17 May 19. SAS says it’s on track to become a leader in global space business. Australian-listed space company Sky and Space Global (SAS) has moved to reassure shareholders that the company is in position to become a dominant player at the forefront of the new global space industry.
In a letter to shareholders, founder and chief executive Meir Moalem said SAS had been putting the foundations necessary to become a successful business.
“As the space sector becomes more and more appealing to companies, I am proud that Sky and Space Global is at the forefront of the new global commercial space industry,” he said.
“We are doing things that no one else has done before and have progressed at a very rapid pace over the past few months. The foundations we have now put in place, and are putting the final touches on, will ultimately make Sky and Space Global a dominant player in the space market with a strong and attractive global business.”
Moalem said SAS’ planned new global coverage had rapidly increased the potential revenue opportunities.
“We are progressing to launch in 2020, and to providing commercial satellite communication services and generating revenues,” he said.
SAS, based in Perth, is planning what it calls the Pearls constellation of as many as 200 nanosatellites in equatorial orbit, providing low cost communications, data and internet services for markets in Africa, South America and Asia.
Under the 6U agreement with GomSpace, there will be an additional constellation high inclination orbits, allowing full global coverage, including Australia, Russia, China, South Africa, Argentina and Canada.
The first launch is planned for early next year.
SAS has faced its share of challenges, including cash flow problems and loss of two board members, who are still to be replaced.
Moalem said the recent company news had unfortunately not focused on their significant technological achievements.
That included development of an algorithm to enable SAS nanosatellites to autonomously manoeuvre by sharing information and making group decisions to keep the constellation up and running and avoid collisions with other space objects.
SAS has also identified two manufacturing candidates to build of ground terminals, providing connectivity for end users.
Moalem said these terminals would meet their stringent requirements for enduring harsh environmental conditions, low power consumption, lightweight and portable, as well as safety and security.
“Necessity is the mother of invention, and our software company in Poland is proving this every day,” he said.
“Our requirement for a very efficient communication system has resulted in advanced algorithms for data compression and transfer that are at the forefront of technology and current capabilities, and we continue to challenge ourselves even further.”
Moalem said negotiations in the US for financing for launch were progressing and were at an advanced stage.
As well, SAS has substantially reduced operating costs, saving $2 million per year. Company founders and directors took a 50 per cent pay cut to set a personal example and invested $300,000 of their own funds in the company. (Source: Defence Connect)
16 May 19. Embraer Earnings Update. Embraer delivered 11 commercial jets and 11 executive jets (8 light / 3 large) in 1Q19;
- The Company’s firm order backlog at the end of 1Q19 was US$ 16bn considering all deliveries as well as firm orders obtained during the period;
- EBIT and EBITDA in 1Q19 were US$ (15.2) m and US$ 30.9m, respectively, yielding EBIT margin of -1.8% and EBITDA margin of 3.8%. This compares to EBIT of US$ (5.3)m (-0.6% EBIT margin) and EBITDA of US$ 57.8m (6.0% EBITDA margin) in 1Q18;
- 1Q19 Net loss attributable to Embraer shareholders and Loss per ADS were US$ (42.5)m and US$ (0.23), respectively. Adjusted net loss (excluding deferred income tax and social contribution) for 1Q19 was US$ (61.8)m, with Adjusted loss per ADS of US$ (0.34). Embraer reported adjusted net loss in 1Q18 of US$ (60.5) m, for an adjusted loss per ADS of US$ (0.33) in the quarter;
- Embraer reported Free cash flow of US$ (665.3)m in 1Q19, compared to free cash flow of US$ (435.2)m reported in 1Q18. The Company finished the quarter with total cash of US$ 2,483.4m and total debt of US$ 3,587.1m, yielding a net debt position of US$ 1,103.7m versus net debt of US$ 439.9m at the end of 2018;
- The Company’s shareholders approved the proposed strategic partnership between Boeing and Embraer during an Extraordinary General Shareholders’ Meeting on February 26, 2019. At the meeting, 96.8% of all valid votes were in favor of the transaction, with participation of roughly 67% of all outstanding shares;
- The closing of the transaction between Boeing and Embraer remains subject to obtaining regulatory approvals and the satisfaction of other customary closing conditions, expected by the end of 2019;
- The Company reaffirms all aspects of its 2019 financial and deliveries guidance.
16 May 19. Babcock fury at ‘misleading’ report by anonymous group. Boatman Capital Research yesterday launched its latest attack against Babcock International, saying that the company could be about to announce a £50m writedown in one of its Ministry of Defence businesses and calling for the chief executive to go.
The defence contractor rebutted the research note from the anonymous group, saying that it had no intention of writing down the value of its Defence Support Group (DSG) and calling Boatman’s statements inaccurate, misleading and malicious.
Babcock’s shares fell sharply last autumn when it was first attacked online by Boatman. Its stock closed up 3½p at 522½p yesterday — more than 25 per cent down since last October and close to an eight-year low.
Babcock employs 35,000 people, most of them in the UK, and is a support contractor to the MoD, Royal Navy, army and RAF. It also operates emergency helicopters in several countries and is involved in nuclear decommissioning. It is valued on the stock market at £2.6 billion.
The people behind Boatman have not identified themselves or been uncloaked by Babcock, despite the company hiring private investigators.
There has been speculation that it could be civil servants at the MoD with whom Babcock reportedly has a fractious relationship; disenchanted employees; or Russian operatives seeking to destabilise the ministry and the company.
The research group’s latest report, emblazoned with a Victorian engraving of the Stygian ferryman transporting souls to hell, said that Babcock overpaid in its £148m acquisition of DSG and would need to take an impairment charge.
Babcock said that DSG was “performing to financial expectations”.
- Mike Turner, outgoing chairman of Babcock, will be named today as senior independent director of Gulf Marine Services, a London-listed operator of support vessels serving the energy industry, according to Sky News. (Source: The Times)
BATTLESPACE Comment: In our view it has always been not if but when Babcock makes a writedown on the purchase of DSG which it overpaid for with the hope of winning the DARA work in St Athan as part of a future deal. The promise of the Protected Mobility SSS by the MoD never materialised and there is no work for DSG on Ajax. It is likely that Babcock ill delay any decision on a writedown until after the size and timing of Warrior WCSP is clearer.
16 May 19. Trump puts Huawei on exports blacklist. US companies will need to apply for licences to sell to Chinese telecom equipment maker. The Trump administration has launched a dramatic attack on Huawei by requiring US companies to obtain licences to sell critical technology to the Chinese telecoms company. The White House and US Department of Commerce took dual actions on Wednesday that will effectively ban Huawei from selling technology into the American market, and could also prevent it from buying semiconductors from Qualcomm in the US that are crucial for its production. Donald Trump issued an executive order declaring a “national emergency” in relation to threats against US telecommunications, in a move that authorised the commerce department to “prohibit transactions posing an unacceptable risk” to national security.
In a potentially much more significant development, the commerce department put Huawei on the so-called Entity List — a move that means US companies will now have to apply for a licence to sell technology to the Shenzhen-based telecoms company. Tom Cotton, a hawkish Republican senator from Arkansas, welcomed the decision by the Trump administration by tweeting: “@Huawei 5G, RIP. Thanks for playing.” The US has basically openly declared it is willing to engage in a full-fledged technology war with China Paul Triolo, Eurasia Group Samm Sacks, a cyber security and China expert at New America, a Washington-based think-tank, said placing Huawei on the blacklist would have “ripple effects” around the world. “Networks across Europe, Africa and Asia that rely on Huawei equipment will feel the impact because Huawei relies on US components,” Ms Sacks said. “That’s why this was always the nuclear option.” Paul Triolo, a technology policy expert at Eurasia Group, a risk consultancy, said putting Huawei on the Entity List was a “huge development” that would not only hurt the Chinese company but also have an impact on global supply chains involving US companies such as Intel, Microsoft and Oracle. “The US has basically openly declared it is willing to engage in a full-fledged technology war with China,” he said, adding that placing Huawei on the “dreaded Entity List has global ramifications, as Huawei supplies dozens of leading carriers around the world”. Asian benchmark stock indices were little changed following the US move, which follows heightened trade tensions between Washington and Beijing with both sides imposing increased tariffs on each in recent days.
But Huawei-related companies were lower, with stocks of Sunny Optical and AAC Technologies, which are suppliers of the Chinese equipment maker, falling 3.8 per cent and 1.1 per cent in morning trading in Hong Kong. The Entity List is the Department of Commerce’s index of individuals, companies, and other organisations that are seen as posing a risk to US national security. While proliferation of weapons of mass destruction or terrorism are among the potential reasons for getting listed, the US government can also put companies on the list for unspecified risks to security or even just foreign policy goals of the country. Although inclusion in the list is one step down from being designated a “Denied Person” — the total ban that was imposed on ZTE, another Chinese telecom equipment company, last year — US export control authorities say that applications by US suppliers for licences to export to listed companies are “usually subject to a policy of denial”. Don Vieira, a former top national security lawyer at the US justice department, said the moves on Wednesday suggested that the White House had given the intelligence agencies and commerce department a green light to “take on” Huawei. “I don’t know if the US can destroy Huawei, but maybe the US government can get some concessions,” said Mr Vieira, who is a partner at the Skadden Arps, Slate, Meagher & Flom law firm.
Huawei responded to the US measures by saying it was ready to engage with the US government to come up with measures to ensure the security of its products. “Restricting Huawei from doing business in the US will not make the US more secure or stronger; instead, this will only serve to limit the US to inferior yet more expensive alternatives, leaving the US lagging behind in 5G deployment, and eventually harming the interests of US companies and consumers,” Huawei said. “In addition, unreasonable restrictions will infringe upon Huawei’s rights and raise other serious legal issues.” Eurasia Group’s Mr Triolo said the US government could give some firms licences to sell to Huawei but the threat of denial meant “any carrier using [Huawei’s] gear will have to reconsider continuing to rely on the company for existing and next generation 5G networks”. Qualcomm declined to comment on Huawei being put on the Entity List. The Chinese firm licenses the US company’s intellectual property for use in smartphones, although this accounted for less than 10 per cent of its firm’s total sales in 2018. Dennis Wilder, a former head of China analysis at the CIA, said the combination of the executive order and listing on the Entity List was part of a “full court press” against Huawei that represented “the beginning of decoupling” from Chinese telecoms. The actions against Huawei come after a period in which the White House — backed by career security professionals — has warned about the risks of allowing the Chinese company to help countries build their next-generation high-speed 5G networks. Recommended beyondbrics The true cost of signing up with Huawei Australia and Japan have joined the US in banning Huawei but Washington has struggled to persuade other allies such as the UK and Germany to follow suit.
Semiconductor industry executives and analysts said the impact of Huawei being put on the Entity List was unclear as it remained to be seen whether the US government was prepared to issue any licences for export to the company. Credit Suisse said in a research note in December that the supply chain would be hit harder by a full export ban on Huawei than that on ZTE because Huawei is more focused on telecom infrastructure equipment and high-end smartphones. “With Huawei’s high portion of business from networking equipment and high-end mobile devices, the impact on Huawei and its supply chain from a potential denial of export privileges from the US Department of Commerce against Huawei would be material,” Credit Suisse said in the report. It estimated that 20 to 30 per cent of Huawei’s materials bill is related to semiconductors — equivalent to $15bn worth of chips, or 3.8 per cent of global industry production compared with only 0.5 per cent for ZTE. (Source: FT.com)
15 May 19. MBDA boss faces battle of wits as Airbus strategy chief. The chief executive of European missile maker MBDA is returning to Airbus as head of strategy as the planemaker seeks to modernize its factories and explore future options in defense.
Antoine Bouvier, 59, replaces Patrick de Castelbajac who becomes head of Airbus Asia-Pacific, Airbus said in a statement. Castelbajac’s responsibility for Airbus international operations had already been transferred to sales chief Christian Scherer.
At Airbus, Bouvier will be embarking on a battle of wits with a new opposite number at arch-rival Boeing Co.
Chris Raymond, until recently head of Autonomous Systems, has been named Boeing’s group-wide vice-president for enterprise strategy under finance director Greg Smith, Boeing said in his biography on its website, confirming a Reuters report.
Bouvier’s appointment is the latest evidence of a management shake-up at Airbus, accelerated by the promotion last month of planemaking chief Guillaume Faury to CEO.
A former civil servant who narrowly missed out on running France’s DGA defense procurement agency two years ago, Bouvier brings experience in forging defense partnerships to Airbus, which is embroiled in a row with Germany over arms controls. He will be replaced at MBDA by former OneWeb chief Eric Beranger.
From July 1, Castelbajac will also assume responsibility for Asia sales, recently a key battleground with Boeing.
China Airlines last week announced a leasing deal expected to pave the way for the Taiwan carrier to switch its medium-haul fleet to the Airbus A320neo rather than the Boeing 737 MAX.
The deal to replace older 737s took years to complete and was drafted before the 737 MAX was engulfed by a crisis involving two crashes and a worldwide grounding.
Although day-to-day competition remains intense, Airbus seems wary of over-exploiting the 737 MAX problems, fearing they could destabilize the market and supply chains, some industry sources say. A U.S. industry official denied this.
NEXT GENERATION
The future of the Airbus A320neo and Boeing 737 MAX – the industry’s most successful models – is seen as strategically entwined and insiders say Airbus is also worried about the impact of the grounding on global certification.
Decisions on what replaces the current generation of single-aisle jets from about 2030 and how they are built could define the aircraft industry well into the second half of the century.
Early planning of those models will be a major topic for strategists at both Airbus and Boeing in coming years.
Insiders say Faury wants Airbus to focus on industrial strategy and closing a perceived gap with Boeing in production technology, as well as the threat of increased environmental regulation, when designing new products.
Airbus must also assess how to respond to rising defense spending after its failure to merge with Britain’s BAE Systems in 2012 left it heavily skewed toward commercial markets that are now approaching the end of an extended upcycle.
It is involved on the German side of a nascent Franco-German fighter project along with French partner Dassault Aviation but faces competition for valuable systems work and a growing spat with the German government over export controls.
At MBDA, Bouvier was credited with driving an Anglo-French agreement on the use of shared missile technology.
Bouvier followed the classic path of a French mandarin from prestigious Polytechnique engineering school to ENA civil service academy. He had been linked to top posts at suppliers such as Safran and Thales, although was not hired.
“His appointment will be very credible with the French government,” a person familiar with the appointment said. France and Germany own 11 percent each of Airbus. (Source: Reuters)
15 May 19. Cobham agrees to pay £69m to settle long-running tax dispute. Under a deal struck with the tax authorities, Cobham will pay a one-off net tax payment of £55m in the first half of the current year, along with a one-off interest payment of £14m.
The payments will “finally settle the group’s exposure to this matter”, the FTSE 250 firm said, noting that “the settlement is within the amounts previous provided by Cobham for tax”.
Cobham’s dispute with HMRC centred around the availability of interest deductions on one of its internal financing structures, which was in place between 2008 and 2014.
Separately, Cobham also provided an update on the European Commission’s ruling last month that the UK’s controlled foreign company regime partially represented state aid.
It said: “The UK government has not yet announced how it would identify and see to recover state aid; Cobham estimates is could have an additional tax payable of between nil and approximately £60m.” (Source: Google/https://www.sharecast.com)
08 May 19. EchoStar Announces Financial Results for Three Months Ended March 31, 2019. EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the three months ended March 31, 2019.
Financial Highlights:
- Consolidated revenues of $531m.
- Consolidated net income of $15m, consolidated net income attributable to EchoStar common stock of $14m, and diluted earnings per share of $0.15.
- Consolidated Adjusted EBITDA of $206m
- Additional Highlights:
- Approximately 1,388,000 total Hughes broadband subscribers as of March 31, 2019 including approximately 150,000 subscribers in Latin America.
- Cash, cash equivalents and current marketable investment securities of $3.3bn as of March 31, 2019.
14 May 19. Acorn Growth Companies Acquires DIMO. Acorn Growth Companies, a private equity firm investing exclusively in aerospace, defense and intelligence, announced today the acquisition of DIMO Corporation (DIMO), headquartered in New Castle, Delaware.
Founded in 1994, DIMO has established itself as a leading value-added distributor of operationally critical parts and higher-level assemblies for power, electromechanical, life support and mission-specific aircraft systems.
“With its reputation in the Aerospace & Defense industry as a trusted advisor to leading OEMs of flight critical parts and government customers, DIMO has positioned itself in the U.S., Middle East, Europe, Latin America and Asia as a critical enabler of maintenance, repair, overhaul and upgrade (MRO&U) program execution,” said Rick Nagel, managing partner of Acorn Growth Companies. “DIMO’s global operating infrastructure and key relationships with foreign government aerospace and defense procurement organizations will be a tremendous strategic asset to the Acorn portfolio.”
Sohrab Naghshineh, DIMO’s founder, will continue to serve as its president focusing on supporting the company’s strategic growth initiatives as well as assisting other Acorn portfolio companies to address business opportunities in international markets. Omid Naghshineh will serve as COO.
DIMO’s core focus is on addressing the part availability challenges that impair the operations of military aircraft fleet operators globally. DIMO has positioned itself at the nexus of post-production support on high-value systems for military aircraft fleets. DIMO provides mission-critical parts availability solutions for military aircraft, leveraging long-term exclusive distribution agreements with military system OEMs and its extensive government customer and vendor networks in the U.S., Middle East, Europe, Latin America and Asia to position itself as a critical enabler of maintenance, repair, overhaul and upgrade (MRO&U) program execution.
“We could not have picked a better partner than Acorn Growth Companies. We have been impressed with the expertise and professionalism of the entire Acorn team,” said Sohrab Naghshineh, founder of DIMO. “The combination of Acorn’s strong reputation and performance in Aerospace, Defense and Intelligence and DIMO’s extensive inventory and numerous contacts globally for both military and commercial aircraft will be a powerful growth driver for both DIMO and Acorn.”
Terms of the transaction were not disclosed.
DIMO provides mission-critical parts availability solutions for military aircraft operated by the U.S. and its allies. Founded in 1994 in New Castle, Delaware, DIMO has established itself as a leading value-added distributor of operationally critical parts and higher-level assemblies for power, electromechanical, life support, and mission-specific aircraft systems.
Acorn Growth Companies is a middle market private equity firm focused exclusively on Aerospace, Defense and Intelligence. Acorn invests solely in operating companies that strive to enhance global mobility and protect national interests. Acorn has a formidable reputation in the industry and is recognized for its deep understanding of the Aerospace & Defense markets, with proprietary access to the best companies within these sectors. With operational expertise and its ability to lead and manage investments through variable economic and industry cycles, Acorn works in tandem with management to build its portfolio companies into significant market leaders. (Source: BUSINESS WIRE)
08 May 19. EchoStar Announces Financial Results for Three Months Ended March 31, 2019. EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the three months ended March 31, 2019.
Financial Highlights:
- Consolidated revenues of $531m.
- Consolidated net income of $15m, consolidated net income attributable to EchoStar common stock of $14m, and diluted earnings per share of $0.15.
- Consolidated Adjusted EBITDA of $206m (see discussion and the reconciliation of GAAP to this non-GAAP measure below).
Additional Highlights:
- Approximately 1,388,000 total Hughes broadband subscribers as of March 31, 2019 including approximately 150,000 subscribers in Latin America.
- Cash, cash equivalents and current marketable investment securities of $3.3bn as of March 31, 2019.
14 May 19. Scisys space division flying higher. Shares in Scisys (SSY:200p), a supplier of bespoke software systems to the media, space, defence and commercial sectors, have increased by 25 per cent in value since I reiterated my buy recommendation when I covered the annual results (‘Scisys set for another record year’, 28 Mar 2019) and have now doubled in value since I first suggested buying, at 102p, in the autumn of 2017 (‘Tune into a media play’, 11 Oct 2017).
It’s justified, too, as Scisys’s space division is absolutely flying. Having Brexit-proofed this operation by redomiciling the company to Dublin at the end of November, Scisys won multiple contracts on European Space Agency (ESA)-funded projects. In fact, between mid-December and the end of January, the company won €23.3m (£20m) of new space contracts to lift the division’s order book to £40m. Since then, the space division has won two further European Union-funded contracts, worth €9.7m, from Thales Alenia Space France for the development and implementation of security-relevant elements within the Galileo Ground Segment. These follow-on orders cement Scisys’s space division’s position as an expert for innovative ground-segment solutions and as a longstanding partner of Thales Alenia Space, the prime contractor to the ESA.
The orders also further boost Scisys’s record 2018 closing order book of £98.6m, derisk analysts’ 2019 revenue forecast of £62m, and support expectations that the company will lift full-year pre-tax profit by 15 per cent to £5.3m to produce earnings per share (EPS) of 14p. Buoyed by strong operating cash flow, net debt was slashed by almost 50 per cent to £3.1m last year, which cut the interest bill by 30 per cent to £0.5m, and analysts are predicting the balance sheet could be almost debt-free by the year-end. This means that more profit is being retained by shareholders. That’s good news for the dividend per share, which has been hiked by at least 10 per cent a year since 2013. Expect a payout of 2.62p a share for the 2019 financial year, rising to 2.88p in 2020.
Degearing the balance sheet also means that more of the economic ownership of the enterprise is being transferred from debt holders to shareholders. It’s also supportive of my 230p target price, which values the company’s equity at £68m and is based on a multiple of 10 times the 2019 cash profit estimate of £6.7m, and 12 times the operating profit estimate of £5.5m, a level of profit that analysts at both Finncap and Edison Investment Research are predicting this year. Buy. (Source: Investors Chronicle)
14 May 19. DRB-Hicom confirms probe into Deftech. DRB-Hicom Bhd confirmed that the Malaysian Anti-Corruption Commission (MACC) has launched a probe on its subsidiary, DRB-Hicom Defence Technologies Sdn Bhd (Deftech).
“We wish to refer to the media report relating to Deftech, a subsidiary of DRB-Hicom, on the investigation connected to Deftech by the MACC. DRB-Hicom wishes to confirm the media report,” the conglomerate said in a statement yesterday.
DRB-Hicom also assured that it will extend full cooperation to the authorities during the investigation process. Media reports emerged yesterday on the detention of two top executives of Deftech on allegations of graft in a RM17m defence contract. The duo were remanded for four days to facilitate investigations on alleged discrepancies in contracts to supply equipment for the Deftech AV8 Gempita and ACV-300 Adnan armoured combat vehicles to a defence agency between 2014 and 2017.
Deftech is a premier defence company involved in designing, developing, manufacturing and supplying armoured and logistics vehicles to the military, homeland security, hospital and transportation sector.
Its long-term strategy is to develop an indigenous land combat system, as well as an airborne surveillance, control and combat system through strategic collaborations with various stakeholders.
In doing so, Deftech aims to become Malaysia’s best and most comprehensive defence contractor.
CTRM Aviation Sdn Bhd, a subsidiary of Deftech, supplies composite aero-structures to top global aerospace companies and aircraft manufacturers.
With five other subsidiary companies under its wing, CTRM’s expertise spans the commercial and military aerospace-and-non aerospace, general aviation and defence industries. (Source: Google/https://themalaysianreserve.com)
13 May 19. Bristow Group files for Chapter 11 protection. Helicopter services and training provider Bristow Group has announced that following a period of financial difficulty, it has voluntarily elected to file for Chapter 11 protection for its six US-based and two Cayman Islands businesses in the US Bankruptcy Court for the Southern District of Texas.
Following this move, the company said it intends to restructure and strengthen its balance sheet to reach a more sustainable debt profile, noting this filing will provide enough security so that all business units can continue to operate as usual, and are expected to do so throughout the course of the Chapter 11 term as Bristow works to reorganise the business. (Source: IHS Jane’s)
10 May 19. Chemring celebrates early insurance pay-out and two significant contract wins. The board’s full-year expectations for 2019 are unchanged but results will be less second-half weighted than previously expected. The meaning of the word ““undefinitised” has yet to be subject to a “definitionalerisation”
Military decoy flares maker Chemring Group PLC (LON:CHG) said it has bagged two significant contracts down under.
Its Australian subsidiary has won an “undefinitised contract action” worth up to US$60.4m and a further contract contract award worth US$6.5m to supply countermeasures to the Royal Australian Air Force, US Navy and Foreign Military Sales in support of the F-35 Joint Strike Fighter and other platforms.
Chemring – insurance recoveries earlier than hoped means underlying op profit split now 30/70% between H1 and H2 from 15/85%
Chemring, which has been slowly repairing its reputation in the City since a profit warning in late 2015, said full-year expectations for 2019 are unchanged but will be less second-half weighted than previously indicated, thanks to the company receiving an insurance pay-out sooner than expected. Previously, the company had indicated the full-year earnings split would be 15%/85% in favour of the second half; it now expects the split will now be more in the area of 30%/70%.(Source: proactiveinvestors.co.uk)
13 May 19. North East based property and investment business, Adderstone Group, has invested a seven-figure sum into OpenWorks Engineering, an award-winning, hi-tech product company which is developing world-leading security and counter-terrorism products.
OpenWorks, which operates from premises in Stocksfield, Northumberland, has developed a unique and innovative drone capture system named SkyWall, which is already being used across the globe by a number of government authorities, militaries and private security organisations to provide close protection to the likes of airports, major infrastructure and even world leaders at summits.
OpenWorks was established in 2015 by five directors; Chris Down, Neil Armstrong, Alex Wilkinson, James Cross, and Roland Wilkinson; and has developed game-changing products for the defence and security industry. Its directors are confident that the significant investment from Adderstone Group will enable OpenWorks to increase capacity to manufacture their award-winning SkyWall drone defence products, accelerate research and development of the next generation of SkyWall products and ultimately add significant value to the business.
Whilst Adderstone Group is known primarily as one of the largest property development businesses in the region, it has a long and successful track record at founding and growing a range of investments.
The funding is Adderstone Group’s second investment into an engineering business, following the company’s successful support of a delisting and management buyout of Turbo Power Systems Plc., which specialises in providing innovative high-speed machines and power electronic solutions for the Energy, Industrial, Transport and Defence markets.
Ian Baggett, CEO and Founder of Adderstone Group said: “OpenWorks achievements to date have been astounding. They are an extremely talented group of engineers who not only foresaw a massive need to protect against rogue drones but have gone on to design, patent, manufacture and monetise what is acknowledged to be world leading technology from their base in Stocksfield. My team and I look forward to doing whatever we can to help our new colleagues continue to grow a world leading business that protects the public and infrastructure from this burgeoning threat.”
Chris Down, Managing Director of OpenWorks said: “Adderstone Group’s track record speaks for itself. We were determined to partner with a local investor to expand our production capability and accelerate the development of new products. We are confident that, in Adderstone, we have secured the perfect investment partner.”
11 May 19. To counter China, Pentagon wants to create patriotic investors. Faced with Chinese tactics of creating private equity firms and investing in American technologies, the Pentagon is preparing a new tool, one it hopes will lead domestic investors to increase spending in companies vital for the defense-industrial base.
Ellen Lord, the Pentagon’s top acquisition official, unveiled the launch of the Trusted Capital Marketplace program, or TCM, on Friday, a public-private partnership that will convene trusted sources of private capital with innovative companies critical to the defense-industrial base and national security.
The program, which is the result of Section 1711 of the fiscal 2018 National Defense Authorization Act, represents a pilot program to support small and medium-sized companies that produce emerging defense and commercial technologies.
The program was stood up “just a few weeks ago,” Lord said, and there is a contract out there now for the development of a website to act as a meeting point between vetted funders and companies looking for a cash infusion. The goal is to fully roll out the program in July.
Why launch this effort? As with so much in the Pentagon right now, the answer lies in the Pacific.
“China is increasingly attempting to erase research and developments gains by leveraging and manipulating economic tools, like investment in U.S. companies with technology critical to our national security,” Lord said, singling out an incident in 2016 when a Chinese-backed private equity firm attempted to buy out a major American producer of field-programmable gate array chips, a critical technology for the Pentagon.
The Committee on Foreign Investment in the United States blocked that attempt, but Lord noted that while CFIUS can say no, it does nothing to actually provide a solution for how those smaller companies should get the vital dollars they need to keep the doors open.
And in the case where a company may not fall under the view of the committee but where the Pentagon would still prefer to keep Chinese eyes off the firm’s research, TCM could provide an alternative to accepting foreign dollars.
Details on how the program will work are scant. Lord noted that by law she can’t directly tell a funder that a company might match up with them, and vice versa. Instead, it seems TCM will largely be a vehicle where a pool of funders and a pool of companies looking for funding can connect and learn about each other.
That’s particularly useful for small companies, which often don’t know how to go about reaching firms with big pockets. But it will require a specific group of funders who are willing to put mission ahead of pure cash flow.
Traditionally, venture capital or private equity investors are primarily looking for return on investment when considering what companies to back. The individuals and companies talking with the Pentagon about TCM, however, will be doing so with eyes open that their investments are made partly out of patriotic duty, with less instant financial benefit.
“This is going to be a situation where we have individuals, family foundations, [private equity funds] that are interested in our national defense, interested in making a return on investment, but this might not be the best return if all else were equal,” she said.
“We have some incredible patriots who have come to us and said: ‘We are interested in putting our money somewhere that will make a difference for our national defense.’ Frankly I think there is an unmet need that somebody like [the] government could provide an ecosystem to make it work.” (Source: Defense News)
10 May 19. Magellan Aerospace Corporation (“Magellan” or the “Corporation”) released its financial results for the first quarter of 2019.
- Overview
A summary of Magellan’s business and significant updates
Magellan is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries, Magellan designs, engineers, and manufactures aeroengine and aerostructure components for aerospace markets, advanced products for defence and space markets, and complementary specialty products. The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services.
Magellan operates substantially all of its activities in one reportable segment, Aerospace, which is viewed as one segment by the chief operating decision-makers for the purpose of resource allocations, assessing performance and strategic planning. The Aerospace segment includes the design, development, manufacture, repair and overhaul, and sale of systems and components for defence and civil aviation.
Business Update
On February 20, 2019, Magellan announced it has increased its investment in Triveni Aeronautics Private Limited (“Triveni”), an aerospace parts manufacture located in Tumkur, Karnataka, India to 75%. Magellan’s investment in Triveni commenced in 2013 when it acquired a 49% share of the business.
On March 15, 2019, Magellan announced agreements valued at $48m with the Canadian government to perform the licensed manufacture of LUU-2 Illumination flares for the Royal Canadian Air Force. Magellan-produced flares will be delivered from the Magellan’s propellant plant located near Winnipeg, Manitoba, Canada. The term of the contract is five years.
On April 12, 2019, Magellan announced an agreement with Atlas Elektronik Canada for the design and development phase of the SeaSpider® Anti Torpedo Torpedo (ATT) program. The initial $19m phase of the program was launched in January 2019 and is expected to conclude in 2023. Magellan will lead the design and development of the SeaSpider® ATT rocket motor and warhead section of the torpedo that includes design, build, test and production qualification.
On April 24, 2019, Magellan announced it has reached a multi-year agreement with The Boeing Company (“Boeing”) to manufacture 777X control surface ribs in support of Boeing’s Focused Factory initiative. Magellan will provide internal dual source capability for risk mitigation and business continuity. Work will begin at its United Kingdom facility and later transition to a new factory in Bangalore, India. Boeing’s Focused Factory initiative is the aggregation of products grouped by commonality and forecasted demand. The product groups utilize similar technologies and aggregating the products creates economies of scale that deliver lower cost, improved quality, and delivery efficiencies.
On April 29, 2019 , Magellan announced agreements with an undisclosed customer for the supply of complex fabricated engine front frames for a commercial platform, to be manufactured at Magellan’s facility in Winnipeg, Manitoba, Canada , and critical rotating engine shafts for a dual use platform, to be manufactured at Magellan’s facility in Haverhill, Massachusetts , USA. These agreements are valued at approximately $45m and will be delivered starting in 2019 through 2022.
For additional information, please refer to the “Management’s Discussion and Analysis” section of the Corporation’s 2018 Annual Report available on www.sedar.com.
- Results of Operations
A discussion of Magellan’s operating results for the first quarter ended March 31, 2019
The Corporation reported revenue in the first quarter of 2019 of $269.9m, a $25.3m increase from the first quarter of 2018 of $244.6m. Gross profit and net income for the first quarter of 2019 were $42.8 m and $20.4m, respectively, in comparison to gross profit of $40.4 m and net income of $17.5m for the first quarter of 2018.
Consolidated Revenue
Consolidated revenues for the three month period ended March 31, 2019 were $269.9m, an increase of $25.3 m from $244.6m recorded for the same period in 2018. Revenues in Canada increased 15.3% in the first quarter of 2019 compared to the corresponding period in 2018, primarily due to volume increases, new contract awards, and the strengthening of the United States dollar relative to the Canadian dollar when compared to the prior period. On a currency neutral basis, Canadian revenues in the first quarter of 2019 increased by 11.9% over the same period of 2018.(Source: Google/https://finance.yahoo.com)
13 May 19. This year, TMD Technologies Limited (TMD), world class designer and manufacturer of products for radar, EW, communications, scientific and EMC testing applications – celebrates an unbeatable 75 years in the microwave and RF industry.
Innovation at its core
TMD’s innovative heritage can be traced right back to the 1940s where, under the then leadership of EMI, the company produced the world’s first high power klystron the CV150. Subsequent major developments covered travelling wave tubes (TWTs) and magnetrons, leading to a multi-cavity klystron for the UK’s first early warning radar, and the world’s first and only electrostatically focussed klystron produced in volume.
Later, then under the management of Thorn Microwave Devices (the first ‘TMD’), the company continued its lead at the cutting edge of technology with a raft of new introductions including spin and shutter-tuned magnetrons, broadband klystrons, ring loop and ring bar travelling wave tubes, and ELINT receivers. Also, highlighting the company’s increasing world status, the UK MoD and US DoD funded a team at TMD doing research into thermionic emission – with substantial benefits for the company’s subsequent tube products.
The advent of TMD Technologies Limited (TMD)
Following a successful management buy-out, the mid-90s saw the birth of TMD Technologies Limited – the ’TMD’ known worldwide today.
New management initiatives saw the development of high voltage switched mode power supplies, which enabled TMD to supply complete rugged amplifiers, thereby solving the many integration issues customers were facing and leading to thousands of TMD rugged amplifiers being fielded worldwide.
Developing from the rugged amplifier technology, TMD also began the production of ‘commercial’ instrumentation amplifiers for laboratory applications such as EMC testing and scientific research.
Responding to market needs, TMD also progressed into development of its now popular rugged, miniaturised microwave power modules (MPMs) – for applications where weight and space are critical requirements. Also, at the other end of the scale, the company showed its burgeoning total design and manufacturing capability by producing a complete S band air traffic control transmitter – now in use at several major airports worldwide.
TMD later introduced an advanced GaN MMIC-based solid state MPM, optimised for EW/ECM systems and featuring over 30,000 hours predicted MTBF in an uninhabited fighter environment!
The company’s tube legacy was not however forgotten, and major advances in this area included volume production of fast-warm Ku band ring loop tubes.
Expansion into USA and acquisition
TMD-US, Maryland, provides comprehensive support for TMD’s growing
US customer base. In 2012 overseas business acceleration led TMD to form a new subsidiary, TMD Technologies, LLC based in Baltimore, Maryland – to provide complete technical and commercial support for TMD’s customers in the USA. This important new company not only offers a comprehensive product repair centre, but is also engaged in the sales of the whole range of TMD’s products, as well as dealing with new business development in the United States.
Back in the UK, to extend its product portfolio, TMD recently acquired G2 Engineering, a small specialist company engaged in the design and manufacture of radar transponders and support equipment for applications that include UAVs, missiles and manned aircraft.
TMD now – and going forward … to quantum technology
Today, TMD’s product focus is mainly on solid state MPMs and ultra-compact tube based MPMs which, in response to industry demand now successfully cover the technically challenging Ka band. Furthermore, the introduction of modular architecture for the company’s commercial instrumentation amplifiers provides many new and enhanced user benefits.
Dave Brown, Group CEO said: “Primarily, TMD continues to be a forward-looking innovative company striving to be the best partner for the most demanding RF and HV power solutions. No less important, we have reinforced our commitment to the local community and the environment with initiatives including a ‘charity of the year’ scheme, the fitting of solar roof panels at our premises, and the introduction of corporate electric vehicles. We seek to be an employer of excellence – providing a nurturing environment and attracting the highest calibre staff.”
Jane McAlister, Sales & Business Development Director, continued: “Our business development team is at the leading edge of scientific development, working with major universities and research establishments on projects such as ultra-high-power solid state amplifiers for particle accelerators, quantum clock technology and THz devices. To reflect recent developments, TMD has been rebranded, with new websites, literature and improved social network engagement.”
10 May 19. L&T’s profit up 8% at ₹3,418 crore. Revenues up 10%at ₹44,934 crore. Engineering and infrastructure major L&T has reported a strong set of numbers on the back of orders in infrastructure, hydrocarbon and others but said that with a new government on the anvil, it expects a modest start to the first half of 2019-20.
Inflating order book
L&T’s Q4 profit came in at ₹3,418 crore, a 7.9-per cent increase compared to ₹3,167 crore it posted in the same period last year. For the whole year, profits went up 22 per cent from ₹8,167 crore in the 2018 fiscal to ₹9,986 crore in the 2019 fiscal.
The company bagged new orders worth ₹1.76 lakh crore in the 2019 fiscal — a 16 per cent increase from last year. The consolidated order book for the group is ₹2.9 lakh crore, with international orders contributing to 22 per cent of the total order book. Revenues for the fourth quarter ended March 31, came in at ₹45,555 crore (₹41,091 crore). For the whole year, revenues came in at ₹142,858 crore (₹121,204 crore).
The board has recommended a dividend of ₹18 per equity share.
Segment-wise numbers
The infrastructure segment saw its EBIT go up to ₹3,088.3 crore, while margin was at 11.4 per cent. However, revenue from power business was down by 38 per cent at ₹934.3 crore.
Defence and Aerospace, which was part of Heavy Engineering segment until last year, was reported as a separate segment from the current financial year. Heavy Engineering segment bagged new orders worth ₹4,049 crore during the year ended March 31, 2019 substantially higher by 78 per cent y-o-y supported by increased demand for clean fuel to comply with Euro and other regulatory norms. International orders constituted 67 per cent of the total order inflow of the segment during the year, with orders mainly from the Netherlands, the US and the UK. The segment, for Q4, recorded an order inflow of ₹791 crore.
Hydrocarbon segment clocked revenues of ₹2,174 crore, a yearly growth of 56 per cent, with execution momentum in oil and gas projects. International sales constituted 54 per cent.
Hydrocarbon Segment secured orders valued Rs 27,871 crore during the year, a 76 per cent increase. The order inflow for the quarter January-March 2019 stood at Rs 12,568 crore.
L&T Infotech
IT & Technology Services segment clocked revenues of ₹14,371 crore during the year, a yearly growth of 28 per cent. Financial Services revenues grew by 26 per cent to ₹12,638 crore.
L&T is also involved in a takeover battle of services company Mindtree to acquire a majority stake but L&T CEO SN Subrahmanyan offered no updates on the gameplan to acquire this stake.
Developmental Projects vertical clocked revenues of ₹5,068 crore , an 18 per cent increase driven by divestment of container port at Kattupalli near Chennai and partial commissioning of the company’s metro rail concession in Hyderabad, which is being implemented through a subsidiary. (Source: Google/www.thehindubusinessline.com)
10 May 19. Kongsberg defence revenue continues to weaken in first quarter. Norwegian maritime and defence supplier Kongsberg Group achieved operating revenues of NOK3,627m (USD415m) in the first quarter of 2019, according to financial results released on 10 May. As well as a 2.1% improvement in sales, the company’s earnings before interest, tax, depreciation and amortisation (EBITDA) rose by almost 45% year on year, reaching NOK414m. However, Kongsberg’s defence activities were not the source of the company’s improved revenue or profit results. Kongsberg Defence & Aerospace brought in revenue of NOK1,369m in the first quarter, a 13.6% reduction on the first quarter of 2018, while EBITDA fell by almost 20% to NOK138m. (Source: Google/IHS Jane’s)
10 May 19. Patria Group Interim Report for 1 January – 31 March 2019. Patria Group’s result for the first quarter of the year fell somewhat below the target. Net sales totaled EUR 105.1m. Operating profit was EUR -0.3m. Equity ratio was 49.4% and net gearing 51.8%.
The first quarter 2019
In January, President and CEO Olli Isotalo left the company, and CFO Ville Jaakonsalo was named interim CEO for the transition period. CEO change is partly connected to Patria’s strategy, under which the company looks for growth especially in international service business.
Patria and the Finnish Defence Forces signed an agreement on preliminary and basic pilot training services. The contract covers pilot training and maintenance of aircraft.
In February Senop, a member of Patria Group, launched a new hyperspectral camera Senop HSC-2, designed to be the new reference in the evolution of hyperspectral imaging.
Patria made an agreement with the Kazakh airline Air Astana to train their new pilots till 2022.
Patria attended IDEX 2019 event in Abu Dhabi featuring its latest technology and showcasing several products: Patria AMV vehicles, Patria Nemo, CANDL, which is a compact data link for air-to-air and air-to-ground applications, ARIS, which is a remote operable Electronic Intelligence (ELINT) system, ARIS-E, which is a new Electronic Support Measures (ESM) product building on ARIS, and MUSCL passive radar system.
In the end of February Patria published news about a joint project with the Finnish Innovation Fund Sitra and HUS Helsinki University Hospital, in which a method is being sought to transfer information between the patient and a professional, based on the patient’s consent. Patria’s role is to provide support in ensuring the cybersecurity of the project’s data and information systems.
Highlights after the first quarter financial period
In April Patria announced to relocate the initial civil pilot training operations from Tampere-Pirkkala, Finland to city of Córdoba in Spain. Patria’s single-engine DA40 fleet will be based in Córdoba while theoretical training, simulator training and multi-engine training with DA42 fleet will remain in Finland. Patria attended Rotorcraft & Unmanned Systems Asia event in Singapore and showcased extensive helicopter support services and high-performance data link solution for UAVs. Patria’s subsidiary Milrem LCM signed a framework agreement for the maintenance and repair of BV206 tracked vehicles with the Logistics Command of the Latvian National Armed Forces. The agreement is valid for eight years. Patria attended XPONENTIAL 2019 event in Chicago, and showcased there CANDL, Compact Airborne Networking Data Link.
Outlook for the rest of the year
Patria’s domestic customer, the Finnish Defence Forces, has significant projects (HX, SQ 2020) in progress. The next phase after receiving the preliminary quotations is a content analysis that lasts several months. This is followed by the first phase of negotiations during which the quotations are further specified in cooperation with the manufacturers. Patria will also negotiate with the manufacturers about the industrial participation, which is extremely important and a great opportunity to Patria.
The development of the order stock depends to large extent on whether certain large Land export projects, now at the tendering stage, are launched on international markets.
23 Apr 19. Iridium Communications Inc. (Nasdaq: IRDM) (“Iridium”) today reported financial results for the first quarter of 2019 and affirmed its full-year 2019 outlook. Net loss was $18.0 m, or $0.18 per diluted share, for the first quarter of 2019, as compared to net income of $11.5 m, or $0.07 per diluted share, for the first quarter of 2018. This decrease in net income was primarily the result of a $34.5m increase in depreciation and amortization expense compared to the year-ago period. Operational EBITDA (“OEBITDA”)(1) for the first quarter was $78.0m, as compared to $68.5m for the prior-year period, representing a year-over-year increase of 14.0% and an OEBITDA margin(1) of 58%. OEBITDA primarily benefitted from the recognition of revenue from hosted payload and other data services, telephony pricing actions and growth in the Company’s IoT data business.
Iridium reported first-quarter total revenue of $133.7m, which consisted of $107.0m of service revenue and $26.7m of revenue related to equipment sales and engineering and support projects. Total revenue increased 12% from the comparable period of 2018, while service revenue grew 19% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 80% of total revenue for the first quarter of 2019.
The Company ended the quarter with 1,151,000 total billable subscribers, which compares to 996,000 for the year-ago period and is up from 1,121,000 for the quarter ended December 31, 2018. Total billable subscribers grew 16% year-over-year, driven by growth in commercial and government IoT customers.
“Iridium enjoyed solid revenue and subscriber growth to start 2019, driven predominantly by strength in commercial services. New contributions from hosted payloads and continued momentum in commercial IoT are expected to be a tailwind to our business and support OEBITDA growth for the remainder of the year,” said Matt Desch, CEO, Iridium.
The Company’s negotiations continue with the Department of Defense (“DoD”) to renew its Enhanced Mobile Satellite Services (“EMSS”) contract with the U.S. government. On April 19, 2019, the Company entered into a short-term contract extension with the DoD to provide additional time to finalize the terms of a new EMSS contract. Under the terms of this extension, the DoD will pay Iridium $8.3 m for a one-month period, during which the Company expects to conclude an agreement. Iridium continues to expect a five-year contract with annual revenue greater than the final year of the current EMSS contract.
As announced yesterday, Iridium was awarded a $54m contract for Gateway Maintenance and Support Services (“GMSS”) by the DoD. The multi-year contract provides ongoing technical and maintenance support for the dedicated U.S. government ground infrastructure that connect to the Iridium network.
Commenting on Iridium Certus® and Aireon LLC, Desch said, “Iridium Certus is positioned to be a best-in-class solution for L-band broadband users around the world. Demand for our new broadband service has continued to ramp since its formal launch in January, and activations are meeting our expectations.” Desch added, “Our Aireon joint venture also launched its live air traffic surveillance and tracking service earlier this month. For the first time in history, aircraft can be surveilled anywhere on the planet. Aireon’s real-time air traffic information will extend the reach of traditional terrestrial-based systems and radically optimize flight safety and efficiency. We are proud of this accomplishment and delighted to maintain a meaningful equity interest in this transformative company.”
Iridium Business Highlights
Service – Commercial
Commercial service remained the largest part of Iridium’s business, representing 64% of the Company’s total revenue during the first quarter. The Company’s commercial customer base is diverse and includes markets such as maritime, aviation, oil and gas, mining, recreation, forestry, construction, transportation and emergency services. These customers rely on Iridium’s products and services as critical to their daily operations and integral to their communications and business infrastructure.
- Commercial service revenue was $85.0m, up 25% from last year’s comparable period due to revenue from hosted payload and other data services, telephony pricing action and increased IoT revenues.
- Commercial voice and data subscribers rose 1% from the year-ago period to 358,000 customers. Commercial voice and data average revenue per user (“ARPU”) was $45 during the first quarter, compared to $41 in last year’s comparable period, as a result of the rollout of new pricing plans in 2018. Commercial IoT data subscribers grew 26% from the year-ago period to 678,000 customers, driven by continued strength in consumer personal communications and tracking devices. Commercial IoT data ARPU was down 10% to $11.32 in the first quarter.
- Iridium’s commercial business ended the quarter with 1,036,000 billable subscribers, which compares to 892,000 for the year-ago period and is up from 1,008,000 for the quarter ended December 31, 2018. IoT data subscribers represented 65% of billable commercial subscribers at the end of the quarter, an increase from 60% at the end of the prior-year period.
- Hosted payload and other data service revenue increased $9.6m, or 228%, from the prior-year period primarily due to increased hosting and data services.
Service – Government
Iridium’s voice and data solutions improve situational awareness for military personnel and track critical assets in tough environments around the globe, providing a unique value proposition that is not easily duplicated.
- Government service revenue was $22.0m, consistent with the prior-year period, under the Company’s fixed fee EMSS contract with the U.S. government.
- Iridium’s government business ended the quarter with 115,000 subscribers, which compares to 104,000 for the year-ago period and is up from 113,000 for the quarter ended December 31, 2018. Government voice and data subscribers remained unchanged from the year-ago period at 53,000 as of March 31, 2019. IoT data subscribers increased 22% year-over-year and represented 54% of government subscribers, an increase from 49% at the end of the prior-year period.
Equipment
- Equipment revenue was $21.0m during the first quarter, down 19% from the prior-year period.
- The Company continues to forecast lower equipment sales in 2019.
Engineering & Support
- Engineering and support revenue was $5.7m during the first quarter, compared to $3.6m in the prior year’s quarter, primarily due to the episodic nature of government-sponsored projects.
Capital expenditures were $34.6 m for the first quarter and primarily related to spending for the Company’s recently completed, next-generation satellite program. The Company ended the first quarter with credit facility gross debt of $1.7bn and a cash and cash equivalents balance of $275.7m. Net debt was $1.6bn, calculated as $1.7bn of credit facility gross debt and $360.0 m of unsecured notes, less $275.7m of cash and cash equivalents, as well as $193.0 m in restricted cash.
2019 Outlook
The Company affirmed its full-year 2019 outlook for total service revenue growth, OEBITDA, cash taxes, and net leverage. The Company continues to expect:
- Total service revenue of approximately $440m for the full-year 2019.
- OEBITDA of between $325 and $335m in 2019. OEBITDA for 2018 was $302.0m.
- Negligible cash taxes in 2019. Cash taxes are expected to be negligible through approximately 2023.
- Net leverage of approximately 4.5x OEBITDA at the end of 2019.