16 Apr 20. SRT funded to makes waves. Aim-traded SRT Marine Systems (SRT:25.5p), a global leader in AIS, an advanced identification communications technology used to track and monitor maritime vessels, has created a prudent cash buffer ahead of the implementation of a number of substantial highly profitable contracts.
The company raised £1.8m through a placing and retail offer which was backed by chief executive Simon Tucker who purchased £100,000 of shares. In addition, SRT raised £1m by issuing senior loan notes under an existing £10m facility, and has applied to its main bankers for a £4.5m low cost loan facility under the government’s Coronavirus Business Interruption Loan Scheme. On this basis, the company will have gross cash of £7.9m and borrowings of £10.5m, implying net debt of £2.6m equating to 16 per cent of proforma equity shareholder funds. Importantly, borrowings can be paid down quickly from milestone payments when work recommences on contracts that have been temporarily delayed due to Covid-19 lockdowns.
In the Middle East, two new national vessel tracking systems awards and a smaller system upgrade contract with an existing customer were due to commence in March, but have been delayed due to Covid-19 lockdowns. SRT is in discussions with the clients to enable project implementation to start during the existing lockdown period. Prudently, SRT has allowed for a nine-month delay even though the clients only expect the start date to be pushed back by one to three months. The contracts are worth £70m in revenue.
In the Philippines, SRT’s game-changing government contract, worth £31.8m, to deliver a vessel management system for fisheries monitoring is also temporarily paused due to the Covid-19 lockdown. Installation had already started and SRT still expects to earn £17m in milestone payments in the coming year. Cash payments due in April will now be made in June upon recommencement of Philippine government activities.
In the meantime, SRT’s monthly cash overheads of £600,000 are comfortably covered by its cash pile. Although analysts have withdrawn forecasts given the uncertainty over the exact timing of when work on the four contracts will recommence, I estimate that they should still contribute upwards of annual revenues of £50m on operating profit north of £10m. Add to that SRT’s transceiver business, which generated £8.1m of revenue in the 12 months to 31 March 2020, and SRT’s profit generation from both existing contracts and a bumper £550m validated sales pipeline, is being materially undervalued in its £44m market capitalisation.
The shares hit my 55p target price in January after I highlighted the company’s potential (Alpha Report: Set sail for a profitable voyage, 16 August 2019). Offering 100 per cent plus upside to my fair value, this is a new buying opportunity. (Source: Investors Chronicle)
16 Apr 20. Kromek starts manufacturing medical ventilators. Sedgefield-based Kromek (KMK:20p), a radiation detection technology company focused on the medical, security screening and nuclear markets, has signed a licensing deal with Metran, a leading medical ventilator manufacturer in Japan, to support the fight against Covid-19. Kromek will commence production of medical ventilators before the end of April, producing 2,000 units within 12 weeks, for sale both in the UK and globally.
Given that the NHS alone needs another 8,000 ventilators to add to its current stock of 10,120, and there is an acute global shortage, then there is scope for the licensing deal to be expanded in due course. The global threat of Covid-19 will not pass until a vaccine is developed, and until then countries across the world are having to materially increase intensive care bed capacity and acquire medical ventilators. The deal is likely to prove a decent earner for Kromek – medical ventilators normally sell for around US$20,000 per unit – although the financial terms are confidential.
There is no issue with funding Kromek’s bumper order as the company had closing net cash of £7.7m at 31 October 2019, and was well on course to report second-half cash profit of £3.3m on revenue of £13.3m as it delivered on an estimated order book worth $90m. Moreover, with Kromek’s cadmium zinc telluride (CZT) cutting edge technology proving popular in state-of-the-art medical imaging systems, ‘dirty bomb’ detectors and border security screening at ports, airports and international rail terminals to counter terrorism risk, then demand from its core end markets remains robust.
Kromek’s share price is unchanged since I covered the first half results (‘Profit from terrorism and medical science’, 11 December 2019), during which time the FTSE Aim All-Share index has fallen by 18 per cent. There is considerable upside to my target price of 35p. Buy. (Source: Investors Chronicle)
15 Apr 20. AEgis Technologies’ Acquisition of EMRC Heli to Expand Autonomous Capability. Arlington Capital Partners’ (“Arlington”) portfolio company, AEgis Technologies Group (“AEgis”), an industry-leading Defense and National Security focused advanced engineering & technology firm serving space superiority, directed energy, missile defense, and intelligence communities, announces the acquisition of partner and sUAS manufacturer EMRC Heli (“EMRC”).
AEgis provides a wide spectrum of capabilities in the Directed Energy (DE) community including development and deployment of novel targets and instrumentation to characterize High Energy Laser (HEL) and High Power Microwave (HPM) DE weapon systems.
EMRC’s capabilities enhance AEgis’ DE mission area, accelerating the testing and fielding of DE weapon systems and expanding our UAS portfolio to support multi-mission sensor suites, swarm applications, and proxy warfare for the warfighter.
“The acquisition of EMRC Heli to the AEgis platform deepens our offering to our existing markets while enabling us to offer complete platform-to-payload solutions and rapidly integrate new advanced capabilities support to adjacent missions,” said Jonathan Moneymaker, CEO AEgis Technologies Group. “The recent advancements in our hybrid power units and multi-mission design allow these platforms to address the critical needs of our warfighters across a wide spectrum of ISR, Directed Energy, or even atmospheric phenomenology applications.”
Founded in 2010 by Tommy Whitaker, EMRC specializes in the design, rapid prototyping, manufacturing, integration, test, and support of multiple fixed and rotary-wing small Unmanned Aerial (sUAS) Platforms. EMRC will integrate into AEgis’ existing management structure with their platforms going to market horizontally through its various mission areas as well as direct to their existing customer base.
“I’m incredibly proud to join the AEgis team,” said Tommy Whitaker, EMRC Heli founder. “The cultural, technical, and overall strategic fit is perfect and allows us access to new customers, to accelerate our development, and resources to grow.”
The AEgis Technologies platform is Arlington’s newest National Security focused investment out of their $1.7B fifth fund. Arlington looks to accelerate AEgis’ thesis of “Leading the Transformation of Modern Warfare” through continued inorganic investment while also capitalizing the business to best serve their customers.
About the AEgis Technologies Group Inc.
The AEgis Technologies Group (AEgis) provides advanced engineering solutions across the space superiority, directed energy, missile defense, electronic warfare & cyber, C4ISR, and intelligence markets. The Company was founded in 1989 and has served its core customer base as a trusted partner for decades focused on solving the Defense and National Security Community’s hardest challenges. AEgis is an end-to-end lifecycle partner from R&D, through development, and into operations. We are the trusted provider leading the transformation for tomorrow’s multi-model and multi-domain warfare. https://aegistg.com/
About EMRC Heli
EMRC Heli provides Small Unmanned Aerial Systems (sUAS) to government and commercial customers including sUAS design, development, payload integration, and operational support services for fixed-wing and rotary-wing sUAS platforms. https://emergentrc.com/
About Arlington Capital Partners
Arlington Capital Partners is a Washington, DC-based private equity firm that is currently investing out of Arlington Capital Partners V, L.P., a $1.7bn fund. The firm has managed approximately $4.0bn of committed capital via five investment funds. Arlington is focused on middle market investment opportunities in growth industries including government services and technology, aerospace & defense, healthcare, and business services and software. The firm’s professionals and network have a unique combination of both operating and private equity experience that enables Arlington to be a value-added investor. Arlington invests in companies in partnership with high quality management teams that are motivated to establish and/or advance their Company’s position as leading competitors in their field. www.arlingtoncap.com (Source: PR Newswire)
16 Apr 20. KBR Closes Strategic Acquisition in Australia Further Enhancing Strong Organic Growth. KBR (NYSE: KBR) announced today that its Government Solutions Asia-Pacific (GS APAC) business has recently acquired over 15 new defense contracts from Australian company SMA.
The highly strategic SMA contract acquisition covers a range of projects around Australia and adds even more depth and strength to KBR’s successful technical training services with the Royal Australian Navy (RAN). KBR is now positioned as the leading provider of technical training to the RAN and well prepared to support the RAN’s commitment to upgrade its fleet across submarines, offshore patrol vessels and new frigates.
The GS APAC business had double digit organic growth in 2019 and is working toward continuing the momentum with 28 contract wins in Q1 — a combination of new awards and extensions — reflecting its strong reputation for trusted service and delivery excellence.
The majority of awards were from the Australian Department of Defence supporting the government’s investment in new military capabilities for the Australian Defence Force (ADF). These include major programs, some of which KBR has been engaged with for many years, such as the integrated soldier system support program for the Australian Army, sustainment engineering for the largest ships in the RAN, Mission IT solutions and support across the ADF, and workforce training for the Garrison Estate Management System project. KBR’s work as a ‘Major Service Provider’ to the Department of Defence also accounts for a significant portion of the awards for multiple Defence System Program Offices spanning land, sea, air and joint domains.
“KBR’s global Government Solutions business has enjoyed strong revenue performance, especially so in Australia where we have consistently delivered growth with healthy margins,” KBR President and CEO Stuart Bradie said. “The addition of SMA adds to our continued success in the region and winning new work and contract extensions further demonstrates our operational strength and mission focus even as we maneuver through these unprecedented and challenging times.”
13 Apr 20. Textron Inc. (NYSE: TXT) will hold its 2020 Annual Meeting of Shareholders virtually to comply with restrictions on in-person gatherings in effect in Rhode Island due to the coronavirus (COVID-19) pandemic, as well as to support the health and well-being of shareholders and company personnel. As previously announced, the Annual Meeting will be held on Wednesday, April 29, 2020 at 11 a.m. Eastern Time. Shareholders will not be able to attend the Annual Meeting in person.
As described in the proxy materials for the Annual Meeting previously distributed, shareholders as of the close of business on March 2, 2020, the record date, are entitled to participate in and vote at the meeting. To be admitted to the meeting at http://www.virtualshareholdermeeting.com/TXT2020, a shareholder must enter the 16-digit control number found on the proxy card, voting instruction form, notice of internet availability of proxy materials or email, as applicable, previously sent or made available to shareholders. Online access to the audio webcast will open 15 minutes prior to the start of the meeting.
The meeting’s virtual attendance format will provide shareholders the ability to participate and submit questions during the meeting. Shareholders may vote in advance of the meeting at www.proxyvote.com and may vote during the meeting by following the instructions available on the meeting website. Whether or not they plan to attend the meeting, we urge all shareholders to vote in advance of the meeting by using one of the methods described in the proxy materials. The proxy card or voting instruction form included with the previously distributed proxy materials (or notice of internet availability) will not be reissued and may continue to be used to vote your shares in connection with the meeting.
For additional information regarding how shareholders may attend, participate in and/or vote at the virtual meeting, please refer to the Company’s supplemental proxy materials filed today with the Securities and Exchange Commission.
09 Apr 20. Textron Inc. (NYSE: TXT) today announced that it will revise the date of its earnings release and conference call for the first quarter of 2020, originally scheduled for April 22, to April 30. The change is due to the potential disruptions of the COVID-19 pandemic on its workforce. Textron will also host a conference call at 8:00 a.m. (Eastern) to discuss the results and the company’s outlook. The call will be available via webcast at www.textron.com or by direct dial at (844) 721-7241 in the U.S. or (409) 207-6955 outside of the U.S.; Access Code: 4252363. In addition, the call will be recorded and available for playback beginning at 11:00 a.m. (Eastern) on Thursday, April 30, 2020 by dialing (402) 970-0847; Access Code: 1767619.
07 Apr 20. Covid-19: Austal signals strong 2020 despite pandemic impact. Australian shipbuilder Austal has said its business is largely unaffected by the Covid-19 pandemic. Strong forecasted revenues are partly attributed to its US business, which includes the ongoing programme to build Littoral Combat Ships (pictured) for the US Navy. Source: US Navy
Australian naval shipbuilder Austal has said its business activities remain “largely unaffected” by Covid-19 and that it is on track to register annual increases in revenue and earnings.
Austal said on 7 April that despite the ongoing pandemic it maintains previously issued guidance of fiscal year (FY) 2020 group revenues of “no less than” AUD1.9bn (USD1.2bn). Group earnings before interest and taxes (EBIT) in FY 2020 are expected to be “no less than” AUD110m, it added.
Compared to FY 2019, the figures represent increases of nearly 3% and 19% respectively. Austal said, “Operational and financial performance to date [is] largely unaffected by Covid-19.” It added, “Austal has a strong balance sheet, with a net cash position of AUD152.4m as of 31 December 2019.”
Commenting on the company’s financial position, Austal CEO David Singleton said the company’s “robust balance sheet combined with a strong, coronavirus-resilient order book and continued efficient operating performance means Austal has never been in a better position to weather these current challenges”.
Austal said its guidance for FY 2020 is underpinned by its “strong customer base”, with the vast majority of its AUD4.3bn order book attributed to military vessel programmes with the United States Navy (USN) and the government of Australia. For the USN, Austal is building – at its facilities in Mobile, Alabama – Independence-class Littoral Combat Ships (LCS) and Spearhead-class Expeditionary Fast Transport (EPF) vessels. From its shipyard in Western Australia, Austal is also building more than 20 patrol boats for Pacific Island countries under a contract awarded by the Australian government in 2016. Austal said that its defence shipbuilding operations in the US have been identified by the US government as “mission essential industries” and are continuing to operate during the Covid-19 outbreak. (Source: Jane’s)
14 Apr 20. Chemring (CHG) says the duration and impact of the Covid-19 pandemic across its home markets is as yet unknown, although its operations have been designated as critical in the US, UK and Norway. Net debt sits at £84m, comprising £33m of cash balances and £108m of drawings from its £150m committed revolving credit facilities (RCF). With net debt being 1.18 times cash profits (Ebitda), this is well within its financial covenant of being less than 3 times. The final 2.4p dividend declared for 2019 has been maintained and approved by shareholders and will be paid on 24 April. Buy. (Source: Investors Chronicle)
14 Apr 20. Ultra provides the following update in the light of the ongoing COVID-19 pandemic and Government mandated actions taken to mitigate its impact.
Response to COVID-19
Our first priority is to keep our employees as safe and healthy as possible. We are also required to continue to support our customers’ needs. Where possible, we have therefore enabled home working across the Group, and we have changed shop floor practices to meet recommendations on social distancing and employee protection. Our employees are showing great spirit and resilience. As a result of their exceptional efforts, all facilities remain open and productive, and there has been no significant disruption to product or programme delivery.
Trading in the first quarter of 2020 was broadly in line with our expectations with good underlying order book, revenue, profit and cash performance. Demand in our defence markets and most of our critical detection and control markets remains robust. Our supply chains are also proving generally stable, and we are working to mitigate and provide support as necessary where we see isolated issues. Production inefficiency associated with changing working patterns has so far been kept to a minimum. We also remain focused on driving transformation across Ultra and we made good progress on the key initiatives in the first quarter.
Whilst Ultra is currently operating broadly as normal, as a result of the rapidly changing environment caused by COVID-19 we have developed a response plan with detailed actions to mitigate any possible profitability, liquidity and cash flow challenges that may arise. Currently we do not see any material deterioration in trading that merits the need to initiate any of these actions. We are therefore continuing to invest in Ultra where we see opportunities to improve the long-term growth prospects for the business and remain focused on delivering our order book. We will continue to keep the situation under constant review.
Liquidity and balance sheet position
The liquidity of the Group is strong, with significant cash and access to our £300m Revolving Credit Facility (“RCF”), the majority of which is committed to November 2024, along with long-term committed Private Placement debt of £50m and $70m, as well as other smaller uncommitted short-term overdraft facilities. At 31 December 2019 the Group had committed liquidity available of £296.7m comprising cash of £82.2m and £214.5m of undrawn RCF. At 31 December 2019 the Group’s net debt (excluding IFRS 16) was £113.6m. The net debt to EBITDA covenant on our debt facilities is 3.00x (on a pre-IFRS16 covenant basis) and is tested on a rolling twelve-month basis at 30 June and 31 December. At 31 December 2019 our net debt to EBITDA was 0.86x (on a pre-IFRS 16 covenant basis) and further improved in the first quarter.
Full Year Dividend and 2020 Annual General Meeting
Ultra has an exciting strategy for value creation, is financially very robust and continues to trade broadly in line with expectations. The Board is, however, mindful of the uncertainty as to the duration and impact of further disruption from COVID-19. As a precautionary measure the Board has therefore decided to delay payment of its 2019 final dividend by withdrawing the proposed recommendation to pay a final 2019 dividend of 39.2 pence per share from the resolutions being put at the forthcoming AGM. Based on the Board’s current knowledge, it intends to pay an additional interim dividend of the same amount in the second half of 2020. The Board will keep this under review as the COVID-19 pandemic unfolds. The 2020 Annual General Meeting (“AGM”) will take place on 13 May 2020. The Notice of AGM and Form of Proxy will be made available on www.ultra.group and will be posted this week to those shareholders who have elected to receive hard copy communications.
As public gatherings of more than two people are currently prohibited, shareholders (other than two senior executives) will not be able to attend the meeting in person. Should the Government relax this requirement, or other measures be necessary, alternative arrangements will be considered. Shareholders will still be able to vote by proxy using the usual online and postal facilities. A poll will be taken on each of the resolutions put to the meeting and the results will be posted on the Company website.
Given the revised dividend arrangements described above, a resolution to approve a final dividend will not be put to Shareholders at the AGM.
06 Apr 20. Satellite Imagery and AI Tech Company Bird. i Acquired by Hanley Wood | Meyers Research. Hanley Wood | Meyers Research has acquired Bird.i, a Scotland-based company that combines the latest satellite imagery and artificial intelligence (AI) technology to provide valuable land and building insights. Bird.i’s imagery processing technology shows how things are changing on the ground, allowing for more timely, better informed decision-making throughout the building process, providing a competitive advantage for users. The Bird.i data platform will be available for Hanley Wood | Meyers Research customers this month, so its current clients can take advantage of real-time imagery. Additionally, Bird.i will be integrated in Metrostudy and Zonda – the respective data products of Hanley Wood and Meyers Research – later this year.
Satellite imagery is a major catalyst for the development of advanced capabilities that make it possible for builders, developers, contractors and more to accurately and securely obtain real-time data on land and construction changes.
The state-of-the-art data can be tailored to the unique needs of Hanley Wood | Meyers Research clients and can have an enormous impact in areas including land procurement, design, supply chain and more.
Hanley Wood | Meyers Research CEO, Jeff Meyersy, said merging Bird.i’s satellite imagery and insights derived from it with the company’s rich data on Zonda and Metrostudy, the firm will be powering the future of the housing industry. The company will be able to create incredible efficiencies and deliver new solutions for customers that are even faster and easier than ever before experienced.
Hanley Wood | Meyers Research COO, Andy Reid, commented, even small inaccuracies can affect future decision-making in the construction process, which is why the company truly understands the importance of leveraging Bird.i’s modern technology to track activity from the sky. The firm looks forward to building on the great work by Bird.i with its trailblazing data analytics platform evolving the company’s data and analytical research offerings.
Bird.i’s founder and CEO, Corentin Guillo, stated that Bird.i is pioneering the democratization of satellite imagery, and the insight it contains, with a strong focus on the construction sector. Joining forces with Hanley Wood | Meyers Research is a super exciting opportunity to take it to the housing market, driven by a visionary leadership team and a long-term growth ambition aligned with Bird.i’s original vision.
MidOcean Partners, a premier middle market private equity firm focused on the business services and consumer sectors, is the controlling shareholder of Hanley Wood | Meyers Research. (Source: Satnews)