28 May 20. S&P cuts Rolls-Royce credit rating to junk on COVID-19 hit. Ratings agency Standard & Poor’s cut engine maker Rolls-Royce’s (RR.L) credit rating to junk on Thursday, citing the disruption caused to global air travel from the COVID-19 pandemic.
S&P cut its rating for the British company to “BB” from “BBB-“, below investment-grade.
“Actions to contain the pandemic, including government-imposed social-distancing measures, travel restrictions, and stay-at-home orders, have suddenly and sharply reduced global demand for air travel,” S&P said in a statement.
In response, Rolls-Royce said it had taken swift action to boost its liquidity and cut costs to deal with the short-term impact of the health crisis.
“While it is disappointing to lose our investment grade rating with S&P, none of our borrowing facilities contain covenants or credit rating triggers that demand early repayment nor do any of our contracts with airlines,” the company said in a statement. (Source: Reuters)
26 May 20. Elbit Systems Ltd. (NASDAQ: ESLT and TASE: ESLT), (the “Company”) the international high technology company, reported today its consolidated results for the quarter ended March 31, 2020.
Bezhalel (Butzi) Machlis, President and CEO of Elbit Systems, commented: “In the first quarter we witnessed positive momentum across our markets, receiving more than $1.8bn in orders from customers around the world. These orders contributed to a record backlog of $10.8bn, growing by 8% over the last quarter of 2019, and providing Elbit Systems with good revenue visibility.
As a result of the COVID-19 pandemic, since March we have made significant changes to the way we work in order to protect the health and safety of our employees around the world, while at the same time maintaining business continuity in order to deliver our products and services to our customers as planned. This includes utilizing our healthy balance sheet to secure our supply channels and maintaining adequate levels of inventory to enable us to continue deliveries to customers.”
First Quarter 2020 Results:
Revenues in the first quarter of 2020 were $1,071.2m, as compared to $1,021.7m in the first quarter of 2019.
Non-GAAP (*) gross profit amounted to $295.4m (27.6% of revenues) in the first quarter of 2020, as compared to $283.4m (27.7% of revenues) in the first quarter of 2019. GAAP gross profit in the first quarter of 2020 was $289.4m (27.0% of revenues), as compared to $277.6m (27.2% of revenues) in the first quarter of 2019.
Research and development expenses, net were $80.4m (7.5% of revenues) in the first quarter of 2020, as compared to $77.4m (7.6% of revenues) in the first quarter of 2019.
Marketing and selling expenses, net were $70.5m (6.6% of revenues) in the first quarter of 2020, as compared to $71.8m (7.0% of revenues) in the first quarter of 2019.
General and administrative expenses, net were $58.0m (5.4% of revenues) in the first quarter of 2020, as compared to $53.6m (5.2% of revenues) in the first quarter of 2019.
Other operating income, net in the first quarter of 2019 was $1.2m, due to a gain resulting from an investment and remeasurement of the Company in a subsidiary.
Non-GAAP(*) operating income was $90.4m (8.4% of revenues) in the first quarter of 2020, as compared to $84.0m (8.2% of revenues) in the first quarter of 2019. GAAP operating income in the first quarter of 2020 was $80.4m (7.5% of revenues), as compared to $76.0m (7.4% of revenues) in the first quarter of 2019.
Financial expenses, net were $12.5m in the first quarter of 2020, as compared to $13.9m in the first quarter of 2019.
Other income, net in the first quarter of 2020 was $1.2m, as compared to other expenses of $3.4m in the first quarter of 2019. Other income in the first quarter of 2020 includes income of approximately $3.2m as a result of revaluation of an investment in a subsidiary accounted for under the fair value method.
Taxes on income were $8.7m (effective tax rate of 12.6%) in the first quarter of 2020, as compared to $10.1m (effective tax rate of 17.2%) in the first quarter of 2019.
Equity in net earnings of affiliated companies and partnerships was $3.1m (0.3% of revenues) in the first quarter of 2020, as compared to $2.2m (0.2% of revenues) in the first quarter of 2019.
Net income attributable to non-controlling interests in the first quarter of 2019 was $0.4m.
Non-GAAP(*) net income attributable to the Company’s shareholders in the first quarter of 2020 was $72.0m (6.7% of revenues), as compared to $65.8m (6.4% of revenues) in the first quarter of 2019. GAAP net income attributable to the Company’s shareholders in the first quarter of 2020 was $63.6m (5.9% of revenues), as compared to $50.5m (4.9% of revenues) in the first quarter of 2019.
Non-GAAP(*) diluted net earnings per share attributable to the Company’s shareholders were $1.63 for the first quarter of 2020, as compared to $1.54 for the first quarter of 2019. GAAP diluted earnings per share in the first quarter of 2020 were $1.44, as compared to $1.18 for the first quarter of 2019.
The Company’s backlog of orders as of March 31, 2020 totaled $10,790m, as compared to $9,658m as of March 31, 2019. Approximately 63% of the current backlog is attributable to orders from outside Israel. Approximately 59% of the current backlog is scheduled to be performed during 2020 and 2021.
Operating cash flow used in the three months ended March 31, 2020 was $9.9m, as compared to operating cash flow generated in the three months ended March 31, 2019 in the amount of $46.5m.
25 May 20. Rolls-Royce increases price-cuts pressure on suppliers. Big equipment makers turn to strained supply chain for savings. The timing of Rolls-Royce’s demands has sparked outrage in the UK supply chain. Rolls-Royce is threatening to withdraw “support” from suppliers who do not agree to price cuts of up to 15 per cent, heightening pressure on a supply chain facing a cash crunch as a result of the abrupt drop in demand amid the pandemic. The British aero-engine maker this month wrote to many of its 700 global aerospace suppliers to demand price cuts of between 5 and 15 per cent, even as it slashes orders to adjust to reduced demand.
The letter came days before Rolls-Royce on Thursday announced plans to axe 9,000 jobs — shrinking its global workforce by 17 per cent and its civil aerospace business by a third. The company, which spends £7bn a year with suppliers, is not the only leading aerospace manufacturer turning to the supply chain for savings as the industry reels from the collapse in global aviation. Roland Berger, the management consultancy, estimates demand for new aircraft could drop as much as 50 per cent by 2028. Safran, the French aero-engine maker, has invoked a “force majeure” clause with several suppliers, which allows it to stop taking deliveries even if goods are in the process of being manufactured. Others are pushing orders into next year or delaying payments, according to several suppliers. The timing of the demands has sparked outrage in the UK supply chain, coming as many suppliers are facing a cash shortage with bills arriving for materials requested in better times, while orders have collapsed. “The unknown has caused people to overreact and try to protect their cash position,” said one supplier to the big aircraft and aero-engine manufacturers. “We have got goods to go and they won’t take them.” A cut in pricing could push many companies into bankruptcy, according to Andrew Mair, head of the Midlands Aerospace Alliance, which brings together big and small companies in one of the world’s largest aerospace clusters. Several of his members have complained about the pressure from the big equipment makers, he said.
It seems illogical and damaging to push for reduced prices right now . . . It will simply aggravate disruption in their supply chains if companies go out of business Andrew Mair, Midlands Aerospace Alliance “It seems illogical and damaging to push for reduced prices right now, on top of rapid rate reductions,” he said. “It will simply aggravate disruption in their supply chains if companies go out of business.” Suppliers have presented a dossier on the actions being taken by the big companies to the business department, according to people with knowledge of the situation. They are particularly frustrated that during meetings with ministers and officials, the aircraft and equipment makers demanding price cuts have voiced concerns over the financial health of UK suppliers and stressed the need to support the supply chain. The majority of companies in the UK aerospace industry — which generates sales of £35bn a year — are small enterprises with scant cash resources and fewer than 10 staff. “The big platform makers and tier ones [biggest suppliers] are pushing hard to renegotiate contracts and pricing,” said one large supplier. “As you go down the supply chain the ability to deal with that gets harder and the ability to push back weaker.” Some suppliers have refused to countenance cutting prices when they have only recently taken on debt to expand facilities at the request of customers who are now slashing orders. “The one thing we won’t do is negotiate on price right now,” said one supplier. “We would be mortgaging the next 10 years.” Both Safran and Rolls-Royce said they had no choice but to reduce costs in the current climate. “Now more than ever we need a competitive supply chain,” said Warrick Matthews, Rolls-Royce’s chief procurement officer for the civil aerospace division. “We will reward . . . those who will work with us to help us take cost down with more business.” Mr Matthews said Rolls-Royce would work with suppliers by increasing orders for certain low volume parts if that reduced costs. Safran said it would “negotiate on a case-by-case basis to minimise the impact as much as possible. But the reduction is structural and the supply chain will have to adapt.” Mr Matthews said the letters demanding price cuts had not been sent to the biggest suppliers, or to those deemed to be financially most at risk. The group was financially supporting those it deemed to be critical to its production, he said. (Source: FT.com)
22 May 20. CAE reports fourth quarter and full fiscal year 2020 results.
- Strong annual performance despite COVID-19 impact in Q4
- Annual revenue up 10% to $3.6bn
- Annual segment operating income of $537.1m ($590.4m before specific items) up 12% vs. $480.6m in prior year (up 21% vs. $487.4m before specific items)
- Annual EPS of $1.16 ($1.34 before specific items) vs. $1.23 (up 7% vs. $1.25 before specific items) in prior year
- Q4 revenue down 4% to $977.3m
- Q4 segment operating income of $146.5m ($193.9m before specific items) down 14% vs. $170.4m in prior year (up 9% vs. $177.2m before specific items)
- Q4 EPS of $0.29 ($0.46 before specific items) vs. $0.46 ($0.48 before specific items) in prior year
- $3.8bn annual order intake, including 49 Civil FFSs, and $9.5bn order backlog
- Annual free cash flow of $351.2m for 98% cash conversion
- CAE Air1 ventilator in final stages of certification by health authorities
CAE (NYSE: CAE) (TSX: CAE) today reported strong annual performance despite the COVID-19 impact during its fourth quarter of fiscal year 2020. Annual revenue was $3.6bn, up 10% over the prior year. Annual segment operating income was $537.1m compared to $480.6m in fiscal year 2019. Annual segment operating income before specific items was $590.4m, up 21% compared to $487.4m in the prior year. Annual net income attributable to equity holders was $311.4m ($1.16 per share) compared to $330.0m ($1.23 per share) in fiscal year 2019. Net income before specific items was $359.7m ($1.34 per share) this year, compared to $335.2m ($1.25 per share) last year, which represents a 7% EPS increase over the same period last year.
Fourth quarter fiscal 2020 revenue was $977.3m, down 4% from the fourth quarter last year. Fourth quarter net income attributable to equity holders was $78.4m ($0.29 per share) compared to $122.3m ($0.46 per share) last year. Net income before specific items in the fourth quarter was $122.3m ($0.46 per share), compared to $127.5m ($0.48 per share) last year. All financial information is in Canadian dollars.
“While leading CAE toward what would have been another record year, the COVID-19 pandemic hit us in our fourth quarter. Our first response was to ensure the health and safety of our employees and customers, and this continues to be our top priority. I am extremely proud of CAE’s employees worldwide, who daily, through even the most extreme conditions, take to heart the continuity of our customers’ critical operations, and earn the privilege of being their training partner of choice,” said Marc Parent, CAE’s President and Chief Executive Officer. “Our employees went beyond the call of duty in the fight against COVID-19 by bringing forward the idea to develop a critical care ventilator. It took just 11 days for 12 CAE engineers and scientists to develop a prototype, and now more than 500 of our employees are delivering on a contract with the Government of Canada to manufacture 10,000 ventilators to help save lives. The CAE Air1 ventilator is in the final stages of certification by health authorities. This is a true testament to the social impact CAE and its employees have, and it underscores the Company’s culture of innovation.”
Marc Parent added, “Turning to our results, notwithstanding the impact of COVID-19 headwinds on what is typically our best quarter of the year, we achieved strong performance overall in fiscal 2020, with double-digit revenue growth, 21% operating income growth, and 7% higher earnings per share. I am especially pleased with our 98% conversion of net income to free cash flow, which underscores the cash-generative profile of CAE’s world-leading training solutions. In Civil, we exceeded our annual outlook with 37% higher operating income, and annual orders totaling $2.5bn, including additional airline training outsourcings and 49 full-flight simulator sales. In Defence, we anticipated a strong fourth quarter to reach our annual outlook for modest growth. While we achieved this on revenue, we came up short on operating income which was down 13%, mainly on lower than expected progress on program milestones and delays in securing new orders in the face of the COVID-19 pandemic. We booked $1.2bn of defence orders during the year, for a $4.1bn Defence backlog, which provides CAE with a good measure of diversification. And in Healthcare, we were on track for double-digit annual revenue growth until the last quarter, where it too was negatively affected by COVID-19, as medical and nursing school customers went into lockdowns, and hospital customers focused their attention on the healthcare crisis.”
The COVID-19 pandemic is a crisis of unprecedented speed and magnitude with respect to the disruption it has caused to daily life. The global air transportation environment and air passenger travel have been especially impacted, and CAE has seen a material disruption to its operations. CAE has implemented several flexible measures to protect the Company’s financial position and preserve liquidity, including the reduction of capital expenditures and R&D investments in fiscal 2021, strict cost containment measures, salary freezes, salary reductions, reduced work weeks and temporary layoffs, as well as a suspension of the common share dividend and share repurchase plan. CAE is a global leader, and the long-term outlook for the Company remains highly compelling, with increased potential for long-term partnerships and outsourcings, and the resumption of above-market rates of growth. In the short-term; however, the Company expects the pandemic to have a significantly negative impact on performance.
Marc Parent on CAE’s outlook, “As we look to the fiscal year ahead, we believe it will be a tale of two halves, with the first-half of the year marked by sharply lower demand and major disruptions to our operations, and the second-half, slightly more positive as markets potentially begin to reopen and travel restrictions ease. For the year overall, we expect a material decrease in operational and financial performance. Much uncertainty persists with respect to the duration and severity of the market downturn, and while COVID-19 may not have been foreseeable, our business is resilient by design. We entered this pandemic from a position of strength, with a global leading market position, a balanced business with recurring revenue streams, and a solid financial position. We have taken decisive yet flexible actions to help protect our people and operations over the short-term and to give us the necessary agility to resume long-term growth when global air travel eventually returns. We realize that it may be some time before things get back to normal, and based on our scenario analysis, we have the liquidity to weather the storm with upwards of $2bn in cash and available credit. CAE is a highly innovative company with over seven decades of industry firsts under its belt. At the same time as we manage through the pandemic, we are focused on the future, and I expect we will ultimately be stronger for it.”
Civil Aviation Training Solutions (Civil)
The COVID-19 pandemic began to negatively impact Civil training revenues during the last quarter, with significantly lower than usual training utilization, especially in March, resulting from lower customer demand and government restrictions including travel bans, border restrictions, lockdown protocols and self-isolation measures that forced temporary closures and disruptions to Civil operations worldwide. During the month of March 2020, approximately one-third of Civil training locations worldwide suspended operations, and several of those remaining open, operated at significantly reduced capacity. In addition to the disruptions to Civil’s training centre network, Civil was also required to suspend the installation and delivery of simulator products to its customers worldwide.
Fourth quarter Civil revenue was $601.9m, which is stable compared to the same quarter last year, and segment operating income was $151.5m (25.2% of revenue) compared to $115.5m (19.5% of revenue) in the fourth quarter last year. Fourth quarter Civil segment operating income before specific items was $153.6m (25.5% of revenue), up 26% compared to the fourth quarter last year. Fourth quarter Civil training centre utilization was 67%.
Annual Civil revenue was $2.2bn, up 16% compared to last year, and segment operating income was $473.3m (21.8% of revenue). Annual segment operating income before specific items was $479.4m (22.1% of revenue) this year and $351.1m (18.7% of revenue) last year, representing a 37% increase. Annual Civil training centre utilization was 70%.
During the quarter, Civil signed training solutions contracts valued at $468.6m, including long-term training services agreements and the sale of 12 full-flight simulators (FFSs). For the year, Civil booked orders for $2.5bn, demonstrating CAE’s continued momentum as the training partner of choice for airlines, business jet operators and pilots worldwide. These included 49 FFS sales and comprehensive, long-term training agreements with airlines including LATAM, JetSmart Airlines, and Sunwing Airlines. In business aviation, Civil won long-term training contracts with customers worldwide, including TAG Aviation Holdings, JetSuite, Solairus Aviation, and Flightworks Inc.
The Civil book-to-sales ratio was 0.78x for the quarter and 1.14x for the last 12 months. The Civil backlog at the end of the year was a record $5.3bn, which is up 6% from the prior year period.
Defence and Security (Defence)
The COVID-19 pandemic contributed to delays in the execution of programs from backlog and in order intake. A range of Defence programs involving government and OEM customers globally experienced delays due to travel bans, border restrictions, client access restrictions and supply chain disruptions. While some of the required progress and acceptance testing continued with virtual meetings and remote work procedures, delays impacted the attainment of key program milestones. In addition, there have been delays in the award of new contracts, as government acquisition authorities follow directives in their respective countries to shelter-in-place and eliminate travel. These delays impacted Defence order intake during the fourth quarter.
Fourth quarter Defence revenue was $341.8m, down 12% compared to the same quarter last year and segment operating income was $32.4m (9.5% of revenue) compared to $50.7m (13.1% of revenue) in the fourth quarter last year. Fourth quarter Defence segment operating income before specific items was $40.2m (11.8% of revenue), down 21% compared to the fourth quarter last year. Annual Defence revenue was $1,331.2m, up 2% over last year, and annual segment operating income was $104.8m (7.9% of revenue). Annual segment operating income before specific items was $114.5m (8.6% of revenue), down 13% compared to last year.
During the quarter, Defence booked orders for $276.6m. Notable wins include a contract with Leonardo to provide M346 training devices and upgrades, with BAE Systems to provide the CAE Medallion MR e-Series visual system to undisclosed customers, and with Babcock France to provide an additional Pilatus PC-21 full-mission simulator to support pilot training for the French Air Force.
For the year, Defence booked $1.2bn in orders including a contract with Lockheed Martin to support the design and manufacture of additional C-130J simulators and training devices for the U.S. Air Force and U.S. Marine Corps. Defence also won contracts to continue providing KC-135 aircrew training services as well as perform a range of simulator upgrades and modifications on KC-135 training devices for the U.S. Air Force, and a contract with the NATO Support and Procurement Agency to provide the German Navy with a comprehensive training solution for the NH90 Sea Lion helicopter.
The Defence book-to-sales ratio was 0.81x for the quarter and 0.92x for the last 12 months (excluding contract options that extend beyond the initial funded year of these contracts). The Defence backlog, including options and CAE’s interest in joint ventures, at the end of the year was $4.1bn.
Management outlook for fiscal year 2021
The COVID-19 pandemic has created unprecedented uncertainty in the global economy, the global air transportation environment and to CAE’s business. Several of CAE’s customers are facing significant challenges, with airlines and business jet operators having to ground most of their aircraft in response to travel bans, border restrictions, and lower demand for air travel. CAE continues to take measures to protect the health and safety of its employees, work with its customers to minimize potential disruptions and support its community in addressing the challenges posed by this global pandemic. This outbreak has had an important and immediate impact on all of CAE’s businesses, especially in the Civil Aviation Training Solutions segment. CAE began fiscal year 2021 in April with approximately one-third of its global Civil aviation training locations temporarily closed, and with production at its main manufacturing facility in Montreal suspended. The pandemic has also manifested in delays in the execution of Defence and Healthcare programs and in order intake.
Consolidated outlook
CAE customarily provides an annual growth outlook for each of its three business segments; however, given current uncertainty about the duration and severity of the crisis, no outlook on growth for fiscal year 2021 will be provided at this time. CAE is a global leader, and the long-term outlook for the Company remains compelling, with potential for above market rates of growth. CAE expects to emerge strong from the pandemic and has maintained its priority on Digital innovation to enhance customer experience and strengthen its competitive moat with advanced training systems that it expects will help shape the fundamentals of aviation and healthcare training.
In the short-term; however, the Company expects the COVID-19 pandemic to have a significant negative impact on its performance. The current view for fiscal year 2021 is for a material decrease in operational and financial performance in the first half, and for the second half of the year to potentially begin to inflect positively, as markets are expected to begin to reopen, and travel restrictions are eased. CAE has implemented several measures to preserve liquidity and reduce operating costs as it weathers the COVID-19 pandemic. Among these measures, the Company significantly reduced capital expenditures, which it currently expects to total approximately $50m for the first six months of fiscal year 2021. CAE’s training operations are inherently highly cash generative and can continue to be cash flow positive, even down to very low levels of utilization. However, the combination of sharply lower demand and the COVID-19-related disruptions to CAE’s operations are expected to result in negative free cash flow for the Company in the first half of the fiscal year, and it expects to generate positive free cash flow in the second half.
Civil outlook
In Civil, as air travel eventually resumes, the Company expects to continue building on its previously positive momentum in training, increasing market share and securing new customer partnerships with its innovative training solutions. In the brunt of the pandemic, airlines globally have suspended a vast proportion of the commercial fleet; however, this does not imply a proportionate impact on training demand. In fact, a minimum level of recurrent pilot training, typically every six to nine months, is required by regulation to maintain the currency of the global cadre of certified pilots. Dispensations have been given in major jurisdictions, including Europe and North America, to extend the deadline of various time-bound training obligations to compensate for travel restrictions and border closures; however, these training requirements will ultimately need to be fulfilled for pilots to retain their licences and resume flight duty. In the current context, the Company also believes more airline training partnership and outsourcing opportunities should materialize as the industry looks for ways to gain greater agility and resiliency in the post-COVID-19 era, including partnering with CAE. In business aviation training, while growth-driven demand is being negatively affected by the downturn, Civil relies largely on servicing the training needs of the already active global business aircraft fleet and the delivery of large-cabin business jets. Demand for Civil full-flight simulators is closely linked to new aircraft deliveries, and while the total market is expected to be smaller this fiscal year, Civil expects to maintain its leading share of the available FFS sales.
Defence outlook
In Defence, the Company benefits from a large backlog of contracts with government customers to provide training solutions and operational support services that are considered essential to national security. The Defence business has been under new leadership since February 2020 and has been in the process of bolstering its operational efficiencies and effectiveness and expanding its bid pipeline. In the short-term, COVID-19-related issues are slowing Defence’s progress toward program milestones on work in backlog, including for some of its more complex contracts. The pandemic has also led to delays in contract awards globally, and the precipitous drop in oil prices has further impacted the rate of expected contract awards in the Middle East. Beyond the current year, the long-term outlook for Defence continues to be for growth, supported by a large addressable market for its innovative solutions and the realization of the benefits of its new leadership and strengthened organization.
Healthcare outlook
CAE believes Healthcare is well positioned to experience a change in the appreciation of the importance, relevancy and benefits of healthcare simulation and training to help save lives at a steady state and in a healthcare crisis. With its innovative products and demonstrated agility, CAE continues to believe Healthcare will become a more material part of the Company over the long term.
Management’s expectations are based on the prevailing market conditions, the timing and degree of easing of global COVID-19-related mobility restrictions, and customer receptivity to CAE’s training solutions as well as material assumptions contained in this press release, quarterly MD&A and in CAE’s fiscal year 2020 MD&A.
CAE Director and executive appointments
CAE is pleased to announce that General (Retired) David G. Perkins has joined its Board of Directors, effective May 1, 2020. General (R) David Perkins served over 40 years in the U.S. Army culminating as the Commander of the United States Army Training and Doctrine Command (TRADOC) which is responsible for designing, acquiring, building and constantly improving the U.S. Army which is one of the largest, with over 1.2 m people, and most complex organizations in the world. Under his leadership TRADOC developed the Army’s concept of Multi-Domain Operations which has become a driver for future changes in operations and training, not only in the US Military, but around the world. General (R) Perkins is an excellent addition to the CAE Board of Directors, offering invaluable strategic counsel as the Company navigates the way forward.
CAE is also pleased to announce the appointment of Heidi R. Wood as Executive Vice President, Business Development & Growth Initiatives. Heidi’s primary focus involves partnering with CAE’s business unit leaders to identify and drive new avenues of growth across CAE, maximize synergies across businesses, and drive CAE’s entry into adjacencies and leverage Artificial Intelligence and Digital. Heidi has over 25 years’ experience analyzing, creating and driving strategic growth in the Aerospace and Defense industry. She has been recognized for her dynamic leadership, driving transformation and creating value for numerous Fortune 500 companies. Heidi is an excellent addition to the CAE executive management team, to accelerate and strengthen our market leadership in training and further our position as our customers’ partner of choice. (Source: PR Newswire)
21 May 20. Curtiss-Wright values debt offering at $300m. US-headquartered electronics manufacturer Curtiss-Wright has announced it has priced a private debt offering at $300m in a move aimed at bolstering the company’s balance book. The debt offering is made up of $150m in 3.1% notes due by 2030, and $150m in 3.2% notes due by 2032.
The move comes after Curtiss-Wright released its first quarter (Q1) financial results that reported steady results with operating income and sales to increase on the same period last year.
Commenting on the debt valuation Curtiss-Wright chairman and CEO David C. Adams said: “We are very pleased with the tremendous response we received for this debt offering to bolster our strong and healthy balance sheet and also take advantage of historically low-interest rates.”
The company said it aims to use the proceeds from the debt offering for ‘general corporate purposes’. The company said that this ‘may include’ paying down existing debts under existing credit facilities, funding future acquisitions and internal growth initiatives.
Adams added: “This financing will provide Curtiss-Wright with greater flexibility to execute on our balanced capital allocation strategy that consists of reinvesting in our business, supplementing our organic growth with strategic acquisitions, and returning capital to shareholders.
“Together with our strong free cash flow generation, Curtiss-Wright remains well-positioned for future growth.”
Like other contractors that work across both defence and civilian markets, Curtiss-Wright has benefited from strong defence sales bolstering its operations.
GlobalData Aerospace, Defence and Security analyst Anthony Endresen told Air Force Technology: “Curtiss-Wright first-quarter earnings were better than generally expected, but being led by strong defence sales it is to be expected. Resilience is coming from defence sector work in large part, across the industry.
“Limitation of exposure to the collapse of the commercial markets is a key Covid-19 crisis mitigation incentive, as is capital retention and debt offerings for reinvestment internally. In this case, Curtiss-Wright are using the funds largely for general corporate purposes as well as ensuring cash flow.”
Curtiss-Wright’s finances
In Q1 of 2020, Curtiss-Wright reported net sales of $601m up 4%, and an adjusted operating income of $80m up 10% on the same period for the previous year.
Commenting on the results Adams said: “We delivered solid adjusted diluted EPS of $1.34 in the first quarter, exceeding our expectations, due to strong sales growth in our defence markets, which we expect to remain resilient.
“However, the challenges posed by the Covid-19 pandemic have caused volatility and disruption across our operations and the global economy, with a heightened impact in our most economically-sensitive, industrial end markets. As we moved through the quarter, several of our operations were impacted due primarily to customer-driven delays and government-mandated shutdowns.”
Adams added that the company was ‘a well-positioned, agile business with significant financial flexibility.’ Although, the company predicted that orders may be reduced in later quarters it has ‘ample liquidity’ to maintain operations throughout the rest of the year.
Despite the stable finances, like many companies, Curtiss-Wright suspended its 2020 financial guidance in light of the ongoing effects of the Covid-19 coronavirus pandemic. (Source: airforce-technology.com)
19 May 20. Eutelsat Demonstrates Resilience + Foreign Satellite Operators Must Pay Fees. The latest Chris Forrester filing at the Advanced Television infosite reveals that Eutelsat’s Q3 numbers were “in line with expectations [and] a return to quarter-on-quarter growth with ongoing signs of commercial dynamism in emerging markets with a new DTH platform in Sub-Saharan Africa and the extension of a contract in the Balkans,” this according to CEO Rodolphe Belmer on May 14th.
Belmer also welcomed progress on C-band over the US and said that Eutelsat expected to receive $507m (€470m) as a result of the upcoming FCC auction. During phase one, $125m would be paid to Eutelsat and $382m in Phase 2.
Giles Thorne, equity analyst at investment bank Jefferies, told clients that Eutelsat’s Broadcast division performance “finally sees Eutelsat deliver what it has promised for some time now: resilience.”
However, Thorne also reminded readers that it has taken seven quarter-year periods to get its guidance in line and even “that rarest of sightings: out-performance.” He was referring to Eutelsat’s extremely important Broadcast division’s Q3 being up 2.5 percent (and 62 percent of the company’s revenues).
As to the other divisions, Data & Professional Video was down 6.1 percent and not helped by the absence of sports and similar Occasional Use demand. Government services was up a tad at 0.3 per cent, and Mobile Connectivity held up and was 5.1 per cent up y-o-y.
Belmer added that he expected the impact of Coronavirus on Full Year revenues to be limited, reflecting mainly the effects of confinement on Mobility, Professional Video and to a lesser extent Fixed Broadband.
“As we continue to assess the effects on future years, we do so with the confidence that our strong financial position and cash-flow generation capacity, together with our combination of resilient heritage activities and connectivity-related growth opportunities will ensure we are well positioned to withstand challenges of the current environment,” Belmer added.
Total revenues for Q3 stood at €322.0m, down 4.4 percent year-on-year.
At March 31, 2020, the total number of channels broadcast by Eutelsat satellites stood at 6,867, down 2 percent year-on-year and stable quarter-on-quarter. On a year-on-year basis, HD channels rose by 10 percent to 1,667, implying a penetration rate of 24.3 percent compared to 21.5 percent a year earlier.
During the quarter, Eutelsat 7C entered into service, bringing 19 incremental transponders to the African market which are expected to ramp-up gradually; elsewhere, Eutelsat 5 West B entered into service, replacing E-5 West A which is now operating in inclined orbit.
The number of used transponders stood at 959, stable year-on-year and down by seven units quarter-on-quarter. As a result, the fill rate stood at 69.7 per cent at end-March 2020 compared to 67.7 percent a year earlier and unchanged over the quarter.
The order backlog stood at €4.2bn at March 31st 2020 versus, €4.3bn at end-December 2019 and €4.4bn a year earlier.
Also of importance from Chris Forrester is that the Federal Communications Commission (FCC) has ruled that foreign-licensed satellite operators and “space stations” which access the US market must pay regulatory fees to the FCC.
The FCC, in the order, says it is having to devote significant resources in processing market access applications of non-US satellites.
The ruling gained a favorable reception by the likes of EchoStar and Hughes Networks, and Intelsat.
EchoStar/Hughes, in its statement, stated it was concerned that it was paying fees when foreign operators received what they describe as regulatory benefits without paying fees. (Source: Satnews)
18 May 20. Series E Funding Round Opened by Astroscale. Astroscale Holdings Inc. (“Astroscale”) has opened a Series E funding round and has secured I-NET CORP. (I-NET), a leading Japanese data center provider, as its first investor for an undisclosed amount.
The additional financing will be used to broaden Astroscale’s current business services and achieve the company’s mission of securing a sustainable orbital environment.
Despite the many complications brought on by the onset of COVID-19, Astroscale has shown steady growth and success in the first half of 2020. In January, the company was awarded a grant of up to US $4.5m from the Tokyo Metropolitan Government’s “Innovation Tokyo Project,” and in February, Astroscale was selected as commercial partner for Phase I of the Japan Aerospace Exploration Agency’s (JAXA) first debris removal project.
Astroscale’s offices in the United Kingdom and United States continue to make key additions to their management and technical teams and are well positioned to service future commercial and institutional customers. In addition to building technical capabilities and securing contracts, Astroscale continues to work with industry and government representatives to develop standards and best practices for safe and sustainable satellite servicing and debris removal.
Astroscale’s success in the first half of the year is expected to continue. Notably, in the later half of 2020 Astroscale is on track to launch its End-of-Life Services by Astroscale-demonstration (ELSA-d) mission, the world’s first demonstration of commercial orbital debris removal.
The Series E funding round will close by the end of 2020.
Nobu Okada, Founder and CEO of Astroscale, stated that daily lives have changed drastically and all have come to depend on satellite services at a whole new level during this unprecedented global crisis. Now, more than ever, it is evident that we need to take action to protect assets in space and, with the broadening of Astroscale’s business services, the company will be even better positioned to meet the challenges of orbital sustainability. The firm is grateful to I-NET as the first investor of this Series E funding round. (Source: Satnews)