12 Feb 20. Babcock hit by aviation delays and oil and gas disruption. Babcock International (BAB) has lowered its full-year expectations for its aviation business, which has been hampered by delays and a challenging oil and gas market. The defence support services group has previously flagged delays in the award of new contracts for aerial emergency services in Italy and Spain, which has pushed revenues into future periods.
The three largest helicopter services providers operating in oil and gas have all recently emerged from bankruptcy, which has “effectively reset global market pricing levels”. Babcock is also exiting its oil and gas activities in Ghana and Congo. The group expects to incur an exceptional charge of around £85m primarily linked to the write-down of oil and gas assets and leases. Babcock has set new guidance for underlying operating profit at around £540m, down from £540m-£560m.
Babcock shares edged down 5 per cent in early trading after its trading update. This is arguably a slightly harsh response given that its revenue delays were public knowledge, while its marine business continues to outperform expectations. Overall, Babcock’s combined order book and pipeline sits at a record level of £34bn. Buy at 527p.
Last IC View: Buy, 590.6p, 5 Dec 2019. (Source: Investors Chronicle)
12 Feb 20. Babcock nudges down profit forecast on oil and gas woes. Babcock International (BAB.L) nudged down its guidance for annual underlying operating profit and wrote down the value of its oil and gas transportation business in the latest blow to the British engineer.
One week after the company announced the retirement of Chief Executive Archie Bethel, Babcock said it would also embark on an improvement and restructuring programme to ensure it remains on track for medium term targets.
It will write down the value of assets in its oil and gas division, which transports around 260,000 men and women to platforms in the UK’s North Sea, leading to an exceptional charge of around £85m.
The company said it had been hit by delays in the award of new contracts for aerial emergency services in Italy and Spain. In the oil and gas division, three large competitors have emerged from bankruptcy protection with reduced debts and written-down assets.
That has enabled them to reset global market pricing levels, Babcock said. The company, which also operates in defence and civil nuclear markets, said its forecasts for underlying revenue, cash flow and earnings per share remained in line with expectations. (Source: Reuters)
13 Feb 20. Airbus pledges profit gain after bribery settlement hit. Airbus (AIR.PA) plunged to a 1.362bn euro (£1.14bn) net loss in 2019, weighed down by a multinational bribery settlement, but the European aerospace group pledged to increase operating profit and deliver 880 commercial jets this year.
Full-year adjusted operating income, which excludes the criminal settlement and other one-offs, rose 19% to 6.946bn euros and should top 7.5bn euros in 2020, Airbus said. Revenue increased 11% to 70.478bn euros.
Airbus turned in a “strong underlying financial performance driven mainly by our commercial aircraft deliveries”, Chief Executive Guillaume Faury said in the company statement.
The group will focus on operational and cost improvements in 2020 as well as “reinforcing our company culture”, he added.
The net loss reflected a 1.212bn euro charge on the A400M military transporter programme as well as a provision for last month’s $4bn settlement with British, French and U.S. prosecutors over past corrupt practices.
Airbus played down the potential damage from the virus outbreak currently rattling airlines and the broader global economy, endorsing traffic growth forecasts that “assume no major disruptions, including from the coronavirus.”
Raising its proposed dividend by 9% to 1.80 euros per share, Airbus predicted full-year free cash flow of around 4 bn euros, improved from 3.509 bn in 2019.
The long-delayed A400M programme delivered 14 planes in 2019, on schedule, but is now hampered by “increasingly challenging” obstacles including repeated extensions to a German export ban on Saudi Arabia, Airbus said.
For the fourth quarter, adjusted operating income fell 9% to 2.813bn euros, ahead of the 2.736bn expected by analysts, according to an Airbus consensus poll. Quarterly revenue rose 4% to 24.31bn euros. (Source: Reuters)
13 Feb 20. Airbus reports Full-Year (FY) 2019 results, delivers on guidance.
- Record commercial aircraft deliveries
- Strong underlying financial performance, FY 2019 guidance achieved
- €-3.6bn penalties recognised for agreements with authorities
- A400M €-1.2bn charge; export assumptions revised
- Revenues €70.5bn, +11% YoY; EBIT Adjusted €6.9bn, +19% YoY
- EBIT (reported) €1.3bn; loss per share (reported) €-1.75
- 2019 dividend proposal: €1.80 per share, +9% versus 2018
- 2020 guidance to set the path for sustainable growth
Airbus SE (stock exchange symbol: AIR) reported Full-Year (FY) 2019 consolidated financial results and provided guidance for 2020.
“We achieved a great deal in 2019. We delivered a strong underlying financial performance driven mainly by our commercial aircraft deliveries,” said Airbus Chief Executive Officer Guillaume Faury. “The reported earnings also reflect the final agreements with the authorities resolving the compliance investigations and a charge related to revised export assumptions for the A400M. The level of confidence in our ability to continue to deliver sustainable growth going forward has led to a dividend proposal of € 1.80 per share. Our focus in 2020 will be on reinforcing our company culture, improving operationally, and adjusting our cost structure to strengthen the financial performance and prepare for the future.”
Net commercial aircraft orders increased to 768 aircraft (2018: 747 aircraft), including 32 A350 XWBs, 89 A330s and 63 A220s. At the end of 2019, the order backlog reached 7,482 commercial aircraft. Airbus Helicopters achieved a book-to-bill ratio by value above 1 in a difficult market, recording 310 net orders in the year (2018: 381 units). This included 25 helicopters from the Super Puma family, 23 NH90s and 10 H160s. Airbus Defence and Space’s order intake by value of €8.5bn was supported by A400M services contracts and key contract wins in Space Systems
Consolidated order intake in 2019 increased to €81.2 bn (2018: €55.5bn) with the consolidated order book valued at €471bn on 31 December 2019 (end December 2018: €460bn).
Consolidated revenues increased to € 70.5bn (2018: € 63.7bn), mainly driven by the higher commercial aircraft deliveries and a favourable mix at Airbus, and to a lesser extent the favourable exchange rate development. A record 863 commercial aircraft were delivered (2018: 800 aircraft), comprising 48 A220s, 642 A320 Family, 53 A330s, 112 A350s and 8 A380s. Airbus Helicopters recorded stable revenues supported by growth in services, which offset lower deliveries of 332 rotorcraft (2018: 356 units). Revenues at Airbus Defence and Space were broadly stable compared to the previous year.
Consolidated EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructurings or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – increased to €6,946m (2018: €5,834m), mainly reflecting the operational performance at Airbus, partially offset by Airbus Defence and Space’s performance and additional ramp-up costs.
Airbus’ EBIT Adjusted increased by 32% to €6,358m (2018: €4,808m), largely driven by the A320 ramp-up and NEO premium, together with good progress on the A350.
On the A320 programme, NEO aircraft deliveries rose by 43% year-on-year to 551 aircraft. The ramp-up continued for the Airbus Cabin Flex (ACF) version of the A321 with almost 100 more deliveries than in 2018. The Airbus teams are focused on securing the ongoing ACF ramp-up and improving the industrial flow. Airbus is discussing further ramp-up potential for the A320 programme beyond rate 63 per month with the supply chain, and already sees a clear path to further increase the monthly production rate by 1 or 2 for each of the 2 years after 2021. The breakeven target for the A350 was achieved in 2019. Given overall customer demand for widebody aircraft, Airbus expects A330 deliveries of approximately 40 aircraft per year beginning in 2020 and the A350 to stay between a monthly rate of 9 and 10 aircraft.
Airbus Helicopters’ EBIT Adjusted increased to €422m (2018: €380m), mainly reflecting an increased contribution from services and lower research and development costs. This was reduced by a less favourable delivery mix.
EBIT Adjusted at Airbus Defence and Space declined to €565m (2018: €935m), mainly reflecting the lower performance in a competitive Space environment and efforts to support sales campaigns. The Division is targeting a restructuring programme to address its cost structure and restore profitability to a high single digit margin.
During 2019, 14 A400M military transport aircraft were delivered in line with the latest delivery schedule, bringing the in-service fleet to 88 aircraft at year-end. Several key milestones towards full capability were achieved in the year, including the simultaneous deployment of paratroopers and helicopter air-to-air refuelling dry contacts. In 2020, development activities will continue towards achieving the revised capability roadmap. Retrofit activities are progressing in line with the customer-agreed plan. While the rebaselining of the A400M programme was completed and significant progress has been made on technical capabilities, the outlook is increasingly challenging on exports during the launch contract phase, also in light of the repeatedly extended German export ban to Saudi Arabia. As a result, the Company has reassessed its export assumptions on future export deliveries for the launch contract phase and recognised a charge of € 1.2bn in the fourth quarter of 2019.
Consolidated self-financed R&D expenses totalled € 3,358m (2018: €3,217m).
Consolidated EBIT (reported) was €1,339m (2018: €5,048m), including Adjustments totalling a net €5,607m. These Adjustments comprised:
- €-3,598m related to the penalties;
- €-1,212m related to the A400M charge;
- €-221m related to the suspension of defence export licences to Saudi Arabia by the German government, now prolonged to March 2020;
- €-202m related to A380 programme cost;
- €-170m related to the dollar pre-delivery payment mismatch and balance sheet revaluation;
- €-103m related to Premium AEROTEC’s restructuring plan launched to improve its competitiveness;
- €-101m of other costs, including compliance costs partially offset by positive capital gains from the Alestis Aerospace and PFW Aerospace divestments.
Consolidated reported loss per share of €-1.75 (2018 earnings per share: €3.94) includes a negative impact from the financial result, mainly driven by the revaluation of financial instruments. The financial result was €-275m (2018: €-763m). The consolidated net loss(1) was €-1,362m (2018 net income: €3,054m).
Consolidated free cash flow before M&A and customer financing improved by 21% to € 3,509m (2018: € 2,912m), mainly reflecting commercial aircraft deliveries and the earnings performance. Consolidated free cash flow was € 3,475m (2018: € 3,505m). The consolidated net cash position was € 12.5bn on 31 December 2019 (year-end 2018: € 13.3bn) after the 2018 dividend payment of € 1.3bn and pension contribution of € 1.8bn. The gross cash position on 31 December was € 22.7bn (year-end 2018: € 22.2bn).
The Board of Directors will propose the payment of a 2019 dividend of €1.80 per share to the 2020 Annual General Meeting. This represents an increase of 9% over the 2018 dividend of
€1.65 per share. The payment date is 22 April 2020.
As the basis for its 2020 guidance, the Company assumes:
-The world economy and air traffic to grow in line with prevailing independent forecasts, which assume no major disruptions, including from the coronavirus.
-The current tariff regime to remain unchanged.
The 2020 earnings and FCF guidance is before M&A.
- Airbus targets around 880 commercial aircraft deliveries in 2020.
- On that basis:
Airbus expects to deliver an EBIT Adjusted of approximately € 7.5bn, and
Free Cash Flow before M&A and Customer Financing of approximately € 4bn before:
- €-3.6bn for the penalty payments and;
- A negative mid-to-high triple digit m Euro amount for the consumption of compliance-related provisions for tax and legal disputes.
13 Feb 20. Steel becomes new problem child as Thyssenkrupp posts profit drop. Thyssenkrupp’s steel division swung to a loss in the first quarter, raising doubts over Europe’s second-biggest steelmaker, the conglomerate’s core following its planned sale of its elevator business.
Imports from China and weak demand from the car industry have pummelled steelmakers across the continent, including German rival Salzgitter (SZGG.DE) and the local division of India’s Tata Steel (TISC.NS).
Thyssenkrupp’s loss highlights the challenges it will face in revamping the business, which, along with materials trading, will be the backbone of Thyssenkrupp once the sale of its elevator business is decided at the end of the month.
“The latest figures are not great. But we are convinced that we are on the right track,” CEO Martina Merz said in a statement.
Restructuring efforts at the steel division, including 2,000 job cuts, are currently under way.
The division posted an adjusted operating loss of 164m euros (£137.7m) in the first quarter versus a profit of 38m a year earlier, blaming a “significant drop in demand from the auto industry”.
Shares in the group were indicated 1.7% lower in pre-market trade.
Pressured by a sector-wide shift towards electric cars, the auto industry has been hit by a raft of profit warnings, with suppliers, including Thyssenkrupp, hit as a result. The auto industry is Thyssenkrupp single biggest client group.
Cash from a sale of the elevator business, which is valued at 16-17bn euros, will therefore be much needed. The company’s net debt stood at 7.14bn euros, nearly doubling quarter on quarter reflecting adjusted accounting of lease liabilities under the IFRS accounting standard.
Merz said a decision on the elevator deal was imminent. The group’s equity ratio fell to 5.4% from 6.1% for the 2018/19 financial year, indicating that virtually all of the group’s assets are backed by debt. (Source: Reuters)
11 Feb 20. Space Software Startup To Pursue SDA Contracts. NewSpace Networks will bid against Lockheed Martin for bankrupt Vector Launch’s GalacticSky software-defined satellite assets, says co-founder Shaun Coleman. Three of the founders of bankrupt Vector Launch have created a new startup, NewSpace Networks, to develop space software products for applications such as data analysis, cybersecurity, and the Internet of Things (IoT). As one of their first forays into the market, the company intends to respond to the Space Development Agency’s January call for “leap-ahead technologies” for its evolving DoD space architecture.
The new San Jose-based company is eyeing SDA’s top two priorities: the so-called ‘transport layer’ for Internet and communications connectivity and the ‘tracking layer’ that will also cover hypersonic missiles. NewSpace Networks leadership believe they could provide capabilities to the ‘battle management layer,’ and the ‘support layer’ to enable ground and launch segments to support a responsive space architecture.
“We could occupy several of those layers,” Robert Cleave, formerly Vector’s chief revenue office, told me in a phone conversation today, which included NewSpace Network co-founders Shaun Coleman and John Metzger. Coleman was the first investor in Vector Launch; Metzger was vice president of software engineering. As we reported, the SDA’s Jan. 21 Broad Area Announcement gives interested vendors one year to pitch their ideas.
Coleman said that NewSpace Networks is the only company focused on creating a software-based infrastructure in space. Rather than building satellites, Cleave explained, “we see ourselves as a provider of software that makes the satellite smarter.” The idea is to move the aerospace industry from its current hardware focus to a focus on software, as has happened at big tech firms across Silicon Valley and is recognized by many of the Air Force’s leadership.
NewSpace Networks intends to target military and defense-related customers, along with commercial firms and civilian government agencies. This includes pitching to be a part of DoD’s efforts to develop and use 5G high-speed communications capabilities and to provide connectivity to Army vehicles.
But it also is looking at potential sales outside of the traditional aerospace community, such as vendors of autonomous vehicles, city governments interested in infrastructure monitoring, and even direct consumer sales of healthcare devices and entertainment services.
The wide variety of potential customers is based on the fact that NewSpace Networks’ planned products are focused on computing, data storage and processing capabilities at the edge, ones that have a wide variety of potential uses. According to today’s announcement, NewSpace Networks’s initial products will focus on “the unique challenges of edge computing via space connectivity.” But the company’s tech also could be used with aircraft, drones or aerostats serving as the connectivity node, the co-founders explained.
Tuscon-based Vector was one of three commercial space firms chosen in April by the Defense Advanced Research Projects Agency for its DARPA Launch Challenge, a $12m competition to rapidly launch small satellites to Low Earth Orbit (LEO), until its surprise withdrawal in September due to financial difficulties. The other two companies were Virgin Orbit, which withdrew in October to concentrate on more lucrative customers, and the secretive California-based startup Astra, that first went public in early February via a website. According to a Feb. 3 profile in Bloomberg Businessweek, the firm intends its first launch on Feb. 21.
Vector declared Chapter 11 bankruptcy in December, and as colleague Jeff Foust reported on Jan. 24 announced it would auction off its assets. Vector already has a $4.5m bid from Lockheed Martin for its GalacticSky software-defined satellite technology — essentially a computer on orbit that can be configured for various satellite missions that will be accepted if no other firms issues a bid by Feb. 21. If others throw their hats in the ring, there will be an auction for GalacticSky on Feb. 25.
And guess what? NewSpace Networks intends to do just that. “We will be bidding for GalacticSky as well,” Coleman said, noting that I was the first reporter they have told. The founders believe that GalacticSky’s technology, that allows a satellite to act more like a cloud node than a mainframe computer, would be complementary to their own developments. Even if they don’t win the auction, they hope to work with whoever wins. (Source: Defense News Early Bird/Breaking Defense)
06 Feb 20. Counter-UAS company CerbAir announces EUR5.5m in new funding. French counter-UAS systems manufacturer CerbAir has announced a EUR5.5m round of financing and the incorporation of new shareholders. “With a number of detection and counter-measure systems already installed around the world, the French leader in anti-drone systems announced the conclusion of a EUR5.5m round of financing,” said a press statement released today. “In December 2017, CerbAir secured EUR1.5m in a funding round with the help of several investors of which several prominent contributors include Denis Gardin from MBDA, Jean-Michel Aulas with his family office HOLNEST and Technofounders, the French accelerator that kick-started CerbAir…., CerbAir has obtained the confidence of Boundary Holding, a specialist in cybersecurity, Aubé Management (the investment holding of Nicolas Aubé, CEO of Celeste Group) and Smart Move Holding (Cyril Balas). MDBA, co-historic shareholder of CerbAir, as well as TF Participations (investment vehicle of the start-up studio Technofounders) complete the round table.”
For more information
https://www.cerbair.com/ (Source: www.unmannedairspace.info)
10 Feb 20. Gores Holdings III, Inc. Completes Acquisition of PAE From Platinum Equity. Combined company renamed PAE Incorporated and will trade on Nasdaq under PAE and PAEWW. Gores Holdings III, Inc. (“Gores Holdings III”) (Nasdaq CM: GRSH, GRSHU, and GRSHW), a special purpose acquisition company sponsored by an affiliate of The Gores Group, LLC (“The Gores Group” or “Gores”), today announced that it completed the acquisition of Platinum Equity portfolio company PAE (“PAE” or the “Company”), trusted provider of outsourced solutions for enduring missions of the United States government and international partners for over 60 years. The transaction was unanimously approved by the Board of Directors of both Gores Holdings III and the ultimate parent company of PAE and was approved at a special meeting of Gores Holdings III’s stockholders on February 7, 2020. There were 0.0005% (virtually zero) redemptions in connection with the business combination. In connection with the transaction, Gores Holdings III has been renamed PAE Incorporated and its common stock and warrants now trade on Nasdaq under the symbols “PAE” and “PAEWW”, respectively.
As previously announced, the consideration payable to the stockholders of the Company will consist of a combination of cash and shares of Gores Holdings III common stock. In addition to the $400m of cash held in Gores Holdings III’s trust account, additional investors participated in the transaction through a $220m private placement, led by Alec Gores, Chairman and CEO of The Gores Group. As a result of the acquisition and the private placement, funds managed by affiliates of Platinum Equity, the prior majority owners of PAE, hold an approximate 23% combined stake in the newly public company.
Founded in 1955, PAE is a leading provider of mission-critical services to the U.S. government, armed forces and international customers including the U.S. Department of State, Army, Navy, Air Force, NASA and others. Headquartered in Falls Church, Virginia, PAE operates in approximately 60 countries across all seven continents.
“Through a culmination of efforts by a workforce dedicated to excellence and professionalism, PAE has reached this milestone. We’re grateful to Platinum Equity, Gores Holdings III and the investors who share our optimism in PAE’s growth value,” said PAE CEO John Heller. “Although we are now a public company, nothing changes with respect to our commitment to our customers, our exceptional employees and our focus on building on our nearly 65-year tradition of being a trusted partner to the U.S. government and our allies worldwide.”
“John and his team provide exceptional leadership and I’m proud of the work we have done together growing the business over the past four years,” said Platinum Equity Partner Louis Samson, who is now a board member of the publicly traded company. “PAE is an outstanding platform for continued growth with a proven track record of successful M&A. The company now has a de-levered balance sheet and the public company currency of a listed business, which position the company well to participate in the consolidation underway in the government services sector. We are excited to participate in the company’s continued value creation through a meaningful remaining equity stake in the business.”
Mark Stone, CEO of Gores Holdings III, said, “We are honored to be bringing PAE public. John and team have built an outstanding platform ready for its next stage of accelerated growth, further diversification, additional scale, and consolidation. We are eager to support and watch this next chapter unfold.”
As of the closing of the acquisition, the PAE Board of Directors consists of Marshall Heinberg, Paul T. Bader, John P. Hendrickson, John Heller, and Louis Samson.
Deutsche Bank Securities Inc. and Evercore acted as lead financial advisors to Gores Holdings III. Deutsche Bank Securities Inc. also acted as lead capital markets advisor, while Evercore, BofA Securities and Morgan Stanley & Co, LLC also acted as capital markets advisors and Moelis & Company LLC acted as financial advisor. Weil, Gotshal & Manges LLP acted as legal advisor to Gores Holdings III. Latham & Watkins LLP acted as legal advisor to Platinum Equity and PAE. (Source: BUSINESS WIRE)
07 Feb 20. CAE reports third quarter fiscal 2020 results.
- Revenue of $923.5m up 13% vs. $816.3m in prior year
- Segment operating income(1) of $154.9m ($155.3m before specific items(2)) up 37% vs. $113.0m in prior year
- EPS of $0.37 vs. $0.29 in prior year
- Free cash flow(3) of $275.3m up from $155.1m in prior year
- Order intake(4) of $1,106.6m for 1.20x book-to-sales(4) and $9.4bn backlog(4)
- Company pledged to become carbon neutral by summer 2020
(NYSE: CAE) (TSX: CAE) – CAE today reported revenue of $923.5 m for the third quarter of fiscal 2020, compared with $816.3m in the third quarter last year. Third quarter net income attributable to equity holders was $97.7m ($0.37 per share) compared to $77.6m ($0.29 per share) last year. Net income before specific items(5) in the third quarter of fiscal 2020 was $98.0m ($0.37 per share before specific items(6)).
Third quarter segment operating income was $154.9m (16.8% of revenue) compared with $113.0m (13.8% of revenue) in the third quarter of last year. Segment operating income before specific items in the third quarter of fiscal 2020 was $155.3m (16.8% of revenue). All financial information is in Canadian dollars unless otherwise indicated.
“CAE had strong growth in the third quarter, with 13 percent higher revenue and 37 percent higher operating income, and we generated over $275m of free cash flow. Customers continued to put their trust in CAE as their training partner of choice, awarding us $1.1bn of orders for a $9.4bn backlog,” said Marc Parent, CAE’s President and Chief Executive Officer. “Our performance was led by Civil with 42 percent operating income growth and continued good momentum with our innovative and comprehensive training solutions. In Defence, we had 32 percent operating income growth and we secured orders in excess of revenue by 1.11 times. Todd Probert recently joined CAE as its new Group President, Defence & Security and I am very pleased to welcome a leader of his calibre to our executive team. In Healthcare, we had double-digit revenue growth and we continued to bring highly innovative solutions to market to help make healthcare safer. As we look to the remainder of the fiscal year, our positive annual growth outlook for the Company remains unchanged.”
Civil Aviation Training Solutions (Civil)
Third quarter Civil revenue was $558.1m, up 22% compared to the same quarter last year. Segment operating income was $123.0m (22.0% of revenue) compared to $87.2m (19.0% of revenue) in the third quarter last year. Third quarter segment operating income before specific items was $123.4m (22.1% of revenue), up 42% compared to the third quarter last year. During the quarter, Civil delivered 12 full-flight simulators (FFSs)(7) to customers and third quarter Civil training centre utilization(8) was 70%.
During the quarter, Civil signed training solutions contracts valued at $706.2m, including a long-term pilot training agreement with JetSmart Airlines, and 17 FFSs, for 37 sales in the first nine months of the year. Since the beginning of January, Civil received orders for seven FFSs, including six for the Boeing B737MAX aircraft, bringing total current year-to-date FFS sales to 44.
To address the growing global demand for new pilots, during the quarter, Civil launched new Multi-Crew Pilot License programs with easyJet and Volotea and a new cadet pilot training program with Jazz Aviation and Seneca School of Aviation called Jazz Approach. In business aviation, Civil signed several business aviation pilot training contracts with business jet operators including JetSuite, Solairus Aviation, and TAG Aviation Holdings.
The Civil book-to-sales ratio was 1.27x for the quarter and 1.44x for the last 12 months. The Civil backlog at the end of the quarter was a record $5.3bn. Defence and Security (Defence)
Third quarter Defence revenue was $332.4m, up 1% compared to the same quarter last year and segment operating income was $31.3m (9.4% of revenue). Before reorganizational costs incurred this quarter, Defence segment operating income for the quarter would have been $33.2m (10.0% of revenue), up 32% compared to the third quarter last year.
During the quarter, Defence booked orders for $367.4m, including contracts to provide the German Navy with a comprehensive training solution for the NH90 Sea Lion helicopter and to upgrade and modify the German Army’s NH90 full-mission simulators. Other notable contracts include the next increment of a multi-year contract with the U.S. Air Force to provide comprehensive C-130H aircrew training services. Defence also received orders to continue providing long-term maintenance and support services for Rotorsim, a joint venture between CAE and Leonardo, and a contract for Abrams M1A2 tank maintenance trainers for the U.S. Army.
The Defence book-to-sales ratio was 1.11x for the quarter and 0.88x for the last 12 months (excluding contract options). The Defence backlog, including options and CAE’s interest in joint ventures, at the end of the quarter was $4.2bn. The Defence pipeline remains strong with approximately $3.8bn of bids and proposals pending customer decisions.
On January 20, 2020, CAE announced the appointment of Todd Probert as Group President, Defence & Security, effective January 27, 2020. He is based in Washington, DC and succeeds Gene Colabatistto, who retired from CAE in December 2019. (Source: BUSINESS WIRE)
10 Feb 20. Acquisition propels Momentum into US$2.7tn aviation sector. Momentum Media Group, the business behind Defence Connect, has today acquired leading aviation media assets Australian Aviation and World of Aviation from Aviator Media.
The addition of the new aerospace vertical augments Momentum’s already strong suite of products in the interconnected defence and space sectors: Defence Connect (www.defenceconnect.com.au) and Space Connect (www.spaceconnectonline.com.au).
It also provides a bridgehead for the business to expand internationally into Asia-Pacific and beyond.
Australian Aviation has been the trusted source of market intelligence and situational awareness for Australia’s aviation sector since 1977. Throughout the industry globally it is considered the benchmark for long-form aviation journalism.
The brand spans the digital platform, which includes the leading website www.australianaviation.com.au, Australian Aviation podcast, substantive and influential social channels as well as the best-selling 40-year-old Australian Aviation magazine.
World of Aviation is a newer brand created in 2018 to support the global aviation industry, which is valued at $4.0trn (US$2.7trn) annually – or 3.6 per cent of global GDP.
It delivers the unique mix of content that Australian Aviation is renowned for to aviators, enthusiasts, industry professionals and the aviation trade across the globe.
The web platform, www.worldofaviation.com, plus complementing social channels, podcast and print magazine form the nucleus of the highly-regarded brand that is expanding rapidly globally.
Momentum is a leading market intelligence and information business for a range of industry sectors, including legal, professional and financial services, real estate, investment, retirement, wealth, defence, national security and space.
According to Phillip Tarrant, director – defence and aerospace at Momentum Media, the expansion into aviation is the realisation of a strategic plan to build a suite of products across the aerospace and defence sectors.
“We identified a number of years ago that the defence and aerospace sectors were under supported in terms of daily market intelligence and business information compared to the other industries in which we operate, and saw an opportunity to enter these markets,” Tarrant said.
“The acquisition of these aviation assets puts us in a comprehensive position to deliver immense value to both the Australian and global aviation sectors as they enter a new decade that will be defined by speed and access to information to make more informed business decisions.”
Momentum acquired Defence Connect in late 2016 and subsequently launched Space Connect in November 2018.
Both brands have seen rapid growth, with Defence Connect winning the coveted Business Website of the Year at the 2018 Mumbrella Publish Awards.
“Our initial plan is to bed down these new assets and inject our energies and efforts to amplify their current operations, then seek to expand based on our experiences in the other markets in which we operate,” Tarrant said.
“The defence, space and aviation industries are enormous and of immense value to Australia as well as globally. We’re excited by the opportunity to support stakeholders right across the aviation sector and quickly cement our position as the trusted source of information, market intelligence and situational awareness.”
The domestic aviation industry is valued at over $46bn (US$31bn), and adds an additional $18bn (US$12bn) to the Australian economy through enabling tourism, business and other trade.
The industry employs 93,000 people directly, servicing 60 million domestic passengers each year and 27 million inbound seats to Australia across 1,930 inbound weekly international flights. International scheduled freight traffic is estimated at over 1 million tonnes each year.
Global commercial airline revenue generates $1.3trn (US$872bn) annually, with over 4.3bn passengers each year across 38 million scheduled flights. There were 63.3 million metric tonnes of airfreight transported by the aviation sector in 2018.
In terms of GDP, if aviation were a country it would rank 20th by size, similar to the GDP of Switzerland or Argentina.
In transitioning the brands to Momentum, director of Aviator Media Christian “Boo” Boucousis said there wasn’t a better custodian of Australian Aviation and World of Aviation.
“These brands are in their ascendency, driven by an aviation sector, both at home and abroad, in need of up-to-the-minute information and intelligence,” Boucousis said.
“Momentum is a forward leaning organisation; they understand the disruptive effect that digital can be in today’s world. Rather than fighting this disruption, Momentum has embraced it and I’m impressed with their deep understanding of community.
“This deal brings high-quality information to the industry, with a focus on enhancing situational awareness across multiple platforms. It also delivers a meeting place to celebrate the successes and the people that also have a passion for aviation and I’m excited to see where Momentum will take things considering their established events business.”
Leveraging his deep understanding of aviation, and a decade serving the Royal Australian Air Force as a fast-jet pilot, Boucousis will continue to support Australian Aviation and World of Aviation as an ambassador, co-host of the podcast and chief pilot.
“My passion for aviation is limitless; as a child I dreamed of flight and I’m very fortunate to have made aviation a lifelong career. After 15 years out of the cockpit, I’m looking forward to reconnecting ‘hands-on’ as a professional pilot,” Boucousis said.
“As an independent publisher, I don’t believe we had the resourcing to do these brands and the industry the justice it deserves. I have the utmost trust in Phillip and his team, and I’m excited to stay connected in a meaningful way with the brands on an ongoing basis.
“I’ve read Australian Aviation all my life, so it’s been a real privilege to have steered these two brands over the last number of years.
“Under Momentum’s leadership, both Australian Aviation and World of Aviation will support the ongoing growth and development of the domestic and global aviation sectors. The organisation’s strategic approach to deliver timely news and detailed insights will secure its place as a valued asset to the industry as it enters an exciting new decade of growth and development.” (Source: Defence Connect)
09 Feb 20. Satellite Service Provider Earnings Preview Released by Morgan Stanley Research. Morgan Stanley Research / Telecom Services (MSR) has published their Satellite Service Provider Earnings preview report and previews the C4Q19 earnings for GOGO, GSAT, VSAT and ATEX.
The report indicates the names under pressure Year-to-Date (ytd), with GOGO -19%, GSAT -3% and VSAT -11%: the company believes the group has struggled to find footing so far in 2020 with few identifiable catalysts on the horizon and a lack of FCF or dividend yield support. While not a satellite company, Anterix also trades on spectrum valuation like some of the satellite operators. The stock has performed well so far ytd (+10%) as the firm awaits the FCC Report and Order for the 900 MHz band.
Looking ahead to 2020, the company has also noted that they will lap $9m in non-recurring benefits and see $10-15m in higher ATG 5G costs along with some other additional program spending, while some ADS-B headwinds are still likely to persist in BA through 1H20; we estimate EBITDA of $149m vs consensus at $141m.
Beyond the 2020 outlook, we are also focused on the following: 1) Any updated commentary regarding Delta free Wi-Fi following the carrier’s recent indication that they will seek to roll it out “in the next couple years.” 2) Details on any impact from airlines suspensions to China, which is likely having a modestly negative impact in the company’s ROW segment (see Gogo Inc: Modest impact likely from airline suspensions to China). 3) Progress on 5G ATG with costs set to ramp in the next year along with any lingering impacts from ADS-B in BA. We update our model with 2019 EBITDA up ~$11M but 2020 EBITDA down ~$8M to reflect the latest management targets and commentary.
GSAT (Equal-weight; earnings date TBA) – Financing accomplished, now focus on spectrum monetization: During 4Q, Globalstar successfully completed its long-awaited financing transaction amending its French bank credit facility agreement and raising a ~$200M second lien facility (led by Thermo and EchoStar) which will help the company manage their debt load. With the transaction behind them, the company expects they’ll be able to focus more on their longer-term business opportunities around both the spectrum and the satellite business.
MSR continues to believe that most of the value here lies in Globalstar’s spectrum assets (mainly the 2.4 GHz assets). The company has said they’re developing more opportunities to deploy their spectrum for private LTE, but still “remain in conversations with cable, carriers and tech companies for nationwide spectrum leasing”. We’ll be looking for any developments that signal additional progress towards having a deal to monetize the spectrum via lease or sale. Management is also working towards getting the band approved for 5G and is focused on securing more international approvals for terrestrial use of their spectrum which we also expect updates on.
On the satellite side, the company seems most focused on IoT opportunities and is building a pipeline of large projects with both short and long-term development timelines (some of which should benefit 2020). Globalstar has historically not given financial guidance, but with the upcoming earnings release and conference call, MSR hopes to get some sense of trajectory for the segments, particularly Commercial IoT and Duplex. With this note, the firm updates the model to reflect the recent financing transaction and raise our 2019 Adj. EBITDA c. 2% although our 2020 figures are relatively unchanged.
VSAT (Equal-weight; reporting Thursday, February 6) IFC progress and expenses in focus: We are expecting modest sequential pressure on EBITDA for the quarter following some investment areas flagged by management last quarter; we estimate EBITDA of $116m vs $118m last quarter and consensus at $109m. IFC has been a major focus for management in recent quarters, so we will look for updates related to potential new contract wins, while we note the ongoing 737 MAX grounding remains a drag.Other focus areas include: 1) Ongoing revenue maximization in residential broadband, though ARPU growth could begin to moderate from 17% last quarter as the company laps tougher comps. 2) Continued momentum in government systems, though MSR notes management called out some pull-forward of revenues last quarter. The company is looking for 11% y/y revenue growth vs 7% for consensus and 24% last quarter. MSR updates their model with FY20 EBITDA up 1% in reflection of a strong 1H but FY21 down 5% due to the expected ramp in expenses/investments.
ATEX (Equal-weight; earnings date TBA) – Waiting for the FCC: While not a satellite company, Anterix also trades on spectrum valuation like some of the satellite operators. MSR believes that earnings results this quarter will come second to any announcements on the company’s spectrum monetization initiatives. At this point, the company awaits a 900 MHz Report and Order which would lay out specifics around operational rules, how to acquire spectrum and other items. It is possible that the FCC addresses the 900 MHz band at its February 28th meeting; MSR expects to learn more later this week when the FCC announces the agenda. However, we note that it is possible the item is not discussed at the February meeting given the focus that seems to have gone towards C-Band.
MSR believes other areas of focus will be 1) progress on discussions with potential utility customers 2) updates on retuning progress 3) details on what a potential lease agreement may look like 4) additional use-cases for the spectrum (for critical infrastructure). See more in our note: Anterix Inc: Spectrum Monetization Opportunity, but Patience Is Required; Initiate at Equal-weight (November 11, 2019) (Source: Satnews)
03 Feb 20. $100m Euros Garnered by Kinéis for the IoT Smallsats. CLS, CNES, Bpifrance via the fund for Industrial Project Companies (SPI), financed by the ‘Investments for the Future’ Program and the European Investment Bank, Ifremer, Thales, CELAD, BNP Paribas Développement, HEMERIA and other industrial and financial partners are investing in and supporting Kinéis’ ambition to provide universal satellite connectivity.
Twenty-five smallsats will be added to complement the service which has been provided by the Argos system to scientific and environmental communities for more than 40 years. Kinéis will also develop its activity in the new markets opened up by the IoT.
Kinéis has completed an historic capital-raising campaign, established strategic commercial partnerships with Bouygues Telecom, Suez, the Wize Alliance and Arribada and filled their order book. This new French global connectivity provider, which already has eight operational satellites, has now become the first IoT satellite connectivity player to finance its development, from the construction of the firm’s constellation to the launch of its 25 nanosatellites, scheduled for 2022, and the development of its ground segment.
This young company is fulfilling its financial and industrial promises as well as their commercial and partnership commitments and is aiming to take their place in the NewSpace landscape.
Alexandre Tisserant, who was appointed President of Kinéis, said the company is proud to have reached this major milestone. With the funds needed to launch the company’s constellation, the firm is now free to focus entirely on satellite manufacturing and commercial deployment. The unfailing support of CNES, the French space agency, underlines the project’s importance and signals that we are benefiting from major technical support.
The Kinéis constellation already consists of Argos operational payloads on seven satellites and a prototype nanosatellite, ANGELS, which was placed into orbit on December 18 last year. France’s first industrial nanosatellite, developed with the support of CNES and operated from the Toulouse Space Centre, carries technology similar to that of Kinéis.
The company stated that this launch and the first successful reception of messages bodes well for the future Kinéis system, which is being developed by the same industrial team: Thales Alenia Space (architect of the system, which is in charge of the development of payloads with Syrlinks, and which is responsible for ground stations and the mission control centre) and HEMERIA (which is responsible for the satellite platforms and integration).