29 May 19. Italian Leonardo’s U.S. defense unit grows as military orders rise: CEO. Leonardo SpA’s U.S. defense unit is growing significantly as the American military budget increases and the return on sales should increase, Chief Executive Officer Alessandro Profumo said on Wednesday.
Leonardo, a major Italian defense group, bought DRS Technologies in 2008 and last year said it was not yielding adequate returns. The United States represents about 28% of Leonardo’s total sales.
“It (DRS) is growing significantly, mainly thanks to the fact that the defense budget is growing,” Profumo said in an interview on the sidelines of a security and defense conference in Ottawa.
“We are going at a faster pace than the defense budget and we are winning a huge number of small and medium programs so we are very diversified,” he said.
By end-2022 Leonardo is aiming for close to a double digit compound growth rate for DRS and a double digit return on sales.
“Today we are close to 7% and we want to go up at least to 10% in terms of return on sales,” said Profumo.
Leonardo is also diversifying into services and by the end of 2022 wants 25% of total revenues to come from that sector, up from the current level of between 18% and 19%.
Profumo said he was “pretty confident” Leonardo could meet the 25% target. (Source: glstrade.com/Reuters)
30 May 19. Citadel Group acquires Melbourne-based defence contractor. Citadel Group has announced it will acquire systems integrator Noventus for $5.7m, with the company eyeing future government contract offerings. The deal will expand Citadel’s defence and national security capabilities with Noventus’ expertise in project management.
“Citadel has a successful track record of acquiring strategic bolt-on businesses that are readily integrated into the group in order to provide additional customer-centric solutions, leveraging our significant software engineering expertise,” Citadel chief executive Darren Stanley said.
“The acquisition of Noventus is consistent with our traditional approach to acquisitions and increases the scale of Citadel’s DNS offering, which remains a key industry focus of the group.
“With proven systems integration capabilities, Noventus will reinforce our position as a leading supplier to the defence and national security vertical.”
Citadel will pay $5.7m for all of Noventus’ share capital, with 50 per cent of the sum to be paid upon deal’s completion, which is expected within the next month.
The company confirmed that the remaining funds would be paid in three months’ time.
Citadel has experience working in the defence sector, having created, and continually managing, Australia’s largest enterprise content management solution, which holds over 500 million secure objects including corporate files, reports, personnel records and operational information. This is delivered to users wherever they may be using a range of authentication, security, workflow automation and digital integration solutions.
In the last 13 months, Citadel has acquired government business of technology agency Gruden for $1.65m, and healthcare vendor Anaesthetic Private Practice for $2m. (Source: Defence Connect)
29 May 19. Serco upgraded by RBC after acquisition of US naval engineering business. RBC raised its rating on Serco to ‘outperform’ from ‘sector perform’ and lifted its target price on the shares to 150p from 140p. Serco is now in much better shape, according to RBC’s analysts
Serco Group PLC’s (LON:SRP) acquisition of the naval engineering arm of US defence technology group Alion looks sensible, according to RBC Capital Markets. Last week the outsourcer announced a £130m share placing to help fund the US$225m deal to buy Alion’s Naval Systems Business Unit (NBSU). RBC on Wednesday raised its rating for Serco to ‘outperform’ from ‘sector perform’ and lifted its target price on the shares to 150p from 140p.
“The US Navy looks like a growth market, the deal adds capability for Serco, there are synergies from sharing the fixed overhead and the deal appears to be well priced (8x EBITA) and should be accretive to earnings,” the broker said in a note to clients.
“In addition, the UK becomes a smaller proportion of the group and given 80% of contracts are cost-plus, the risk profile is relatively low.”
RBC expects Serco’s free cash flow (FCF) to improve markedly from £23mln 2019, to £83mln in 2020 and £103mln in 2021.
The broker said this reflects growth in the top line, margin improvements from the deal and the fall away of onerous contract provisions.
“This FCF should provide options for further mergers and acquisitions and to re-instigate the dividend,” it added.
RBC noted that Seco’s management has worked hard to build a platform with the “right operational, back-office and risk management capabilities” and is now starting to benefit after the efforts of the past five years.
“The business is now in much better shape, and new contract and rebid momentum has been strong,” the broker said. “Positive organic growth and potential M&A over time should benefit margins further given the scalability of the platform that has now been created.” (Source: proactiveinvestors.co.uk)
28 May 19. Wesco Aircraft explores options that include sale – sources. Wesco Aircraft Holdings Inc, a U.S. distributor of parts to the aviation and defence industries, is exploring options that include a sale of the company, people familiar with the matter said on Tuesday. Wesco is making progress with its initiatives to improve its inventory management and trim its debt pile. Earlier this month, its shares rallied after it reported quarterly earnings that showed that some of its operational improvements were paying off. Wesco has hired investment banks to explore acquisition interest in the company, the sources said, cautioning that the deliberations are preliminary and no deal is certain.
The sources asked not to be identified because the matter is confidential. Wesco did not immediately respond to a request for comment.
Wesco shares rose 9 percent on the news to $10.58, giving the company a market capitalisation of $1.1bn (869m pounds). Wesco’s outstanding debt as of the end of March totalled $858m.
Based in Pittsburgh, Pennsylvania, Wesco supplies hardware, chemicals, electronic components, bearings, tools and machined parts to the global aerospace industry.
Private equity firm Carlyle Group LP invested in Wesco in 2006 and floated the company in the stock market in 2011. It still owns close to a quarter of the company.
Some of Wesco’s debt load is the legacy of its acquisition of chemical supply chain management company Haas Group Inc from buyout firm Jordan Company LP for $550m in 2014.
On May 2, Wesco reported net sales of $426.5m in its fiscal second quarter, 9.3% higher than the same period last year, “reflecting continued focus and execution in a strong market.”
Private equity firms have shown strong acquisition interest in aircraft servicing providers because of their typically strong cash flow. Last month, Carlyle acquired engine and airframe maintenance company StandardAero from buyout firm Veritas Capital for more than $5bn, including debt. (Source: Reuters)
27 May 19. WEW Becomes THIELMANN. THIELMANN announced that after a period of transition, THIELMANN WEW will be rebranded as the defense business line of THIELMANN in September 2019. The business line will continue to be represented by a specialist defense team at its existing facilities in Weitefeld, Germany, where it has been based for more than two decades.
As part of the THIELMANN company, the defense team will serve its new and existing military and expeditionary customers around the world with market-leading, deployable fuel and water solutions for forward deployed operations and expeditionary logistics.
Over the three-year transition period, THIELMANN has focused on incorporating WEW’s defense capabilities into its wider container solutions portfolio, while bolstering the unit’s financial position and strengthening its market position with the signing of new contracts and development.
A major focus of the defense line’s evolution has been the establishment of a strong team at Weitefeld. The business line is led by Falko Pfeuffer, Head of Defense, with the support of a knowledgeable team including Branislav Jurisic, Deputy head of Defense; Ulrich Bernhardt, Chief Representative Government; and Daniel Jahn, Head of Project Management. The team is supported by Tanya Collier-Jackson, Proposal Manager; and a team of specialist designers, engineers, technicians and production staff.
The Weitefeld facility has also undergone significant investment and modernization, with updated equipment and tooling to enable it to support its growing order book and provide integrated logistics services, while strengthening its capacity to innovate on new products to support its customers as they face the fuel and water logistics challenges of the coming decades.
“We acquired WEW Container Systems GmbH in 2016 knowing that its water and fuel capabilities would perfectly fit with our goal: to become a true one-stop shop for each and every need within the container industry, supplying containers with storage capacity between five and 50,000 liters,” Bernd Loeser, CEO, THIELMANN said. “With our carefully selected Weitefeld team and upgraded facilities, THIELMANN now has a specialist capacity to support military and expeditionary customers globally, providing durable mobile fuel and water logistic solutions that increase autonomy and minimize environmental impact.
“This is something we are immensely proud of and is reflected in the investment we have put into establishing the strongest possible team of defense experts at Weitefeld, backed by the knowledge and expertise of one of the world’s leading container companies.”
“As a full business unit of THIELMANN, we are looking forward to the next stage in our evolution as the market leader of tailored, modular water and fuel solutions for defense and expeditionary customers worldwide,” Falko Pfeuffer, Head of Defense, commented. “We have gone from strength to strength over the past three years and I am excited to lead the team into new market areas as we look to the future.”
The team has already established a number of new partnerships as it looks to support its customers in new ways, including fully integrated and scalable fuel and water base camp infrastructure capabilities, last tactical mile support and the ‘containerization of the forces’ re-deployable infrastructure necessary for temporary and remote bases.
“We strive to innovate in these areas while continuing to support our existing customer base, which includes the German, US, British, Austrian, Lithuanian, Slovenian, Irish and Belgian armed forces, among others, with our mobile and re-deployable ‘drop and go’ water and fuel capabilities,” Pfeuffer added.
27 May 19. Leonardo could seek tie-ups in specific business areas: CEO. Italian aerospace and defense company Leonardo could seek partnerships in specific business areas, CEO Alessandro Profumo said, ruling out a merger involving the entire group.
Speaking to a foreign media event, Profumo said he expected Europe’s fragmented defense industry to consolidate, with tie-ups emerging in specific business areas as companies embark on joint projects and strive to cut costs.
“As a parent company, Leonardo isn’t planning to join a potential M&A trend in the defense industry but I think there is room for M&A in Europe at business area level,” Profumo said on Monday.
“We want to remain in the driving seat and lead the M&A process in those business areas where Leonardo is a leader, on the opposite side, in those areas where the group is not a leader it is open to cede control in a combination,” he said.
The group is currently working on a potential alliance in torpedoes. Apart from this and a preliminary bid for the maintenance business of Italian aviation technology company Piaggio Aerospace, there is no concrete deal on the table at the moment, Profumo said.
Leonardo has three main business areas: helicopters, aircraft and electronics & defense. In addition, the group operates other businesses that could eventually be streamlined and sold to make its portfolio more rational, the CEO said.
Since taking the helm in May 2017, Profumo has managed to turn around the core helicopter division, which last year contributed to a 5% rise in group revenue to 12.4bn euros.Profumo is also working on relaunching the aerostructures division – which makes carbon fiber structures for Boeing and builds fuselage sections for Airbus, Boeing and Dassault.
After a management change at this division, some positive signs are starting to show, he said.
On the group’s newly created cyber security business, Profumo said he wanted to boost investment but declined to comment on possible M&A plans.
Leonardo has made a non-binding bid for Piaggio Aerospace’s maintenance business and Profumo said there were no plans to buy the entire company. The Italian government has said it does not want the company to be split up.
“I am not jealous about Piaggio Aerospace, if there is an investor ready to buy the whole company, it is fine for me.”
Profumo urged a cautious approach toward China when asked about the U.S. decision to place Huawei on a trade black list, effectively banning U.S. firms from doing business with the world’s largest telecom network gear maker.
“Western countries need to respect Chinese as interlocutors but we also need to make their lives more difficult,” he said. (Source: Google/Reuters)
28 May 19. Elbit Systems Ltd. (NASDAQ: ESLT and TASE: ESLT), (the “Company”) the international high technology company, reported today its consolidated results for the quarter ended March 31, 2019.
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: “The results of the first quarter of 2019 mark the first full quarter that includes the results of IMI. I am pleased with our results, especially the 25% growth in revenue with a well-diversified global presence in which our major geographic regions grew on an absolute basis. Our economies of scale enabled us to maintain a similar level of operating margins despite lower gross margins following the IMI acquisition. The significant increase in our backlog and the progress in the integration of IMI into the Company, support our long-term growth potential.”
First quarter 2019 results
Revenues in the first quarter of 2019 were $1,021.7m, as compared to $818.5m in the first quarter of 2018. The strong growth was mainly driven by the consolidation of IMI and Universal performance in the first quarter of 2019.
Non-GAAP gross profit amounted to $283.4m (27.7% of revenues) in the first quarter of 2019, as compared to $239.8m (29.3% of revenues) in the first quarter of 2018. GAAP gross profit in the first quarter of 2019 was $277.6m (27.2% of revenues), as compared to $235.4m (28.8% of revenues) in the first quarter of 2018.
Research and development expenses, net were $77.4m (7.6% of revenues) in the first quarter of 2019, as compared to $68.2m (8.3% of revenues) in the first quarter of 2018.
Marketing and selling expenses, net were $71.8m (7% of revenues) in the first quarter of 2019, as compared to $68.2m (8.3% of revenues) in the first quarter of 2018.
General and administrative expenses, net were $53.6m (5.2% of revenues) in the first quarter of 2019, as compared to $35.7m (4.4% of revenues) in the first quarter of 2018.
Other operating income, net was $1.2m in the first quarter of 2019, due to a gain resulting from an investment and remeasurement of the Company in a subsidiary.
Non-GAAP operating income was $84.0m (8.2% of revenues) in the first quarter of 2019, as compared to $69.4m (8.5% of revenues) in the first quarter of 2018. GAAP operating income in the first quarter of 2019 was $76.0m (7.4% of revenues), as compared to $63.3m (7.7% of revenues) in the first quarter of 2018.
Financial expenses, net were $13.9m in the first quarter of 2019, as compared to $10.2m in the first quarter of 2018. Financial expenses, net in the first quarter of 2019, include exchange rate differences of approximately $9.3 m related to the recognition of lease liabilities denominated in foreign currencies (mainly in New Israeli Shekels) as a result of the adoption of ASC 842, Leases, effective January 1, 2019.
Other (expenses) income, net were $3.4m in the first quarter of 2019, mainly due to the non-service cost components of pension plans, in accordance with ASU 2017-07.
Taxes on income were $10.1m (effective tax rate of 17.2%) in the first quarter of 2019, as compared to $6.4m (effective tax rate of 12.0%) in the first quarter of 2018.
Equity in net earnings of affiliated companies and partnerships was $2.2m (0.2% of revenues) in the first quarter of 2019, as compared to $3.1m (0.4% of revenues) in the first quarter of 2018.
Net income attributable to non-controlling interests was $0.4m in the first quarter of 2019, as compared to $0.2m in the first quarter of 2018.
Non-GAAP net income attributable to the Company’s shareholders in the first quarter of 2019 was $65.8 m (6.4% of revenues), as compared to $55.1m (6.7% of revenues) in the first quarter of 2018. GAAP net income attributable to the Company’s shareholders in the first quarter of 2019 was $50.5m (4.9% of revenues), as compared to $49.6m (6.1% of revenues) in the first quarter of 2018.
Non-GAAP diluted net earnings per share attributable to the Company’s shareholders were $1.54 for the first quarter of 2019, as compared to $1.29 for the first quarter of 2018. GAAP diluted earnings per share in the first quarter of 2019 were $1.18, as compared to $1.16 for the first quarter of 2018.
The Company’s backlog of orders as of March 31, 2019 totaled $9,658m as compared to $8,046m as of March 31, 2018. Approximately 59% of the current backlog is attributable to orders from outside Israel. Approximately 61% of the current backlog is scheduled to be performed during 2019 and 2020.
Operating cash flow generated in the three months ended March 31, 2019 was $46.5m, as compared to $147.9m used in the three months ended March 31, 2018.
28 May 19. TriEye Secures $17m in Series A Financing Led by Intel Capital to Solve the Automotive Low Visibility Challenge. Israeli startup TriEye, whose innovative Short-Wave-Infra-Red (SWIR) sensing technology is able to see in adverse weather and night-time conditions, announced today a $17m Series A funding round, led by Intel Capital. Other investors include Marius Nacht, co-founder of Check Point Software Technologies, and TriEye’s existing investor Grove Ventures, headed by TriEye chairman Dov Moran, the inventor of the USB flash drive and co-founder of M-Systems. Since inception, TriEye has raised over $20m, including a seed investment of $3M led by Grove Ventures in November 2017.
TriEye’s breakthrough HD SWIR camera, whose initial samples are expected to enter the market in 2020, is designed to save lives on the roads. The camera will allow Advanced Driver Assistance Systems (ADAS) and autonomous vehicles to achieve flawless vision capabilities under common adverse weather and low-light conditions such as fog, dust or night-time.
Other approaches to solve this low visibility challenge have not been successful. Even when combining several sensing solutions such as radar, lidar and a camera, it is impossible to accurately detect and identify objects such as a cyclist at night under common adverse conditions. This limitation is impeding the wide-scale deployment and adoption of ADAS and autonomous vehicles. The defense and aerospace industries have already solved the low visibility challenge by using InGaAs-based SWIR cameras. However, up until now, these cameras have been too expensive for mass-market applications.
Similar to a common digital camera, TriEye’s SWIR technology is CMOS-based, enabling the scalable mass-production of SWIR sensors and reducing the cost by a factor of 1,000 compared to current InGaAs-based technology. As a result, the company can produce an affordable HD SWIR camera in a miniaturized format, supporting easy in-vehicle mounting behind the car’s windshield.
TriEye was founded in 2016 by Avi Bakal (CEO), Omer Kapach (VP R&D) and Prof. Uriel Levy (CTO), after nearly a decade of advanced nano-photonics research by Prof. Levy at the Hebrew University in Jerusalem.
Avi Bakal, CEO and co-founder of TriEye, noted that the company’s Raven camera has already drawn the attention of global vehicle manufacturers. He added: “Low visibility conditions such as fog, darkness and dust, and hazards such as black ice on the road, are some of the main contributors to injuries and fatalities in car crashes. In the US alone, around 21% of all vehicle crashes – nearly 1.2 million annually – are weather related and often involve low visibility. Our mission is to save lives, reduce risks of accidents in these kind of safety critical conditions and do this in a very cost efficient way.”
Bakal added: “The funding will be used to execute on our product roadmap for HD SWIR solutions, including our proprietary sensing algorithms. We are humbled by the trust shown by the investors in our series A round, and we remain mission-focused on this opportunity.”
Intel Capital Israel’s Managing Director Yair Shoham, who joined TriEye’s board, added: “As the automotive industry transitions to autonomous driving, demand for sensor technologies is expected to grow rapidly. TriEye technology has the potential to enhance traditional camera functionalities by increasing performance in low visibility conditions in a way that complements vision-based camera sensor technologies. Intel Capital is delighted to support the TriEye team as it works to deliver on its vision.”
Also joining the company’s board are Ophir Shoham, former Rear Admiral and former Director of Defense R&D Directorate in the Israeli Ministry of Defense (MAFAT), and Ido Yablonka, former VP and General Manager of Yahoo Israel.
“I am proud of TriEye’s team for delivering superb results so far and remaining adamant about their vision. The opportunity is huge, and Grove Ventures is happy to continue fostering TriEye’s remarkable journey,” said Dov Moran, the company’s first investor and chairman of the board.
While TriEye’s primary target market is the automotive industry, its technology is highly applicable to a wide range of other sectors, including mobile, industrial, security and optical inspection. The company intends to address challenges and opportunities in these fields in the upcoming future.
28 May 19. Vietnam’s Viettel launches defence subsidiary. Vietnam’s Viettel Military Industry and Telecoms Group, which is owned by the Ministry of Defence in Hanoi, established a subsidiary on 24 May to lead its development of defence technologies.
Viettel said on launching its new affiliated company – named the Viettel High Technology Industries Corporation (VHT) – that it is aimed at supporting Vietnam’s efforts to become self-sufficient in advanced military technologies. The subsidiary will also look to win regional exports. Viettel said VHT will be focused on developing and commercialising defence electronics including the development of advanced capabilities such as artificial intelligence, big data analytics solutions, tactical communications, and military networking systems. (Source: IHS Jane’s)
28 May 19. Wingtra Raises $10m Series A Funding. The Swiss drone developer and producer, Wingtra Ltd., recently raised USD 10m to further scale its global business. The company leads the vertical take-off and landing (VTOL) drone industry and will use the funds to further grow their global footprint and push the limits in their research and development.
Credit Suisse Entrepreneur Capital Ltd., Investiere and private investors, as well as existing investors like Zurcher Kantonalbank, took part in this financing round.
“We see high-growth potential with Wingtra due to the multiple impressive technological advancements across a range of dimensions, setting it apart from its competitors,” said Didier Denat, Chairman of Credit Suisse Entrepreneur Capital Ltd. and Head of Corporate & Investment Banking at Credit Suisse in Switzerland. “The attractive and fast-growing market of VTOL drones, together with the company’s recent key hires, will provide an outstanding setting for the company’s future growth.”
Wingtra focuses on optimization as well as research and development around its WingtraOne VTOL fixed-wing survey and mapping drone. Since its market entry in 2017, it has partnered with more than 50 of the biggest survey equipment dealers worldwide and formed a strong user base. The drone’s VTOL capabilities enable it to take off and land like a multicopter but cover wide areas like a fixed-wing UAV. This also allows WingtraOne to carry high-resolution cameras that achieve the highest resolution and accuracy in the professional drone market.
“We’re proud to have developed a product with a great market fit that helps our customers on a daily basis,” said Elias Kleimann, Founder and CFO at Wingtra. “With the funds raised, we’ll scale up our operations, expand our sales globally and improve our outstanding product to advance the aerial survey and mapping industry.”
Over the past two years, Wingtra has experienced rapid growth. Since 2017, the number of employees has more than doubled, from 30 to more than 70, and the WingtraOne has gone from its first sales in Switzerland to markets more than 40 countries around the world.
Credit Suisse Entrepreneur Capital Ltd., a private equity investment vehicle of Credit Suisse in Switzerland, was one of the key investors in the fundraising round. It provides small and medium-sized businesses as well as young entrepreneurs with risk capital of USD 200m. (Source: UAS VISION)
24 May 19. Lockheed Martin Corporation (NYSE: LMT) has received notice of an unsolicited “mini-tender” offer by Peer & Peri LLC to purchase up to 10,000 shares of Lockheed Martin’s common stock. Peer & Peri’s offer price of $269.00 per share is approximately 20.41 percent lower than the $337.99 closing price of Lockheed Martin common stock on May 17, 2019, the last trading day before the commencement of the offer.
Lockheed Martin is not affiliated in any way with Peer & Peri, the offer, or the offer documentation. However, the rules and regulations of the Securities Exchange Act of 1934 require Lockheed Martin to publicize its position with respect to the offer. Lockheed Martin recommends against stockholders tendering shares in response to the offer, as the offer price was significantly below the market price of Lockheed Martin’s common stock at the commencement of the offer and is also significantly below the current market price.
Mini-tender offers seek to acquire less than five percent of a company’s outstanding shares, thereby avoiding many disclosure and procedural requirements under U.S. federal securities laws and the rules and regulations of the U.S. Securities and Exchange Commission (SEC). As a result, mini-tender offers do not provide investors with the same level of protections as provided by larger tender offers under the U.S. federal securities laws.
The SEC has cautioned investors about mini-tender offers, noting that “some bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price.” The SEC’s tips for investors regarding mini-tender offers may be found at http://www.sec.gov/investor/pubs/minitend.htm.
Lockheed Martin urges stockholders to obtain current market quotations for their shares, review the conditions of the mini-tender offer, consult with their brokers or financial advisors, and exercise caution with respect to the mini-tender offer.
According to Peer & Peri’s offer documents received by the company, stockholders who have already tendered their shares may withdraw their shares by providing notice in the manner described in Peer & Peri’s offer documents prior to the expiration of the offer, currently scheduled to expire at 5:00 p.m., New York time, on June 20, 2019.
Lockheed Martin encourages broker-dealers and other market participants in the dissemination of the offer to review the SEC’s recommendations to broker-dealers in these circumstances, which can be found on the SEC website at http://www.sec.gov/divisions/marketreg/minitenders/sia072401.htm and Information Memo Number 01-27 issued by the NYSE on Sept. 28, 2001, which can be found on the NYSE website at https://www.nyse.com/publicdocs/nyse/markets/nyse/rule-interpretations/2001/01-27.pdf regarding the dissemination of mini-tender offer materials.