19 Jul 19. Inmarsat buyers make fresh commitments to Britain Move to smooth over political resistance to £6bn takeover of satellite group. A private equity consortium pursuing a $6bn takeover of UK satellite group Inmarsat has made a series of legally-binding commitments to secure British government support for the deal. The voluntary commitments to the government are the latest example of how buyers of UK assets are looking to smooth over political resistance to a takeover, and come two days after the Competition & Markets Authority opened an investigation into the takeover, which includes scrutiny on national security and public interest grounds. The undertakings made to Jeremy Wright, culture secretary, which are unrelated to the CMA probe, are softer than those for other UK deals, where specific commitments were made to maintain headquarters or employees.
Japan’s SoftBank, for example, was the first to employ legally binding commitments to seal its £24bn of Arm Holdings, according to one UK adviser. With its takeover of Arm, SoftBank agreed to maintain the company’s Cambridge headquarters, double its UK-based staff and increase its overseas headcount over the next five years. The SoftBank agreements were made with the UK Takeover Panel, an independent body that oversees takeovers of UK-based publicly traded companies. One senior British dealmaker described the Inmarsat undertakings as “wishy-washy”.
For a period of three years, the consortium — which is led by private equity groups Apax and Warburg Pincus — has committed to support Inmarsat’s role in the space sector and “procure a majority of strategic decisions in the UK”, the buyers said. They have promised not to “substantially” cut Inmarsat’s engineering workforce, a small group of employees in the company’s network operations centre that controls its fleet of satellites, and not to move that facility from Britain. The group also said the culture secretary had asked the bidders to guarantee they would continue to invest in new satellites. One satellite industry veteran argued that the legally binding commitments tied Inmarsat’s future to Britain, easing fears that it could relocate offshore. However, the person said: “There’s no real reassurance here at all and it will depend on who is [the culture secretary] in a few weeks time,” the person said. (Source: FT.com) (See: BATTLESPACE ALERT Vol.21 ISSUE 15, 16 July 2019, UK CMA examining the takeover of Inmarsat)
19 Jul 19. Inspired by the moon landing anniversary? Take a punt on Aussie space stocks. With the 50th anniversary of the moon landing, investors with an eye to the stars could well consider Australian space industry stocks. The finance sector website Kalkine Media has taken a look at three Australian space companies listed on the Australian Securities Exchange (ASX), noting that the global space industry is growing, along with Australia’s part in it. Globally, space attracted an estimated $350bn in annual revenue last year, with market experts believing revenues would be in the range of $600bn to $1.8trn by 2040.
“With big names like NASA, Boeing, Airbus, SpaceX and Lockheed Martin syncing with the space industry, the number of private players in the game has steadily increased, giving a healthy competitive edge to the dominators,” Kalkine Media said.
“Amid competition from strong space economies like the US and Europe, Australia needs to enter global supply chain, enhance local value chains and de-limit distances while meeting obligations and security needs and required knowledge, the Aussie economy is pacing towards sustaining itself in the global space industry.”
Of the three ASX-listed Aussie space companies examined, all have big plans but none are yet high flyers.
Perth-based Sky and Space Global (ASX: SAS) is planning a global constellation of up to 200 small communications satellites, providing internet and other services. It has already launched three satellites, which it said are performing above expectations, and has signed more than 40 agreements. It has also developed much of the infrastructure it will need for revenue producing operations. SAS has had its share of challenges, including financing its operations and taking on two new Australian resident non-executive directors to contribute towards the company’s ongoing operations and growth strategy.
SAS shares remain in a voluntary suspension and were last traded on 3 April at a price of 2.8 cents. Trading could resume on Monday.
Beam Communications Holdings (ASX: BCC) was founded in 2002 in Melbourne following a request by Telstra and Iridium for a satellite terminal for the Australian market using the Iridium Satellite Constellation.
It’s now a wholly owned subsidiary of World Reach Limited and now markets satellite communications equipment around the world and is looking to expand into India.
BCC said there is growing demand for its equipment across the mining, shipping, oil and gas, and disaster management sectors. BCC shares last traded for 28 cents.
Kleos Space (ASX KSS) is actually based in Luxembourg with a listing on the ASX last August.
Kleos offers a very specialised service – its proposed 20 satellite constellation will monitor maritime radio frequencies and report on ship location, even for vessels not broadcasting automatic identification system (AIS) signals.
That’s a service of considerable interest to national security organisations, emergency services and port operators.
Kleos plans to launch the first four CubeSats into low-Earth orbit as the primary payload aboard a Rocket Lab Electron launch from New Zealand next month. Earlier this month, the company signed an agreement with L3 Harris Technologies to market its product suite to the US government agencies. It has also appointed an agent for the growing South American market. Kleos shares last traded at 39 cents. (Source: Space Connect)
18 Jul 19. Boeing to Recognize Charge and Increased Costs in Second Quarter Due to 737 MAX Grounding. Amounts relate to expensing of estimated potential concessions and other considerations to customers and the impact of continued lower 737 MAX. Boeing [NYSE: BA] announced today it will recognize an impact to earnings when it releases second-quarter 2019 results on July 24. Boeing will record an after-tax charge of $4.9bn1 ($8.74 per share) in connection with an estimate of potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays. This charge will result in a $5.6bn reduction of revenue and pre-tax earnings in the quarter. While the entire estimated amount will be recognized as a charge in the second quarter, the company expects any potential concessions or other considerations to be provided over a number of years and take various forms of economic value.
Additionally, Boeing’s estimated costs to produce the aircraft in the 737 accounting quantity increased by $1.7bn in the second quarter, primarily due to higher costs associated with a longer than expected reduction in the production rate. The increased 737 program costs will reduce the margin of the 737 program in the second quarter and in future quarters.
Boeing continues to work with civil aviation authorities to ensure the 737 MAX’s safe return to service, and these authorities will determine the timing of return to service. For purposes of the second-quarter financial results, the company has assumed that regulatory approval of 737 MAX return to service in the U.S. and other jurisdictions begins early in the fourth quarter 2019. This assumption reflects the company’s best estimate at this time, but actual timing of return to service could differ from this estimate. The second-quarter financial results will further assume a gradual increase in the 737 production rate from 42 per month to 57 per month in 2020, and that airplanes produced during the grounding and included within inventory will be delivered over several quarters following return to service. Any changes to these assumptions could result in additional financial impact.
“We remain focused on safely returning the 737 MAX to service,” said Boeing Chairman, President and CEO Dennis Muilenburg. “This is a defining moment for Boeing. Nothing is more important to us than the safety of the flight crews and passengers who fly on our airplanes. The MAX grounding presents significant headwinds and the financial impact recognized this quarter reflects the current challenges and helps to address future financial risks.”
Boeing Chief Financial Officer and Executive Vice President of Enterprise Performance and Strategy Greg Smith added, “We are taking appropriate steps to manage our liquidity and increase our balance sheet flexibility the best way possible as we are working through these challenges. Our multi-year efforts on disciplined cash management and maintaining a strong balance sheet, in addition to our strong and broad portfolio offerings, are helping us navigate the current environment.”
Boeing’s previously-issued 2019 financial guidance did not reflect impacts related to the 737 MAX. Due to the uncertainty of the timing and conditions concerning 737 MAX return to service, new guidance will be issued at a future date.
Boeing will issue its full second-quarter earnings release on July 24 and discuss the company’s financial results and outlook, including impact of 737 MAX grounding, during a conference call that day.
1 = Reflects the tax impact recorded in the second quarter of 2019. Based on current assumptions, additional tax impact would be recorded later in the year bringing the 2019 after-tax charge down to approximately $4.4bn.
18 Jul 19. Take cover from BAE Systems. The moral risk hovering over BAE Systems (BA.) has intensified. There’s nothing new about the aerospace and defence giant’s exposure to Saudi Arabia, where it generated 14 per cent of sales last year. Its special relationship with the kingdom, which is facilitated by the UK government, runs back to 1966. Weapons and aircraft sales to Saudi Arabia and its partners, such as Bahrain and Kuwait, along with training and technical support, are a core part of BAE’s operations. But as the disquiet in Europe grows louder, and with more investors keen to ringfence their portfolios from environmental, social and governance (ESG) hazards, some of BAE’s activities face an uncertain future. Underwhelming free cash flow (FCF) expectations have also weakened the investment case.
Political events over the past year have raised the heat on BAE. The murder of journalist Jamal Khashoggi in October 2018 prompted Germany to prohibit arms sales to Saudi Arabia, with a ban that was extended for another six months in March 2019. BAE leads a pan-European consortium to provide and maintain 72 Typhoon aircraft for Saudi Arabia, of which Germany is a member. At its full-year results in February, it warned that the German ban could affect its ability to support its Saudi activities and “may have a consequential impact” on its financial performance. A recent UK government ban on new arms licences for weapons that might be used in the Yemen conflict, meanwhile, could affect future BAE sales to the kingdom and its partners. In March 2018, BAE signed a memorandum of intent to provide 48 further Typhoons to Saudi Arabia, which would require a new export licence. The Labour party has signalled that it would scrap arms sales to Saudi Arabia should it enter government. None of BAE’s competitors have a substantial exposure to the kingdom anymore. It’s a lucrative market for the company – for now.
Beyond Saudi Arabia, BAE’s Qatari Typhoon contract, along with BAE’s capital expenditure committed towards its US expansion, is eating into its cash flow. Free cash flow (FCF) fell from £1.3bn to £615m in the full year to 2018, and BAE has warned that FCF will “not be linear over the three‑year period”. Operating business cash flow, which is operating cash flow less capital expenditure, was down 43 per cent year on year to £993m. A £307m working capital outflow was larger than house broker Berenberg expected. Delivery delays within its Paladin armoured vehicle programme and ongoing issues with its UK offshore patrol vessel operation contributed here. BAE is now targeting cumulative FCF of £3bn-£3.3bn by 2021, which is around £300m-£600m below pre-results consensus. It will need substantial improvement in cash generation in later years to meet this goal.
Growth in the US businesses, which accounted for 42 per cent of last year’s sales, did help to limit the impact on revenues, which fell marginally at the full year, from foreseen reduction in Typhoon production. Here, BAE is ramping up its production of F-35 fighter jets, with levels forecast to be at full rate in 2020, and working capital and capital expenditure predicted to rise in support of US growth. BAE is well established in the US, with over 70 years’ presence and 11 per cent of its £6.7bn 2018 air sector revenues generated here. But the group may be nervous about the planned $120bn (£94bn) merger between US aerospace giants Raytheon and the aerospace arm of United Technologies. Onlookers, including President Trump, have raised concerns over the deal’s impact on competition.
Any thoughts that BAE may have on a tie-up of its own in response, though, would be likely to run into trouble, particularly if it involved an overseas competitor. In his 2017 book, The Economics of Arms, professor Keith Hartley suggests that international mergers could create political and monopoly problems, with nation states fearful of “a loss of independence and national security” and regulators mindful of “the reduced bargaining power of national defence ministries”. It’s unlikely that a merger with another UK aerospace and defence business, meanwhile, would provide the necessary scale.
BAE’s strengths lie in its order book, its size and its strong relationships with national governments, with the UK, Australia and Saudi Arabia having provided consistent orders over the years. Defence budgets are often elevated in uncertain geopolitical times. But defence spending has not been enough on its own of late to support investor returns, with the share price down nearly 25 per cent on its peak of 675p around this time last year. Operational issues, weak cash performance and rising opposition to unethical business (even by the standards of the arms industry) leaves us unwilling to recommend holding BAE for now. Sell. Last IC View: Hold, 492p, 24 Jun 2019. (Source: Investors Chronicle)
18 Jul 19. Microsoft tops earnings forecasts on cloud growth. Shares rise in after-hours trading on strong performance of Azure and Office 365. Microsoft has comfortably topped revenue and earnings expectations for the final quarter of its fiscal year, driving a 1.5 per cent bounce in its shares in after-market trading on Thursday. The company’s cloud business once again fuelled its growth, with the Azure cloud platform seeing 64 per cent growth and revenues from commercial customers of Office 365 rising 31 per cent. Azure revenue rose by 68 per cent, after adjusting for the rise of the US dollar, a slowdown in growth from the 75 per cent in the previous three months but still higher than the company’s expectations when compared with a strong period the year before. Overall, Microsoft reported revenue of $33.7bn, up 12 per cent from a year before and nearly $1bn ahead of most Wall Street forecasts. Its non-GAAP earnings per share of $1.37 were up from $1.13 the year before and 16 cents ahead of expectations. The company also benefited from a favourable tax position in the quarter, with a tax credit of $591m, compared to a tax charge of $1.8bn the year before. The one-off adjustment reflected a consolidation of the company’s intellectual property holdings in the US and Ireland, following the passage of US tax reform 18 months ago. The tax benefit was excluded from the non-GAAP earnings figure, but contributed to a jump in GAAP earnings per share to $1.71, from $1.14 the year before. (Source: FT.com)
18 Jul 19. BAE Systems gets one-off benefit from overseas tax deal. The defence contractor said the main non-cash benefit to earnings per share would come from agreements regarding “overseas tax matters”
BAE also made a provision for estimated exposure to state aid following an EC decision in April. BAE Systems PLC (LON:EIG) said it will see an extra 5p of earnings per share thanks to a one-off tax benefit.
The FTSE 100 defence contractor said that as a result of unspecified agreements regarding “overseas tax matters” a one-off non-cash benefit has been recognised to 2019 earnings per share.
However, BAE also made a provision for estimated exposure to the UK’s Controlled Foreign Company regime, following the European Commission’s decision in April that concluded the regime partially represents state aid. The net earnings per share benefit arises in addition to the current 2019 underlying earnings per share guidance. BAE said neither item is “not expected to have a material impact on the underlying tax rate in future years”. Shares in the Company were little moved at 518.4p in early trading on Thursday. (Source: proactiveinvestors.co.uk)
18 Jul 19. MoD to pay Serco £10m to settle legal dispute over contract awarded to Capita. Serco said the agreement will allow the MoD to move forward with modernising the fire and rescue service. The MoD was forced to suspend the £500m contract with Capita last year
The Ministry of Defence (MoD) will pay Serco Group PLC (LON:SRP) £10m to settle a legal challenge over the government department’s decision to award a fire and rescue contract to rival Capita.
The MoD was forced to suspend the £500m,12-year contract for Capita to provide firefighting services on military services last year after Serco launched a lawsuit over the move.
Capita had beat Serco to win the contract, which involved the transfer of more than 2,000 staff at 78 defence fire stations worldwide, in June last year.
A day after the contract award was announced, the Financial Times reported that an assessment of Capita commissioned by the MoD had given the outsourcer the riskiest possible rating, which prompted Serco to challenge the decision.
The MoD and Serco agreed a deal to end the dispute in May this year and on Thursday the company confirmed that the two parties had reached a commercial settlement.
Serco said the agreement will allow the MoD to move forward with modernising the fire and rescue service and to avoid further delays to the Defence Fire and Rescue Project while also minimising legal costs to both parties.
Kevin Craven, the head of Serco’s UK and Europe division, said: “Serco is pleased that we have reached an amicable and constructive agreement with the UK Ministry of Defence.
“We also welcome the announcement that the MoD has commissioned an independent review into this procurement to be led by Tony Poulter, a non-executive director at the Department for Transport, and we look forward to contributing to this review.” (Source: proactiveinvestors.co.uk)
18 Jul 19. IFS, the global enterprise applications company, today announced its financial results for the second quarter and first half of 2019 that ended June 30, 2019.
“When I look back at Q2 2018, which was my first full quarter with IFS, I am proud of the results we achieved. Reflecting on Q2 of this year, I’m simply blown away by what we accomplished together as we focused on delivering sensible solutions to our customers,” commented IFS Chief Executive Officer, Darren Roos. He continued: “IFS is the only vendor of scale in our sector that stands on a principle of choice, providing an experience free from ultimatums. Now that we see what this IFS is truly capable of, expectations for the second half of the year remain high and I am pleased to have increased our guidance for the remainder of the year to deliver 2019 revenues of $711m, or 6.35bn SEK, an increase that represents a 21% increase year-on-year.”
IFS Chief Financial Officer, Constance Minc added, “We are not only hitting but exceeding our targets in all of our focused geographies, and key market segments. For example, Field Service Management (FSM) licence revenue has increased by 119% in H1 year-on-year, which far outpaces industry standard growth. As our product revenue continues to soar, IFS is asserting itself as a trusted, fast-moving and profitable challenger of the status quo in a market with staid competition. On top of that, the growth in adjusted EBITDA increased by 69% in Q1 versus Q1 2018 and grew by an even more impressive 97% in Q2 versus Q2 2018. This demonstrates that our growth is not at the expense of profitability and we are continuing to architect a sustainable, strong business.”
Financial and Operational Highlights for H1 2019:
- Net revenue was 2,996m SEK (US $322m), an increase of 24% versus H1 2018. In Q2 alone, net revenue comprised 1,586m SEK (US $168m)
- Licence revenue increased 48% versus H1 2018
- Excluding WorkWave, IFS cloud revenue increased 58% versus H1 2018
- Adjusted EBITDA grew 85% versus H1 2018
The first half of 2019 saw an influx of new customers, which included IFS securing the largest deals in the company’s history. The figures offer clear evidence of a focused and profitably growing organisation that is committed to its singular focus on deriving value for IFS customers. Having assembled a senior management team of the industry’s best talent with a motivated and ambitious workforce, the company continues to go from strength to strength.
IFS has also been recognised by industry analysts including IDC and Gartner for its enterprise resource planning (ERP), enterprise asset management (EAM) and FSM solutions. Accolades include being named a Leader once again in the 2019 Gartner Magic Quadrant for Field Service Management, as well as a Leader in the 2019 IDC MarketScape for SaaS and Cloud-Enabled EAM Providers. Such validation from respected third-parties confirms IFS’s prominent market position and forward momentum going into the second half of 2019 and beyond.
The outlook for the third quarter remains positive, with guidance for the full 2019 financial year being increased to 6.35bn SEK (US $711m).
Note: revenue growth figures based on Swedish Krona Q2 2019 versus Q2 2018 and are reported in actual currency.
18 Jul 19. Honeywell profits bolstered by strength in aerospace division. Honeywell on Thursday reported better than expected second-quarter profits driven by strength in its aerospace business and delivered a slightly rosier full-year outlook. The New Jersey-based company said organic sales, which strip out the impact of foreign exchange and the spin off of its home and transportation systems businesses — rose 5 per cent, shy of analysts’ expectations for a 6.3 per cent increase, according to a Refinitiv survey of analysts. Sales in the company’s aerospace business, its largest division, rose 11 per cent on an organic basis driven by strength in business aviation original equipment and in the US and international defence and space business. Net sales fell 15 per cent to $9.2bn, just shy of analysts’ estimates for $9.35bn. It’s net income climbed to $1.5bn or $2.10 a share in the three months ended in June, compared with $1.27bn or $1.68 a share in the year ago quarter. That exceeded analysts’ expectatons expectations earnings of $2.08 per share. “We are making significant progress in transforming Honeywell into a premier software-industrial company, with connected software sales continuing to grow at a double-digit rate organically,” said chief executive, Darius Adamczyk who has been working to streamline the company. The moves come despite a slowdown in the industrial economy amid uncertainty about the ongoing trade war between the US and China that has weighed on business’ spending plans. Honeywell did not provide an update on the impact to its business from the grounding of the Boeing 737 Max following two fatal crashes in which 346 people died. On the company’s last earnings call its management said the impact “is negligible, certainly for the second quarter” and added that they expect a resolution and expect the aircraft to be “back up and flying in [the second half]”. Investors are expected to watch for an update on Thursday’s earnings call amid reports that the delays to the aircraft could stretch into 2020. The company boosted the lower end of its full-year earnings forecast now expects between $7.95 to $8.15 a share, from $7.90 to $8.15 previously. It cited its strong first half performance and “confidence in our ability to continue to deliver for our shareowners even in an uncertain environment”. Honeywell shares are up 27 per cent year-to-date and were little changed in pre-market trade. (Source: FT.com)
16 Jul 19. Dibotics Becomes Outsight. Since 2015, Dibotics, a pioneer in Smart Machine perception, has developed real-time processing solutions for 3D data. Unlike “Machine Learning” approaches, the processing does not require any learning data and mobilizes limited calculation resources while delivering enriched and precise information.
The two co-founders of Dibotics, Raul Bravo and Olivier Garcia, are prominent experts on Autonomous Vehicles and Robotics. They have spoken at the most prestigious international conferences in the industry. Their unique approach received numerous awards and seduced major players in the Automotive, Robotics and Aeronautics Industries in five continents.
Today, the company enters a new phase. Its founders join Cédric Hutchings (co-founder of Withings) and Scott Buchter (co-founder of Lasersec) to create a new entity, Outsight, based in Paris, San Francisco and Helsinki.
This new entity aims to combine the software assets of Dibotics with a new and revolutionary 3D sensor technology.
Outsight will unveil a major innovation that’s a result from this blending of hardware and software, at the AutoSens Show: the world event dedicated to autonomous vehicles, on September 17, in Brussels.
Founded in 2015 by Raul Bravo and Olivier Garcia, Dibotics is a pioneer in mapping and robotic localization solutions, also known as 3D SLAM (Simultaneous Localization and Mapping). Dibotics pushes the boundaries of 3D perception thanks to a unique data processing originating from Lidar, Cameras, Radars or Sonars.
Its disruptive approach that does not use “Machine Learning” enables detection and classification of objects in real-time, without the data sets needed to “learn”, whether it is on the road, inside an airport or from a helicopter.
The information is processed directly by the Dibotics chip and only mobilizes a limited amount of processing power, but still delivers enriched and precise information.
The company has therefore seduced leaders in the automotive industry, manufacturers as well as equipment suppliers, and established partnerships with key industry players such as semiconductors leader Renesas, LIDARs manufacturer Velodyne and automotive supplier AGC.
Its unique approach of machine perception received numerous awards in the US (“30 most Innovative companies to watch” from Insight Success, “10 Fastest Growing Robotics Companies” by The Silicon Review) and in France (Concours d’Innovation Numérique, iLAB, IE-Club 60, Concours de d’Innovation from l’ADEME and Séléction GENERATE by GICAT among others).
Raul and Oliver, prominent experts, have spoken at several prestigious conferences including AutoSens, IS Auto, ADAS Sensors, Automotive LiDAR conference, Autonomous Car Software Symposium, Cognitive Vehicles, Off-Road Autonomous Vehicles and many others.
Dibotics technologies have the ability to better understand and anticipate the 3D environment in real time. The already revolutionary technology of Dibotics is now taking one step further with Outsight notably by adding new hardware and photonic modules, which will be unveiled at Autosens.
Outsight will make a quantum jump in perception and simultaneous understanding for “Smart Machines”, including autonomous vehicles.
Outsight will show the first applications of its technology at AutoSens, the world Mecca of vehicle automation and self-driving cars, and unveil the company’s vision during a plenary Keynote.
The founders of Dibotics are entrepreneurs, pioneers and experts with emblematic backgrounds. Raul Bravo, president of Outsight received his engineering degree at UPC Barcelona and MBA at Collège des Ingénieurs in France. He is a serial entrepreneur and was listed as one of the Top 10 Innovators on MIT’s Technology Review List under 35 and created several well-known companies in autonomous driving, developed the first robotic forklifts for warehouses, created hundreds of jobs, raised more than $125m and took one of his companies through an IPO.
Olivier Garcia, also an engineering graduate of UPC Barcelona and graduate of Paris VI University is one of the world’s leading experts in robotic algorithms, mainly for mapping and robotic localization solutions (3D SLAM). After working as a researcher at INRIA and Thales, he co-founded WifiBot (sold to Nexter) and developed several technologically foundational bases that today are used for autonomous vehicles (such as Navya/Induct), robotics (like Balyo) and more recently Dibotics with Raul.
Dibotics now enters a new phase by becoming Outsight. Raul and Olivier joined two entrepreneurs and complementary experts: Cédric Hutchings and Scott Buchter. With this new team Outsight will combine active software from Dibotics with revolutionary 3D sensor technology.
Cédric Hutchings studied engineering at Centrale Supélec Paris for his undergrad and attended MIT for his masters. He was vice-president of Nokia Technologies and the co-founder and CEO of Withings which he developed since its creation into an internationally recognized innovations company.
Dr. Scott Buchter, CTO of Outsight, is an expert in laser technology. He was formerly an MIT Lincoln Laboratory scientist and has published more than 50 papers and conference proceedings. He founded several companies which pushed the boundaries of laser development and the technology has been adopted by major industry players.
The Outsight founders have recruited top tier talent from around the world based in Paris, Helsinki and San Francisco.
Outsight aims to make a major breakthrough in applications and the perception of “Smart Machines” which will have an impact on several industries. (Source: BUSINESS WIRE)
16 Jul 19. ESCO Technologies Acquires Supplier Of Composite Products For Navy Submarines. ESCO Technologies [ESE] earlier this month said it acquired Globe Composite Solutions, LLC, a provider of composite-based products for the Navy and defense industry customers, including for the Virginia- and Columbia-class nuclear submarines. Terms of the deal were not disclosed. Globe, which is based near Boston, is expected to have
about $37m in sales this year. Globe provides more than 140 different parts for the Virginia- and Columbia-class submarines including special hull treatments (SHT), large aperture bow array acoustic panels, missile hatch gaskets, transducer covers, propulsor fairings and propeller shaft snubbers. ESCO, based in St. Louis, said the quality of Globe’s products and manufacturing capabilities has made the company a preferred supplier, positioning it for further growth.
“We are continually looking to expand our product offerings and gain more content on our existing submarine and defense-related platforms, and by adding the proven capabilities of Globe to our existing product portfolio, we’ve created an additional avenue for meaningful
growth across our existing customer base,” Val Richey, chairman and CEO of ESCO, said in a statement. “The U.S. Navy must continually increase the stealth capabilities of its submarines in order to reduce detection of its fleet through the deployment of its Acoustics Superiority
program. The goal of this program is to insert this technology into new construction as well as to add it to existing boats already in service. Globe’s R&D efforts focused on stealth technologies led to a multi-year award to produce SHT materials for the Block V and VI series
of Virginia-class submarines. The U.S. Navy is also planning to back-fit certain existing subs with this technology and equip the new Columbia-class with this protection when they enter production.”
Globe will become part of ESCO’s Filtration segment. Globe has a 72,000 square-foot research, design, machining and production facility and a 30,000 square-foot logistics support facility in the Boston area.
ESCO had $771.6m in sales last year. The company makes filtration and fluid control products for the aviation, space and process markets, as well as radio frequency shielding and electromagnetic compatibility test products. It also serves the power generation, medical and
commercial markets. Globe’s financial adviser on the deal was Houlihan Lokey. (Source: Defense Daily)
17 Jul 19. Naval Group 2019 half year (H1) financial results.
- H1 results in line with annual forecasts
- Order intake of €3.9bn, of which €2.7bn international
- Sales at €1.8bn, of which €500m from international
- Increase in EBITA up to €131m and in return on sales up to 7.3%.
On 16 July 2019 the Board of Naval Group met to review 2019 half year financial statements, closed on 30 June.
Commenting these results, Frank Le Rebeller, Senior Executive Vice President Finance, Legal and Purchasing, said: “The H1 results for 2019 show a slightly higher than expected operating profit and we have already exceeded our full year order intake target. In addition to the order for a sixth Barracuda submarine, this dynamism is due to a large extent to international orders and in particular to the Dutch/Belgian mine hunters contract and to the Australian design contract. 70% of the order intake is non domestic, highlighting the group’s international growth”.
Main consolidated data
Order intake – €3.9bn
In the first half of 2019 order intake reached €3.853bn. This is above the €3.4bn target set for all of 2019 and boosted the order book to €15.5bn at end June 2019.
International orders represented a large percentage of all new orders at 30 June 2019 and are mainly for new ships. The Belgian and the Dutch mine hunters contract and the design contract for the Australian submarine program have been awarded to Naval Group. The French order for a sixth Barracuda submarine also boosted Naval Group orders this half.
Sales – €1.8bn
First half sales stood at €1.797bn: 57% new ships and 43% services. The biggest contributors to sales were the Barracuda, FREMM and Brazil programs and maintenance for the Le Téméraire ballistic missile submarine.
Profitability – EBITA and operating profit up EBITA (earnings before interest, taxes and amortisation) totalled €130.7m. Operating profit rose again for the fourth consecutive year from 6.8% in the first half of 2018 to 7.3% for the same period in 2019. The group share of net profit is €85.8m for the half year to be compared to 104.6 m for H1 2018 which benefitted from one-off impacts.
Perspectives – an established international player
In the second half of 2019 Naval Group will keep on improving the competitiveness of its products offering as well as mastering its ongoing programs through on time, costs and quality deliveries. Operating profitability is therefore expected to increase through 2019 along with the group’s share of net profit that should grow by 5% as compared to 2018.
These financial results are delivered in the context of strengthened naval defence cooperation between Naval Group and its Italian partner Fincantieri, with a project to develop a more efficient and competitive European naval construction industry.
17 Jul 19. Textron Expects Bell 407, 429 Production to Ramp Up By End of Year. Textron’s [TXT] second quarter 2019 financial results were mixed, as the company reported $3.2bn in revenue, $500m lower than last year, but earnings per share of $.93, compared to $.87 last year.
CEO Scott Donnelly told financial analysts in a July 17 conference call that he expects business to pick up in the third and fourth quarters of this year, including sales of Bell 407 and 429 helicopters for commercial customers who use them for such areas as VIP transport and law enforcement. Bell is a Textron subsidiary.
“The demand [for the 407 and 429] is clearly there,” Donnelly said. “Q-2 was a solid quarter for Textron, as we continue our focus on operational improvements across the company. The underlying market is as healthy as it’s been in a very long time.”
June saw a business slowdown for the company amid talk of tariffs on Mexican goods by the
Trump administration, Donnelly said. “There were a couple of specific [business jet] transactions where customers that do a lot of business in Mexico and their business is dependent on that, and they got pretty rattled,” he said.
Textron reported that Bell second quarter revenues were $771m, down 7 percent from last year, primarily on lower military volume, such as the Bell-Boeing [BA] V-22 tiltrotor, which awaits a third multi-year procurement award. In addition, Bell delivered 53 commercial helicopters in the second quarter, four less than last year.
Last month, the Japan National Police Force ordered its first 412EPX helicopter by Bell and Subaru. The companies are also on contract to build 150 military Bell 412EPI helicopters for the Japanese Ground Self Defense Forces under the UH-X program over the next 20 years. The first UH-X helicopter is scheduled for delivery in 2022.
During the July 17 conference call with financial analysts, Donnelly said ongoing service work and contract opportunities for such programs as the U.S. Marine Corps H-1, V-22, and Marine Air-Ground Task Force Unmanned Aerial System Experimental (MUX) and U.S. Army Future Attack Reconnaissance Aircraft and Future Long Range Assault Aircraft “will drive growth in the future.” (Source: Defense Daily)
18 Jul 19. XTEK acquires American ballistic armour company. Australian defence company XTEK Limited has announced it has entered an agreement to acquire US market provider of body armour and personal protective equipment HighCom Armour Solutions, Inc. Based in Columbus, Ohio, HighCom designs, develops, tests, manufactures and distributes hard and soft armour products and high quality ballistic and personal protective gear.
All HighCom products are certified by the US Department of Justice’s National Institute of Justice, which represents the highest compliance standard in the industry.
“This is a great opportunity for an Australian business to further expand and I congratulate XTEK on their announcement,” Minister for Defence Industry Melissa Price said.
“As the Prime Minister has said, if you have a go, you’ll get a go – and our success in Australia’s defence industry is a result of companies like XTEK who are taking every opportunity to have a go.”
The company said that its acquisition of HighCom supports its strategy to commercialise its high-performance ballistic protection products, by accelerating their entry into key target markets in the US.
Through the acquisition, XTEK will gain direct access to HighCom’s well established US distribution network and existing manufacturing capability necessary to address the US military market.
“We thank Minister Price for her support of this transformational transaction, which represents a key milestone in XTEK’s evolution to becoming a leading ballistic armour player globally,” XTEK managing director Philippe Odouard said.
“XTEK is now in a strong position to accelerate the commercialisation of its proprietary products by combining XTclave technology and existing manufacturing capabilities with an established and growing distribution network in the US, the largest defence market globally.
“We believe the acquisition of HighCom presents significant growth opportunities, with the potential to be the ballistic armour and personal protective equipment supplier of choice and to leverage this success and momentum into other key target markets globally.”
HighCom has an established US network of distributors, original equipment manufacturers and sales agents who supply major government and law enforcement agencies.
HighCom, as a US General Services Administration approved manufacturer, has the opportunity to grow direct distribution channels with the US government, including military, federal and municipal law enforcement agencies.
“This transaction is highly strategic and allows the combined entity to grow its customer base, deliver high quality and proprietary products, expand geographic reach and accelerate entrance into new markets,” said James Black, director of HighCom Global Security Inc.
“More importantly, the deal structure enables shareholders of both XTEK and HighCom the opportunity to participate in the upside of a leading ballistic armour manufacturer.
“We are confident that the complementary combination will result in significant benefits to all shareholders, with the opportunity for a potential re-rating for the expanded shareholder base from enhanced presence, earnings and capital markets profile.” (Source: Defence Connect)
15 Jul 19. Broadcom’s bid for Symantec stalls over price cut. Takeover talks halted at eleventh hour after US chipmaker reduces offer. Broadcom’s plans to take over Symantec hit a wall after the two companies could not agree on a valuation for the cyber security software company, an eleventh-hour twist to a deal that was expected to be clinched as early as Tuesday. Both companies have halted talks after Broadcom sought to cut the price it had agreed to pay for Symantec over the weekend, according to two people with knowledge of the negotiations. Broadcom, the US chipmaker led by billionaire Hock Tan, had earlier agreed to pay $28.25 a share for the company, valuing Symantec at about $20bn, including debt. But as the semiconductor group was finalising its due diligence over the weekend, it discovered new information that prompted it to try to cut the value of the deal below $28 per share. Symantec shares fell as much as 15 per cent on Monday as news of the talks stalling surprised investors, who were convinced a deal was within reach. People close to Broadcom said the company was still keen to find a solution to carry out the deal. The two sides could resume discussions if they iron out their differences over the valuation, said a person briefed on the negotiations. The share price drop by Symantec could add to pressure on the company’s board, they added. Broadcom had arranged financing for the deal with more than 20 banks, who are still on standby to back the transaction, said another person close to the situation.
Broadcom declined to comment. Symantec did not immediately respond to a request for comment. The deal for Symantec would have underlined Broadcom’s shift towards software after having spent several years consolidating the chip making industry. Mr Tan, an avid dealmaker, has been trying to diversify the chipmaker’s focus after the US blocked his attempted $142bn purchase of leading mobile chip company Qualcomm in 2018. Recommended Lex Broadcom/Symantec: slow fade fad Last year Broadcom acquired mainframe software company CA for $18.9bn, and the addition of Symantec would have helped the San Diego-based company further bolster its software capabilities and offering. Daniel Ives, an analyst at Wedbush who covers Symantec, called the news a “major head scratcher” given recent turmoil at the company. Symantec’s chief executive departed abruptly in May, the same day the company warned its profits for the quarter would fall short of analyst estimates. “With the stock under significant pressure this morning in light of reports this deal is off the table. Now Symantec must prove its fundamental valuation to the Street which remains an uphill battle in our opinion with a lot of frustration the way this Broadcom situation appears to have played out,” he said. Symantec’s struggles, which included an internal investigation over its finances, have attracted the likes of both activist investor Starboard Value and the attention of private equity groups. Last year the company was approached about a potential buyout by Thoma Bravo. CNBC reported earlier on Monday that talks had come to a standstill.(Source: FT.com)
15 Jul 19. The UK’s Competition and Markets Authority (CMA) is considering whether the acquisition of Inmarsat by private equity firms led by Apax and Warburg Pincus would reduce competition in the market. The CMA is investigating the anticipated acquisition by Connect Bidco Limited of Inmarsat plc.
Phase 1 date Action
10 September 2019 Deadline for phase 1 decision (*)
16 July to 29 July 2019 Invitation to comment
15 July 2019 Launch of merger inquiry
(*) This date is the current statutory deadline by when the decision will be announced. If any change occurs, the information is refreshed as soon as practicable. However, the CMA cannot guarantee that the decision will be announced on or before this current deadline, as the deadline of a given case may change during the merger assessment process due to different reasons.
Invitation to comment: closes 29 July 2019
The Competition and Markets Authority (CMA) is considering whether it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
To assist it with this assessment, the CMA invites comments on the transaction from any interested party. These comments should be provided by the deadline set out above. Notification of merger enquiry to the Department for Digital, Culture, Media & Sport
The CMA brought the acquisition by Connect Bidco Limited of Inmarsat plc to the attention of the Secretary of State for Digital, Culture, Media & Sport under section 57(1) of the Act, as the CMA considered that the transaction may raise public interest considerations under section 58 of the Act.
Launch of merger inquiry
The CMA announced the launch of its merger inquiry by notice to the parties.
- Commencement of initial period notice (16.7.19)
Please send written representations about any competition issues to:
Competition and Markets Authority
On 25 Mar 19, the FT reported today that a consortium led by private equity groups Apax and Warburg Pincus is set to acquire satellite communications company Inmarsat in a deal that values the UK group’s equity at $3.4bn, the companies said on Monday. Alongside Canada’s CPPIB and Ontario Teachers’ Pension Plan Board, the groups will pay $7.21 in cash per Inmarsat share and will take the entire group private. The offer represents a 27 per cent premium to the closing price of £4.31 per Inmarsat share on March 18. Including debt, the offer values the company at about $6bn. The deal is expected to be completed by the end of the year, pending regulatory approvals. (See: BATTLESPACE ALERT Vol.21 ISSUE 06, 25 March 2019, Private equity consortium to buy Inmarsat for $3.4bn)
15 Jul 19. UK competition watchdog to investigate $6bn Inmarsat take-private deal. Buyout would see Britain’s largest satellite company return to private equity ownership. The UK’s competition watchdog has launched an investigation into plans to take Inmarsat, Britain’s largest satellite company, private. The Competition and Markets Authority said on Tuesday it was considering whether the acquisition of Inmarsat by private equity firms led by Apax and Warburg Pincus would reduce competition in the market. The deal, announced in March, would see Inmarsat return to private equity ownership almost 15 years after it was floated, valuing it at around $6bn, including debt. It had been expected to be completed by the end of the year, pending regulatory approvals. The CMA will now consider whether the deal will create a “relevant merger situation” under the Enterprise Act 2002 and, if so, whether it is likely to result in a “substantial lessening of competition” within the UK. The watchdog has invited comments from any interested parties by the end of this month. The deadline for a decision on a Phase 1 investigation is September 10. Inmarsat has in the past regularly been linked with a takeover by an industry rival but has struggled to attract investors because of its recent poor performance. In May it reported a 13 per cent drop in first-quarter earnings.
15 Jul 19. Sintavia Acquires Testing Company QC Labs. Additive manufacturer Sintavia, LLC, on Monday said it has acquired QC Laboratories, a provider of non-destructive testing (NDT) services to the aerospace and defense industry, to strengthen the quality of its additive manufactured (AM) products. Terms of the deal were not disclosed. Both companies are based in Florida. Sintavia said the acquisition significantly enhances its NDT capabilities for commercial aerospace industry applications, particularly for surface finish conformance testing.
“We have worked with QC Labs for a number of years to develop surface finish inspection metrics that are relevant for the additive manufacturing industry,” Doug Hedges, Sintavia’s president and chief technology officer, said in a statement. “Today’s announcement is a natural extension of this same process, and we are looking forward to deepening the relationship with
QC Labs as we continue to develop acceptable NDT metrics for production AM components.”
QC Labs will become a stand-alone subsidiary of Sintavia. Earlier this year Sintavia opened a new 55,000 square foot facility for large-scale additive manufacturing. The company serves the aerospace and defense industry. (Source: Defense Daily)
15 Jul 19. Spain sets up first defence industrial cluster. Spain’s northern region of Cantabria has set up the country’s first industrial cluster dedicated to the defence sector. Backed by the regional government’s development society (Sociedad para el Desarrollo de Cantabria: Sodercan) and the local Chamber of Commerce, it initially includes 18 companies and three local universities or colleges.
Most of the founding members are involved in the naval, electronics, and telecoms sectors, including Everis Aeroespacial, Defensa y Seguridad, and Erzia Technologies, whose CEO Luis García has been elected first president of the cluster. García said that despite having an important presence in the region – whose capital city is Santander – the defence sector was “little visible” to society at large. (Source: IHS Jane’s)
15 Jul 19. Global quantum computing specialist completes acquisition of Aussie start-up. Australian-based Shoal Group congratulated Rigetti Computing on the acquisition of Shoal spin-off company QxBranch – a quantum software and analytical capability specialist. The deal will combine the cloud-based, quantum-classical computing being developed by Rigetti with the quantum software and analytical capabilities of QxBranch to create a ‘full stack’ hardware-to-application software capability to lead the commercialisation of quantum computing. Shoal and QxBranch founder Shaun Wilson welcomed the successful acquisition, saying, “Shoal congratulates Rigetti on what we see as the astute acquisition of QxBranch. We are very pleased that the idea that Shoal conceived and incubated, applying application-focused systems engineering to what was, in 2012, embryonic quantum computing technology, has resulted in a robust quantum-enabled analytical capability in QxBranch that is now recognised across many industries.”
QxBranch was spun-out of Shoal in late 2014 and funded by Ramornie Capital and other significant investors as an independent company. This came after a two-year R&D effort by Shoal directly supported by Lockheed Martin and enabled by Shoal’s extensive experience in complex systems engineering and high-fidelity modelling and simulation.
Over the past five years, QxBranch has garnered major brand-name clients worldwide across the finance, insurance, cyber security, biotech, energy, sports, pharmaceutical, and military research industries. QxBranch has offices in Washington, DC; London and Adelaide, Australia.
“The acquisition of QxBranch by an industry leader like Rigetti is yet another R&D and investment success for Shoal and our backers in Australia and overseas, particularly for our major seed investor, Ramornie Capital. This success gives us the confidence to keep taking risk and investing in new technology in Australia and elsewhere,” Wilson added.
In early 2016, the Commonwealth Bank of Australia announced a partnership with QxBranch to develop a quantum computer simulator, modelled on the hardware being developed at the University of New South Wales in Sydney.
A year later, the simulator was released for use, allowing Commonwealth Bank staff to design and evaluate software and algorithms concurrently with quantum computing hardware development. In November 2016, QxBranch, in partnership with UBS, was won a major project under the Innovate UK Quantum Technologies Innovation Fund under the UK National Quantum Technologies Programme.
Mr Wilson also added, “Combining this with Rigetti’s fast-developing quantum computing hardware technology should drive leadership in the commercialisation of quantum computing.”
Last year, QxBranch partnered with Scandinavian financial services investment house, New Nordic Advisers, to launch London-based cyber risk insurance company, Envelop Risk. The new company combines the analytical capability of QxBranch with deep cyber-risk and insurance industry knowledge. Envelop Risk, which began writing cyber risk insurance policies late last year, is expected to be a significant disruptor of the business insurance market. (Source: Defence Connect)
12 Jul 19. Kromek “will achieve cash breakeven this year”, says Cantor Fitzgerald. While the group’s medical arm was the “key” growth driver, the broker said that the nuclear and security screening businesses would provide “immediately realisable” earnings. Cantor has Kromek rated at ‘buy’ with a 45p price target. Kromek Group PLC (LON:KMK) will achieve cash breakeven this year, according to analysts at Cantor Fitzgerald, who on Friday reiterated their ‘buy’ rating and 45p target price on the stock.
The broker said they expected revenue growth for the radiation detection specialist to continue in the “mid- to high-teens range”, adding that the group’s medical imaging arm was the “key medium-term driver” of growth.
Cantor also said that the company’s nuclear and security screening offerings would provide “more immediately realisable earnings and cash”.
Overall, the broker said Kromek was building “a strong customer, manufacturing and intellectual property base”, with cash breakeven the next milestone for the group. In mid-afternoon trading, Kromek shares were 1% lower at 24.3p. (Source: proactiveinvestors.co.uk)
12 Jul 19. Airbus Helicopters has strengthened its footprint in Italy with the acquisition of its distributor and 50-year partner Aersud Elicotteri. Headquartered in the North of Italy, near the city of Verona, Aersud has played a key role in the development of the country’s helicopter market. It has successfully increased Airbus Helicopters’ market share in Italy, particularly in mission segments such as aerial work, business aviation and emergency medical services, thanks to the Airbus single-engine H125 and twin-engine H145 helicopters that are particularly suited to the country’s mountainous conditions.
The company will now fully integrate Airbus Helicopters’ global network of customer centers.
“With over 250 helicopters in service and more than 90 operators in the country, Italy is an important market for Airbus Helicopters, and we are here to stay” said Bruno Even, Airbus Helicopters CEO. “I would like to thank Aersud Elicotteri which has played a key role in increasing the fleet of Airbus helicopters in Italy over the last 50 years. We are fully committed to providing our local customers with the best-in-class service and support they expect, and to do so while building on the very successful relationship that Aersud Elicotteri has developed with them over the years. I would also like to warmly welcome all of our new colleagues to the Airbus team”.
“Aersud Elicotteri has been an extraordinary adventure on a personal and professional level for two generations of my family and I am very proud of our contribution to the Italian aerospace industry”, said Riccardo Aichner, President of Aersud Elicotteri. “Throughout the years, the people at Aersud Elicotteri have been led by their passion for aviation, putting their expertise and dedication at the service of our customers. I am sure that these same principles will guide the new period we are now starting, under the name of Airbus”.