business on the aircraft field, where it is rapidly developing midstream and downstream applications. A top supplier to world-leading aircraft makers for over 30 years, Teijin is noted for its TENAX carbon-fiber-filament yarn, which is used in primary and secondary structural parts for aircraft. The company is now leveraging its intermediate material and processing technologies for next-generation aircraft applications. Tenax carbon fiber and Tenax TPUD carbon-fiber thermoplastic unidirectional pre-impregnated tape were qualified by Boeing as advanced intermediate composite materials for primary structural aircraft parts.

“Demands for highly heat-resistant thermoset prepregs are increasing in the global aerospace industry,” said Shukei Inui, General Manager of Teijin’s Carbon Fibers Business Unit. “Renegade offers well-established technologies and sales channels in this field, so we expect this acquisition to help us expand our related applications development and global business.” (Source: BUSINESS WIRE)

26 Feb 19. Curtiss-Wright Corporation (NYSE: CW) reports financial results for the fourth quarter and full-year ended December 31, 2018.

Fourth Quarter 2018 Highlights

Reported diluted earnings per share (EPS) of $1.89, with Adjusted diluted EPS of $1.90, up 25% compared with the prior year (defined below);
Free cash flow of $214m, up 3%;
Net sales of $649m, up 6%, including 3% organic growth (defined below);
Reported and Adjusted operating income of $110 m, up 4% and 5%, respectively;
Reported and Adjusted operating margin of 17.0%, down 20 basis points;
New orders of $608m, up 7%; and
Share repurchases of approximately $119m, or 1.1 m shares.

Full-Year 2018 Highlights

Reported diluted EPS of $6.22, with Adjusted diluted EPS of $6.37, up 28% compared with the prior year, reflecting increased profitability in all three segments;
Adjusted free cash flow of $333m and Adjusted free cash flow conversion of 121%;
Net sales of $2.4bn, up 6%, including 3% organic growth, driven by higher sales in all end markets;
Reported operating income of $374m, with Adjusted operating income of $382m, up 14%;
Reported operating margin of 15.5%, with Adjusted operating margin of 15.8%, up 110 basis points;
Effective tax rate of 22.6%;
New orders of $2.4bn increased 6%, while Backlog of $2.0bn increased 1% from December 31, 2017; and
Share repurchases of approximately $199m, or 1.7m shares.

Full-Year 2019 Business Outlook

Expect solid growth in sales (up 3-5%), driven by increases in all end markets;
Anticipate higher operating income (up 4-6%), operating margin of 15.9% to 16.0% (up 10-20 basis points) and diluted earnings per share of $6.80 to $6.95 (up 7-9%), compared with Adjusted full-year 2018;
Commercial/Industrial segment – improved profitability due to higher sales and benefits of our ongoing margin improvement initiatives, partially offset by $4m for tariffs and a $3m increase in R&D investments;
Defense segment – reduced profitability, despite higher sales, due to a $5m increase in R&D investments;
Power segment – reduced profitability, despite solid sales growth, due to $6m for transition and IT security costs related to the relocation of our DRG business and a $2m increase in R&D investments;
Absent these R&D investments, tariffs and DRG relocation costs, all three segments are expected to produce solid year-over-year operating margin expansion; and
Expect Reported free cash flow to range from $300 to $310m, with Adjusted free cash flow to range from $320 to $330m, excluding a $20m capital investment in the Power segment related to construction of a new, state-of-the-art naval facility principally for the DRG business.

“We delivered strong Adjusted diluted EPS of $1.90 in the fourth quarter, driven by better than expected operational performance in the Power segment,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “We reported a 6% increase in sales, led by a solid contribution from the DRG acquisition, as well as strong organic growth across all of our commercial markets. Further, we generated $214m in free cash flow, driving 259% free cash flow conversion in the quarter.

“Full-year 2018 Adjusted diluted EPS of $6.37 exceeded our expectations, driven by a strong operational performance which included 6% top-line growth with higher sales in all end markets, and strong profitability that generated a 15.8% Adjusted operating margin, the highest level of profitability achieved by Curtiss-Wright in recent history. Full-year Adjusted free cash flow of $333m was also strong, and enabled us to return nearly $200m to shareholders through share repurchase activity this past year.

“For 2019, we are projecting another solid performance, as we expect higher sales in all end markets and overall improved operating profitability, despite a planned ramp up in research and development costs and other strategic growth investments, to drive operating margin to approximately 16.0%. These investments remain critical to supporting our objectives for long-term profitable growth and maintaining top-quartile financial performance for all of our key financial metrics, in order to generate significant value for our shareholders.”

Fourth Quarter 2018 Operating Results

Sales of $649m up $37m, or 6%, compared with the prior year (3% organic, 4% acquisitions, 1% unfavorable foreign currency translation);
From an end market perspective, total sales to the defense markets increased 5%, as higher naval defense revenues associated with the DRG acquisition more than offset reduced revenues in the aerospace defense market, while total sales to the commercial markets increased 7%, led by higher power generation revenues from the China Direct AP1000 program and nuclear aftermarket, compared with the prior year. Please refer to the accompanying tables for a breakdown of sales by end market;
Reported operating income was $110m, with Reported operating margin of 17.0%;
Adjusted operating income of $110m, up $5m, or 5%, compared with the prior year, principally reflects higher power generation revenues and the contribution from our DRG acquisition in the Power segment, partially offset by reduced revenues and operating income in the Defense segment;
Adjusted operating margin of 17.0%, essentially flat compared with the prior year, reflects higher revenues and favorable overhead absorption in the Power segment, offset by reduced revenues and increased research and development expenses in the Defense segment, and the negative impact from tariffs (as expected and included in prior guidance) and restructuring charges in the Commercial/Industrial segment; and
Non-segment expenses of $9m were flat compared with the prior year, as lower pension costs were offset by higher environmental costs.
Reported net earnings of $83m and Reported diluted EPS of $1.89;
Adjusted net earnings of $83m, up $15m, or 23%, compared with the prior year, reflecting higher operating income, lower interest expense and a lower tax rate;
Adjusted diluted earnings per share of $1.90, up $0.38, or 25%, compared with the prior year, reflecting higher operating income, lower interest expense and a lower tax rate, as well as a lower share count; and
The effective tax rate (ETR) was 21.7%, a decrease from 31.8% in the prior year quarter, primarily driven by the reduction of the U.S. corporate income tax rate from 35% to 21% associated with the 2017 Tax Cuts and Jobs Act (TCJA).
Free cash flow of $214m, defined as cash flow from operations less capital expenditures, increased $6m compared with the prior year, as higher cash earnings and lower taxes were largely offset by the timing of collections; and
Capital expenditures increased by $5m to $23m compared with the prior year, due to higher capital investments within the Power segment.

New Orders and Backlog

During the fourth quarter, new orders of $608m increased 7% compared with the prior year, led by solid growth in aerospace and naval defense orders, including the contribution from the DRG acquisition;
For full-year 2018, new orders of $2.4bn increased 6% compared with the prior year; and
Backlog of $2.0bn increased 1% from December 31, 2017.

Other Items – Share Repurchase

During the fourth quarter, the Company repurchased 1.1m shares of its common stock for approximately $119m, increasing full-year 2018 repurchase activity to 1.7 m shares for approximately $199m.

Fourth Quarter 2018 Segment Performance

Sales of $305m, up $7m, or 2%, compared with the prior year (3% organic, 1% unfavorable foreign currency translation);
Defense market sales were down slightly, as lower sales of sensors and controls products on various fighter jet programs in the aerospace defense market were partially offset by higher sales of valves on the Virginia class submarine program in the naval defense market;
Commercial aerospace market sales growth reflects higher OEM sales of sensors and controls products and surface treatment services;
General industrial market sales growth was principally driven by solid demand for industrial valves;
Reported operating income of $47m, down less than $1m, or 1%, compared with the prior year ((2%) organic, 1% favorable foreign currency translation), as the benefit from higher sales was offset by the impact from tariffs and restructuring charges; and
Reported operating margin decreased 40 basis points to 15.4%, principally reflecting the aforementioned impact from tariffs and restructuring, partially offset by higher sales and improved profitability for sensors and controls products; Operating margin would have increased 60 basis points excluding the impact from tariffs and restructuring charges.

Defense

Sales of $193m, up $52m, or 37%, compared with the prior year (21% organic, 16% acquisition);
Strong naval defense market sales were driven by higher CVN-80 aircraft carrier revenues and solid DRG service center revenues;
Strong power generation market sales reflect higher revenues on the China Direct AP1000 program as well as solid growth in domestic aftermarket sales supporting currently operating nuclear reactors;
Reported operating income was $36m, with Reported operating margin of 18.7%; and
Adjusted operating income of $36m, up $13m, or 52%, compared with the prior year, while Adjusted operating margin increased 190 basis points to 18.9%, reflecting higher naval defense and power generation revenues, favorable overhead absorption and increased profitability on the China Direct AP1000 program.

Full-year 2019 guidance notes:

Expect solid growth in sales (up 3-5%), driven by increases in all end markets;
Anticipate higher operating income (up 4-6%), operating margin of 15.9% to 16.0% (up 10-20 basis points) and diluted earnings per share of $6.80 to $6.95 (up 7-9%), compared with Adjusted full-year 2018;
Commercial/Industrial segment – improved profitability due to higher sales and benefits of our ongoing margin improvement initiatives, partially offset by $4m for tariffs and a $3m increase in R&D investments;
Defense segment – reduced profitability, despite higher sales, due to a $5m increase in R&D investments;
Power segment – reduced profitability, despite solid sales growth, due to $6m for transition and IT security costs related to the relocation of our DRG business and a $2m increase in R&D investments;
Absent these R&D investments, tariffs and DRG relocation costs, all three segments are expected to produce solid year-over-year operating margin expansion;
Reflects lower share count driven by 2018 share repurchase activity; and
A more detailed breakdown of the Company’s 2019 guidance by segment and by market can be found in the accompanying schedules.

26 Feb 19. KBR Announces Fourth Quarter and Fiscal 2018 Financial Results; Guidance for Fiscal 2019.

4th Quarter 2018:

– Revenue growth of 42% to $1.3bn; Diluted EPS of $0.31; Adjusted EPS of $0.39

– Industry-leading Government Services organic growth of 31%

– Operating cash flow of $129m

Fiscal 2018:

– Revenue growth of 18% to $4.9bn; Diluted EPS of $1.99; Adjusted EPS of $1.53

– Industry-leading Government Services organic growth of 17%

– Operating cash flow of $165m

Guidance for 2019:

– EPS guidance of $1.29-$1.44; Adjusted EPS guidance of $1.58-$1.73

– Operating cash flow of $175-$205m; 90%-110% of Net Income

KBR, Inc. (NYSE: KBR), a global provider of differentiated, professional services and technologies across the asset and program life cycle of the government services and hydrocarbons industries today announced fourth quarter and fiscal 2018 financial results and guidance for fiscal 2019.

“I am delighted to report our 2018 full year results, in which we added our 8th consecutive quarter of strong revenue, earnings and cash flow; quality year-over-year backlog growth; and the successful integration of SGT and Aspire,” said Stuart Bradie, KBR President and CEO. “As we celebrate our 100 year anniversary, the level of energy and enthusiasm across our organization is high. Our Government Services business is delivering industry-leading organic growth with solid margins, our Technology business continues to expand, delivering excellent operating margins and cash conversion, and our Hydrocarbons Services business is well-positioned for growth as our clients embark on a healthy capital investment cycle,” Bradie said. “We are particularly pleased to see the restoration of the fundamental cash generating ability of our business, and with the book of business in our backlog today, we expect to continue our cash momentum as we look ahead,” added Bradie. “Our people across the world are committed to delivering safe, reliable and industry leading execution to our customers. This dedication underpins profitable, predictable, and cash generative financial performance – just as we committed as part of our strategic transformation.”

Fourth Quarter and Fiscal 2018 Financial Results

Financial highlights for the quarter ended December 31, 2018 are as follows:

Industry-leading organic revenue growth in our Government Services business of 31% underpinned by on-contract growth, take-away wins, and new work awarded under our portfolio of well-positioned contracting vehicles:
We won a major award to support the U.S. Air Force at Tyndall Air Force Base as it recovered in the wake of Hurricane Michael, a Category 4 storm that damaged every building on base, devastated the military flight line and wiped out the marina. We rapidly deployed a team that tackled a broad spectrum of activities such as debris removal, airfield and flight line management, supply and restoration of emergency power and satellite communications, and recovery of unique military aircraft;
New wins and takeaways, such as the MSOC NASA contract at Johnson Space Center under which we provide technical, managerial, and administrative services to ensure the availability, integrity, reliability, and security of systems supporting NASA spaceflight programs; and
On-contract growth across our logistics business as additional activities are added to our scope of services;
Incremental revenue and accretive earnings from our acquisition of SGT and consolidation of Aspire;
Strong organic revenue growth in our Technology business of 12% attributable to increasing demand for our innovative solutions across the chemical, petrochemical and refining markets as well as increased bundling of technology licenses with ancillary services, proprietary equipment and catalysts;
Interest expense was in line with expectations;
Income taxes were in line with expectations. The 4th quarter of 2017 included a significant release of valuation allowances and other adjustments associated with 2017 U.S. Tax Reform resulting in a non-cash tax benefit of $241m; and
Operating cash flow of $129m on strong collections and distributions from Joint Ventures.

Financial highlights for the year ended December 31, 2018 are as follows:

Industry-leading organic revenue growth in our Government Services business of 17% underpinned by on-contract growth in logistics and engineering, take-away wins, and new work awarded under our portfolio of well-positioned contracting vehicles, as discussed previously;
Incremental revenue and accretive earnings from our acquisition of SGT and consolidation of Aspire, including a non-cash gain on consolidation of Aspire of $108m;
Strong organic revenue growth in our Technology business of 10% (same drivers as described above);
Consistent execution across each of our segments, including the successful completion of several Hydrocarbons Services projects;
Interest expense was in line with expectations;
Income taxes were in line with expectations. 2017 included a significant release of valuation allowances and other adjustments associated with 2017 U.S. Tax Reform resulting in a non-cash tax benefit of $241m; and
Operating cash flow of $165m on cash earnings, reduction in days sales outstanding and distributions from Joint Ventures.

Liquidity and Capital Structure

Fiscal 2018 operating cash flow to net income conversion, excluding the non-cash gain on Aspire, of 95%;
Gross and net debt leverage as of December 31, 2018 of 3.2x and 1.4x, respectively, in line with management expectations; and
Previously disclosed Ichthys funding expectations remain unchanged.

Notable New Business Awards/Developments:

Quality bookings continue to support the Company’s long-term outlook. Consolidated fiscal year 2018 book-to-bill in 2018 was 1.2x, excluding the workoff of our long-term privately financed initiatives, or PFIs, as follows: Government Services business 1.2x, excluding the workoff of PFIs; Technology 1.6x; and Hydrocarbons Services 1.1x. Booking highlights include the following:

Our Government Services business achieved numerous synergy wins during the year representing our ability to leverage strong customer relationships across our portfolio of high impact, mission critical capabilities. Such wins include a $500 m contract to provide personal services in human performance and behavioral health to the U.S. Special Operations Command, a contract from LIG Nex1 to support the Korean military’s Identify Friend or Foe capabilities, and a seat on the U.S. Army Information Technology Enterprise Solutions-3 Services Contract.
Our Technology business achieved record backlog as of December 31, 2018 of $0.6bn – the fifth sequential quarter of record setting backlog for this business. In 2018, we continued to commission and prove our first of a kind technologies, such as K-SAAT™, a revolutionary technology that increases octane for high quality gasoline blending in a safer, more operationally efficient manner. Additionally, our ROSE® technology continues to be an attractive solution enabling refiners to meet IMO 2020 requirements that reduce allowable sulfur content and emissions for marine fuels.
Our Hydrocarbons Services business continues to add quality projects aligned with our commercial strategies and deep technical expertise. Notable recent announcements include a reimbursable contract with ExxonMobil to provide detailed engineering, procurement, and construction services for the offsites and interconnecting units as part of the recently announced crude expansion project in Texas, a refinery debottlenecking project with SATORP, a joint venture between Saudi Aramco and Total, as well as a front-end engineering design project for Shell Australia’s Crux project to build an autonomous offshore platform and gas pipeline in Western Australia.

2019 Guidance

Across the markets we serve, our 2019 outlook is favorable, as follows:

Strong past performance credentials and win rates, positive synergy momentum from acquisitions, and increased U.S. Government Fiscal 2019 defense and space spending budgets are driving a robust opportunity pipeline;
Growing global economy, technological development, and abundant sources of competitively priced feedstock are driving increased capital project demand in gas monetization and petrochemicals end markets;
Greater than expected global demand for LNG coupled with projected capacity shortfalls are pushing IOC’s and developers to proceed with project final investment decisions in 2019 and 2020.

The company initiates 2019 GAAP EPS guidance with a range of $1.29 to $1.44, and Adjusted EPS guidance with a range of $1.58 to $1.73 per share. Our guidance of earnings per share is on an Adjusted EPS basis, which excludes legacy legal costs for U.S. Government contracts, non-cash imputed interest on the conversion option of the convertible debt, acquisition and integration related costs, amortization related to the consolidation of Aspire, and incremental 2019 interest expense associated with funding the legacy Ichthys project. A reconciliation of GAAP EPS to Adjusted EPS guidance is included at the end of this release.

Operating cash flows for 2019 are estimated to range from $175 m to $205m, representing an operating cash flow to net income ratio of 90% to 110%. Our estimated effective tax rate for 2019 is estimated to range from 23% to 25%.

26 Feb 19. The proposed strategic partnership between Boeing [NYSE: BA] and Embraer [B3: EMBR3, NYSE: ERJ] was approved today by Embraer’s shareholders during an Extraordinary General Shareholders’ Meeting held at the company’s headquarters in Brazil.

At the special meeting, 96.8 percent of all valid votes cast were in favor of the transaction, with participation of approximately 67 percent of all outstanding shares. Shareholders approved the proposal that will establish a joint venture made up of the commercial aircraft and services operations of Embraer. Boeing will hold an 80 percent ownership stake in the new company, and Embraer will hold the remaining 20 percent.

The transaction values 100 percent of Embraer’s commercial aircraft operations at $5.26bn, and contemplates a value of $4.2bn for Boeing’s 80 percent ownership stake in the joint venture.

Embraer shareholders also agreed to a joint venture to promote and develop new markets for the multi-mission medium airlift KC-390. Under the terms of this proposed partnership, Embraer will own a 51 percent stake in the joint venture, with Boeing owning the remaining 49 percent.

“This groundbreaking partnership will position both companies to deliver a stronger value proposition for our customers and other stakeholders and create more opportunities for our employees,” said Paulo Cesar de Souza e Silva, President and CEO of Embraer. “Our agreement will create mutual benefits and boost the competitiveness of both Embraer and Boeing.”

“Approval by Embraer’s shareholders is an important step forward as we make progress on bringing together our two great aerospace companies. This strategic global partnership will build on Boeing’s and Embraer’s long history of collaboration, benefit our customers and accelerate our future growth,” said Dennis Muilenburg, Boeing chairman, president and chief executive officer.

Embraer’s defense and executive jet business and services operations associated with those products would remain as a standalone publically-traded company. A series of support agreements focused on supply chain, engineering and facilities would ensure mutual benefits and enhanced competitiveness between Boeing, the joint venture and Embraer.

“Our shareholders have recognized the benefits of partnering with Boeing in commercial aviation and the promotion of the multi-mission airlift KC-390, as well as understanding the opportunities that exist in the executive aviation and defense business,” said Nelson Salgado, Embraer Executive Vice President of Finance and Investor Relations.

“People across Boeing and Embraer share a passion for innovation, a commitment to excellence, and a deep sense of pride in their products and their teams – these joint ventures will strengthen those attributes as we build an exciting future together,” said Greg Smith, Boeing Chief Financial Officer and Executive Vice President of Enterprise Performance & Strategy.

Boeing and Embraer announced in December 2018 that they had approved the terms for the joint ventures and the Brazilian government gave its approval in January 2019. Shortly thereafter, Embraer’s board of directors ratified its support for the deal and definitive transaction documents were signed. The closing of the transaction is now subject to obtaining regulatory approvals and the satisfaction of other customary closing conditions, which Boeing and Embraer hope to achieve by the end of 2019.

Embraer will continue to operate the commercial aviation business and the KC-390 program independently until the closing of the transaction.

26 Feb 19. Meggitt profits down 6%, Brexit contingency adds to drop in cash flow. The aerospace, defence and energy components group also recorded a 15% drop in free cash flow partly driven by growth in inventory and Brexit contingency. Meggitt PLC (LON:MGGT) saw profits fall 6% partly because of its marked-to-market currency hedges. The aerospace, defence and energy components group also saw a 15% drop in free cash flow partly driven by growth in inventory and Brexit contingency.

Tony Wood, chief executive, said: “Together with our growing installed base of 71,000 aircraft, we are well positioned to sustain growth over the medium term and to deliver our 2021 targets for underlying operating margin and cash.”

In 2018, statutory operating profit dropped 6% to £256.6mln with earnings per share dropping 39% to 23.2p.

Cash generated dropped 15% to £167.4mln as a result of an incremental £30.4m contribution to reduce US pension deficits and an increased working capital outflow of £30.1m (2017: £3.0m inflow).

The working capital outflow reflected £37.5m to support growth, site consolidations and stockpiling as a Brexit contingency.

Underlying profit increased 4% to £367m and organic revenue growth by 9% to £2.08bn, with 7% growth in civil aerospace, 10% in defence and 19% in energy.

During the year Meggitt won orders for engine composites on the Pratt & Whitney F-135 and F-119 engines and brakes on the Airbus A321neo.

The board is recommending a final dividend of 11.35p giving a full year dividend of 16.65p, an increase of 5%. FTSE 250-listed Meggitt saw its shares drop 0.85% to 560p in morning trading. (Source: proactiveinvestors.co.uk)

26 Feb 19. Kromek lifted as it inks nuclear security contract with new customer. The contract, which carries a price tag of at least US$1.4m, will begin immediately. The contract will be delivered over a three year period, with minimum volumes annually. Kromek Group PLC (LON:KMK) shares were lifted on Tuesday after it secured a contract to supply its CZT radiation detectors to a new customer, an original equipment manufacturer (OEM), for use in the nuclear security market.

The contract, which carries a price tag of at least US$1.4m, will begin immediately and be delivered over a three year period with minimum volumes for each year.

Arnab Basu, Kromek’s chief executive, said that the contract increased the “visibility of future revenues” and, following a £21m fundraise earlier this month, the firm was able to “capitalise on similar opportunities in this fast-growing market”. In late-morning trading, Kromek shares were up 1.5% at 27p. (Source: proactiveinvestors.co.uk)

25 Feb 19. Black Diamond Networks, Inc. Acquires American Personnel Staffing’s BioSciences Division. Black Diamond Networks, Inc., a leading professional staffing organization supporting the Life Sciences, Engineering and Information Technologies sectors announced that the company has acquired American Personnel Staffing’s BioSciences Division to strengthen its position within that key industry sector. The addition of AP BioSciences enhances Black Diamond Networks’ established Life Science &Technology (LS&T) business model, combining high-level permanent search capabilities along with mid-level contract placement; further expanding its local presence in Massachusetts to also include additional life science business sectors.

“This strategic acquisition of AP BioScience will allow Black Diamond Networks to expand upon the company’s existing national staffing capability and participate in the exciting and rapidly expanding biosciences industry in Massachusetts and beyond,” said Mike Sklar, President of Black Diamond Networks. “In recent years the company has successfully established a distinct platform within this industry’s local market sectors such as Cambridge, MA, San Diego, CA, the New York/New Jersey corridor and South San Francisco, CA. Now with the addition of AP Biosciences we will be well-positioned to expand upon that capability and continue our strong growth trajectory.” (Source: BUSINESS WIRE)

25 Feb 19. L3 Announces Date for Special Meeting of Stockholders. L3 Technologies (NYSE:LLL) (“L3”) today announced that it has set a date for a special meeting of its stockholders to consider and vote on various proposals necessary to close the previously announced proposed merger with Harris Corporation (“Harris”) and certain other matters. The special meeting will be held on April 4, 2019, at 10:00 a.m., Eastern Time, at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017.

L3 stockholders of record as of the close of business on February 22, 2019 will be entitled to notice of, and to vote at, the special meeting. The merger is expected to close in mid-calendar year 2019, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals and approval by the stockholders of L3 and Harris. (Source: BUSINESS WIRE)

26 Feb 19. Meggitt builds up inventory to prepare for no-deal Brexit. Meggitt, the aerospace and defence group, said it had spent up to £5m to build inventory buffers in preparation for Brexit. The company has also recruited additional customs administrators and applied for third-country status with Europe’s aviation safety agency to enable it to continue supporting European registered aircraft in the event of Britain crashing out of the EU without a deal, it said on Tuesday. Tony Wood, Meggitt chief executive, told the Financial Times the company had built up “about one months’ worth” of inventory, including aircraft components such as sensing systems and brakes and controls for customers including Airbus and Dassault. However, with less than 5 per cent of the group’s revenues transacted between the UK and the EU, “Brexit is not considered to be a significant risk for the group in 2019.” Meggitt disclosed the preparations as it reported a drop of 5.3 per cent in pre-tax profits in 2018 after booking a non-cash charge from currency hedges. Revenues and orders for the year to end December 2018, however, were up. The FTSE 250 company said it made a pre-tax profit of £261.1m compared with £228.3m the year before. Underlying operating profit, Meggitt’s preferred measure that strips out exceptional and one-off charges, rose to £367.3m from £353.3m a year before. Revenues for the full year rose to £2.08bn, from £1.99bn in 2017, the company said. Orders increased 12 per cent on an organic basis to £2.24bn. The board declared a final dividend of 11.35p a share, up from 10.80p. Mr Wood said the impact of tariffs on products sourced from China into its US facilities had been in the “low single-digit millions” in 2018. The company will look to optimise its logistics to offset any headwinds in the coming year. Meggitt adopted a new, simplified, organisational structure at the start of 2019 to focus on its customers. It reduced its divisions from six to four. “We expect 2019 to be a year of further good progress,” added Mr Wood. (Source: FT.com)

26 Feb 19. Babcock to take £10m tax hit to prepare for Brexit. British defence contractor also forecasts dip in annual revenues. Babcock International said Britain’s impending departure from the EU would lead to a £10m tax cost this year as it restructures its aerial emergency services business to comply with European operating requirements. Britain’s second biggest defence contractor said the restructuring would result in a one-off cost this financial year. It said it estimates that “additional ongoing costs related to the operation of the new structures will be around £10m per year”. The company provides services including aerial firefighting as well as search and rescue operations to several European governments. It said it expected to take a second exceptional charge, of around £30m, related to an adjustment to its pension liabilities to equalise guaranteed minimum pension benefits for men and women. The company used a trading update on Tuesday to signal that group underlying revenues for the year would be around £5.2bn — down from £5.36bn last year. The drop is a result of lower activity in its rail business while its South African operations have been impacted by delayed power station outages, Babcock said. Underlying earnings expectations for the year, however, remain unchanged. Its order book remains strong, Babcock said, with around £18bn worth of orders. Archie Bethel, Babcock chief executive, said the group continues to “make good operational and strategic progress”. (Source: FT.com)

26 Feb 19. French group Thales sees more profit growth in 2019 as earnings rise. French defence electronics group Thales forecast higher sales and profits for 2019 as it posted a rise in its full-year earnings.

Thales’ 2018 earnings before interest and tax (EBIT) climbed 23 percent from a year ago to 1.685 bn euros (1.46 bn pounds), while sales rose 4.1 percent to 15.86bn euros. For 2019, Thales forecast EBIT between 1.78-1.8bn euros. The group – which provides military radar, civil air traffic control systems and rail infrastructure – is in the process of buying chipmaker Gemalto for 4.8bn euros to become a leading player in digital security. Thales expected to finalise the Gemalto deal in March.

“The integration of Gemalto, which we have been actively preparing for over a year, will in the coming weeks consolidate our position as a global leader in digital security,” said Thales chairman and chief executive Patrice Caine.

Analysts had on average been expecting 1.635bn euros of EBIT on revenues of 16.072 bn euros, according to Refinitiv Eikon data.

Thales’ intake of fresh orders rose 9 percent to 16.034bn euros, after accelerating in the fourth quarter due to higher defence and security spending by clients. (Source: Reuters)

26 Feb 19. Thales 2018 Full-Year results.

 All 2018 objectives exceeded

— Order intake: €16.0bn, up 7%1 (+9% on an organic basis2)

— Sales: €15.86bn, up 4.1% (+5.3% on an organic basis)

— EBIT3: €1,685m, up 23% (+25% on an organic basis)

 Adjusted net income, Group share3: €1,178m, up 40%

 Consolidated net income, Group share: €982m, up 44%

 Free operating cash flow3: €811m, 69% of adjusted net income

 Dividend4 up 19% to €2.08

 Finalisation of the acquisition of Gemalto expected in March 2019

 2019 objectives: organic sales growth between 3% and 4%

1 Since 1 January 2018, the Group has been applying IFRS 15 “Revenue from Contracts with Customers”. All changes in this press release are calculated compared with the figures restated for the application of this standard, which appear in the 2018 consolidated financial statements.

2 In this press release, “organic” means “at constant scope and currency”. See note on methodology, page 13.

3 Non-GAAP financial indicators, see definitions in the Appendices, page 13.

4 Proposed to the Shareholders’ Meeting on 15 May 2019.

5 At the date of this press release, the audit procedures have been completed and the Statutory Auditors’ report was in the process of being issued. EBIT between €1,780m and €1,800m

Thales’s Board of Directors (Euronext Paris: HO) met on 25 February 2019 to examine the 2018 financial statements5.

“Thanks to the commitment of its 66,000 employees, 2018 has been an excellent year for Thales. Order momentum stepped up in the fourth quarter, enabling order intake to reach €16 bn and exceed the annual objective. For the third year running, organic sales growth exceeded 5%, driven by an exceptional year in Transport and strong growth in the Defence & Security segment. Operating profitability improved across all segments and reached 10.6%, a level never before achieved by the Group.

Our action plan until 2021 is clear: to support profitable growth in the long term, we will continue to roll out our operational performance initiatives and to strengthen our customer-centric culture while also continuing to step up our investments in innovation.

The integration of Gemalto, which we have been actively preparing for over a year, will, in the coming weeks, consolidate our position as a global leader in digital security.

In an increasingly digital world, Thales’s business model, both robust and balanced, delivers value more than ever.”

Patrice Caine, Chairman and Chief Executive Officer

 All 2018 objectives exceeded

— Order intake: €16.0bn, up 7%1 (+9% on an organic basis2)

— Sales: €15.86bn, up 4.1% (+5.3% on an organic basis)

— EBIT3: €1,685m, up 23% (+25% on an organic basis)

 Adjusted net income, Group share3: €1,178m, up 40%

 Consolidated net income, Group share: €982m, up 44%

 Free operating cash flow3: €811m, 69% of adjusted net income

 Dividend4 up 19% to €2.08

 Finalisation of the acquisition of Gemalto expected in March 2019

 2019 objectives: organic sales growth between 3% and 4%

2 In this press release, “organic” means “at constant scope and currency”. See note on methodology, page 13.

3 Non-GAAP financial indicators, see definitions in the Appendices, page 13.

4 Proposed to the Shareholders’ Meeting on 15 May 2019.

5 At the date of this press release, the audit procedures have been completed and the Statutory Auditors’ report was in the process of being issued.

EBIT between €1,780m and €1,800m

Thales’s Board of Directors (Euronext Paris: HO) met on 25 February 2019 to examine the 2018 financial statements5.

“Thanks to the commitment of its 66,000 employees, 2018 has been an excellent year for Thales.

Order momentum stepped up in the fourth quarter, enabling order intake to reach €16bn and exceed the annual objective. For the third year running, organic sales growth exceeded 5%, driven by an exceptional year in Transport and strong growth in the Defence & Security segment. Operating profitability improved across all segments and reached 10.6%, a level never before achieved by the Group.

The integration of Gemalto, which we have been actively preparing for over a year, will, in the coming weeks, consolidate our position as a global leader in digital security.

In an increasingly digital world, Thales’s business model, both robust and balanced, delivers value more than ever.” Patrice Caine, Chairman and Chief Executive Officer.

20 Feb 19. Intelsat Continues to Lose. Intelsat has reported total revenue of $542.8m (478.6m euros) and net loss of $111.3m for the three months ended December 31, 2018. For the full year, Intelsat reported total revenue of $2,161.2m and net loss of $599.6m.

Those cold numbers reflect much of what the market was expecting. Stephen Spengler, CEO of Intelsat, said that the operator’s 2019 priorities were to focus on its high-throughput fleet of ‘EPIC’ satellites, and to continue working hard to clear — with SES — 200 MHz of spectrum over the U.S. for repurposing and sale for 5G.

Equity analysts at investment bank Exane/BNPP said the results were disappointing. “Q4/18 revenues of $543 m declined by 4 per cent y-o-y driven by lower renewals and lower pricing in Government, Media and Networks. This was broadly in line with consensus expectations. Pricing pressure in Government and Networks for wide beam capacity is presented as the main driver of the revenue pressure. Lower volume consumption in the US and Latin America is given as the main driver of the decline in Media. Intelsat’s contracted backlog (adjusted for ASC 606 accounting changes) fell from $7.3bn at the end of September 2018 to $7.1bn at the end of December.”

In terms of 2019 outlook, Intelsat is guiding for revenues and EBITDA that are respectively 3 and 5 percent below current consensus forecasts. This reflects a guided decline of 3 to 6 percent in Media, 3 to 6 percent in Networks and -1 to +2 percent revenue growth in Government. Increased direct costs and lower revenues explain the comparatively disappointing EBITDA outlook. Exane’s analyst Sami Kassab said there are important lessons for Europe’s two satellite players (SES and Eutelsat). “Intelsat Q4/18 brings home the intense pricing pressure that the industry is suffering from especially for wide beam capacity. While the read across is negative for European satellite operators, we note that each player has its own specificities that drive differences in operating trends. Intelsat has historically been more exposed to Trunking and cable distribution, structurally more challenged segments. Volume reductions in video capacity consumption is partly reflective of its US cable distribution focus. Eutelsat volume consumption is growing as per management statement and our own independent tracking. SES Networks has been a growth driver throughout 2018 as it has gained share thanks to lower priced higher capacity services.” (Source: Satnews)

25 Feb 19. Quickstep welcomes positive sales growth on back of aerospace production. Sydney-based Quickstep Holdings has reported a major turnaround in the company’s profitability driven by a growing international aerospace and advanced manufacturing order books. Quickstep continues to deliver improved profitability, evidenced through $2m earnings before interest and taxes (EBIT) and $0.9m net profit after tax in the first half of FY19 compared to a $2.9m net loss for the first half of FY18.

The company’s turnaround has been driven by continued strong volume growth on the Joint Strike Fighter programme, lean enterprise programs at the company’s Bankstown and Geelong sites, plus increasing efficiency, delivering first half gross profit of 23 per cent, an improvement of 10.5 per cent points on the previous corresponding period, the $3.8m year on year net profit after tax (NPAT) improvement includes a lift of $4.3m in gross profit.

Mark Burgess, CEO and managing director of Quickstep, welcomed the company’s turnaround, saying, “First half FY19 NPAT of $0.9m positions the company well for future profitable growth, and increased investment in business development has contributed to a healthy pipeline of new business from which we anticipate securing significant new business during FY19.”

Quickstep’s profitability has been driven by a number of existing and new contracts, including:

F-35 production ramp-up: Revenue from Quickstep’s F-35 Joint Strike Fighter contracts for H1 FY19 was $24.0m, up 36 per cent from $16.7m in the previous corresponding period, JSF revenues are expected to further increase in the second half of FY19, in line with the growing F-35 production schedule, which has delivered 358 JSF aircraft to date, ahead of full-rate production, expected in 2021.
C-130J Super Hercules Wing-flap production: Quickstep’s recently extended five-year contract to support the production of composite wing-flaps for the Lockheed Martin C-130J Super Hercules aircraft will ensure that Quickstep will continue to provide wing flaps for the C-130J/LM-100J aircraft through to 2024.
Boeing Defense: Quickstep continued development work for two Boeing contracts for both F-15 and F-18 combat aircraft. These contracts add a new “prime” customer, as well as new aircraft platforms and part families for Quickstep’s portfolio. Quickstep has “approved supplier” status with Boeing, which opens up significant future business opportunities across the scope of Boeing’s operations.
Chemring: In July 2018, Quickstep was awarded a new defence project to establish production for F-35 countermeasure flare housings. The contract, funded via Chemring from the F-35 Joint Program Office, and an additional NACC-ISP grant of $1m to complement the investment made by Quickstep.

The success of these two long-term production contracts has enabled the company to position itself for broader expansion in the US defence and aerospace market, pursuing contracts with Boeing, which resulted in the company securing a three-year deal to support Boeing as a “gold” supplier, positioning the company for new business in 2019. Securing this supplier status has enabled Quickstep to deliver on a new three-year programme with Boeing Defense with broader opportunities expected across the Boeing Company.

Burgess also reported negotiation progress with General Atomics Aeronautical Systems Inc (GA-ASI) as part of the Team Reaper Australia (TRA) industrial consortium to provide Australia with an armed remotely piloted aerial system (RPAS) as part of the AIR 7003 program outlined in the 2016 Defence White Paper.

The company plans to accelerate its business development activities to win additional business through its tiered growth strategy, focusing on key areas, including:

Core defence aerospace: Increasing revenue and diversifying the company’s customer base within the defence/aerospace sector, utilising existing Bankstown facilities while expanding core capabilities.
Aerospace Qure/advanced manufacturing deployment: Strategic growth within the aerospace and other sectors, using Qure and innovative technology solutions to attract new business opportunities.
Step-change growth: Step change to commercial aerospace supply. Securing of large global programs and/or inorganic growth across the wider defence, commercial aerospace and automotive industries.

Quickstep anticipates that the business will continue to strengthen over the remainder of FY19 as JSF deliveries ramp up towards peak production volumes over the next two years. The group’s revenue is expected to grow by more than 20 per cent in FY19 and gross margins will continue to improve as the group benefits from further economies of scale and increasing efficiencies.

The group expects to deliver positive EBIT and positive NPAT for FY19 as well as positive operating cash flow for the full year. This is despite the impact of a failure in a key machine during Q2. This issue has now been resolved; however, it will impact Q3 results. The group has significant growth potential and expects to win new composite manufacturing contracts, primarily in the aerospace sector, using traditional techniques and its proprietary advanced manufacturing Qure and QPS technologies. These provide faster, more controllable methods for curing of parts and enable a Class A finish.

Burgess added, “Our focus on driving efficiency improvements across the business and revenue growth backed up by a strong order book is now delivering profits.”

Quickstep is an independent aerospace‐grade advanced composite manufacturer in Australia, operating from state‐of‐the‐art aerospace manufacturing facilities at Bankstown Airport in Sydney and a manufacturing and R&D/process development centre in Geelong. The group employs more than 200 people in Australia and internationally. (Source: Defence Connect)

22 Feb 19. Adani Enterprises surges 7% on buying interest. “Adani Defence & Aerospace is well positioned to transition to system integration of larger platforms including UAVs, Rotary-wing and Fixed-wing aircrafts,” said Ashish Rajvanshi, Head of Adani Defence & Aerospace. Shares of Adani Enterprisessurged over 7 percent on February 22 on buying interest from investors.

“The MALE UAV is being produced in India and offered by Adani & Elbit’s joint venture company under IDDM category of DPP 2016 to the Indian Armed Forces. Adani has established India’s first Unmanned Aerial Systems manufacturing facility for HERMES 900 MALE at Adani Aerospace Park in Hyderabad, Telangana,” the company said in its media release.

“Adani Defence & Aerospace is well positioned to transition to system integration of larger platforms including UAVs, Rotary-wing and Fixed-wing aircrafts,” said Ashish Rajvanshi, Head of Adani Defence & Aerospace.

At 14:42 hrs Adani Enterprises was quoting at Rs 128.05, up Rs 8.50, or 7.11 percent. It has touched an intraday high of Rs 128.50 and an intraday low of Rs 119.80. (Source: Google/https://www.moneycontrol.com)

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