09 May 19. J.F. Lehman & Company Completes Sale of API Technologies (“API”). J.F. Lehman & Company (“J.F. Lehman”), a leading middle-market private equity firm focused exclusively on investing in the defense, aerospace, maritime, government and environmental industries, announced today that investment affiliates have sold API Technologies (“API”) to affiliates of AEA Investors LP. Terms of the transaction were not disclosed.
API is a leading designer and manufacturer of high-performance components and subsystems for demanding RF / microwave and electromagnetic spectrum management applications. Headquartered in Marlborough, MA, the company provides a broad portfolio of mission-critical products to approximately 1,800 global customers supporting more than 200 programs.
Since acquiring API in 2016, J.F. Lehman successfully worked with management to transform the company’s operations, rationalize its product portfolio, augment research and development activities and enhance API’s sales and marketing strategy – resulting in substantial revenue and earnings growth. “Our successful partnership with management has enabled API to transform a collection of market-leading technologies and brands into a cohesive, growing and best-in-class enterprise,” said Louis N. Mintz, Chairman of API and a Partner at J.F. Lehman. “The sale of API also represents an excellent outcome for our investors, whose continued support has been essential to our success.”
“We are extremely proud of the efficient, process-oriented culture and organization we have built over the past three years, and the significant operational improvements that have resulted from this company-wide effort,” said Bob Tavares, President and Chief Executive Officer of API. “We have enjoyed our partnership with J.F. Lehman, and their unwavering support has enabled the successful transformation of our business and the continuing expansion of our capabilities. We are looking forward to continuing to deliver on future growth opportunities with our new partners at AEA.”
Glenn Shor, a member of API’s Board of Directors and Partner at J.F. Lehman, added, “We are proud of the accomplishments of the API management team and the success the business achieved during our ownership period. We believe the company is well positioned to continue its trajectory and produce leading products in its core markets.”
Evercore Group LLC and Houlihan Lokey Capital, Inc. served as financial advisors to J.F. Lehman and Blank Rome served as lead legal counsel. BakerHostetler provided legal support related to international trade, government contracts and defense security compliance matters. Renaissance Strategic Advisors provided market vendor due diligence.
09 May 19. Melrose Industries PLC (“Melrose”) publishes the following trading update for the four months from 1 January 2019 to 30 April 2019, ahead of its Annual General Meeting taking place later today. Current trading in Melrose is in line with the Board’s expectations. Consistent with the recent commentary given at the year-end results announcement in March and the Capital Markets Event on 3 April this year, good progress is being made in delivering the operational improvements required in our businesses and specifically to achieve the GKN margin objectives disclosed at the Investor Event.
After serving as Chief Executive for nine years, from the flotation of Melrose in 2003 to 2012, and since then as Executive Vice Chairman, David Roper has decided to step down and to retire from the Group on 31 May 2020.
We will issue our interim results on 5 September 2019.
Justin Dowley, Chairman of Melrose, said: “We have recently laid out our targets for GKN which are better than those we indicated only one year ago at the time of the acquisition, and which come on the back of a stronger performance than expected in the first year of ownership. We are delighted to keep investing in all our businesses, including Nortek and Brush, and look forward to another year of progress. The businesses we own have very valuable qualities and characteristics, and we look forward to maximising their potential.”
09 May 19. BAE Systems plc – 2019 Annual General Meeting. BAE Systems plc held its Annual General Meeting today at 11.00 a.m. in Farnborough, Hampshire, UK. At the meeting, Chairman, Sir Roger Carr, and Chief Executive, Charles Woodburn, will comment on the performance of the Group in 2018, as detailed in the results announcement published on 21 February 2019, and outline the continued progress in the Group in the year to date.
Charles Woodburn, Chief Executive, said: “With a record defence order backlog and long term programme positions the business is well positioned for growth. Our priority is to deliver consistent and strong operational performance for our customers and shareholders. The start to the year has been in line with expectations with improvements being made on a number of fronts.”
Whilst the Group remains subject to geopolitical uncertainties, the Group’s guidance provided at the Preliminary announcement on 21 February remains unchanged for 2019 for underlying earnings per share and Net Debt and for the three-year cash generation target. As usual operating cashflow in 2019 is expected to be significantly second half weighted.
The results of voting at the Annual General Meeting will be announced later today.
Market environment and operational key points year to date
UK Market and Programmes
In the UK, Defence and Security remains a priority for the UK government with the next phase of the Tempest next generation combat air programme contracted between industry and UK government.
The focus for the year continues to be on the execution of the Group’s long-term contracted positions in Air and Maritime. The production ramp on the F-35 programme progresses well. Typhoon support continues to perform strongly and, with the centurion standard having been declared, the UK Tornado fleet successfully retired from service on schedule.
On the Offshore Patrol Vessels programme the second ship of five, HMS Medway, has been accepted by the customer. This programme is due to complete in 2020. On the Carrier programme HMS Prince of Wales remains on track for sea trials later in 2019. The Type 26 programme is progressing towards its first of class contractual acceptance date in the mid 2020s. Work continues on the manufacture of the remaining four Astute class submarines with Boat 4 due to exit Barrow in 2019. Activity on the Dreadnought programme is ramping up along with the major programme of building works at the Barrow site required to deliver the programme.
US Market and Programmes
In the US, the fiscal year 2019 budget and the President’s proposal for 2020 maintain the positive momentum in funding for military readiness and modernisation and support for key BAE Systems programmes. The Group’s US portfolio remains well aligned with customer priorities and growth areas, providing greater near-term certainty and support to our medium term planning assumptions. Performance in Electronic Systems remains strong as production ramps on F-35, APKWS and classified programmes continue on plan.
Following the challenges on the M109A7 Paladin Integrated Management production in 2018, gradual improvements are being made towards achieving the revised production schedule that ramps to eight vehicles per month by year-end. Lessons learned are being applied to the other combat vehicle programmes of Armored Multi-Purpose Vehicle, Bradley A4 and Amphibious Combat Vehicle. Whilst in the early stages of initial production, these programmes to date are currently on track.
With the final commercial ship constructed and delivered, the ship repair business is now focused on its core mission and working with the Navy on its acquisition strategy for ship maintenance to improve utilisation levels.
International Markets and Programmes
Following the recent updates from the German Government regarding export licences, we are working closely with industry partners and the UK government to continue to fulfil our contractual support arrangements in Saudi Arabia on the key European collaboration programmes.
The Qatar Typhoon and Hawk contract is progressing well with contractual milestones being met.
In Australia the Hunter class frigate programme is in the early stages of mobilisation under the initial four-year design and development phase.
The Group will hold an Investor event in the UK on the 15th and 16th May focused on its Air Sector business.
BAE Systems will announce its financial results for the half year ending 30 June 2019 on 31st July 2019.
The Board and directors
As previously announced Nicole Piasecki and Stephen Pearce will join the Board on 1st June 2019.
09 May 19. Rheinmetall Group starts well into fiscal 2019.
Sales and earnings increase in the first quarter.
– Consolidated sales grow by 6.6% to €1,343m
– Consolidated operating earnings rise by 15% to €54m
– Automotive: operating earnings margin remains at high level of 6.9% despite decline in sales
– Considerable growth in Defence: Sales increase by 24% to €629m – operating earnings already positive in the first quarter at €9m
– Order backlog increased by 26% to €9.1bn
– Forecast for fiscal 2019 confirmed
Rheinmetall AG in Düsseldorf started fiscal 2019 with an increase in sales and a substantial improvement in earnings. In terms of sales, the Group’s business performance in the first quarter of 2019 saw high growth in the Defence sector and, as expected, a slight decline in Automotive, which is attributable to the weaker development of the global automotive markets.
The technology group confirms its 2019 forecast from March of this year and continues to expect organic consolidated sales growth of between 4% and 6% before currency effects and an operating margin of around 8% for the year as a whole.
Armin Papperger, Chief Executive Officer of Rheinmetall AG: “Rheinmetall has made a successful start to the new fiscal year. At Group level, we can boast solid growth in both sales and income and are sticking to the targets we have set for this fiscal year. Our Defence sector developed particularly positively in the first quarter. We are therefore very confident that we will continue to expand our business and increase the sector’s profitability year-on-year. Given the extensive backlog of demand in armed forces’ procurement, we continue to see major opportunities in the Defence sector – in Germany and internationally. Automotive continues to prove very profitable, although we are also feeling the effects of the declining auto industry. However, our pioneering technologies, global network of locations and very efficient cost management put us in a very flexible position to continue being successful. With products for fuel efficiency and emissions reduction, and increasingly for electromobility as well, we want to continue expanding our global market positions.”
Rheinmetall AG is reporting consolidated sales of €1,343m for the first quarter of 2019, after €1,260 m in the same quarter of the previous year. This represents
growth of €83m or 6.6%. Adjusted for currency effects, the growth is 6.5%. The international share of sales was 73% in the first quarter of 2019.
The order backlog has reached a new record level. At the end of the quarter (March 31, 2019), it amounted to €9.1bn after €7.2bn in the previous year, equating to growth of 26%.
Operating earnings before interest and taxes increased by 15% in the reporting period from €47m in the previous year to €54m in the first quarter of 2019. The operating earnings margin at Group level therefore rose from 3.7% to 4.0%.
Earnings per share grew considerably, rising around 35% from €0.55 to €0.74.
Automotive: slight sales decline after market slump – profitability remains robust
Rheinmetall Automotive could not escape the negative development of the global automotive markets in the first quarter of 2019 and posted sales of €714m, down 4.9% on the previous year (€751m). The global production of light vehicles (vehicles under 6t) declined by 5.7% in the first quarter of 2019.
The sector’s operating earnings decreased by €16 m or around 25% to €49m. Nevertheless, the operating earnings margin remained at a relatively high level of 6.9% (previous year: 8.6%).
The Mechatronics division is reporting a sales decline of 6.5% to €401m in the first quarter of 2019. Operating earnings amounted to €31 m in the first quarter of 2019 after €44m in the previous year. Earnings were primarily influenced by the decline in sales and by start-up costs and costs for the alignment of the product portfolio to the requirements of e-mobility.
At €252m, the Hardparts division’s sales were 0.9% lower year-on-year. Due in particular to lower earnings contributions from companies accounted at-equity, the operating earnings of the first three months of 2019 fell to €13m after €18m in the previous year.
In the Aftermarket division, sales fell by 7.6% year-on-year to €85m in the first quarter of 2019. The division’s operating earnings amounted to €7m after €8m in the same period of the previous year.
In a significantly declining market environment – light vehicle production in China fell by 12% compared to the same quarter of the previous year – the joint ventures in China, which are not included in the Automotive sector’s sales figures, achieved growth on a par with the previous year at €219m in the first quarter of 2019 (previous year at €218m).
Defence: sales increase significantly – earnings already positive in first quarter
The Defence sector made a successful start to the new fiscal year and increased its sales by 24% to €629m after €509m in the same quarter of the previous year.
Rheinmetall Defence’s earnings also grew significantly, and the sector is reporting positive income in the first quarter for the first time in seven years. Operating earnings amounted to €9m after €-13m in the previous year. This industry is typically characterized by low sales and earnings figures at the start of the year.
In the first three months of 2019, Rheinmetall Defence posted orders worth €564m, after €857m in the first quarter of 2018. The decline is chiefly due to a high-volume ammunition order, which had an effect of €380m in the same quarter of the previous year. The order backlog increased to €8,615m after €6,740m in the previous year.
The Weapon and Ammunition division posted sales of €177m in the first quarter, €38m or 27% higher than in the previous year. The previous year’s loss of €-19m was lowered by €8m to €-11m by the increased sales in particular.
Sales in the Electronic Solutions division of €168m were €42m or 33% higher than in the previous year, so the division achieved a clear improvement in operating earnings from €-1m in the previous year to €10m.
Sales in the Vehicle Systems division were increased by €32m to €329m due to higher deliveries. The higher truck deliveries compensate for lower sales with tactical vehicles. At €12m (previous year: €11m), operating earnings are up slightly on the previous year.
Outlook unchanged: Rheinmetall continues its growth trajectory
Rheinmetall still anticipates another phase of organic growth for the Group in the current fiscal 2019. Starting from around €6.1bn in fiscal 2018, Rheinmetall AG’s annual sales are expected to grow organically and before currency effects by 4% to 6% in the current fiscal year. This sales growth will be supported by a dynamic performance in the Defence sector. Noticeable contributions to growth from the Automotive sector cannot be expected in fiscal 2019, on the other hand, on account of the general development of the market.
Sales performance in the Automotive sector will be strongly influenced by economic developments in the automotive markets of Europe, North and South America and Asia as well as by a noticeable market recovery that is expected in the second half of the year. Against the background of currently cautious market expectations in the automotive sector, Rheinmetall forecasts – in terms of the whole year – a rather stagnant to slightly positive sales performance overall, before currency effects, for the Automotive sector.
For the Defence sector, Rheinmetall expects sales growth of between 9% and 11% before currency effects in fiscal 2019, which is already assured thanks to relatively high coverage through the existing order backlog.
Further absolute improvement in earnings expected in fiscal 2019
Based on the expected development of the market and the sales forecast derived from that, Rheinmetall expects an operating earnings margin of around 8% for the Automotive sector in fiscal 2019. Rheinmetall anticipates a further improvement in operating earnings in the Defence sector in 2019 and forecasts an operating earnings margin of between 8.0% and 8.5%.
Taking into account holding costs, the Rheinmetall Group’s projected operating earnings margin comes to around 8%.
Statements and forecasts referring to the future
This release contains statements referring to the future. These statements are based on the current estimates and forecasts of Rheinmetall AG and the information currently available to it. The statements referring to the future are not to be understood as guarantees of the future developments and results that they describe. These instead depend on a number of factors. They involve various risks and uncertainties and are based on assumptions that may prove to be inaccurate. Rheinmetall does not undertake a commitment to update statements referring to the future made in this release.
09 May 19. Rheinmetall’s first quarter boosted by defence sales, shares jump. Germany’s Rheinmetall on Thursday confirmed its outlook after a 15 percent rise in first-quarter operating profit on higher defence sales, boosting its shares.
“Given the extensive backlog of demand in armed forces’ procurement, we continue to see major opportunities in the Defence sector – in Germany and internationally,” CEO Armin Papperger said in a statement.
Earnings before interest and taxes (EBIT) rose to 54m euros (46m pounds) from 47m a year earlier and topped the 41 m expected by analysts.
Rheinmetall shares were up 2.8 percent at 0914 GMT to lead Germany’s midcap MDAX index.
Revenue rose 6.6 percent led by defence sales, which account for roughly half of its total, which jumped by 24 percent to 629m euros ($704m), topping a consensus forecast of 604m.
Rheinmetall made no reference to any possible negative impact from Germany’s decision to prolong an embargo on arms exports to Saudi Arabia following the killing of journalist Jamal Khashoggi last year.
In March Rheinmetall said it stood ready to ship 120 military trucks to Saudi Arabia in a deal worth 136m euros ($154m) which remains in limbo.
The export ban prompted planemaker Airbus to take a 190m euro charge last month related to a Saudi border security contract.
The Duesseldorf-based maker of tanks, ammunition and electronic defence devices confirmed its full-year targets, saying it expected defence to power group organic growth of 4 to 6 percent while its automotive sector is not be expected to grow.
Its automotive sales fell 5 percent to 714m euros, in line with expectations. The unit, which produces components including engine blocks, pumps and electronics, posted an operating profit margin of 6.9 percent, Rheinmetall said, despite the industry’s current slowdown.
“We are in particular surprised by automotive,” a broker at Bankhaus Lampe said, noting Rheinmetall’s overall operating profit came in much better than expected.
Weaker demand in China along with global trade tensions and new emissions legislation are weighing on the margins of automakers and their suppliers. German automotive supplier Continental on Thursday reported a 22 percent fall in quarterly net profit. (Source: Reuters)
08 May 19. Curtiss-Wright Corporation (NYSE: CW) reports financial results for the first quarter ended March 31, 2019. On March 18, 2019, Curtiss-Wright announced the acquisition of Tactical Communications Group, LLC (TCG), a leading supplier of tactical data link software solutions for critical military communication systems. In addition to our Reported results, we have included an Adjusted view (defined below) that excludes first year purchase accounting costs associated with this acquisition, as well as one-time transition and IT security costs associated with the relocation of the DRG business.
First Quarter 2019 Highlights:
- Reported diluted earnings per share (EPS) of $1.29, with Adjusted diluted EPS of $1.30 (defined below), up 32% and 33%, respectively, compared with the prior year;
- Net sales of $578m, up 6%;
- Reported and Adjusted operating income of $72m, up 12%;
- Reported and Adjusted operating margin of 12.5%, up 70 basis points;
- New orders of $747m increased 23%, led by strong naval defense orders, while Backlog of $2.2bn increased 7% from December 31, 2018; and
- Share repurchases of approximately $12m.
Full-Year 2019 Business Outlook (compared with Adjusted full-year 2018):
- Increased Adjusted diluted EPS guidance by $0.20 to new range of $7.00 to $7.15, up 10-12%, due to expectations for higher sales and profitability in the Commercial/Industrial segment, contribution from the TCG acquisition (as Adjusted), exclusion of one-time costs associated with the relocation of the DRG business, and a slight reduction to share count;
- Increased sales guidance to new range of 4-6% growth (previously up 3-5%) and Adjusted operating income guidance to new range of 6-9% growth (previously up 4-6%);
- Increased Adjusted operating margin guidance to new range of 16.2% to 16.3%, up 40-50 basis points (previously 15.9% to 16.0%, up 10-20 basis points); and
- Increased Reported free cash flow by $10m to new range of $310 to $320m and Adjusted free cash flow range to new range of $330 to $340m, excluding a $20m capital investment in the Power segment related to construction of and move to a new, state-of-the-art naval facility for the DRG business, generating a free cash flow conversion rate of approximately 110%.
“We delivered a strong start to the year, allowing us to increase our full-year guidance for sales, operating income, operating margin, diluted EPS and free cash flow,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “First quarter Adjusted diluted EPS was $1.30, as we delivered solid 6% top-line growth driven by strong defense market sales, as well as improved profitability led by a strong performance in the Power segment. Our results also reflected solid new order growth of 23%, primarily based on the timing of naval defense orders, which provides increased confidence in achieving our overall sales expectations.”
“Looking ahead to the remainder of 2019, we anticipate steady, sequential improvement in operating margin, diluted EPS and free cash flow. Further, the recently completed acquisition of TCG supports our objectives for long-term profitable growth and strong free cash flow generation. Overall, we continue to execute on our long-term strategy to deliver top-quartile financial performance, which will enable us to deliver significant value for our shareholders.”
First Quarter 2019 Operating Results
- Sales of $578m, up $31m, or 6%, compared with the prior year (2% organic, 5% acquisitions, 1% unfavorable foreign currency translation);
- From an end market perspective, total sales to the defense markets increased 12%, or 3% organically, led by a 27% surge in naval defense revenues, while total sales to the commercial markets increased 2%, led by improved commercial aerospace and general industrial sales, compared with the prior year. Please refer to the accompanying tables for a breakdown of sales by end market;
- Reported and Adjusted operating income of $72m, up $8m, or 12%, compared with the prior year, principally reflects higher organic revenues and the contribution from our DRG acquisition in the Power segment, partially offset by reduced operating income in the Defense segment;
- Reported and Adjusted operating margin of 12.5%, up 70 basis points compared with the prior year, reflects favorable overhead absorption on higher naval defense revenues and increased profitability on the China Direct AP1000 program in the Power segment, as well as the benefits of our ongoing margin improvement initiatives, partially offset by unfavorable mix for our defense electronics products in the Defense segment, as expected; and
- Non-segment expenses of $9m were slightly lower compared with the prior year, principally due to lower environmental costs.
- Reported free cash flow of ($69)m, defined as cash flow from operations less capital expenditures, increased $11m, or 14%, compared with the prior year, primarily driven by higher cash earnings;
- Capital expenditures increased by $8m to $17 m compared with the prior year, primarily due to higher capital investments within the Power segment, including a $5m investment related to the construction of a new, state-of-the-art naval facility for the DRG business; and
- Adjusted free cash flow, which excludes the facility investment in the current period and the pension payment in the prior period, decreased $34m to ($64)m, principally due to the timing of supplier payments, partially offset by higher cash earnings.
New Orders and Backlog
- During the first quarter, new orders of $747m increased 23% compared with the prior year, led by strong organic growth in naval defense orders, as well as a 3% contribution from the DRG acquisition; and
- Backlog of $2.2bn increased 7% from December 31, 2018.
Other Items – Share Repurchase
- During the first quarter, the Company repurchased 107,272 shares of its common stock for approximately $12m.
First Quarter 2019 Segment Performance
- Sales of $294m, down $3m, or 1%, compared with the prior year (1% organic, 2% unfavorable foreign currency translation);
- Lower naval defense market revenues principally reflects lower sales of valves on the CVN-80 aircraft carrier program, based on timing of production;
- Commercial aerospace market sales were essentially flat, as higher OEM sales of sensors products were mainly offset by lower actuation revenues due to the delayed signing of a new supply agreement and lower FAA directives;
- General industrial market sales growth was principally driven by solid demand for industrial valve and vehicle products; and
- Reported operating income was $39m, up 1% compared with the prior year, while reported operating margin increased 20 basis points to 13.4%, reflecting higher sales and favorable overhead absorption for industrial valve and sensors products, offset by lower sales and unfavorable overhead absorption for actuation products, while the benefits of our ongoing margin improvement initiatives were offset by the impact from tariffs.
Sales of $121m, up $2m, or 2%, compared with the prior year (3% organic, 1% unfavorable foreign currency translation);
- Aerospace defense market sales were essentially flat, as higher sales on various helicopter programs, including the Apache platform, were offset by reduced sales on unmanned aerial vehicle (UAV) programs;
- Ground defense market revenue declines were principally driven by reduced sales on the G/ATOR program and various international tank programs, partially offset by higher sales on the Abrams tank platform;
- Higher naval defense market revenues principally reflect higher sales of embedded computing equipment on the Virginia class submarine program;
- Higher commercial aerospace market revenues principally reflect higher sales of avionics and electronics equipment on various domestic and international platforms;
- Reported operating income was $18m, with Reported operating margin of 14.6%; and
- Adjusted operating income of $18m, down $2m, or 8%, compared with the prior year, while Adjusted operating margin decreased 170 basis points to 14.9%, driven by unfavorable mix for our defense electronics products, despite higher sales.
- Sales of $164m, up $32m, or 24%, compared with the prior year (6% organic, 18% acquisition);
- Strong naval defense market sales were driven by higher Virginia class submarine and CVN-80 aircraft carrier revenues, as well as solid DRG service center revenues;
- Power generation market sales were essentially flat, as increased domestic aftermarket sales were offset by lower international aftermarket sales; and
- Reported operating income was $24m, up $9m, or 58%, compared with the prior year, while Reported operating margin increased 320 basis points to 14.8%, reflecting favorable overhead absorption on higher naval defense revenues and increased profitability on the China Direct AP1000 program.
07 May 19. Envistacom Completes Acquisition of Fast Fit Technologies, the Leader in Waveform and Analytics Virtualization. Envistacom announced today during SATELLITE 2019 that it has completed the acquisition of Fast Fit Technologies, the leader in virtualized communication waveforms and data analytics solutions. This acquisition represents a strategic expansion for Envistacom adding to the company’s Intellectual Property portfolio and positioning Envistacom to serve as a communication waveform and data analytics virtualization integrator for future Department of Defense network modernization efforts.
Based upon an initial Small Business Innovation Research (SBIR) contract award and multiple subsequent waveform virtualization contracts with the US ARMY, US NAVY, and other related customers, Fast Fit Technologies has demonstrated its clear leadership position in this arena. This acquisition will enable Envistacom to virtualize the entire communications architecture to provide ultimate flexibility and resiliency for current and next generation satellite constellations and global communications networks. The vision is a common communication network infrastructure that can host any communications infrastructure’s waveform as virtualized applications selectable in real-time from a library of IP cores by the user.
Located in Frederick, Maryland, Fast Fit Technologies is the pioneer of open-source communication waveform and data analytics virtualization using the OpenCL framework for heterogenous computing and targeting COTS High-Performance Computing (HPC) servers equipped with FPGA-based hardware acceleration. The company has virtualized a number of waveforms and other applications that are available as a library for customer use. During live demonstrations, their high performance optimized OpenCL library of cores delivered performance comparable to purpose built hardware. Moreover, the virtualized applications can be hosted in a private data center with HPC servers or can be hosted as a cloud-based application using Public data center resources. Envistacom will continue to expand this highly optimized virtual library with additional open-standard and proprietary waveforms as well as other data analytics and network applications.
“With the emergence of High Capacity Satellite (HCS) and Low Earth Orbit (LEO) networks, proprietary waveforms are often developed to optimize the performance of those networks. These unique systems have traditionally required purpose-built and often proprietary modem hardware,” said Michael Geist, Vice President, Strategy and Technology, Envistacom. “Virtualization will allow users who require network flexibility and resiliency to benefit from the ability to operate across networks, satellites and constellations without being limited by any single ecosystem.”
“The combined team will realize a virtualization strategy providing a scalable hardware agnostic solution with support for any communications infrastructure (terrestrial radio, tactical radio, satellite, cellular, etc.) and support for any and all virtualized waveforms and data analytics requirements,” said Michael Beeler, COO of Fast Fit Technologies. “Our expertise in virtualization will play an integral role in developing a communications network infrastructure that is waveform agnostic, flexible, resilient and minimizes dependency on purpose-built communications equipment,” said Kasra Toyserkani, CTO of Fast Fit Technologies.
About Envistacom, LLC
Headquartered in Atlanta, Ga., Envistacom provides counterterrorism, cyber and communications solutions to the U.S. DoD and coalition partners in the aerospace, defense, and intelligence communities. Customers rely on Envistacom for rapid-response, secure technology solutions and subject-matter expertise to support mission critical operations. With an elite team of former military leaders and domain experts located in 11 countries, and multiple IDIQ contract vehicles worth $55B+, Envistacom is a trusted partner in protecting military, civilians and critical infrastructure around the world. DWOSB.
07 May 19. SAS seeks another extension to share trading suspension. ASX-listed space company Sky and Space Global (SAS) has again sought to extend the voluntary halt to trading in its shares.
In advice to the Australian Securities Exchange (ASX), SAS managing director Meir Moalem said this request for the extension of the voluntary suspension would enable SAS to finalise appointment of two new Australian resident non-executive directors with the requisite skills and experience.
It would also allow the company to complete negotiations of material commercial and operational agreements to support the company’s ongoing operations and growth strategy.
Moalem said it was expected the voluntary suspension to end no later than start of trading on Tuesday, 14 May.
SAS shares have been in a voluntary trading halt since the first week in April when the company advised the ASX that it was renegotiating its agreement with Danish satellite providers GomSpace and seeking two new directors.
The company is also seeking to raise additional funds through the $7.4m second tranche and priority offer share offers to fund ongoing operations and the business plan.
SAS, based in Perth, has big plans for what it calls the Pearls constellation of around 200 nanosatellites in equatorial orbit, providing low cost communication and internet services for markets in Africa, South America and Asia.
Under its new 6U agreement with GomSpace, there will be an additional constellation of eight to 16 satellites in high inclination orbits, allowing full global coverage.
Launch is planned for early next year. The company has signed launch MoUs with Arianespace and Rocket Lab.
The company has European and Israeli development centres with experts in aerospace, satellites and software. In June 2017, SAS successfully launched into space its first three nan-osatellites, the Three Diamonds.
SAS services will also bring to the equatorial region a huge range of life-saving services, like search and rescue, disaster management, emergency response, security alarms and recreational tracking. This is in addition to a whole range of traditional services, including cellphone applications, offshore communications, smart farming, interactive TV, airplane, vessel and animal tracking, water and electric metering, grid monitoring, and ATM.
The company aims to deliver cost-effective communications infrastructure and services to those who need it most and to disrupt the telecommunications and international transport industries. (Source: Space Connect)
05 May 19. Italy’s Leonardo open to deals as consolidation beckons: CEO. Europe’s defense sector is headed for consolidation and Italy’s Leonardo is open to deals in areas where it is not a market leader, the chief executive of the state-owned defense group said on Monday.
“I’m convinced that, over time, there will be mergers in Europe. As a … company we need to know where and in which businesses to remain a leader and where to proceed with tie-ups,” Alessandro Profumo told a news conference.
He added that any deal would not involve Leonardo’s holding company. Profumo also said the group could be interested in the two maintenance divisions of Piaggio Aero. (Source: Reuters)
03 May 19. Quebec aerospace companies may need to merge to compete in industry. If Quebec aerospace companies are to remain competitive, some of them will have to consolidate. It’s a recurrent theme that was prominent once again during International Aerospace Week in Montreal, Que., held April 15 to 18.
“Can all the SMEs [small- and medium-sized enterprises] survive this globalization?” asked Pierre Fitzgibbon, Quebec’s Minister of Economy and Innovation, during a discussion with aerospace media about efforts to support the province’s large cluster of small companies trying to integrate digital technologies and advanced manufacturing as part of a transformation to Industry 4.0.
The government will extend financial and other support, he said, but some companies may need to combine forces “so they can justify going to 4.0.”
That call to combine arms was echoed by Suzanne Benoît, president of Aéro Montréal, a strategic think tank that represents over 200 companies, most of the them SMEs, in the aerospace cluster. Under its MACH and MACH FAB 4.0 programs, the association has since 2012 been helping small companies strengthen their strategic planning and digitize their manufacturing processes.
Last May, Aéro Montréal launched Accelerator 360, an $8m initiative to help SMEs gain a better foothold in global supply chains and expand their customer base. Noting the fierce competition SMEs face to win contracts on international aircraft programs, Benoit said most will need critical mass.
“We have been telling SMES [for some time] that they are too small,” she said. Accelerator 360 is designed to force companies to collaborate by teaming a few based on their strength and compatibility to then pursue targeted markets. The association will help identify candidates and support the development of export strategies, and hopes to see more mergers and acquisitions and joint ventures.
“When companies go global, they see the advantage of size,” she noted.
The drive to strengthen Quebec’s smaller companies is in part because the federal government is projected to increase defence spending by almost $14bn, from $18.9 to $32.7bn, over the next decade to recapitalize many of the Canadian Armed Forces fleets of aircraft, ships, vehicles, satellites, and communications systems.
Navdeep Bains, Minister of Innovation, Science and Economic Development, told a supply chain summit during the event that the government would leverage its Industrial and Technological Benefits policy and 16 key industrial capabilities (KICs) developed in consultation with industry–everything from advanced materials and autonomous systems to aerospace components and training and simulation technologies–to get the best return from defence procurement. Companies, he said, will “have to step up in a big way” when they bid on those programs.
With a large aerospace ecosystem, a federal government-back supercluster around artificial intelligence, and substantive research and development initiatives, the province is well positioned to capitalize. But at present Quebec firms receive only around 20 per cent of defence contracts, and most of that is in the form of offsets, said Fitzgibbon, a former executive with landing gear manufacturer Héroux-Devtek.
“We need to think cluster as well, because that is how it is going,” he said, suggesting Ottawa consider expanding its “innovation agenda” to include a broader defence strategy. “[We] realize there are contracts that they are going to give for defence in the next year or two [that are] are important, so there might be a requirement for a national strategy,” which would give provincial governments something “to anchor ourselves to. Failing which, I will be working on my own to make sure we get our fair share.”
“There is no question that for the Quebec government, defence is important,” he added. “I have no influence over what the federal government will do, but I will keep hitting the nail with whatever hammer I have.”
To generate strong players in defence, and aerospace more broadly, Fitzgibbon said would enlarge the mandate of Investment Quebec, the government’s investment arm that seeks to bolster Quebec businesses and attract foreign investment in the province, and expand the MACH FAB 4.0 initiative.
“The solidity of our supply chain partners is important,” he said. “Some of them have not invested enough in 4.0, innovative manufacturing, or for that matter digitalization of their businesses. I am going to be very aggressive to support these companies that are in need of capital.” (Source: Google/https://www.skiesmag.com)
01 May 19. Harris Corporation Reports Strong Fiscal 2019 Third Quarter Results With Double-Digit Revenue Growth and Record EPS.
- 3Q19 revenue up 11% to $1.7bn
- 3Q19 GAAP EPS from continuing operations up 24% to $2.02; non-GAAP1 up 30% to $2.11
- 3Q19 operating cash flow of $405m; adjusted free cash flow2 of $379m
- YTD19 revenue up 10% to $4.9 bn; GAAP EPS from continuing operations up 39% to $5.67; non-GAAP1 up 26% to $5.85
- YTD19 operating cash flow of $874m; adjusted free cash flow2 up 75% to $788m
- Increased revenue, EPS and adjusted free cash flow2 guidance for fiscal 2019
Harris Corporation (NYSE:HRS) reported fiscal 2019 third quarter revenue of $1.7bn, up 11% compared with the prior year with a book-to-bill of 1.03. GAAP earnings per diluted share (EPS) from continuing operations increased 24% to $2.02, and non-GAAP EPS1increased 30% to $2.11. Net income increased 24% to $243m, and adjusted earnings before interest and taxes (EBIT1) increased 15% to $341m with margin expansion of 80 basis points (bps) to 19.7%.
“We achieved double-digit EPS growth for the sixth consecutive quarter driven by our highest organic revenue growth and margin in the past eight years,” said William M. Brown, chairman, president and chief executive officer. “These results, combined with another quarter of strong free cash flow, continue our exceptional year-to-date performance and position us well to deliver on increased revenue, EPS and free cash flow guidance for the year.”
“Alongside strong operating results, integration planning continues to progress well with the teams developing detailed plans to deliver cost and revenue synergies. The shareholder approvals for the L3 Harris transaction and Harris signing a definitive agreement to divest the Night Vision business, reaffirm our confidence in closing the merger in mid-calendar 2019. This transformational merger, combined with a strong addressable budget, will drive continued growth and create long-term value for our shareholders.”
Summary Financial Results
Revenue increased 11% for the quarter and 10% year-to-date, with continued strong growth across all three segments. GAAP and non-GAAP EPS3 grew more than 20% for the quarter and for the first three quarters from higher volume, strong operational performance and a lower tax rate, partially offset by product and program mix. In addition, third quarter GAAP EPS growth was partially offset by L3 deal and integration costs. Year-to-date adjusted EBIT3 margin expanded 90 bps to 19.6% and book-to-bill was 1.12.
Revenue increased double digits for the fourth consecutive quarter, up 19%, from growth in Tactical Communications and Public Safety. Tactical Communications revenue grew 19%, driven by 55% growth in DoD Tactical, from a ramp in U.S. DoD modernization programs. Public Safety grew double digits on increased demand from state and federal agencies. Operating income increased 19% to $172m.
U.S. DoD tactical radio modernization momentum continued in the third quarter, with an initial production order from SOCOM for next generation multi-channel handheld radios under the sole-source $390m IDIQ contract and an order from the Marine Corps for multi-channel manpack radios. These orders follow the Army HMS Manpack and 2-Channel Leader Radio LRIP awards received in prior quarters and expand multi-year modernization efforts across the services.
International adoption of multi-channel radios continued to expand with an order from the Canadian Army as part of their modernization program. In addition, Harris received an order from New Zealand to integrate, modernize and upgrade their command and control network, advancing the company’s strategy of expanding into integrated network systems.
Segment revenue in the first three quarters increased 15% from strong growth in all three businesses with a book-to-bill of 1.1 and operating margin expanding 80 bps to 30.1%.
Third quarter revenue increased 7% from sustained strong growth on long-term platforms – F-35, F/A-18 and F-16 – and from increased volume in release systems, partially offset by the United Arab Emirates (UAE) program transition timing. Operating income grew 14% to $123 m, and margin expanded 120 bps to 19.0%, driven by higher volume and strong operational performance.
Strong bookings on long-term platforms continued in the quarter with a $212 m contract to upgrade electronic countermeasure capabilities on U.S. Navy and Kuwaiti F/A-18 aircraft, increasing the inception-to-date IDECM production awards to $2 bn. The company also received a $129m development contract for the open systems mission processor on the F-35, a key milestone supporting platform modernization under the Technology Refresh 3 program.
In addition, Harris strengthened its position in the UAE with the award of a $46m contract to provide technical support and training to the UAE Armed Forces, as the Emirates Land Tactical System (ELTS) transitions to full operations. This award follows the company’s successful completion of the $192m UAE ELTS Initial Operational Capability program.
Segment revenue in the first three quarters increased 7% with a book-to-bill of 1.2 and operating margin expanding 90 bps to 19.1%.
Space and Intelligence Systems
Third quarter revenue increased 7%, as double-digit growth from classified programs, driven by small satellites, exquisite systems and next-generation technology programs, was partially offset by lower revenue from environmental programs. Operating income increased 5% to $87m from higher volume and strong program execution, partially offset by higher investments.
Order momentum remained strong on classified programs, as the company leveraged its investments in innovation and strong customer relationships to secure a $185m follow-on sustainment and modernization award from the U.S. Air Force for counter-communication, $154m of increased scope from an existing classified customer to enhance and deploy mission-critical capabilities and $84m of additional funding for exquisite space systems from a long-standing customer.
Investments in technology have strengthened the company’s position as the partner-of-choice on long-standing Civil programs. Harris received a $243 m award as part of the GPS IIIF SV11-32 contract to provide fully-digital navigation payloads for the first two GPS IIIF satellites. This award follows the company’s success on the current GPS III SV1-10 contract. Harris also received a 3-year, $293m award to expand capabilities on the GOES-R ground system, increasing the total contract value to $1.7bn.
Segment revenue in the first three quarters increased 7% with a book-to-bill of 1.1. Operating income increased 6% and operating margin remained strong at 17.5%.
Cash and Capital Deployment
In the first three quarters of fiscal 2019, the company generated $788m in adjusted free cash flow5, up 75%, and returned $444m to shareholders through dividends and share repurchases and, in the third quarter, paid down $300 m of debt.
As a result of strong year-to-date performance, Harris updated its guidance for fiscal 2019 to the following:
- Revenue ~$6.72bn, up ~9.0% from fiscal 2018 (increased from previous guidance of up 8.0 – 8.5%)
- GAAP EPS from continuing operations ~$7.80 and non-GAAP6 EPS ~$8.15 (increased from previous guidance of $7.50 – $7.60 GAAP and $7.90 – $8.00 non-GAAP6)
- Operating cash flow ~$1,160bn; adjusted free cash flow5 ~$1.025bn (increased from previous guidance of $1.000 – $1.025bn)
- Tax rate of approximately 15.0% GAAP; 15.5% non-GAAP (a decrease from ~16.3% GAAP and ~16.5% non-GAAP previously)