BUSINESS NEWS

28 Feb 20. Jane’s Advertising Business Update. Following a detailed strategic review of our business and in order to continue to invest in our premium products and solutions, we have decided to discontinue our Advertising business.

Jane’s will continue to publish the same world-class news and analysis in Jane’s Defence Weekly, Jane’s International Defence Review, Jane’s Intelligence Review and Jane’s Navy International in hardcopy – without advertising – for subscribing magazine customers.

BATTLESPACE Comment: We have commented before on the fallout from the changeover from printed magazines to online. Jane’s commanded a huge proportion of international defence budgets, so it will be interesting to see how industry re-orientates budgets particularly at exhibitions where the last Show Daily will be at Eurosatory 2020. In addition, BATTLESPACE Understands that all ‘freebie’ subscriptions have been cancelled which means that Jane’s will be a pure pay data subscription service. Growing this business with this model looks to be an uphill struggle for Montagu Private Equity, which paid $470m for the business from HIS Markit in September 2019. SMEs with limited budgets will struggle to pay the high subscription rates for Jane’s products at a time when their pool of experts is diminishing fast.

28 Feb 20. French defense firms fête formidable profits in 2019. France’s major defense companies are looking back at a strong 2019, thanks to a combination of exceptional contracts and the country’s overall healthy economy, executives said this week.

In the naval sector, Naval Group’s orders shot up 44 percent to €5.3bn ($5.8bn) in 2019, taking the company’s order book to a total of €15.1bn ($16.6bn). Of this, 38 percent is for the export market and 62 percent is for France. Roughly three quarters of the business were in the shipbuilding sector, with almost one quarter in services.

These figures do not include the whole of the contract to build 12 submarines for Australia, “as this income will be shown as it is paid, tranche by tranche,” explained outgoing CEO Hervé Guillou.

In addition, the group saw a 6 percent rise in EBIT (earnings before interest and taxes) to €282m ($310m) and a 3 percent rise in revenues to €3.7bn ($4bn).

Guillou, who will be replaced as CEO in March by Pierre-Eric Pommellet, said his successor had four main challenges for the future: delivering the Suffren submarine; accelerating production in the face of Chinese competition; consolidating the group’s international presence; and developing the workforce.

In the land sector, revenues for Arquus, the French company which is the defense arm of Sweden’s Volvo Group, rocketed 72.5 percent between 2017 and 2019. CEO Emmanuel Levacher said he was not allowed to give revenue and sales figures for Arquus, whose revenues are included in the Volvo “Group functions and other” column. However, those data show net sales for 2019 were SEK8.8bn ($911.4m), which means they are likely around the $660m mark.

Levacher was all smiles announcing “a very great year” that was “exceptionally rich,” remarking that “this is remarkable growth for an industrial company.” He said he expected the company to grow a further 10 percent in 2020. Exports accounted for 42 percent of the revenue.

Levacher was able to put a figure on contracts signed in 2019: €1.2 bn ($1.3bn) “mostly in Africa,” but also a tranche of €214m ($235m) in the framework of the CaMo contract with Belgium for 382 Griffon multirole armored vehicles and 60 Jaguar armored reconnaissance and combat vehicles to be delivered between 2025 and 2030.

Levacher said contracts were also signed for “a few dozen” Sherpa and Dagger vehicles for the Middle East.

He was optimistic for the future, remarking that “all of the French army’s military trucks, whether they be 4×4s, 6×6s, 8×8s all need to be changed in the next five years.” He said the company had developed a specific truck to meet these needs as the call for tender will be published before the end of this year.

In the defense-electronics sector, Thales’s CEO Patrice Cain also described 2019 as “a good year in which we progressed.” Its EBIT rose 19 percent to slightly over €2bn ($2.2bn), “the first time we’ve gone over the symbolic bar of €2bn,” he said. Defense accounts for 40 percent of the group’s revenues. Order intakes in the defense and security sector rose a record 17 percent to €9.9bn ($11bn) while sales rose 6.4 percent, “a little higher than anticipated,” according to CFO Pascal Bouchiat, to €8.3bn ($9bn). These include Thales and Babcock winning the bid for the T31 frigate in the UK against BAE Systems.

Bouchiat noted that “several multi-year contracts” had been signed “underpinning long-term growth” for the group.

Finally, in the military-aircraft sector, Dassault Aviation recorded an order intake of €3.3bn (against €2.7bn in 2018), the bulk of which (€2.6bn) was for France and includes the integrated support contract for the French Rafale over the next 10 years and an additional order for supplemental development and integration work concerning communications for the F4 standard of the aircraft.

Net sales shot up 44 percent to €7.3bn due to the record number of 26 Rafales delivered in 2019. CEO Eric Trappier said that in 2020 Dassault expected to deliver 13 Rafales and he saw a tendency of governmental authorities to buying the company’s Falcon business jet for surveillance and reconnaissance missions.

Trappier said that in 2020 the company would continue to try and export the Rafale and was notably working on the Finnish and Swiss fighter competitions. Both countries are expected to make their decisions in 2021. (Source: Defense News)

28 Feb 20. Losses narrow at Rolls-Royce after strong second half. Manufacturing giant Rolls-Royce has narrowed its losses according to its 2019 full-year results. Overcoming a challenging first half, the company ended the year on a high thanks in large part to its civil aerospace and defence divisions, the latter having enjoyed a record order intake of £5.3bn. In a statement to the London Stock Exchange, the firm said it lost £852m last year, down from £1.16bn in 2018 as its Trent 1000 engine problems persisted.

Chief executive Warren East said: “After a challenging first half, we had a good end to 2019, delivering 25 per cent growth in full year underlying operating profit and an encouraging level of free cash flow. Our restructuring efforts gained momentum, with run-rate cost savings of £269m. Civil Aerospace improved its underlying profit significantly, with record engine deliveries, good aftermarket performance and improved OE unit losses. We made further progress on the Trent 1000; cash costs are in line with guidance. We remain on target to reduce aircraft on ground to single digits by the end of Q2 2020.

“We continued to invest significantly in R&D and took important steps towards becoming a leader in low carbon technologies. We grew our electrical capabilities with the acquisitions of Siemens’ eAircraft business and a majority stake in Qinous, as well as developing new in-house hybrid-electric solutions.” (Source: News Now/https://www.thebusinessdesk.com/)

In addition, the group saw a 6 percent rise in EBIT (earnings before interest and taxes) to €282m ($310m) and a 3 percent rise in revenues to €3.7bn ($4bn).

Levacher was able to put a figure on contracts signed in 2019: €1.2bn ($1.3bn) “mostly in Africa,” but also a tranche of €214m ($235m) in the framework of the CaMo contract with Belgium for 382 Griffon multirole armored vehicles and 60 Jaguar armored reconnaissance and combat vehicles to be delivered between 2025 and 2030.

Levacher said contracts were also signed for “a few dozen” Sherpa and Dagger vehicles for the Middle East.

Bouchiat noted that “several multi-year contracts” had been signed “underpinning long-term growth” for the group.

27 Feb 20. Dassault Aviation expects lower net sales in 2020. Dassault Aviation (AVMD.PA) said on Thursday its operating income rose 14% last year, and it predicted lower net sales for 2020. The maker of business jets and French warplanes said operating income reached 765m euros (646m pounds) as revenues rose 44% to 7.34bn euros.

Its annual intake of new orders was up 13% at 5.69bn euros.

Analysts had on average been expecting operating profit of 588.65m euros on revenues of 6.7bn, according to Refinitiv data.

Dassault had already reported that Rafale deliveries more than doubled in 2019 to 26 aircraft, while Falcon business jet deliveries fell by one aircraft to 40 units, missing a target of 45 jets in what Dassault described as difficult market conditions. (Source: Reuters)

27 Feb 20. FLIR Systems Announces Fourth Quarter and Full Year 2019 Financial Results.

– Annual Revenue of $1.9bn

– Fourth Quarter and Full Year Revenue Growth of 9% and 6% over Prior Year, Respectively

– Full Year GAAP Earnings Per Diluted Share of $1.26; Adjusted Earnings Per Diluted Share of $2.23

– Full Year Total Bookings Growth of 11%; Total Backlog Growth of 13% over Prior Year

– Announces Consolidation of Business Unit Structure

FLIR Systems, Inc. (NASDAQ: FLIR), a world leader in the design, manufacture, and marketing of intelligent sensing technologies, today announced financial results for the fourth quarter and full year ended December 31, 2019.

Commenting on FLIR’s fourth quarter results, Jim Cannon, President and Chief Executive Officer, said, “FLIR finished 2019 with full year revenue of $1.9bn and fourth quarter results that reflect a continuation of many of the trends we experienced in the third quarter. Our Government and Defense and Industrial Business Units delivered performances highlighted by fourth quarter revenue growth and expanding full year backlog. I also continue to be very pleased with our success in advancing our strategic priorities as evidenced by several recently announced franchise program wins that will be key to achieving our longer term growth objectives. However, our Commercial Business Unit continued to face challenges that negatively impacted FLIR’s consolidated organic revenue growth and profitability targets for the full year.”

Mr. Cannon continued, “To better position FLIR to deliver long-term growth through the execution of our strategic priorities, we have launched ‘Project Be Ready’. This initiative aims to simplify our product portfolio and better align resources with higher growth opportunities while reducing costs. Through Project Be Ready, we have discontinued certain non-core consumer centric product lines within the Outdoor and Tactical Systems business and have entered into a formal process to evaluate divestiture of our Raymarine non-thermal maritime electronics business. The remaining businesses within the Commercial Business Unit will be integrated into the Industrial Business Unit beginning in the first quarter of 2020. I am very confident that Project Be Ready will help support FLIR’s mission to serve professionals with innovative technologies that provide critical decision support to save lives and livelihoods around the globe.”

Fourth Quarter 2019

Fourth quarter 2019 revenue was $489.0m, 9.0% higher than fourth quarter 2018 revenue of $448.5m. Organic revenue decreased 1.5%, which excludes revenue from acquisitions within the last twelve months. Fourth quarter total bookings increased 4.0% from the fourth quarter of 2018 to $486.3m, driven primarily by strong orders in unmanned systems and integrated solutions (UIS) in the Government and Defense Business Unit and OEM orders in the Industrial Business Unit. At the end of the fourth quarter total 12-month current backlog stood at $672.5m, an increase of 11.7% compared to the balance at the end of the fourth quarter 2018. Similarly, at the end of the fourth quarter total backlog stood at $807.0m, a 13.2% increase relative to the prior year.

GAAP Earnings Results

GAAP gross profit in the fourth quarter 2019 was $232.6m, compared to $227.8m in the fourth quarter 2018. GAAP gross margin decreased 322 basis points to 47.6% in the fourth quarter 2019, compared with 50.8% in the prior year. GAAP operating income in the fourth quarter decreased 37.1% to $54.1m, compared to $85.9 m in the prior year, representing an 810 basis point decline in operating margin. GAAP gross margin and GAAP operating margin were both impacted by increases in intangible asset amortization expense, restructuring expenses and related asset impairment charges. GAAP operating income and GAAP operating margin was also impacted by an increase in research and development expenses, Consent Agreement costs, and other ongoing export compliance expenses.

Fourth quarter 2019 GAAP net earnings were $1.7m, or $0.01 per diluted share, compared with GAAP net earnings of $98.5 m, or $0.71 per diluted share in the fourth quarter last year. GAAP net earnings in the quarter were negatively impacted by the GAAP operating income factors mentioned above as well as impairments of minority interest investments and discrete tax items.

Non-GAAP Earnings Results

Adjusted gross profit was $250.2m in the fourth quarter 2019, an increase of 7.2% over adjusted gross profit of $233.5m in the fourth quarter 2018. Adjusted gross margin decreased 90 basis points to 51.2%, compared with 52.1% in the fourth quarter 2018. Adjusted operating income decreased 3.8% to $103.9 m in the fourth quarter 2019, compared to adjusted operating income of $107.9 m in the fourth quarter 2018. Adjusted operating margin decreased 283 basis points to 21.2%, compared with 24.1% in the fourth quarter 2018. The decrease in adjusted operating income and margin was primarily driven by increases in research and development and ongoing export compliance expenses.

Adjusted net earnings in the fourth quarter 2019 were $74.8m, or $0.55 per diluted share, which was 11.3% lower than adjusted earnings per diluted share of $0.62 in the fourth quarter 2018. Adjusted net earnings was impacted by the adjusted operating income factors mentioned above, including impairments of minority interest investments as well as higher interest expense, partially offset by an increase in adjusted gross profit. The adjusted effective tax rate for the fourth quarter 2019 was 19.0% compared to 19.2% in the fourth quarter of 2018.

Fourth Quarter 2019 Business Unit Results

Industrial Business Unit

The Industrial Business Unit generated revenue of $192.8m, an increase of 6.1% over the fourth quarter last year, as a result of continued strength in cooled cameras and components as well as machine vision. Operating income was $63.5m, 10.9% higher than the fourth quarter of 2018. Operating margin improved 142 basis points year-over-year to 33.0% and gross margin improved 104 basis points to 56.7%. Growth in operating income and the improvement in gross margin and operating margin were driven primarily by product mix, productivity gains resulting from The FLIR Method, and the higher revenue volume.

Government and Defense Business Unit

The Government and Defense Business Unit revenue totaled $210.7m, up 23.1% from the prior year as a result of contributions from the successful acquisitions of Aeryon Labs and Endeavor Robotics. Operating income for the fourth quarter of $53.9m decreased 0.4% year-over-year, while operating margins declined 604 basis points due mainly to higher operating expenses from the acquisitions and lower-margin product mix. Fourth quarter bookings increased by 18.7% from the prior year period due to strong international bookings and domestic program wins in unmanned systems, integrated solutions, and surveillance. This resulted in a book-to-bill ratio of 1.01 for the fourth quarter. Government and Defense current backlog totaled $434.6m at the end of the fourth quarter, an 11.1% increase year-over-year.

Commercial Business Unit

The Commercial Business Unit revenues totaled $85.5m, down 10.6% from the prior year. Revenues were adversely impacted by lower sales volume in the Outdoor and Tactical Systems (“OTS”) and Security product businesses, partially offset by double-digit growth in the Intelligent Transportation Systems (“ITS”) business. Fourth quarter operating income of $12.2m and operating margin of 14.2% decreased 19.4% and 156 basis points year-over-year, respectively. This decrease was primarily driven by the lower revenue volume discussed above.

Full Year 2019

For the full year, 2019 revenue was $1,887.0m, an increase of 6.3% compared to $1,775.7m for the year ended December 31, 2018. Organic revenue growth was 1.1%, which excludes revenue from acquisitions within the last twelve months and security business divestitures. Full year total bookings increased 11.0% from the prior year to $1,975.6 m, driven primarily by strong bookings and program wins in the Government and Defense and Industrial Business Units.

GAAP Earnings Results

GAAP gross profit for 2019 was $929.5m, compared to $900.3 m in 2018. GAAP gross margin decreased 144 basis points to 49.3% in 2019, compared with 50.7% in the prior year. GAAP operating income for 2019 decreased 14.2% to $273.3 m, compared to $318.6 m in the prior year, representing a 346 basis point decline in operating margin. GAAP gross margin and GAAP operating margin were both negatively impacted by increases in intangible asset amortization expense, restructuring expenses and related asset impairment charges. GAAP operating margin was also impacted by an increase in research and development expenses, and other ongoing export compliance expenses.

2019 GAAP net earnings were $171.6m, or $1.26 per diluted share, compared with GAAP net earnings of $282.4m, or $2.01 per diluted share in 2018. GAAP net earnings for the year were negatively impacted by the GAAP operating margin factors mentioned above as well as impairments of minority interest investments and discrete tax items.

Cash provided by operations during 2019 was $370.4m, compared to $374.2m in the prior year, a 1.0% decrease. Approximately 2.5m shares were repurchased in 2019 at an average price of $49.05.

27 Feb 20. Curtiss-Wright Corporation (NYSE: CW) today announced that it has entered into an agreement to acquire the stock of Dyna-Flo Control Valve Services Ltd. (Dyna-Flo) for CAD$81m (US$62m) in cash. Dyna-Flo is a leading designer and manufacturer of linear and rotary control valves, isolation valves, actuators, and level and pressure control systems for the chemical, petrochemical, and oil and gas markets.

The acquired business will operate within Curtiss-Wright’s Commercial/Industrial segment and is expected to be accretive to Curtiss-Wright’s 2020 adjusted diluted earnings per share, excluding first year purchase accounting costs, and produce a free cash flow conversion rate in excess of 100%. Dyna-Flo’s financials are not included in the Company’s initial 2020 guidance.

“The acquisition of Dyna-Flo yields significant opportunities for growth by increasing the breadth of our industrial valve portfolio with complementary products recognized for their critical performance in severe service environments,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “The combination of this business with Curtiss-Wright’s established global sales channel and marketing capabilities serving similar customers will ensure that we remain a leading provider of pressure relief, control and isolation valve solutions. In addition, this transaction supports our long-term financial objectives including increased sales growth, margin expansion and solid free cash flow generation.”

Founded in 1993 and headquartered in Edmonton, Alberta, Canada, Dyna-Flo’s core product offering addresses the majority of control valve applications with designs ranging from compact low profile to heavy duty severe service. The complete range of valves have both on/off and throttle control for gas or fluid service and meet the critical industry standards of NACE and ASME B16.34 compliance. Control valves are an integral part of the pressure relief system design, where Curtiss-Wright enjoys a leadership position. Dyna-Flo has approximately 120 employees and is expected to generate sales of approximately CAD$33m (US$25m) in fiscal 2020, principally to the general industrial market. The acquisition is expected to close in March 2020.

27 Feb 20. Piaggio Aerospace Calls for Expressions of Interest. With a notice published in a selected number of financial newspapers, and after receiving the relevant authorization from the Italian Ministry of Economic Development, Piaggio Aero Industries and its subsidiary Piaggio Aviation officially launch an international call for the sale of their business complexes.

The two companies, currently under Extraordinary Administration, operate under the Piaggio Aerospace brand.

Those interested in the purchase of all or part of the business complexes of the two companies – which, despite being two different entities from a legal standpoint, represent a unicum from an industrial standpoint – will have to send their expressions of interest to the Extraordinary Commissioner, Vincenzo Nicastro, no later than April 3, 2020. After assessing the quality and completeness of each proposals, the Commissioner will decide whether to admit the applicants to the following steps. Similarly, as the published announcement literally reads, “any final determination with regard to the sale shall […] be subject to the authorization of the Italian Ministry of Economic Development, after hearing the opinion of the Surveillance Committee”.

“Just over a year since the extraordinary administration started, we have succeeded in creating a respectable order intake, which makes the company attractive for a buyer,” said Nicastro. “We shall rigorously evaluate each of the offers that will reach us,” he added, “with the aim of selling the company in its entirety and finding a buyer who can offer a solid, long-lasting recovery and development plan. We aim at concluding the process within the current year”.

Piaggio Aerospace goes to potential buyers with approximately EUR 450m orders in execution, to which further agreements will shortly be added for a value of EUR 450m, thus bringing the total order intake to approximately EUR 900m. Piaggio Aerospace – which also controls the subsidiary Piaggio America in the United States – operates in the Aviation and Engine sectors. In particular, the Aircraft business unit focuses on the design, construction and maintenance of civil and military aircraft, along with customer service activities. The Engine business unit revolves around the construction and maintenance of aero-engines. All EOI shall be sent (in English or Italian) to the Extraordinary Commissioner via email at . (Source: UAS VISION)

06 Feb 20. Viasat Announces Third Quarter Fiscal Year 2020 Results.

– Third quarter fiscal year 2020 marked another quarter of strong performance: revenues totaled $588.2m, net income and non-GAAP net income increased to $6.5m and $24.7m, respectively, and Adjusted EBITDA reached an all-time high of $122.3m on a 13% year-over-year increase

– Awards grew 29% to $577.4m for the quarter, reflecting continued momentum across the Company’s government, U.S. fixed broadband and commercial aviation businesses

– Both the Satellite Services and Government Systems segments posted impressive quarterly and year-to-date revenue gains, with Satellite Services reaching a quarterly revenue record of $211.7 m and Government Systems delivering $291.8m, a year-over-year increase of 19% and 17%, respectively

Viasat Inc. (NASDAQ: VSAT), a global communications company, today announced financial results for the fiscal third quarter ended December 31, 2019.

“We achieved another quarter of solid revenue growth and margin improvement in our Q3 of fiscal year 2020,” said Mark Dankberg, Viasat chairman and CEO. “We’re building on a differentiated foundation of business fundamentals in our government systems and satellite services segments. New contract awards and backlog signal continued momentum, and build confidence in a strong finish to our fiscal year 2020 and on into fiscal year 2021. We believe our unique vertical technology and service delivery integration creates compelling long-term opportunities for global expansion. Growth drivers for our government business are in the early innings and are substantially enhanced by global coverage. Our diverse portfolio of fixed and mobile broadband satellite services gives us the flexibility and resilience to thrive in the distinct market environments of each region of the world. We see enormous demand for bandwidth. We’re confident in our strategic approach and are focused on executing the opportunities before us, and delivering the ViaSat-3 constellation into service.”

At the 2019 World Radiocommunication Conference, International Telecommunication Union Member States agreed to expand Ka-band spectrum availability for satellite broadband mobility services, enabling Viasat to expand its global mobility broadband offerings
Viasat, in cooperation with the Government Business Council, released the first-ever ‘State of Military Communications’ study which highlighted military technology improvement tactics to alleviate mission risks
Following the close of third quarter fiscal year 2020, Viasat announced the appointment of Dr. Theresa Wise, former chief information officer of Delta Air Lines and Northwest Airlines, to the Company’s Board of Directors

Satellite Services

— Q3 Fiscal Year 2020 Financials

Revenues reached a new high of $211m, a 19% increase year-over-year and a 3% increase sequentially, marking the eighth sequential quarter of revenue gains
New contract awards increased 14% year-over-year to $210.7m
Segment operating income was $3.6m, compared to a $10.2m operating loss in the prior year period, while Adjusted EBITDA increased by 33% year-over-year to $75.1m as fixed and mobile broadband revenues continued to scale on the ViaSat-2 satellite system. Excluding the $4.0 mViaSat-2 insurance gain in the same period last year, segment Adjusted EBITDA increased 43%

— Business Highlights

U.S. fixed broadband subscriber average revenue per user (ARPU) reached a record $89.71, an increase of 15% year-over-year on approximately flat subscriber growth, as new subscribers continued to embrace Viasat’s premium broadband service plans
In Mexico, Viasat continued to diversify its broadband service offerings and launched residential service; while consumer engagement on Community Wi-Fi internet hotspots grew on a sequential quarter basis
In Brazil, Viasat’s participation in the Governo Eletrônico – Serviço de Atendimento ao Cidadão (GESAC) initiative continued to ramp, with over 1,500 new sites deployed in the quarter
In Business Aviation, Viasat’s next-generation Ka-band In-Flight Connectivity (IFC) system was approved for Gulfstream G280 aircraft and received Type Certification for Embraer Praetor 600 aircraft; Viasat’s dual-band business aviation IFC system also received Supplemental Type Certificate for the Bombardier Global 5000/6000/GEX family
In Commercial Aviation, IFC service was active on 1,379 commercial aircraft – up 23% year-over-year with a gross annual passenger opportunity reaching over 250 m people
As reported during Viasat’s prior earnings call, in early third quarter of fiscal year 2020, Viasat was selected by Brazil’sAzul Airlines to install IFC equipment/service on more than 100 combined Airbus A320neo and Embraer E195-E2 aircraft; additionally EL AL Israel Airlines committed to go full fleet with Viasat, adding Viasat’s latest equipment to its new Boeing 777 widebody and remaining Boeing 737 narrowbody fleet
Following the close of third quarter fiscal year 2020, Viasat:

o Expects to install its IFC equipment on over 690 additional commercial aircraft under existing contracts, with rising momentum seen in international aviation markets as passengers increasingly value an ‘at home’ internet experience while in-flight

o Announced expansion of its third-party platform engagement program, with the addition of fuboTV, one of the first live TV and sports streaming services to expand distribution to the U.S. aviation market

— Fiscal Year-to-Date Summary

Fiscal year-to-date, Satellite Services segment reached record revenue levels with operating profit and Adjusted EBITDA performance increases compared to the same period last year reflecting year-over-year impacts similar to those seen in the third quarter of fiscal year 2020

Commercial Networks

— Q3 Fiscal Year 2020 Financials

Revenues were $84.7m, a 33% decrease year-over-year, reflecting the year-ago period’s accelerated IFC equipment installations for American Airlines; on a sequential quarter basis IFC terminal deliveries were up despite the continued grounding of the Boeing 737 MAX aircraft
New contract awards were at $134.2m, a 25% year-over-year increase
Segment operating loss was 50% higher and Adjusted EBITDA was 80% lower compared to the same period last year due to expected reductions in IFC terminal deliveries and higher research and development costs associated with the ViaSat-3 space and ground segments

— Business Highlights

Continued progress made on the ViaSat-3 program with multiple project milestones being achieved including critical unit deliveries; integration and test activities on both the ViaSat-3 (Americas) and ViaSat-3 (Europe, Middle East, Africa) satellites; and successful completion of the Preliminary Design Review (PDR) for the third ViaSat-3 (Asia Pacific) satellite
Began deployment of the U.S. and European ground networks for the first two ViaSat-3 satellites and initiated siting work for the Asia-Pacific ground network
Completed successful over-the-air test antenna switching on Viasat’s second-generation hybrid Ku-/Ka-band aviation antenna, highlighting antenna readiness for global aviation opportunities

— Fiscal Year-to-Date Summary

Fiscal year-to-date, Commercial Networks segment revenue was lower, operating loss was higher and Adjusted EBITDA was lower compared to the same period last year, reflecting year-over-year impacts similar to those seen in the third quarter of fiscal year 2020

Government Systems

— Q3 Fiscal Year 2020 Financials

Revenues were $291.8m, an increase of 17% year-over-year led by expanding positions in the Company’s satellite communications (SATCOM), mobile networking solutions and tactical data links products
New contract awards were up 49% year-over-year to $232.5m securing a positive book-to-bill ratio performance for the year-to-date period
Operating profit increased 18% year-over-year to $59.1 m while Adjusted EBITDA increased 13% to $77.8m

— Business Highlights

Fiscal year 2020 U.S. Appropriations legislation signed into law; created new opportunities for Viasat in IFC and cybersecurity, as additional government defense funds were released
Viasat’s Multi-Mission Terminal began the UK Skynet SATCOM assurance and certification process; allowing the UK Ministry of Defence to access secure, resilient, high-speed, multi-orbit, multi-frequency band and multi-network SATCOM architectures
Viasat expanded its presence in Australia and established two maintenance, test and integration facilities to enhance in-country sovereign defense capabilities
Viasat made third-party government terminal modification kits available, enabling U.S. Department of Defense and coalition forces to use existing SATCOM terminals to access high-capacity, secure and resilient networks, without needing to completely replace the entire set of terminal equipment

— Fiscal Year-to-Date Summary

Fiscal year-to-date, Government Systems segment revenue, operating profit and Adjusted EBITDA performance for the segment were higher compared to the same period last year reflecting strong performance across the segment’s product lines, especially SATCOM, tactical data links products, information assurance and global mobility/intelligence surveillance and reconnaissance offerings.

26 Feb 20. Curtiss-Wright Corporation (NYSE: CW) reports financial results for the fourth quarter and full-year ended December 31, 2019.

Fourth Quarter 2019 Highlights:

Reported diluted earnings per share (EPS) of $2.08, with Adjusted diluted EPS of $2.12 (defined below), up 10% and 12%, respectively, compared to the prior year;
Reported free cash flow of $243m, with Adjusted free cash flow of $248m and an Adjusted free cash flow conversion of 277%;
Net sales of $656m, up 1%;
Reported operating income of $121m, up 10%, with Reported operating margin of 18.4%, up 140 basis points;
Adjusted operating income of $123m, up 12%, with Adjusted operating margin of 18.8%, up 180 basis points; and
Share repurchases of approximately $12m.

Full-Year 2019 Highlights:

Reported diluted EPS of $7.15, with Adjusted diluted EPS of $7.27, up 15% and 14%, respectively, compared to the prior year;
Reported free cash flow of $352m, with Adjusted free cash flow of $371m and an Adjusted free cash flow conversion of 121%;
Net sales of $2.5bn, up 3%, including 2% organic growth;
Reported operating income of $404m, up 8%, with Reported operating margin of 16.2%, up 70 basis points;
Adjusted operating income of $411m, up 7%, with Adjusted operating margin of 16.5%, up 70 basis points;
New orders of $2.6bn increased 6%, while Backlog of $2.2bn increased 7% from December 31, 2018; and
Share repurchases of $50m.

“We delivered record Adjusted diluted EPS in the fourth quarter, driven by continued strong sales growth in our defense markets and the benefits of our ongoing margin improvement initiatives,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “In addition, we generated nearly $250m in Adjusted free cash flow, along with robust free cash flow conversion of 277% in the quarter. Our full-year 2019 results were highlighted by a strong operational performance, as we delivered higher sales and operating income in all three segments, improved profitability that produced a 16.5% Adjusted operating margin, and double-digit growth in Adjusted diluted EPS. Adjusted free cash flow of $371m was also strong, driven by solid growth in earnings as well as our continued efforts to reduce working capital.”

Full-Year 2020 Guidance

The Company is issuing full-year 2020 financial guidance as follows:

Full-year 2020 Adjusted guidance notes (compared to Adjusted full-year 2019):

Expect solid sales growth of 4% – 6%, driven by increases in all defense markets;
Expect Adjusted operating income growth of 4% – 6%, Adjusted operating margin of 16.5% to 16.6% (flat to up 10 basis points) and Adjusted diluted EPS of $7.50 to $7.70 (up 3% – 6%);
Commercial/Industrial segment reflects improved profitability due to higher sales and the benefits of our ongoing margin improvement initiatives; Adjusted guidance excludes $13m in restructuring costs;
Defense segment reflects reduced profitability, despite higher sales, mainly due to a $5m increase in R&D investments; Adjusted guidance excludes $4m in restructuring costs and $7m in first year purchase accounting costs associated with acquisitions;
Power segment reflects reduced profitability, despite higher sales, mainly due to a $5m increase in R&D investments; Adjusted guidance excludes $11m in restructuring costs and $3m in one-time transition and IT security costs; and
Expect Adjusted free cash flow to range from $370 to $390m, representing an Adjusted free cash flow conversion rate in excess of 115%.

In addition, the Company has reorganized two business units to better align to its management structure and to shift most of the naval defense revenue into the Defense and Power segments. Historical financials will be available on the Company’s website.

A more detailed breakdown of the Company’s 2020 financial guidance by segment and by market, as well as all reconciliations of Reported GAAP amounts to Adjusted non-GAAP amounts can be found in the accompanying schedules.

Mr. Adams continued, “For 2020, we anticipate increased sales driven by growth in all defense markets, improved profitability despite significantly increasing our year-over-year R&D investments, and strong free cash flow generation. We will continue to execute on our ongoing margin improvement initiatives, including various restructuring actions. These initiatives are expected to generate approximately $20 m in annualized savings beginning in 2021, and support Curtiss-Wright’s long-term profitable growth. Overall, we expect to maintain top-quartile performance for all of our key financial metrics and deliver significant long-term value for our shareholders.”

Fourth Quarter 2019 Operating Results

Sales of $656m, up $7m, or 1%, compared to the prior year (1% organic, 1% acquisitions, partially offset by 1% unfavorable foreign currency translation);
From an end market perspective, total sales to the defense markets increased 9% (8% organic), led by strong growth in aerospace and naval defense, while total sales to the commercial markets decreased 5%, as higher commercial aerospace sales were more than offset by reduced power generation and general industrial sales. Please refer to the accompanying tables for an overall breakdown of sales by end market;
Reported operating income was $121m, up 10%, while reported operating margin increased 140 basis points to 18.4%;
Adjusted operating income of $123m, up 12%, principally reflects higher profitability on strong defense revenues in the Commercial/Industrial and Defense segments, partially offset by lower power generation revenues in the Power segment;
Adjusted operating margin of 18.8%, up 180 basis points, primarily reflects higher revenues and favorable absorption in the Commercial/Industrial and Defense segments, and increased profitability in the Power segment, despite lower revenues, due to the benefits of our ongoing margin improvement initiatives; and
Non-segment expenses of $8m decreased by $1m, or 10% compared to the prior year, primarily due to lower environmental expenses.

Net Earnings and Diluted EPS

Reported net earnings of $89m, up $7 m, or 8% from the prior year, principally reflecting higher segment operating income and lower corporate expenses;
Reported diluted EPS of $2.08, up 10% from the prior year, principally reflecting higher net earnings, as well as a lower share count;
Adjusted net earnings of $91m, up 10%;
Adjusted diluted EPS of $2.12, up 12%; and
Effective tax rate (ETR) of 24.6% increased slightly compared to the prior year quarter.

Free Cash Flow

Reported free cash flow of $243m, increased $28m, or 13%, compared to the prior year, driven by improved working capital, primarily due to the timing of advanced payments received in the fourth quarter of 2019 which were expected in 2020;
Capital expenditures decreased by $3m to $20m compared to the prior year, primarily due to lower capital investments within the Commercial/Industrial segment, despite a $5m investment related to the new, state-of-the-art naval facility for the DRG business; and
Adjusted free cash flow, which excludes the DRG facility investment in the current period, increased $34 m to $248 m.

New Orders and Backlog

For full-year 2019, new orders of $2.6bn increased 6% compared to the prior year, led by strong organic growth in naval defense and commercial aerospace orders.
Backlog of $2.2bn increased 7% from December 31, 2018.

Other Items – Share Repurchase

During the fourth quarter, the Company repurchased 92,006 shares of its common stock for approximately $12m.
Year-to-date, the Company repurchased 410,530 shares for $50m.

Fourth Quarter 2019 Segment Performance

Commercial/Industrial

Sales of $323m, up $18m, or 6%, compared to the prior year;
Strong sales growth in the aerospace and naval defense markets principally reflects higher sales of actuation systems on the F-35 program and higher sales of valves on the Virginia class submarine program;
Commercial aerospace market sales increased primarily due to higher sales of actuation equipment and sensors;
Lower general industrial market sales reflect reduced demand for industrial vehicles, industrial valves and surface treatment services; and
Reported operating income was $53m, up 12%, while reported operating margin increased 90 basis points to 16.3%, principally reflecting favorable overhead absorption on higher defense revenues and a one-time gain on sale of a product line, partially offset by a shift in mix to lower margin actuation products.

Defense

Sales of $163m, up $13m, or 8%, compared to the prior year (6% organic, 2% acquisition);
Higher aerospace defense market revenues principally reflect increased sales of embedded computing and avionics equipment on various unmanned aerial vehicles (UAVs) and helicopter platforms, as well as the contribution from the TCG acquisition, partially offset by lower revenues on various fighter jet programs;
Naval defense market revenue growth was primarily due to higher sales of embedded computing and aircraft handling equipment on various platforms;
Lower ground defense market revenues reflect reduced sales of embedded computing equipment on the Abrams tank platform and lower sales of our turret drive stabilization systems for armored tanks to international customers;
Reported operating income was $44m, with Reported operating margin of 27.0%; and
Adjusted operating income was $45m, up 22% from the prior year, while Adjusted operating margin increased 300 basis points to 27.2%, primarily reflecting favorable mix on higher defense revenues.

Power

Sales of $169m, down $24m, or 12%, compared to the prior year;
Lower naval defense market sales primarily reflect the timing of naval spares and service center revenues;
Reduced power generation market sales primarily reflect lower domestic aftermarket revenues, as well as the timing of production on the China Direct AP1000 program;
Reported operating income was $32m, with Reported operating margin of 19.1%; and
Adjusted operating income was $34m, down 6%, while Adjusted operating margin increased 140 basis points to 20.3%, primarily reflecting higher profitability in the aftermarket power generation business, despite lower sales volumes, due to savings generated by our margin improvement initiatives.

26 Feb 20. Robotic Skies Raises Strategic Investment from CerraCap Ventures. Robotic Skies, Inc, the only certified global maintenance network for commercial unmanned aircraft systems (UAS), has announced a strategic investment from CerraCap Ventures to support the company’s continued growth and technology development. Robotic Skies provides turnkey maintenance solutions designed to scale with the needs of unmanned aircraft manufacturers and enterprise operators. The Robotic Skies Service Center network has more than 190 independently owned and operated aviation repair stations to serve the global commercial UAS market.

“A robust software platform is essential to aviation maintenance operations. As we continue to support the rapidly expanding unmanned market, a highly automated and data-driven technology stack becomes an even more vital element of our business,” said Brad Hayden, Robotic Skies CEO and Founder. “The investment from CerraCap accelerates the development of this key enterprise technology for our company.”

CerraCap Ventures is an early-stage technology venture capital firm specializing in Cyber Security, Artificial Intelligence and Advanced Analytics, and Healthcare Technology investments. The firm joins Robotic Skies’ investment group, which also includes Boeing HorizonX Ventures, Thayer Ventures, Sun Mountain Capital, and Kickstart Seed Fund.

“We are excited to expand our portfolio into commercial unmanned aircraft systems with our investment in Robotic Skies. There is exceptional value in what this company offers the unmanned aviation maintenance industry. With CerraCap investment, Robotic Skies is building a world-class, data-driven services platform to support the safe integration of unmanned aircraft technology,” said Saurabh Ranjan, CEO and Managing Partner at CerraCap Ventures. (Source: UAS VISION)

25 Feb 20. Iridium Completes Milestone Year; Company Announces 2019 Results And Issues 2020 Outlook. Financial transformation continues with new streamlined capital structure. Iridium Communications Inc. (Nasdaq: IRDM) (“Iridium”) today reported financial results for the fourth quarter of 2019 and issued its full-year 2020 guidance. Net loss was $107.9m, or $0.82 per diluted share, for the fourth quarter of 2019, as compared to net loss of $7.6m, or $0.09 per diluted share, for the fourth quarter of 2018. This increase in net loss was primarily the result of debt extinguishment costs associated with Iridium’s refinancing, as well as higher interest expense and depreciation and amortization expense related to the completion of the Iridium® NEXT program. Operational EBITDA (“OEBITDA”)(1) for the fourth quarter was $80.1 m, as compared to $75.5m for the prior-year period, representing a year-over-year increase of 6% and an OEBITDA margin(1) of 58%. OEBITDA primarily benefitted from higher government service revenue and strong growth in commercial IoT.

Iridium reported fourth-quarter total revenue of $138.9 m, which consisted of $113.6m of service revenue and $25.3 m of revenue related to equipment sales and engineering and support projects. Total revenue increased 5% versus the comparable period of 2018, while service revenue grew 6% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 82% of total revenue for the fourth quarter of 2019.

The Company ended the quarter with 1,300,000 total billable subscribers, which compares to 1,121,000 for the year-ago period and is up from 1,269,000 for the quarter ended September 30, 2019. Total billable subscribers grew 16% year-over-year, driven by growth in commercial IoT and government business.

Full-Year 2019 Iridium Business Highlights

For the full year, Iridium reported net loss of $162.0m, or $1.33 per diluted share attributable to common stockholders, as compared to net loss of $13.4m, or $0.22 per diluted share attributable to common stockholders for 2018. This increase in net loss resulted from debt extinguishment costs associated with Iridium’s refinancing, as well as higher depreciation and amortization expense and interest expense related to the completion of the Iridium NEXT program. The Company reported record total revenue in 2019 of $560.4m, which was up 7% from the year-ago period. Total revenue included $447.2m of service revenue and $113.3m of revenue related to equipment sales and engineering and support projects. OEBITDA for 2019 was $331.7m, a 10% increase from $302.0 m in the prior year, representing an OEBITDA margin of 59%. Capital expenditures were $117.8m for the full-year 2019.

“2019 was a transformational year for Iridium with the completion of our constellation and the launch of our new Iridium Certus® broadband service. These milestones support a new era of technological innovation and growth, and also signal the long-awaited move from capital spending to a sustained period of positive cash flow,” said Matt Desch, CEO, Iridium.

Commenting on the refinancing of Iridium’s BPIAE credit facility, Desch said, “Iridium completed the issuance of a seven-year Term Loan in November, which fully refinanced the French credit facility that supported the development and execution of the Iridium NEXT program. The new facility, along with the retirement of Iridium’s high yield notes earlier this month, streamline our capital structure and provide Iridium significant financial flexibility for shareholder friendly activities as we look to the future.”

Fourth-Quarter Iridium Business Highlights

Service – Commercial

Commercial service remained the largest part of Iridium’s business, representing 64% of the Company’s total revenue during the fourth quarter. The Company’s commercial customer base is diverse and includes markets such as maritime, aviation, oil and gas, mining, recreation, forestry, construction, transportation and emergency services. These customers rely on Iridium’s products and services as critical to their daily operations and integral to their communications and business infrastructure.

Commercial service revenue was $88.6m, up 4% from last year’s comparable period due primarily to increased revenues from IoT and voice and data services.
Commercial voice and data subscribers were up 1% from the year-ago period to 363,000 subscribers. Commercial voice and data average revenue per user (“ARPU”) was $47 during the fourth quarter, compared to $45 in last year’s comparable period, as a result of growing broadband usage associated with new activations of Iridium Certus™ terminals and increased access and roaming revenue. Commercial IoT data subscribers grew 24% from the year-ago period to 802,000 customers, driven by continued strength in consumer personal communications devices. Commercial IoT data ARPU was $10.50 in the fourth quarter, compared to $11.55 in last year’s comparable period.
Iridium’s commercial business ended the quarter with 1,165,000 billable subscribers, which compares to 1,008,000 for the prior-year quarter and is up from 1,138,000 for the quarter ended September 30, 2019. IoT data subscribers represented 69% of billable commercial subscribers at the end of the quarter, an increase from 64% at the end of the prior-year period.
Hosted payload and other data service revenue was $12.1m in the fourth quarter compared to $14.2m in the prior-year period. Last year’s quarter benefitted from $4.5 m in non-recurring revenue related to satellite time and location services.

Service – U.S. Government

Iridium’s voice and data solutions improve situational awareness for military personnel and track critical assets in tough environments around the globe, providing a unique value proposition that is not easily duplicated.

Iridium signed three new contracts in 2019 that support the use of Iridium satellite technology and services by the U.S. government. Most significantly, effective September 15, 2019, the Company entered into a seven-year, $738.5m fixed-price airtime contract with the U.S. Air Force Space Command for Enhanced Mobile Satellite Services (the “EMSS Contract”). Under the EMSS Contract, Iridium provides specified satellite airtime services, including unlimited global standard and secure voice, paging, fax, Short Burst Data®, Iridium Burst®, RUDICS and Distributed Tactical Communications System services for an unlimited number of Department of Defense and other federal government subscribers. The other two of these contracts provide for maintenance and support work for the U.S. government’s dedicated Iridium gateway. Iridium Certus airtime services are not included under these contracts and may be procured separately for an additional fee.

Government service revenue was $25.0m and reflected increased revenue from the Company’s new EMSS contract with the U.S. government signed in September 2019.
Iridium’s U.S. government business ended the quarter with 135,000 subscribers, which compares to 113,000 for the prior-year quarter and is up from 131,000 for the quarter ended September 30, 2019. Government voice and data subscribers increased 6% from the year-ago period to 57,000 as of December 31, 2019. IoT data subscribers increased 32% year-over-year and represented 58% of government subscribers at year-end.

Equipment

Equipment revenue was $17.1m during the fourth quarter, down 15% from the prior-year period. This was consistent with the Company’s guidance.
In 2020, the Company expects an increase in equipment sales related to product evolution.

Engineering & Support

Engineering and support revenue was $8.3m during the fourth quarter, up 73% from the prior-year quarter, primarily due to an increase in the volume of contracted work to enable services for the U.S. government.

Capital expenditures were $15.1m for the fourth quarter, including $3.4m in capitalized interest. The Company ended the fourth quarter with gross debt of $1.8bn and a cash and cash equivalents balance of $223.6m. Net debt was $1.6bn, calculated as $1.45 bn of gross Term Loan and $360.0 m of gross unsecured notes, less $223.6m of cash and cash equivalents.

Two noteworthy transactions impacted the structure of Iridium’s debt financing. In November 2019, the Company entered into a seven-year $1.45bn secured Term Loan. The proceeds of the Term Loan, along with the cash in its debt service reserve account and cash on hand, were used to prepay all of the indebtedness outstanding under the BPIAE Facility and premiums for early prepayment, net of amounts refunded, of $48.9m. On February 7, 2020, the Company closed on an additional $200.0 m under its Term Loan. On February 13, 2020, the Company used the proceeds of this transaction, together with cash on hand, to prepay all of the indebtedness outstanding under the Company’s senior unsecured notes, premiums for early prepayment of $23.5m, and accrued interest.

2020 Outlook

The Company issued its full-year 2020 outlook and reiterated other elements of long-term guidance:

Total service revenue growth between 6% and 8% for full-year 2020.
Full-year 2020 OEBITDA between $355m and $365m. OEBITDA for 2019 was $331.7m.
Negligible cash taxes in 2020. Cash taxes are expected to be negligible through approximately 2023.
Net leverage of approximately 4.0 times OEBITDA at the end of 2020. Net leverage was 4.8 times OEBITDA at December 31, 2019. (Source: PR Newswire)

25 Feb 20. In first public results, Branson’s Virgin Galactic posts $73m quarterly loss. Billionaire Richard Branson’s space tourism company, Virgin Galactic Holdings Inc (SPCE.N), said on Tuesday its fourth-quarter net loss widened to $73m from a year-ago loss of $46m as it reported its first results as a publicly traded company.

The quarterly results, which include one-time transaction and other related costs, come as the company is aiming for a first commercial flight later this year with Branson on board.

“It will be a transformative moment for the company,” Chief Executive George Whitesides told analysts on a conference call, adding that revenue and cash flow will ramp up in 2021.

Shares of Virgin Galactic were volatile in after-hours trading and were last down 6.4%. Shares had rallied in recent days, driven by investor interest in the first space tourism company to hit public markets.

Virgin Galactic competes with billionaire-backed ventures such as Blue Origin, founded by Amazon.com Inc (AMZN.O) CEO Jeff Bezos, to be the first to offer suborbital flights to fare-paying thrill seekers, presaging a new era of civilian space travel that could kick off as soon as this year.

Other players including Elon Musk’s SpaceX and Boeing Co (BA.N) have their sights set on higher altitudes like the International Space Station, the moon and eventually Mars.

Some 600 people from 60 countries have paid or put down deposits to fly on one of Virgin’s suborbital flights, worth about $80m in total collected deposits and $120m of potential revenue, the company said.

A 90-minute flight, which allows passengers to experience a few minutes of weightlessness, costs about $250,000.

Now, Virgin plans to seize on a wave of more than 7,900 “registrations of interest” it has received since then from would-be astronauts by collecting $1,000 deposits to secure a place in line as seats become available, it said on Tuesday.

Virgin Galactic has invested $1bn in its reusable mid-air launch technology and said on Tuesday it was in talks with Italy and United Arab Emirates for potential spaceports.

Closer to Earth, Virgin also plans to develop hypersonic passenger air travel that could dramatically cut travel times across the world, the company said. For example, flying from New York to London would take about an hour, it said.

The company, which went public last year, reported fourth-quarter revenue of $529,000, and $3.8m for 2019, the first full year of results. (Source: Reuters)

26 Feb 20. France’s Thales sees rebound in 2021 after hitting cautious 2019 target. France’s Thales (TCFP.PA) on Wednesday predicted a return to tangible top-line growth from next year as 2019 revenues and profits crept up in line with expectations, propped up by rising defence and security demand.

Europe’s largest defence electronics manufacturer said demand for fighter and warship systems and cybersecurity compensated for weakness in its space activities, lifting revenues 0.8% on a like-for-like basis to 18.401bn euros (15.40bn pounds).

Operating profit rose 4% on a like-for-like basis to 2.008 bn euros, for a margin of 10.9%, as gains in defence and security masked softer performances in aerospace and transport.

The same pattern emerged in new orders which rose by an underlying 4% to 19.142bn euros, marking a ratio of orders to sales – or book-to-bill ratio – just above 1.

Analysts were on average expecting operating income of 1.954bn euros on revenues of 18.394bn, according to Refinitiv data.

TANGIBLE GROWTH FOR 2021

After an October sales warning, Thales had predicted underlying revenues would grow by around 1% in 2019 due partly to slow sales of commercial satellites and delays with an Australian military project.

The French company on Wednesday projected 2020 sales of 19-19.5bn euros, followed by a sharper pickup in 2021.

“2021 will be a year of measurable, tangible growth,” Chief Executive Patrice Caine told reporters.

Thales, whose businesses involve securing critical infrastructure from air traffic control to borders, joined a chorus of industry concerns over less visible barriers to movement from recent health worries and trade friction.

Although its 2020 forecasts are based on a “limited impact” of coronavirus, it noted global uncertainty over the epidemic’s impact on supply chains as well as over U.S. aerospace tariffs, and the timing of the grounded Boeing (BA.N) 737 MAX’s return to use.

Also included in its 2020 goals, Thales predicted another year of orders above sales and an implied increase in the operating margin to a range of 10.8% to 11.0%.

That compares with a proforma margin of 10.6% for the whole of 2019, reflecting what Thales would have looked like if recently acquired chipmaker Gemalto had been included for the whole of last year, Chief Finance Officer Pascal Bouchiat said.

Between 2019 and 2023, Thales targeted average underlying sales growth of 3-5% and an operating margin of 11.5-12% by 2023 due in part due to synergies linked to the purchase last April of Gemalto to forge a “digital identity and security” segment. (Source: Reuters)

26 Feb 20. Thales reports its 2019 Full-Year results

Order intake: €19.1bn, up 19% (+4% on an organic basis[1])
Sales: €18.4bn, up 16.1% (+0.8% on an organic basis)
EBIT[2]: €2,008m, up 19% (+4% on an organic basis)
Adjusted net income, Group share[2]: €1,405m, up 19%
Consolidated net income, Group share: €1,122m, up 14%
Free operating cash flow[2]: €1,372m, 98% of adjusted net income, Group share
Dividend[3] of €2.65, up 27%
2020 objectives:

o Book-to-bill[4] above 1, supporting sales growth acceleration from 2021

o Sales between €19.0bn and €19.5bn

o EBIT margin between 10.8% and 11.0%

Thales’s Board of Directors (Euronext Paris: HO) met on 25 February 2020 to review the 2019 financial statements.[5]

“Thanks to the commitment of its 80,000 employees, Thales ended 2019 with a commercially very dynamic fourth quarter. The booking of 12 projects over €100m in the last quarter drove us significantly above our order intake objective. After recording growth above 5% in the past three years, sales slowed down due to the commercial Space market downturn and an exceptionally high basis of comparison in Transport. EBIT and adjusted net income were up 19%, boosted by the smooth integration of Gemalto.

Our roadmap between now and 2023 remains unchanged. We are focused on generating profitable growth sustainably.

In a global 2020 environment with several uncertainties, Thales’s business model, which is both balanced and resilient, is more than ever creating value.” Patrice Caine, Chairman and Chief Executive Officer

Key figures

Order intake in 2019 amounted to €19,142m, up 19% from 2018 (+4% at constant scope and currency). Order momentum was particularly strong in the Defence & Security segment. At 31 December 2019, the consolidated order book stood at €33.8bn.

Sales totalled €18,401m, up 16.1% compared to 2018 and up 0.8% at constant scope and currency (“organic” change), with the decline in sales in the Aerospace and Transport segments offsetting the robust performance in Defence & Security.

In 2019, the Group posted an EBIT of €2,008m (10.9% of sales) compared to €1,685m (10.6% of sales) in 2018, up 19% (and up 4% organically), while continuing to increase investments in R&D.

At €1,405m, adjusted net income, Group share was up 19%, thanks to the strong improvement in EBIT.

Consolidated net income, Group share amounted to €1,122m. It recorded an increase of 14%, driven primarily by gains on asset disposals.

Free operating cash-flow[10] amounted to €1,372m versus €811m in 2018. This increase was due to the significant rise in adjusted net income (+€227m), an improvement in the change in working capital requirement and the impact of IFRS 16 (+€203m).

In this context, the Board of Directors decided to propose the payment of a dividend of €2.65 per share, up 27% from 2018, corresponding to an adjusted net income, Group share, per share pay-out ratio of 40%.

Order intake

Order intake in 2019 amounted to €19,142m, up 19% from 2018 (+4% at constant scope and currency[12]). The ratio of order intake to sales (“book-to-bill”) stood at 1.04 compared with 1.01 in 2018 (and 1.05 excluding the Digital Identity and Security business, which has an order intake to sales ratio structurally very close to 1).

Thales booked 21 large orders with a unit value of over €100m, representing a total amount of €4,522m:

3 large orders recorded in Q1 2019, covering the acquisition of new mobile radars systems by the Dutch Army, a support contract for a European army, and the provision of equipment for Indian army helicopters;
4 large orders recorded in Q2 2019, for the design of the ground segment of the Syracuse IV satellite, the delivery of electronic systems aboard Belgian Scorpion vehicles (CaMo project), a significant long-term maintenance contract for the French air force, and the design of two geostationary satellites for Spain as part of a consortium (SpainSat NG);
2 large orders recorded in Q3 2019: the supply of combat management systems for two military vessels and a contract to modernise satellite navigation systems for the French army;
12 large orders booked in Q4 2019:

o the construction of 3 commercial telecommunications satellites (Eutelsat 10B for Eutelsat, NileSat-301 for the Egyptian operator NileSat and Amazonas Nexus for the Spanish operator Hispasat);

o a new tranche of the COSMO-SkyMed Second Generation (CSG) project of radar observation satellites for Italy;

o supervision and communications systems for the Sydney subway extension;

o additional work in the context of the project to modernise signalling on 4 lines of the London Underground;

o the major strategic airborne intelligence programme of the French armed forces (Archange project);

o an additional tranche in the development of the Rafale F4 standard;

o the supply of combat management systems aboard British Type 31 frigates;

o the installation of integrated sonar suites on board 5 F110 Spanish frigates;

o the design of a new generation of sensors and systems for a major navy;

o the development, supply and support of the Ground Fire radar for the French army.

At €14,620m, orders with a unit value of less than €100m were up 28% from 2018 (+8% at constant scope), in particular with a sharp increase in orders with a unit value of between €10m and €100m (+18% at constant scope).

From a geographical perspective[13], order intake in emerging markets totalled €4,883m and were up 19% at constant scope and currency (+51% after consolidation of Gemalto). At €14,258m, order intake in the mature markets remained high (+1% at constant scope and currency, +11% after consolidation of Gemalto), driven primarily by the increase in defence budgets in many countries.

Order intake in the Aerospace segment totalled €4,829m versus €5,346m in 2018 (-11% at constant scope and currency). This change reflects the drop in order intake in the Space and in-flight entertainment (IFE) businesses. Order intake for the Space business was down 14% over the year, despite the recording in the fourth quarter of some major telecommunications satellite wins. At 31 December 2019, the order book stood at €7.3bn, down 8%.

At €1,751m, order intake in the Transport segment was down 7% from 2018 at constant scope and currency. This change primarily reflects the effects of phasing in the award of major contracts (three large orders in 2018 and two in 2019). At 31 December 2019, the consolidated order book totalled €4.1bn.

Order intake in the Defence & Security segment was €9,906m compared with €8,570m in 2018 (+17% at constant scope and currency), benefiting from robust bookings in equipment for ships and fighter aircraft, military communications networks and several long-term maintenance contracts. The order book for this segment amounted to €21.8bn, representing 2.6 years of sales, increasing visibility for the business in the coming years.

At €2,573m, orders for the Digital Identity & Security segment are very close to sales, as the majority of the businesses in this segment operate on short cycles. As a result, the order book is not relevant.

Sales

Sales for 2019 amounted to €18,401m, compared with €15,228 m in 2018, an increase of 16.1% after consolidation of Gemalto. Organic change (at constant scope and currency[15]) was +0.8%, with the decline in sales in Aerospace and Transport masking the strong performance in Defence & Security.

From a geographical perspective,[16] this performance reflects solid growth in mature markets (+4.7% at constant scope and currency), and a slowdown in emerging markets (-7.7% at constant scope and currency) following several years of strong growth (organic growth of +10.3% in 2017 and +6.5% in 2018).

In the Aerospace segment, sales totalled €5,595m, down 3.2% compared to 2018 (-4.2% at constant scope and currency). This decline in sales was focused in Space, which fell 13%, reflecting the slowdown in the commercial telecommunications satellite market combined with the end of a number of military projects.

In the Transport segment, sales totalled €1,910m, down 4.5% compared to 2018 (-5.8% at constant scope and currency). This segment recorded exceptional growth in 2018 (+18% at constant scope and currency), which reflected the peak load on 4 major urban rail signalling contracts signed in 2015 and 2016 (London, Doha, Dubai and Hong Kong). Excluding these 4 contracts, 2019 sales recorded organic growth of +5%.

Sales in the Defence & Security segment came in at €8,265m, up 5.6% from 2018 (+6.4% at constant scope and currency). Many different businesses contributed to this momentum, including air traffic control, optronics, systems for fighter aircraft, systems and services for military ships, military radio communications, and cybersecurity.

At €2,552m, sales for the Digital Identity & Security segment were in line with the Full Year target (organic growth of 0% to 2%). It reflects a strong performance in EMV payment cards, the negative impact of the reorganisation of the HSM businesses, and the continuous decline in sales of traditional SIM cards.

Results

For 2019, the Group posted an EBIT[17] of €2,008m, at 10.9% of sales, compared with €1,685m (10.6% of sales) in 2018.

The Aerospace segment posted an EBIT of €521m (9.3% of sales), versus €580m (10.0% of sales) in 2018. The margin decline in this segment primarily reflects the drop in sales and the increase in restructuring charges recorded in the Space business, combined with an increase in R&D investments in avionics.

EBIT for the Transport segment was €56m (2.9% of sales) compared with €88m (4.4% of sales) in 2018. The underlying margin improvement in this segment was hidden by the recognition in the first half of 2019 of two one-off charges totalling around €60m related to an engineering transformation plan and additional costs incurred in the execution of an urban rail signalling project. Corrected for these one-off charges, the margin was around 6%, thus continuing to increase in line with the medium-term objective.

In the Defence & Security segment, EBIT improved significantly to €1,153m, versus €992m in 2018 (+21% at constant scope and currency). Margin was 14.0% versus 12.7% in 2018. The substantial rise in margin was due to sales momentum, positive impacts of competitiveness initiatives, solid project execution and reversals of provisions on contracts at completion recorded in the first half, for approximately €40m.

At €264m (10.3% of sales), EBIT for the Digital Identity & Security segment was slightly higher than the target set in June 2019 (€240m to €260m), reflecting lower than expected integration costs, partially offset by the negative impact of the reorganisation of the HSM business following the Gemalto acquisition.

The contribution of Naval Group to EBIT was stable at €65m in 2019, compared with €63m in 2018, in line with its 3% sales growth.

The increase in net financial interest (-€43m versus -€7m 2018) was primarily due to the recognition, according to IFRS16, of a financial interest expense of €27m relating to lease debts. Other adjusted financial results[18] remained low (-€12m in 2019, compared with -€8m in 2018). Adjusted finance cost on pensions and other long-term employee benefits[18] was stable at constant scope (‑€56m compared with ‑€52m in 2018).

Adjusted net income, Group share[18] amounted to €1,405m, up from €1,178m in 2018, after adjusted income tax[18] of ‑€454m versus ‑€387m in 2018. At 26.3%, the effective tax rate was down slightly from 2018 (26.7%).

Adjusted net income, Group share, per share[18] stood at €6.61, up 19% from 2018 (€5.55).

At €1,122m, consolidated net income, Group share increased by 14%, driven primarily by gains on asset disposals.

Financial position at 31 December 2019

In 2019, free operating cash flow[19] amounted to €1,372m compared with €811m in 2018. This increase was mainly due to the rise in adjusted net income, Group share (+€227m), improvement of change in working capital (WCR) and the impact of IFRS 16 (+€203m). The conversion rate from adjusted net income, Group share, to free operating cash flow stood at 98%. This robust performance includes several one-off items which adversely impacted the change in Working Capital Requirement for approximately -€100m.

At 31 December 2019, net cash totalled -€3,311m versus €1,673m at 31 December 2018, after taking into account the IFRS 16 lease debt, after the distribution of €463m in dividends (€382m in 2018) and a net disbursement of €5,345m linked to acquisitions and disposals completed during the year, mostly relating to the acquisition of Gemalto and the sale of the GP HSM business.

Shareholders’ Equity, Group share totalled €5,449m, versus €5,700m at 31 December 2018, with consolidated net income, Group share (€1,122m) not fully offsetting the distribution of dividends (€463m), the increase in the net pension commitment (€454m net of tax), and the purchase of Gemalto minority interests (€437m net of tax).

Proposed dividend

At the Annual General Meeting to be held on 6 May 2020, the Board of Directors will propose the distribution of a dividend of €2.65 per share, an increase of 27% from 2018. This level corresponds to an Adjusted Net Income, Group share, per share pay-out ratio of 40%, (37.5% for financial year 2018).

If approved, the ex-dividend date will be 12 May 2020 and the payment date will be 14 May 2020. The dividend will be paid fully in cash and will amount to €2.05 per share, after deducting the interim dividend of €0.60 per share paid in December 2019.

Appointment of a director

The Board of Directors has decided to propose to the 6 May 2020 Annual General Meeting the appointment of Mr. Philippe Knoche, Chief Executive Officer of Orano, as “external director”, for a 4-year term, with a view to succeeding to Mr. Yannick d’Escatha, whose term expires at the end of the Meeting.

Outlook

In 2020, the Group will continue implementing all the levers of its Ambition 10 strategic plan in support of profitable and sustainable growth.

The global environment of early 2020 displays several factors of uncertainty: impact of the Coronavirus on the Group’s markets and supply chains, US tariffs in civil aeronautics, return to operations for the Boeing 737 MAX, timing of orders by satellite operators, etc.

Taking into consideration this background, and assuming a limited impact of the Coronavirus crisis based on the current situation, the Group has set the following goals for 2020:

As in 2019, a book-to-bill ratio above 1, benefiting from the solid trend in most of the Group’s markets and the acceleration of growth initiatives;
Sales in the range of €19.0bn to €19.5bn[20], including the continued normalisation in urban rail signalling sales and the momentum in Defence & Security and Digital Identity & Security;
A further increase in EBIT margin[20] which should stand between 10.8% and 11.0%[21], thanks to the continuation of the Ambition 10 competitiveness initiatives and the ramp-up of cost synergies related to the acquisition of Gemalto.

Over the 2019-2023 period, and based on the February 2020 scope, the Group has set itself the following medium-term goals:

Organic sales growth between +3% and +5% on average over the 2019-2023 period, the strengthening of the Group’s growth potential relating to digital investments and to the integration of Gemalto largely offsetting a more uncertain outlook in the commercial space market and no growth in transport over 2019-2023 after strong performance in 2018 (+18%). The phasing of these different factors is expected to translate into lower growth in the first part of the period, and progressive acceleration thereafter.
EBIT margin between 11.5% and 12% by 2023, reflecting the positive impact of competitiveness initiatives and the synergies linked to the acquisition of Gemalto.

24 eb 20. Meggitt flags slower growth in 2020. Engineering group Meggitt (MGGT) delivered 8 per cent organic revenue growth in 2019, exceeding the upgraded 6-7 per cent guidance range it had provided in November. The defence division, which accounts for over a third of group revenue, reported like-for-like sales growth of 11 per cent, propelled by higher demand for parts for the F-35 Joint Strike fighter jet and M1A Abrams tank. Yet with the ongoing production halt of Boeing’s 737 Max jet and now the fallout from coronavirus, the group expects overall organic revenue growth to drop to between 2 and 4 per cent this year.

The grounding of Boeing’s flagship aircraft was not the only challenge in 2019. Supply chain disruption created a production backlog in the second half, while there was a greater weighting towards lower-margin original equipment sales versus aftermarket services. Still, underlying operating profit rose 10 per cent to £403m, with the margin maintained at 17.7 per cent. The value of orders increased by a tenth to £2.5bn, benefiting from multi-year contract wins across key market segments.

Gross capital expenditure already increased by over a quarter to £94m in 2019 and is expected to rise to between £120m and £140m this year as the group ramps up investment in its new headquarters and expands its carbon furnace capacity. So while free cash flow surged by 60 per cent to £268m last year, it is expected to fall in 2020.

The Bloomberg consensus forecast is for adjusted pre-tax profit of £373m and EPS of 39.2p in 2020, rising to £422m and 44.1p in 2021.

IC View

While disruption from the twin effects of the 737 Max and Coronavirus is not unexpected, the group expects the effects to extend into 2021, having lowered its margin guidance from 19.9 per cent to a range of 18.5-19 per cent. We think that level of uncertainty warrants caution. Hold.

Last IC View: Hold, 599p, 6 Aug 2019. (Source: Investors Chronicle)

24 Feb 20. Toward a ‘Naval Airbus’? Not so fast. With Hervé Guillou retiring, the naval industry loses one of its most intelligent and visionary figureheads. During the six years at the helm of Naval Group, he has promoted the concept of a European Naval Airbus. He was quoted by Defense News as saying during a press conference last week: “Over the past 15 years, we’ve seen one Chinese, one Russian, two Koreans, the Japanese, Singaporeans, Indians — and I could go on — arriving on the naval defence market. They are posing a considerable challenge, and that’s why Europe must consolidate.”

He continues to complain in the article: “We are the only ones in the world who have to export over half our production to survive. When you are only two on a U.S. domestic market, which provides 80 percent financing at cost-plus pricing and margins of more than 10 percent, then you can stay in your comfort zone. You don’t have to take unmeasured risks in Australia, Egypt, Romania or Belgium to win business that you’ve fought for tooth and nail.”

A shipbuilder myself, I have to admit that I struggle to connect the rise of the Asian competition, to which countries like Turkey, Singapore and Indonesia could be added, to the necessity of a Naval Airbus. I have always regarded the export success of the European naval industry as a sign of its competitiveness, combining top quality with attractive pricing. U.S. destroyers cost twice as much as European ones.

Nobody denies that we do have severe problems in Europe. Our political weakness offsets our economic strength. It is unhealthy and worrying that we, a European community of 500 m people, need the help of 350 m US citizens to defend ourselves against a country of 140 m Russians. But how is the creation of a Naval Airbus going to make Europe stronger?

I admit that apart from more realistic spending levels, industrial consolidation can help in tackling the problem of exponentially increasing R&D cost. As a result, consolidation in aerospace and defense electronics is self-propelled rather than politically enforced. Unfortunately, Fincantieri, Navantia and Naval Group are state-owned companies, not generally known for their political independence nor their drive for efficiency. Moreover, you can ask yourself the question of whether consolidating big naval shipbuilders will create an efficient organization. History shows otherwise.

On top of that, Naval Group is a highly diversified company, trying to excel simultaneously in activities as diverse as nuclear propulsion, combat management systems and shipbuilding. If we seek economy of scale, that formula is not sustainable. The future belongs to technological centers of excellence, not to national champions.

So, before we start a ‘Naval Airbus’, let Naval Group first decide what it wants to be: A jack of all trades or a specialist? National champion or provider of shareholder value? Private, like its Northern European colleagues, or state-owned? Let Naval Group make up its mind first before embarking on this European adventure. (Source: glstrade.com/Defense News)

25 Feb 20. Ricardo plc – Interim Report for the six months ended 31 December 2019.

HIGHLIGHTS

Order intake and revenue both up 3% on HY 2018/19 to £208.6m and £192.9m, respectively;
Underlying profit before tax (‘PBT’) up 5% to £16.0m on HY 2018/19;
Strong growth in Energy & Environment (‘E&E’) and Defense, together with our newly acquired Rail and E&E businesses in Australia, has more than offset continuing pressures in the global automotive sector;
Acquired businesses have been integrated and are performing well;
Good order intake at £208.6m, compared to £201.9m in HY 2018/19;
Order book increased to £319.4m, up £5.6m on June 2019;
Net debt at £73.8m (June 2019: £47.4m) predominantly reflecting purchase of the Detroit facility and the acquisition of PLC Consulting. Underlying cash conversion of 80.8%; and
Interim dividend increased by 4% to 6.24p from 6.00p;
Full year outlook impacted by further automotive slowdown and Coronavirus.

Commenting on the results, Dave Shemmans, Chief Executive Officer, said:

“Overall, the Group has achieved a good set of results in the first half of the year, which is in line with our expectations. The performance of E&E and Defense has been excellent, underlining the importance of our strategy of diversification. Our new acquisitions have been integrated into the Group and are both performing well. This has helped to offset the continuing challenges in our automotive sector businesses, particularly in China, where order intake has suffered from challenging macro conditions.

As we start the second half of the year, we have seen increased headwinds in the automotive sector which we anticipate will lead to suppressed order intake in our US, EMEA and China Automotive businesses. The Coronavirus outbreak at the start of H2 has already had an operationally disruptive impact on our Automotive and Rail operations in China and we anticipate continuing disruption to client engagement, project delivery and business development in the coming months in mainland China and surrounding countries. Based on the issues highlighted above we are anticipating material impact to our forecast second half profits and thus full year.”

24 Feb 20. Meggitt PLC – 2019 Full Year results. Another year of strong organic growth Meggitt PLC (“Meggitt” or “the Group”), a leading international engineering company specialising in high performance components and sub-systems for the aerospace, defence and selected energy markets, today announces audited results for the year ended 31 December 2019. Highlights

• Organic order growth of 10% underpins expectations for long term revenue growth; organic book to bill4 of 1.09x included a strong performance in defence (1.17x book to bill)

• Group organic revenue growth of 8% reflects strong performance in growing end-markets; with 8% growth in civil aerospace, 11% in defence and 10% in energy

• Underlying operating profit up 10% and underlying operating margin maintained at 17.7%, with the benefits of our strategic initiatives offsetting a number of headwinds including: higher Free of Charge content, adverse mix, the grounding of the 737 MAX and supply chain disruption

Statutory operating profit increased by 27% as a result of strong operational results, lower exceptional costs and a non-cash gain from the marking to market of financial derivatives
Free cash flow increased by £100m to £267.8m and cash conversion increased to 93% (2018: 63%), reflecting the strong operating performance, cash proceeds relating to property transactions (sale of Holbrook Lane site and reverse lease premium relating to Ansty Park) and the 2018 result being reduced by a one-off payment into the US pension schemes
ROCE increased to 11.0% (2018: 9.9%)
Recommended final dividend of 11.95p giving a full year dividend of 17.50p, an increase of 5%
Chairman, Sir Nigel Rudd to step down from the Board by 2021 AGM; to remain as Chairman until a successor is appointed Strategic highlights Good progress on strategic initiatives, further enhancing our foundation for revenue growth, margin expansion and cash conversion:
New customer aligned organisation fully embedded, with experienced and capable teams in place to accelerate long term growth; 21 Smart Support™ deals signed in the year underpinning growth in our aftermarket business 1 Organic numbers exclude the impact of acquisitions, disposals and foreign exchange. 2 Underlying profit and EPS are used by the Board to measure the trading performance of the Group and are reconciled to statutory measures in notes 4 and 10. 3 Underlying EBITDA represents underlying operating profit adjusted to add back depreciation, amortisation and impairment losses. 4 The ratio of orders received to revenue recognised in a period. Meggitt PLC 2019 Full year results 2
Good progress on investment in sustainable and differentiated technologies including: exclusive partnership with Luna Innovations for optical sensing; investment in HiETA Technologies Limited, to support next generation thermal management systems; and sustained investment in advanced engine composites manufacturing in the US and Mexico
Completion of two further non-core disposals to increase our focus on attractive markets where we have strong positions
Further progress on site consolidation and purchasing initiatives with a 25% reduction in footprint compared to the 2016 baseline and a 2.2% reduction in purchased costs in the year
Improved performance in Engine Composites with an increase in underlying operating margin in the second half • Continued deployment of the Meggitt Production System („MPS‟) with 33% (2018: 29%) of sites now in the Bronze or above stages of the programme Outlook
Our strong content and exposure to the fastest growing and hardest worked platforms will continue to underpin organic revenue and profit growth. Sector specific factors including the production halt of the 737 MAX and supply chain disruption, as well as the wider macroeconomic impact of COVID-19 are expected to hold back margin progression in the short-term
As a result, in 2020, we expect to deliver Group organic revenue growth of 2% to 4% and an increase in underlying operating margins of 30 to 50 basis points. As previously guided, we also expect the level of free cash flow to be lower as a result of: an increase in capital and operating expenditure relating to our move to Ansty Park and investment in carbon capacity; an increase in cash tax paid; and one-off property-related cash receipts in 2019
At the current time, we expect the effect of these sector-specific and macroeconomic factors to be felt beyond 2020. Nonetheless, we expect to deliver low to mid-single digit organic revenue growth and underlying operating margins in the range of 18.5% to 19.0% in 2021
Over the medium-term, we are confident that the continued, successful execution of our strategic initiatives, differentiated technology and strong content will enable us to continue to deliver good levels of organic growth, attractive margins and to sustainably generate strong levels of cash flow, with cash conversion of at least 70% over the same period Tony Wood, Chief Executive, commented: “Over the last three years, as a result of the successful execution of our strategy, the Group has become a more focused, higher quality and more resilient business, reflected in the delivery of strong levels of organic growth and cash generation. We delivered another strong set of results in 2019, with organic revenue growth of 8%, ahead of our raised guidance, and good performance across all end markets, particularly Defence. Our performance was underpinned by growing end-markets and strong execution across our teams during the first full year of our new customer-aligned organisation. We delivered good progress on our strategic initiatives helping offset the investment made at our fast growing advanced engine composites sites and headwinds caused by adverse mix, supply and trading environment conditions and the grounding of the Boeing 737 MAX, and enabling us to deliver an increase in underlying operating profit of 10% to £403m. 2020 will mark another important year for the Group including the phased transfer into our new, state-ofthe-art manufacturing campus at Ansty Park, UK. With a clear strategy, good cash generation and our increasing market share across our growing installed base of 73,000 aircraft, we are well positioned to sustain growth ahead of the market over the medium term. Reflecting our continuing confidence in the prospects for the Group, the proposed final dividend is 11.95p giving a full year dividend of 17.50p, an increase of 5% and we expect 2020 to be a year of further progress and profitable growth.”

24 Feb 20. United Technologies, Raytheon offer EU concessions over $120bn merger deal. United Technologies Corp (UTX.N) and Raytheon Co (RTN.N) have offered concessions to address EU antitrust concerns about their plan to create a $120bn U.S. aerospace and defense giant, a filing on the European Commission website showed on Monday.

The companies submitted their concessions on Friday. The European Commission, which did not provide details in line with its policy, extended its deadline for a decision to March 13 from Feb. 28.

In January, UTC agreed to divest a military-focused GPS unit from its subsidiary Collins while Raytheon agreed to sell an airborne tactical radios unit to British defense company BAE Systems (BAES.L) in a bid to win regulatory clearance.

The EU competition watchdog will now seek feedback from rivals and customers before deciding whether to clear the deal, demand more concessions or open a full-scale investigation. (Source: Reuters)

24 Feb 20. The ACR Group confirmed an agreement to acquire FreeFlight Systems, a leading designer and manufacturer of avionics systems that improve safety, efficiency and affordability for the aviation industry. FreeFlight Systems will report into ACR Electronics, Inc.

Headquartered in Texas, FreeFlight Systems specializes in technologies and solutions that bring the benefits of the NextGen airspace transformation to all segments of aerospace. Certified to AS9100 and ISO quality standards, FreeFlight Systems has built a strong reputation for delivering quality products with exceptional reliability and flexibility to meet its long-term client satisfaction strategy.

FreeFlight Systems will continue to operate as an independent subsidiary, retaining the existing management team, products, brand, locations, engineering capabilities, and sales.

“FreeFlight Systems brings new innovative technologies that better completes our company’s avionics suite of products for our customers including ADS-B, SBAS/GNSS Receivers, and Flight Management Systems,” said Michael Wilkerson, Vice-President of ACR Aviation and Government Businesses.

FreeFlight Systems now joins the ACR Aviation group of companies which includes Skytrac Systems, Latitude Technologies, Flight Data Systems, and ARTEX. Together they provide every segment of the aviation market with high value solutions including Emergency Locator Transmitters, Flight Data Recorders, GADSS, ADS-B, Flight Management Systems, Data Acquisition, Monitoring, Tracking, Communications and Flight Data Analysis.

“We’ve always made it our mission to make flying safer and more efficient with the highest-quality, longest-lasting, and most affordable products available,” said Tim Taylor, FreeFlight Systems’ President. “Both companies share common values and goals, with focuses on safety, product performance, and client satisfaction, and together we will continue to lead the industry in the development of critical technologies that supports the aviation industry.”

24 Feb 20. Pennant’s contract momentum building. Pennant (PEN:73p), an Aim-traded supplier of products and services that train and assist engineers in the defence and civilian sectors, has made an earnings accretive acquisition, won several new contracts and entered 2020 with a bumper three-year order book worth £33m.

Moreover, having announced new orders for the provision of additional training aids on a Middle East contract, and one with the Australian Defence Force, Pennant has just received a Statement of Intent on a contract with another long-standing customer in the Middle East. The potential award to supply a generic suite of training aids has a contract value of £5m. Assuming it is confirmed in the first half of this year then £3m revenue will be recognised in the second half of 2020.

On this basis, the 2020 order book will cover 85 per cent of analysts’ current year revenue estimate of £22.3m, up from £20m in 2019, which in turn underpins a two-thirds increase in this year’s underlying pre-tax profits (from £1.6m to £2.7m) and earnings per share (EPS) of 6.9p, up from 4.1p forecast in 2019. However, despite the raft of positive news flow, and an impressive conversion of the bid pipeline into confirmed contracts, Pennant’s share price has drifted since I last advised buying at 84p (‘Pennant’s growth back on track’, 4 November 2019).

As a result the shares are only priced on 10.5 times 2020 EPS estimates even though a chunk of this year’s profit growth is already underpinned by substantial cost savings made by the company after the start date on a contingent contract (worth £28m in revenue over three years) was pushed back to 30 June 2020. Please note that Pennant’s £33m contracted order book excludes any contribution from this contingent award for the design, build and delivery of training equipment to the Ministry of Defence (MoD), thus offering upside for outperformance.

Last month’s proposed acquisition of Absolute Data Group (ADG), a Brisbane-based software company, adds further weight to the investment case. It is highly complementary to Pennant’s existing Oracle-based software business that reduces the support cost of major capital equipment. Analyst Nick Spolair at house broker WH Ireland points out that “ADG’s software enables its client base (military aviation, commercial aerospace, and marine, rail, nuclear and automotive sectors) to manage vast quantities of maintenance and training data effectively, and is already being used as a dynamic extension to Pennant’s existing OmegaPS logistics product database.” This means that the combined business has a ready-made client base of new business targets, which already utilise one or the other of their systems.

Furthermore, two thirds of ADG’s revenues are derived from the US where the company has worked with government agencies such as the US Air Force Communications Agency, thus extending Pennant’s geographic reach as well as strengthening its Australian business. The £3.4m consideration, of which half is being paid upfront and the balance is subject to an earn-out, equates to a reasonable 7.3 times ADG’s pre-tax profit in the 2019 financial year.

From a technical perspective, a chart break-out above the 90p key resistance level would be a bullish signal and one that improves the chance of a move towards my 130p target price, albeit that’s below my original 180p target when I initiated coverage (Alpha Company Research: ‘Pennant poised for a return to growth’, 13 Aug 2018). Pennant’s heavily oversold shares rate a buy ahead of the annual results on 23 March 2020. Buy. (Source: Investors Chronicle)

21 Feb 20. Naval Group achieves a record level of orders in 2019.

5.3bn euros of order intake (+44% vs 2018), including 3bn internationally, taking the order book to 15bn euros
Sales of 3.7bn euros (+3% vs 2018)
EBITA up to 282m euros, taking operating profitability up to 7.6%
Robust outlook for 2020

Naval Group’s Board of Directors met on 20 February 2020 to review the financial statements for the 2019 reporting period closed on December 31st.

Commenting on these results, Hervé Guillou, Chairman and CEO of Naval Group, declared: “Naval Group once again confirms the soundness of its strategic position as an industrial prime contractor, designer and integrator of whole warships and combat systems, as well as the good progress of its development plan. The operational milestones, both in France and internationally, have all been met. Among the most striking illustrations, we are proud to have launched the Suffren, the first next-generation SSN, and to have cut the first metal sheet for the defence and intervention frigate (FDI), a digital frigate intended for the French Navy. Internationally, we have delivered the Khanderi to the Indian Navy but also signed the design contract for the Australian Future Submarine program. We are benefiting from a dynamic market situation and, despite increasingly fierce competition, we won bids for more than twenty ships in five new countries. We also play a pivotal role in European alliances and have set up Naviris, a joint company with Fincantieri, our long-standing Italian partner. Our operational and financial performance enables us to guarantee our ability to finance the future long-term growth of the company.”

Frank Le Rebeller, Senior Executive Vice President Finance, Legal, Purchasing and Real Estate, added: “Order intake in 2019 reached record levels. The results for the 2019 reporting period (produced according to IFRS standards and in particular the IFRS 15 standard since 2018), for the fifth consecutive year, show progress in sales, which stand at 3.7 bn euros, along with an improvement of operating profitability, which has shown a steady increase since 2015 and this year reached 7.6%. Consolidated net income (group share) amounts to nearly 190 m euros, thus raising our equity to 1.2 bn euros. These results are slightly over than our targets. They reflect a solid financial situation, more particularly characterised by levels of profitability in line with our targets and a robust level of equity that has been reconstituted over the past four years. We continued our overall investment efforts, which increased to nearly 480 m euros, in particular in innovation, R&D and digitisation. Our development is creating significant need for recruitment and in 2019 we welcomed 1,500 new colleagues.”

Order intake: 5.3bn euros (+44% vs 2018), including 3bn internationally, raising the order book to 15bn euros

The order intake over the 2019 reporting period amounts to 5.3bn euros, boosting the order book which now stands at 15 bn euros. Orders recorded in France and overseas for the 2019 reporting period benefited all sectors. In France, in new construction, the main notifications concerned the sixth nuclear-powered attack submarines (SSN) for the Barracuda program. The main contract awarded for new constructions internationally is the program for twelve minehunters and their toolboxes for the Belgian and Dutch navies. Finally, regarding services, several multi-year availability contracts were notified, notably the routine maintenance contract for the ballistic-missile submarines (SSBN) for 2020-2025, as well as the maintenance contract for the Egyptian Navy.

For the year 2019, the book-to-bill ratio (order intake divided by sales), which measures the order book’s renewal rate, stands at 1.4, and at 1.2 for the past three years.

Activity: increased sales

The consolidated sales amount to 3,712m euros. Its 3% increase over 2018 was driven by the major national programs, mainly the Barracuda program, the multimission frigates program and the defence and intervention frigates program. The Australian program also contributed to Naval Group sales. Finally, services represented a key component, with a 41% share. For France, they include in-service support for first rank surface ships and nuclear submarines of the French Navy. Internationally, they include the periodic docking for maintenance of the Malaysian submarines, as well as the adaptation and modernisation of the Bouchard corvette for the Argentinian Navy, delivered two months ahead of schedule.

Profitability: significant growth of EBITA and operating profit

EBITA (earnings before interest, tax and amortisation) totalled 282 m euros. Its progress compared to 2018 drives an increase in operating profitability, which has risen from 7.4% in 2018 to 7.6% in 2019, placing Naval Group as the leader of the naval defence sector in Europe.

This progression shows the operational improvement of all naval programs and the effectiveness of the improvement plans undertaken for over five years.

Group net income is 188.2m euros, up by almost 10 m euros compared to 2018. This result increases the group’s consolidated equity to 1.2bn euros.

Strong prospects for 2020

In 2019, Naval Group hired more than 1,500 new staff, taking the group’s total workforce to more than 15,000, presenting an increase of nearly 10% compared to 2018 levels. This trend will continue thanks in particular to numerous initiatives such as the opening of the arrangement designer school on the Cherbourg site and the Naval Industries Campus, which has been launched last November by the French Minister for Education.

Naval Group is also accelerating its investments, worth nearly 480 m euros, specifically targeting open and collaborative innovation, the development of international activities and trade relations, as well as industrial and IT equipment.

Lastly, thanks to its increased capacity to invest, Naval Group will pursue the internationalisation of its activity. This deployment will more specifically be driven by Naviris, its joint-venture with Fincantieri, which will allow a joint response to some calls for tender and sharing of R&D activities for surface ships.

The prospects for 2020 are robust, with expected sales growth of about 5% and a rise in consolidated net income (group share) of about 10%.

27 Feb 20. COMSovereign Holding Corp. Announces Letter of Intent to Acquire Virtual Network Communications, Inc. – Transaction to Expand 5G Networking Solution Portfolio. COMSovereign Holding Corp. (OTCQB: COMS) (“COMSovereign” or the “Company”), a U.S.-based pure-play enabler of 5G connectivity and data transmission systems, today announced that it has signed a Letter of Intent to acquire Virtual Network Communications, Inc. (“VNC”), a developer of fixed and mobile broadband communications solutions for wireless networks operated by commercial, enterprise, government and defense customers.

The parties currently expect the transaction to be completed on or before April 15th subject to the satisfactory completion of due diligence and the negotiation and execution of a definitive acquisition agreement. The Company can provide no assurance that it will complete its due diligence review or that it will be able to successfully negotiate and execute a definitive acquisition agreement.

Dan Hodges, chairman and CEO of COMSovereign Holding Corp., stated, “VNC’s capabilities can serve as a cornerstone in our strategic vision to make COMSovereign into one of the only US-based providers of connectivity solutions that span the entire data transmission spectrum. Through a combination of proprietary hardware and software, and a growing list of tier-one commercial and national security customers, this transaction can deliver both near-term synergies and long-term value to our shareholders and customers in 4G and 5G infrastructures, and those already planning for ‘nG’ and beyond.”

Virtual Network Communications produces deployable broadband communications equipment and services designed to support advanced wireless networks providing mission critical communications for Public Safety, Homeland Security, Department of Defense and commercial Private Network users. VNC’s products include instant deployable Micro LTE solutions suitable for rapid deployment of Tactical LTE networks, LTE small cell technology, Customer Premises Equipment (CPE) for fixed broadband LTE installations and advanced, low altitude/high altitude airborne LTE communications solutions. See www.virtualnetcom.com. (Source: PR Newswire)

28 Feb 20. GomSpace (Provider of Nanosatellites) Announces its Quarterly Results for the Fourth Quarter 2019. GomSpace Group AB (the “Company”) announces its interim report for the fourth quarter of 2019. The report is available on the Company’s homepage (www.gomspace.com). The following is taken from the quarterly report:

Fourth quarter summary

1 October – 31 December 2019 (2018)

Order intake increased to T.SEK 89,347 (19,488)
Net revenues decreased to T.SEK 38,406 (40,217)
Gross margin increased to 10% (6%)
Operating profit (loss) increased to a negative T.SEK 16,628 (a negative 44,514)
Earnings per share were a negative SEK 0.78 (a negative 1.73)

1 January – 31 December 2019 (2018)

Order intake increased to T.SEK 192,354 (120,741)
Net revenues decreased to T.SEK 136,263 (153,384)
Gross margin decreased to 13% (25%)
Operating profit (loss) increased to a negative T.SEK 113,856 (a negative 116,601)
Earnings per share were a negative SEK 2.90 (a negative 3.93)
The Board proposes no dividend for 2019

Subsequent events

GomSpace leads development of a teaming agreement to demonstrate game-changing communications technology in space with the University of Arizona, American FreeFall Aerospace and Rincon Research
GomSpace and Unseen Labs enter into a contract at a value of SEK 18.6m

“In the fourth quarter of 2019, we started showing progress again after we performed a big cost reduction program due to the loss of the large Sky and Space Global order. During the year, we have reduced the staff with more than 100 people and cut the cost with more than 60m SEK and we have thereby reduced our total cash burn from 184m SEK in 2018 to 142m in 2019. In the last quarter of 2019, it was reduced to SEK 23m.

These activities have influenced the company’s performance by most accounts. The net revenue in 2019 amounted to T.SEK 136,263 compared to T.SEK 153,384 in 2018. This corresponds to a decrease of 11%. The gross margin amounts to 13% compared to 25% in 2018.” CEO Niels Buus commented. (Source: PR Newswire)

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