22 May 20. Virgin sells $366m stake in Galactic space business. Money raised likely to fund group’s other businesses hit hard by coronavirus pandemic. The group’s airlines including Virgin Atlantic have been grounded due to the Covid-19 crisis. Sir Richard Branson’s Virgin Group has given up majority control of Virgin Galactic, selling $366m worth of shares in the space travel company to fund other Virgin businesses hit hard by the coronavirus pandemic. The group sold 25m shares in Virgin Galactic, the company announced on Friday, offloading a fifth of its stake in a sale that brings its holding below 50 per cent.
Virgin remains the largest shareholder with a 40 per cent stake, giving it a commanding say in running the business. The share sale was completed by Vieco 10, an investment vehicle controlled by the group. Virgin would use the money to “support its portfolio of global leisure, holiday and travel businesses that continue to be affected by the unprecedented impact of Covid-19”, the company said. The group’s airlines are expected to receive the lion’s share of the proceeds. Virgin Atlantic and Virgin Australia have faced pressure on revenues as passenger aircraft around the world have been grounded due to the pandemic.
Virgin Atlantic has asked for up to £500m in loans and guarantees from the UK government. Virgin Australia was placed into administration in April after its request for a bailout worth A$1.4bn ($886m) was rebuffed by the Australian government. Sir Richard said he might mortgage Necker Island, his home in the British Virgin Islands, as a result of the pressure on the billionaire to use his personal fortune to support the struggling businesses Other beneficiaries from the share sale are expected to include Virgin Voyages, the group’s cruise business, and Virgin Active gyms. The company is also set to earmark a portion of the proceeds for Virgin Orbit, its satellite business, which is planning its first test launch this weekend.
The sale comes after Virgin filed to sell up to half its stake in Virgin Galactic earlier this month. Virgin Galactic listed on the US stock market last year by combining with an acquisition vehicle led by Chamath Palihapitiya, a former Facebook executive. The deal valued the company at $2.3bn when it listed, which has increased to $3.4bn. The company has flown crew to the edge of space but has yet to send any of the 600 customers that have signed up to fly. (Source: FT.com)
21 May 20. Héroux-Devtek Reports Fourth Quarter and Fiscal 2020 Year-End Financial Results.
- Sales of $166.8m, up 5.6% from $157.9m last year
- Operating loss of $64.4m resulting from non-cash impairment charges of $85.8 m
- Adjusted operating income1 of $17.6m, up from $16.2m last year
- Adjusted EBITDA1 of 28.6m, or 17.2% of sales, up from $25.9m or 16.4% last year
- Solid cash flows related to operating activities of $26.7m
- Funded backlog of $810 m, two thirds of which is comprised of defence orders
- All facilities remain open, and Héroux-Devtek has available liquidity of $193m
Héroux-Devtek Inc. (TSX: HRX) (“Héroux-Devtek” or the “Corporation”), a leading international manufacturer of aerospace products and the world’s third-largest landing gear manufacturer, today reported its financial results for the fourth quarter and fiscal year ended March 31, 2020. Unless otherwise indicated, all amounts are in Canadian dollars.
“I am pleased with our strong operational and financial performance this year and I want to thank our teams around the world for these great results. Today, our industry is facing a high degree of uncertainty as to the length and severity of the ongoing pandemic and its impact on the commercial aerospace industry. Given these unprecedented circumstances, we took swift action at various levels to ensure our ability to carry on safely with our production activities across all Héroux-Devtek sites. We made adjustments to our capacity to meet the new production rates in the commercial market and secured enhanced financial flexibility to support our activities for the long term,” said Martin Brassard, President and CEO of Héroux-Devtek.
“We believe we are in good position to weather the storm and eventually emerge as a well-positioned organization. First, we can count on a strong backlog of $810 m, two thirds of which is comprised of orders for the defence sector. Second, Héroux-Devtek is in a solid financial position, with $193 m of available liquidity at yearend and no significant capital repayments due on our debt until the end of 2024. Last but not least, we can count on a highly dedicated team of employees in Canada, Europe and the USA, who have already demonstrated their impressive resilience under these challenging circumstances,” concluded Mr. Brassard.
FOURTH QUARTER RESULTS
Consolidated sales grew 5.6% to $166.8m, up from $157.9 m last year, including a 0.4% organic growth and a contribution of $8.1 m by the Corporation’s recent acquisitions. Commercial sales decreased 7.8% from $78.0m to $72.0m, while defence sales were up 18.7%, from $79.9 m to $94.8m. The net impact of foreign exchange fluctuations was negligible for the quarter ended March 31, 2020.
The decrease in gross profit from 18.8% to 17.9% for the quarter compared to the same period last fiscal year was mainly driven by inefficiencies and delayed deliveries brought on by the impact of COVID-19.
We recorded an operating loss of $64.4m, mainly due to a $79.7m non-cash goodwill impairment charge accounted for in the fourth quarter resulting from the significant reduction in expected demand for commercial aerospace products caused by the ongoing COVID-19 pandemic. Excluding non-recurring items, operating income would have been $17.6m, representing 10.5% percent of sales, an increase of 0.2% when compared to the fourth quarter of Fiscal 2019.
Adjusted EBITDA, which excludes non-recurring items, stood at $28.6m, or 17.2% of sales, compared with $25.9m, or 16.4% of sales, a year ago.
Results per share decreased from earnings of $0.34 last year to a loss of $1.98, mainly due to the non-cash impairment charges of $85.8m recorded in Q4. Adjusted EPS grew 5.6% in the fourth quarter, from $0.36 last year to $0.38.
Consolidated sales grew 26.7% to $613.0 m, up from $483.9m for the corresponding period last year. Commercial sales grew 20.1% in Fiscal 2020, from $236.3m to $283.7m, while defence sales were up 33.0% in Fiscal 2020, from $247.6 m to $329.3m, driven mainly by acquisitions and a 12.2% organic growth.
Gross profit as a percentage of sales decreased from 17.2% to 16.8% over the twelve-month period due to inefficiencies and delayed deliveries resulting from COVID-19, as well as by higher manufacturing costs at our Longueuil facility in the first six months of the year. The net impact of foreign exchange fluctuations was negligible for the twelve-month period ended March 31, 2020.
In Fiscal 2020, the Company recorded an operating loss of $30.1m, due to a $79.7m non-cash goodwill impairment charge recorded in Q4 as a result of the significant reduction in expected demand for commercial aerospace products driven by the ongoing COVID-19 pandemic. Excluding non-recurring items, the operating income as a percentage of sales remained stable at 8.6% compared to the prior year.
Adjusted EBITDA, which excludes non-recurring items, stood at $96.2 m, or 15.7% of sales, compared with $74.2m, or 15.3% of sales last year.
In Fiscal 2020, results per share decreased from earnings of $0.73 last year to a loss of $1.38 due to the same factors as for the operating income, while adjusted EPS grew to $1.00, up 19.0% from the $0.84 recorded last year.
On April 7, 2020, management announced its decision to withdraw Fiscal 2022 sales guidance given the uncertainty related to the duration and extent of the impact of the ongoing COVID-19 pandemic on the aerospace industry and on the Corporation’s activities.
Due to the unprecedented uncertainty brought by the pandemic, management is not providing any financial guidance for Fiscal 2021.
Cash flows related to operating activities reached $26.7 m in the fourth quarter, down from $36.9 m last year. For the twelve-month period, cash flows related to operating activities amounted to $52.6 m, down from $70.0m for the prior year. Both decreases result from investments in inventory related to organic growth in defence programs, as well as from the impact of foreign exchange fluctuations.
As at March 31, 2020, net debt stood at $246.9m, up from $243.0m as at April 1, 20191. The increase in long-term debt during the twelve-month period is mainly related to the Alta acquisition partially offset by the fiscal year’s cash flow generation.
In April 2020, subsequently to the end of the fourth quarter, the Corporation drew $60m on its credit facilities, comprised of $45m on the Revolving Facility and $15m on the Term Loan Facility. These drawings were made as a precaution for potential liquidity requirements related to the COVID-19 pandemic. (Source: PR Newswire)
21 May 20. Cohort (CHRT) expects earnings for the year to 30 April to be in line with expectations, benefitting from a lower tax charge. Revenue is guided to be 10 per cent higher at £133m with an 11 per cent increase in adjusted operating profit to £18m. Net debt is set to fall to £5m versus £6.4m a year earlier, equivalent to less than 0.3 times cash profits (Ebitda). The closing order book is worth £186m, giving visibility on 60 per cent of revenue for its 2021 financial year. The Covid-19 pandemic has restricted access to customer premises and clients’ ability to place new orders. But the Ministry of Defence has accelerated payments to suppliers. Cohort currently expects trading for the year to 30 April 2021 to be in line with 2020. (Source: Investors Chronicle)
21 May 20. Profit from Kape’s chart break-out. Aim-traded shares in Kape Technologies (KAPE:208.5p), a provider of cyber security software, have smashed through my 200p target price after doubling in value since I last suggested buying, at 100p, two months ago (‘Three buying opportunities’, 18 March 2020). I first recommended buying, at 47.9p, in my 2017 Bargain Shares portfolio, so long-term holders have more than quadrupled their money. The re-rating is fully justified as this morning’s trading update highlights.
Firstly, home working and remote working restrictions imposed on billions of people across the globe due to the Covid-19 pandemic has led to increased adoption of Kape’s cyber security software (which protects data security and privacy against piracy and phishing attacks). . Moreover, management report that demand for virtual private network (VPN) solutions that encrypt and secure internet connections has been rising notably in both North America and Europe, regions which account for almost three quarters of Kape’s annual revenue. Indeed, new monthly sign ups increased by 19 per cent last month within the digital privacy segment
Secondly, even before the lockdown restrictions, industry experts were predicting that the digital privacy market would grow by 50 per cent by 2022, thus providing a strong tailwind to Kape’s business. It’s a safe bet to assume that growth rates will be even higher now as hundreds of millions of internet users try to protect themselves from the marked increase in cyber and phishing attacks. The data security breach of 9m online customer accounts at budget airline EasyJet (EZJ) this week highlights the need for both companies and consumers to be extra vigilant.
Thirdly, there is scope for earnings upgrades driven by ongoing organic growth and by successfully marketing new products and cross selling existing ones to a significantly enlarged customer base following the acquisition of Colorado-based Private Internet Access, a leading provider of VPN solutions.
Fourthly, management reiterated guidance which points to underlying pre-tax profit trebling to $31.4m, and earnings per share (EPS) almost doubling to 13.4¢ (11p). Bumper operating cash flow should cut net borrowings by 38 per cent to $20m by year-end which means a higher level of economic interest in the company for shareholders. Kape has also completed a recent debt refinancing that has reduced interest charges in half.
Fifthly, the shares registered an important triple top chart break-out when they smashed through the 200p resistance level into blue sky territory. On a 2020 price/earnings (PE) ratio of 18.8, and with potential to deliver double-digit EPS growth in 2021 and beyond, I lift my target price to 275p. Buy. (Source: Investors Chronicle)
21 May 20. QinetiQ sees orders soar. Defence technology group QinetiQ (QQ.) secured its largest order intake in nearly a decade in the year to 31 March. On the back of £168m of orders under its engineering delivery partner framework contract, total orders jumped by a quarter to £972m, excluding amendments to long-term partnering agreements with the Ministry of Defence.
Statutory operating profit only rose 2 per cent to £118m, held back by a £14m goodwill impairment on its advisory services and German aircraft operations. However, organic revenue growth of 10 per cent was driven by a double-digit increase in the larger Europe Middle East and Australasia services division.
Qinetiq (QQ.) saw an 18 per cent increase in revenue to £1.1bn for the year ending 31 March with 10 per cent organic growth. Underlying operating profit rose 7 per cent to £133m. Orders for the year increased by almost a fifth to £972m, benefitting from £168m of orders under the engineering delivery partner framework contract in the ‘Europe, Middle East and Africa’ (EMEA) services division. The group finished the year with £85m of net cash, down from £161m a year earlier. A decision on the final dividend has been postponed. The impact of Covid-19 has been limited on the EMEA services due to the critical nature of its work that is underpinned by long-term contracts. But the shorter-cycle products business is being affected by travel restrictions and social distancing.
The £90m spent on the Manufacturing Techniques and Newman & Spurr Consultancy acquisitions meant net cash almost halved to £85m, offsetting strong free cashflow generation. As previously announced, a decision on the final dividend has been deferred.
House broker Numis expects adjusted pre-tax profit of £125m and EPS of 18.8p in 2021, down from £132m and 20p in 2020.
Disruption from Covid-19 has been limited and weighted towards the shorter-cycle products division. Looking ahead, global defence spending could come under pressure as countries prioritise investment elsewhere. Yet the same geopolitical threats will exist post-pandemic, perhaps even more so given rising US-China tensions. QinetiQ believes budget constraints could shift defence procurement to the more mission-led projects it serves. As the group increases exposure to international defence markets, in particular the US, the outlook remains promising. Buy. Last IC view: Buy, 339p, 14 Nov 2019. (Source: Investors Chronicle)
19 May 20. Adaptas Solutions Completes Acquisition of Applied Kilovolts and Analytical Instrumentation Business from L3Harris Technologies. Acquisition to expand global footprint, enhance product development and broaden Adaptas’ scientific instrument industry leadership position
Adaptas Solutions, LLC, a leader in mass spectrometry and analytical instrument contract design and manufacturing, completed the previously announced acquisition of L3Harris Technologies’ (NYSE: LHX) Applied Kilovolts and Analytical Instrumentation business.
“We are excited to complete the addition of these highly strategic assets which immediately expand our mass spectrometer component offerings and further establish Adaptas as a leading provider of components, subassemblies, and contract manufacturing to the global analytical instrumentation market,” said Jay Ray, President and CEO of Adaptas Solutions. “With the CeraMAXTM and Applied Kilovolts business units now a part of Adaptas, we look forward to continuing our commitment to driving market-leading innovation in the mass spectrometry market and to begin leveraging our new manufacturing presence in Europe to best support global OEM customers.”
This acquisition further enhances Adaptas’ manufacturing and engineering resources, allowing Adaptas to accelerate OEM client development projects while offering the industry’s broadest range of next generation mass spectrometer detection solutions. Adaptas Solutions is a portfolio company of Ampersand Capital Partners. Financial terms of the acquisition were not disclosed. (Source: PR Newswire)
19 May 20. Avon Rubber (AVON) saw revenue increase by 9.7 per cent at constant currencies to £94.7m in the six months to 31 March. Adjusted pre-tax profit jumped by more than a third to £14.7m, benefitting from the acquisition of 3M’s (US:MMM) ballistic protection business. The purchase has almost doubled the size of the order book for the group’s protection division to £111m. On a statutory basis, pre-tax profit halved to £1.7m thanks to higher administrative costs and depreciation and amortisation charges. Still, the group has hiked its interim dividend by 30 per cent to 9.02p. With only minor disruption from Covid-19 to the protection and ‘milkrite’ businesses, Avon Rubber is confident of meeting expectations for the current financial year. Buy. (Source: Investors Chronicle)
19 May 20. Elbit Systems Ltd. (NASDAQ: ESLT and TASE: ESLT) (“Elbit Systems”) announced today that Charlesbank Technology Opportunities Fund, a fund managed by Charlesbank Capital Partners (“Charlesbank”), invested approximately $70m Elbit Systems’ Israeli subsidiary, Cyberbit Ltd. (“Cyberbit”), of which approximately $22m was invested in Cyberbit and approximately $48m was paid in consideration of a portion of Elbit Systems’ shares in Cyberbit. As a result of the investment and sale of equity holdings, Elbit Systems became a minority shareholder in Cyberbit. Claridge Israel L.P., an existing shareholder of Cuberbit, which invested $30m in Cyberbit in June 2018, also participated in this round of investment. Cyberbit is engaged in commercial training systems for cybersecurity teams.
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: “Preparing the human element for cyber-attacks is one of the most acute cybersecurity challenges. The investment of Charlesbank in Cyberbit is a recognition of Cyberbit’s market-leading position and the growth potential of Cyberbit’s training platform – the Cyber Range. I am confident that this investment will allow Cyberbit to realize its full growth potential.”
12 May 20. Musk Has No Interest in OneWeb and Phasor Enters Bankruptcy. Chris Forrester has posted a story at the Advanced Television infosite that the widespread reports last week suggested that Elon Musk’s SpaceX had conducted an examination of OneWeb’s assets, which is currently in Chapter 11 bankruptcy liquidation.
Elon Musk, in a Tweet, has denied those reports, saying, “Not SpaceX”
SpaceX’s apparent lack of interest still leaves a group of powerful players with interest in the OneWeb assets including Amazon, Cerebus Capital, Eutelsat (+French/EU interests) as well as two unspecified Chinese companies.
Final bids along with deposits have to be tabled by June 26th and an auction is currently scheduled for July 2nd, unless firm sales are achieved prior to this event.
Chris also filed a report that Phasor Solutions, a designer of special flat-panel satellite antennas, has entered bankruptcy.
Phasor is Virginia and London-based and is a specialist supplier of flat electronically steered antennas for use on aircraft, maritime, trains and military vehicles. Phasor In. owns the UK business. The CEO is David Helfgott, formerly of Inmarsat, SES and Cobham.
A UK administrator was appointed on April 24th. A formal charge (debenture) was placed on the business on March 6 by Glas Trust Corp Ltd. as the security trustee. The charge covers patents, trademarks, designs, etc., and has Power of Attorney over the business. It is being reported that the company’s assets will shortly be put up for sale.
A statement from Mr. Helfgott reads, “Phasor was at a very late stage of completing an investment round with a large corporate/strategic investor. The COVID19 pandemic and its effects on global capital markets put the process on hold. Phasor was in the process of reorganizing its operations and finances, but creditors initiated UK administration of its UK subsidiary. Duff & Phelps, as administrator, is conducting an ongoing sale process of the UK subsidiary company.” (Source: Satnews)