24 Sep 20. Amentum to Acquire DynCorp International. Amentum Holdings LLC (“Amentum”), a leading contractor to U.S. federal and allied governments, and DynCorp International (“DynCorp”), a worldwide leader in aviation and logistics support services, announced today a definitive agreement under which an affiliate of Amentum will acquire DynCorp. The acquisition, once finalized, will create one of the largest providers of mission critical support services, with more than $6 billion of combined revenue over the last 12 months. Financial terms of the transaction were not disclosed.
The combination with DynCorp will accelerate Amentum’s growth, enhance market access and transform the company into one of the largest in the industry, with more than 34,000 employees in more than 30 countries around the world.
“The combination of our two companies will accelerate our growth into key new markets such as aviation support services, contractor logistics support, intelligence solutions, and training,” said John Vollmer, Amentum’s CEO. “We look forward to welcoming DynCorp’s employees to the Amentum family. Our complementary capabilities and cultures will propel Amentum to the top of our market as a leader with differentiated solutions to support our clients’ most challenging missions.”
“This strategic combination of two market leading companies will deliver tremendous value to our customers and increased opportunities for our employees,” said George Krivo, CEO of DynCorp.
The transaction is subject to customary closing conditions and regulatory approvals. The transaction is expected to close in fourth quarter 2020.
RBC Capital Markets, LLC acted as financial advisor to Amentum, Cravath, Swaine & Moore LLP acted as legal counsel, and Covington & Burling LLP acted as regulatory and government contracts counsel. Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC acted as DynCorp’s financial advisors and Schulte Roth & Zabel LLP acted as legal counsel.
Amentum is a premier global technical and engineering services partner supporting critical programs of national significance across defense, security, intelligence, energy, and environment. We draw from a century-old heritage of operational excellence, mission focus, and successful execution underpinned by a strong culture of safety and ethics. Headquartered in Germantown, Md., we employ more than 20,000 people in 48 states and 28 foreign countries and territories. Visit us at amentum.com to explore how we deliver excellence for our customers’ most vital missions.
About DynCorp International
DynCorp International is a leading global services provider offering unique, tailored solutions for an ever-changing world. Built on more than seven decades of experience as a trusted partner to commercial, government and military customers, DI provides sophisticated aviation, logistics, training, intelligence and operational solutions wherever we are needed. DynCorp International is headquartered in McLean, Va. (Source: BUSINESS WIRE)
24 Sep 20. Curtiss-Wright Corporation (NYSE: CW) today announced that it has entered into an agreement to acquire the stock of Pacific Star Communications, Inc. (PacStar®) for $400m in cash. PacStar, a private company, is a leading provider of tactical communications solutions for battlefield network management, including commercial off-the-shelf (COTS)-based rugged, small form factor communications systems, and its proprietary “IQ-Core® Software” integrated network communications management software.
The acquired business will operate within Curtiss-Wright’s Defense segment and is expected to generate sales in excess of $120m in 2020. PacStar is expected to be accretive to Curtiss-Wright’s adjusted diluted earnings per share in its first full year of ownership, excluding first year purchase accounting costs, and produce a strong free cash flow conversion rate well in excess of 100%.
“The acquisition of PacStar establishes Curtiss-Wright as a critical supplier of advanced tactical and enterprise network communications solutions supporting a broad spectrum of high-priority U.S. military force modernization programs,” said David C. Adams, Chairman and CEO of Curtiss-Wright Corporation. “The combination of Curtiss-Wright’s mission-critical mobile and secure COTS-based processing, data management and communications technologies with PacStar’s highly complementary hardware and software solutions will enable us to deliver best-in-class platform network integration and tactical data link network management to the warfighter.
“PacStar, which represents the largest transaction in Curtiss-Wright’s recent history, is well-positioned to benefit from the military’s continued investment in robust, secure and integrated battlefield network management and is expected to yield significant opportunities for revenue growth. Further, this acquisition supports Curtiss-Wright’s financial objectives for long-term profitable growth and strong free cash flow generation within our disciplined and balanced capital allocation strategy.”
Founded in 2000, PacStar’s solutions are utilized in mission-critical applications, combining tactical networking equipment and software to enable enhanced battlefield situational awareness down to the individual warfighter. Their patented software and hardware technologies are core components of secure command, control and communications systems, particularly in remote or infrastructure-starved areas. PacStar’s network management software, IQ-Core Software, provides a simpler, faster and more reliable solution for setting up and managing network communications, including secure wireless, satellite communications, and soldier-portable systems. PacStar has secured strong positions on critical U.S. Army programs, including Warfighter Information Network-Tactical (WIN-T) (now PM TN) and Transportable Tactical Command Communications (T2C2), and the U.S. Marine Corps’ Networking-on-the-Move (NOTM) program.
PacStar, which employs nearly 145 people (30+ engineers) and is based in Portland, Oregon, primarily generates sales from the ground defense market. The acquisition is expected to close in the fourth quarter of 2020, subject to regulatory approval and other closing conditions.
23 Sep 20. Rebrand for world-leading defence technology manufacturer. Seven Technologies Group has rebranded to 7Technologies as part of its strategy to continue to meet the needs of today’s and tomorrow’s defence requirements, through the bespoke application of cutting-edge technology.
Looking back on its 40-year heritage of operational experience and purpose-built products, 7Technologies has decided to evolve its brand in line with its new purpose, mission and vision that will take the business into the next generation of ISTAR products, whilst maintaining its heritage and reputation.
The refreshed logo embodies the company’s shift from yesterday’s analogue landscape to a much more digital and virtual world, while the number ‘7’ remains the heart of its identity, representing 7Technologies’ heritage and longstanding relationships in the sector.
A world leader in technical surveillance solutions for the defence sector, the company will now focus primarily on developing and delivering pioneering new technology for the battlefield, as the need for sensor fusion and machine teaming is most evident in this area.
7Technologies’ rebrand coincides with the manifestation of digital transformation in the defence sector, as countries are showing increased interest in ethical use of artificial intelligence and digital technologies on the battlefield.
Mike Howarth, CEO at 7Technologies, said: “7Technologies has been a pioneer in technical surveillance solutions since the company’s inception. At this time of rapid change and fast evolving technological requirements, we’re committed to leading and supporting the industry into an era of game-changing new solutions using applied technologies.
“Renewing our commitment to our customers, our purpose and to the sector will enable us to ensure our solutions are designed and delivered as indisputably capable and bespoke to the needs of our customers and partners.”
22 Sep 20. Legendary Ventures Invests In SpaceX. Legendary Ventures announced today an investment in Space Exploration Technologies Corp. (“SpaceX”) through its Series N funding round. Founded by Elon Musk, SpaceX is an aviation and aerospace company that designs, manufactures, and launches advanced rockets and spacecrafts, including the Starlink satellite constellation.
With this investment, Legendary Ventures continues to execute its strategy of investing in consumer, retail and technology companies, including businesses with enterprise values ranging between $1bn and $100bn (USD). “We are honored to be a part of the SpaceX effort to usher in a new era of space exploration, telecommunications, and travel,” says Jayson Kim, General Partner of Legendary Ventures.
About Legendary Ventures
Legendary Ventures is a venture capital firm that accelerates value creation for early-stage startups in the consumer, retail and technology industries. For more information about the firm or its funds, visit https://legendary.vc. (Source: PR Newswire)
22 Sep 20. USD 87m in Series C for ICEYE to Continue Conquering Boundaries in Radar Satellite Imaging. Radar (SAR), with Four Satellites to be Launched Still Within 2020, Eight for 2021. ICEYE, a World-leading SAR data provider, today announced the closing of a larger than planned for $87m Series C funding, led by the return investor True Ventures, with a substantial investment contribution from OTB Ventures. ICEYE has so far successfully launched 5 satellite missions, starting with the first ever small SAR satellite launched in January 2018. The company is launching 4 additional SAR satellites still this year and is on course to launch an additional 8 in 2021. This will grow the existing operational constellation into a capability that is unique in the World. To date, ICEYE has raised a total of $152m in financing.
ICEYE SAR satellite in orbit, concept art.
“ICEYE has built a reputation of delivering on its promises for timelines and quality, while continually developing technologies that others have not been able to execute. We are very proud of that reputation, and we will continue to do our best to maintain it,” said Rafal Modrzewski, CEO and Co-founder of ICEYE. “This round of investment ensures our SAR satellite constellation size continues to grow during the 2021 schedule as planned.”
ICEYE designs, manufactures and operates its SAR satellites in-house, with manufacturing timelines brought down to months for its spacecraft. Since the January 2018 launch of the first operational ICEYE SAR satellite, the company has been consistently delivering SAR imaging services and new capabilities to global customers, including many ‘world firsts’ from small SAR satellites, such as 0.25 meter resolution data and SAR video.
ICEYE intends to use this financing round to accelerate the size of its SAR satellite constellation in the coming years, increasing data availability for all continents through 24/7 customer operations, continuing development of ground-breaking radar imaging capabilities and for establishing spacecraft manufacturing in the US. This significantly larger than originally planned for financing round during the economically turbulent year of 2020 is a powerful sign of trust from the financial community that ICEYE’s business and operational model works and continues to deliver results.
Given the unprecedented frequency and scale of climate driven changes in the weather, crop patterns, fires, urban living and human activities, there is a growing need for real-time information access on a global scale. This access can be used for humanitarian and disaster response, towards saving lives, in addition to being utilized for economic decision making during moments of crisis.
ICEYE has provided commercial radar satellite imaging worldwide for data users starting from 2018, for ICEYE’s customers to respond to oil spills, hurricanes, deforestation and many more use cases. Along with these active customer imaging operations, the ICEYE SAR satellite constellation has seen an unprecedented development cycle of new imaging capabilities and new spacecraft generations.
Adam Niewiński, co-founder and Managing Partner of OTB Ventures, said:
“We are pleased to be a cornerstone investor in the latest round of venture funding for ICEYE. We are thrilled to be part of the evolving ecosystem where even the sky is no longer the limit.”
ICEYE’s Series C includes participation from return investors True Ventures, OTB Ventures, Luxembourg Future Fund (LFF), Finnish Industry Investment (Tesi), Draper Esprit, DNX, Draper Associates, Seraphim Space, Promus Ventures and Space Angels. The funding round is joined by New Space Capital. The European Investment Bank (EIB) has participated both as advisor to Luxembourg Future Fund and as investor through its financing mechanism InnovFin For Equity (IFE). Further, a significant portion of Tesi’s investment is part of the EFSI investment program set up between Tesi and the European Investment Bank. Coinciding with ICEYE’s Series C funding, OTB Ventures today announced the launch of a dedicated investment vehicle to support Europe’s leading space technologies – OTB Space Program I – backed by the European Investment Fund (EIF).
ICEYE is building and operating its own commercial constellation of radar imaging satellites, with SAR data available to global customers since 2018. With the company’s unique satellite constellation capabilities, ICEYE empowers others to make better decisions in governmental and commercial industries. The company is tackling a tremendous global need for timely and reliable information, with world-first aerospace capabilities and a New Space approach. ICEYE’s radar satellite imaging service, designed to deliver very frequent coverage, both day and night, helps clients resolve challenges in sectors such as maritime, disaster management, insurance, and finance. For more information, please visit: www.iceye.com (Source: PR Newswire)
21 Sep 20. Torchlight and Metamaterial Announce Planned Business Combination. Special Dividend Intended to be Issued to Torchlight Shareholders at Closing. Torchlight Energy Resources, Inc. (NASDAQ: TRCH), an oil and gas exploration company (“Torchlight”) and Metamaterial Inc. (“META”) (CSE: MMAT), a developer of high-performance functional materials and nanocomposite products, announced today the execution of a non-binding letter of intent (“LOI”, signed on September 15, 2020), for Torchlight to acquire 100% of META and to divest within the first half of 2021 Torchlight’s oil and gas assets for the benefit of Torchlight’s legacy shareholders (the “Proposed Transaction”). Upon completion of the Proposed Transaction, shareholders of META are expected to hold a 75% interest in the combined entity.
The Proposed Transaction represents a strategic shift for Torchlight. It is intended to reposition Torchlight into the multi-billion-dollar Advanced Materials market1 as a global cleantech and technology leader. META has an extensive intellectual property portfolio, a global presence and multiple R&D and product development agreements with government agencies and private enterprises. The combined entity will continue to service a clientele of world-class OEM customers for a range of applications in the automotive, aerospace and defense, energy, consumer electronics and medical markets.
“During the past six months the oil and gas market has softened due to the economic slowdown resulting from the pandemic,” stated John Brda, Torchlight’s CEO. “In order to unlock value potential from our national listing and access to the capital markets, we shifted some attention from the divestiture of our oil and gas assets to an acquisition strategy targeting proven disruptive technology companies with strong environmental, social and governance (ESG) priorities. This Proposed Transaction is the first step in that effort, providing our shareholders with access to the multi-billion-dollar target market and new applications that are being revolutionized with sustainable technologies, while allowing them to participate in the future upside from our oil and gas asset divestitures.”
“META’s management, led by George Palikaras has built an extraordinary award-winning cleantech company whose proprietary advanced technologies address multiple markets and improve their customer’s capabilities,” said Greg McCabe, Torchlights Chairman. “I am excited to work with them and equally excited about the outcome for our faithful Torchlight shareholders. Not only will their loyalty be rewarded with ownership in Metamaterials, they will also retain full value in our oil and gas assets through the Special Dividend.”
“We recognize the significant value in having a national exchange listing in the United States that will provide META with better access to the capital markets,” commented George Palikaras, Metamaterial’s President and Chief Executive Officer. “NASDAQ is the world’s premier technology exchange, providing us with the best platform to expand awareness of META on the global stage and fully realize the value of our portfolio of innovative sustainable products. This transaction will enhance our ability to pursue a broad range of opportunities and attract additional world-class talent.
“We look forward to driving significant value for shareholders in our mission to make every product smarter and more sustainable by utilizing the power of light and advanced materials.”
Many of META’s functional materials and metamaterials are designed to increase the efficient use of light and other energy forms. META’s innovations have been reported in popular technology magazines such as Wired.com “Bizarre New Materials Could Make Bendy Phones That Work” and the Financial Times which listed the category of metamaterials in their “50 Ideas To Change The World” in a special annual report.
META’s products are designed and manufactured with environmental sustainability as a high priority. As a result, META has won a number of industry awards and federal government grants for its pioneering work, including being named among the “2019 Global Cleantech 100”, by Cleantech Group. The Global Cleantech 100 is an annual guide to the leading companies and themes in sustainable innovation and features companies that are best positioned to solve tomorrow’s clean technology challenges. In 2018 META was awarded “Best New Product in Commercial Aviation” by Aviation Week Network at the 63rd Annual Laureate Awards, for metaAIR®, a Laser Strike Protection solution to protect pilots from harmful laser attacks without interfering with visibility. META partnered with Airbus to develop and commercialize this technology. In 2013 Metamaterial Technologies USA, Inc (formerly Rolith Inc and now META’s subsidiary in Silicon Valley) received “Best Manufacturing Technology” award at the tenth annual IDTechEx printed electronics industry event. META has also partnered with Lockheed Martin and the Canadian Government’s Sustainable Development Technology Canada (SDTC) fund to develop metaSOLARTM a new solar energy product suitable for the transportation industry.
Since 2011, approximately CAD $60MM has been invested in META, yielding a sizable IP portfolio. In 2020 to date, META has been granted 11 new patents. META has a total of 52 granted and 37 pending patent applications, including 26 in the United States and 63 in 18 other countries around the world. META’s portfolio comprises 28 patent families, 19 of which are granted.
A video interview with both CEO’s and Torchlight’s Chairman will be available this week and separately announced with links provided.
Preliminary LOI Transaction Parameters:
The following is a summary of the key terms of the Proposed Transaction as contemplated by the LOI. The Proposed Transaction remains subject to completion of a due diligence review by each party and negotiation of definitive agreements and the structure may change due to tax or other transaction considerations. There can be no assurance that the parties will reach agreement on the terms of definitive agreements or that the Proposed Transaction will be completed as currently contemplated or at all.
- Torchlight to acquire META through the issuance of common stock, such that at closing, the former equity holders of Torchlight would own 25% of the combined company (the “Combined Company”) with the former equity holders of META owning the remaining 75% and META becoming a wholly-owned subsidiary of Torchlight.
- This ownership split assumes that the Combined Company has financing of USD $10m or more net of Torchlight’s debt prior to closing of the business combination (the “Torchlight Cash Threshold”).
- The Combined Company shall use its commercially reasonable efforts to cause the Torchlight oil and gas assets to be sold by June 30th, 2021. Torchlight legacy shareholders will be entitled to a distribution of any values attributable to the sale of Torchlight’s existing oil and gas business asset (net of Torchlight’s debt, and closing expenses incurred in connection with such sale, subject to a 10% holdback to be held for a 12 month period to address any potential liabilities relating to the sale of the oil and gas assets of TRCH’s pre-closing business).
- The Combined Company, formerly known as Torchlight Energy Resources, Inc., will at closing focus its business to align with the current business of META.
- Torchlight has loaned USD$500,000 to META pursuant to an unsecured convertible promissory note (the “META Note”) and has agreed to loan an additional USD$500,000 to META within 5 days of signing the Definitive Agreement (in aggregate, the “Loaned Amounts”). An entity owned by Greg McCabe, Torchlight’s Chairman, provided a bridge loan to Torchlight for USD $1.5m with a conversion feature of $.375 per common share of Torchlight.
- The META Note is for a 24-month term and bears interest at 8%, with principal and interest due in a lump sum at maturity. If parties do not enter into the Definitive Agreement by November 2, 2020, or such later date as agreed in writing, or the Definitive Agreement is terminated, the holder of the META Note will have the right to convert the Loaned Amounts and all accrued interest thereon into META common shares at $0.35 (CAD) per common share.
- Following the Closing of the Transaction the board of directors of the combined company shall be comprised of 7 members (a) one of whom shall be appointed by Torchlight , subject to the approval of META and (b) one of whom shall be jointly agreed to by META and Torchlight . META shall appoint the 5 remaining members of the Board, which members must include the required number of independent members to maintain the NASDAQ listing requirement.
- META’s CEO, George Palikaras to be appointed CEO of the Combined Company, along with the appointment of a new CFO. Torchlight’s management is to remain in an advisory role focused on winding down the Torchlight legacy business and maximizing the value obtained from the divestiture of the Torchlight oil and gas assets.
- Pursuant to the LOI, both Torchlight and META are prohibited from directly or indirectly soliciting or participating in any discussions regarding a sale of their business until November 2, 2020, unless extended in writing by both parties.
Entry into a transaction will be subject to satisfactory completion of due diligence by both parties, negotiation of a Definitive Agreement and audits of Torchlight and META. If a Definitive Agreement is entered into, it is expected that the closing of a transaction will include customary closing conditions, including NASDAQ and CSE approval and approval by the shareholders of both companies, in addition to the closing conditions described above. There can be no assurances that a transaction will be consummated as a result of the LOI.
Torchlight has engaged Roth Capital Partners as financial advisor in connection with the transaction. META has engaged Hamilton Clark as financial advisor on its behalf. Additional details will be announced if and when a Definitive Agreement is reached.
About Metamaterial Inc.
META is changing the way we use, interact and benefit from light. META designs and manufactures advanced materials and performance functional films which are engineered at the nanoscale to control light and electromagnetic waves. META is currently developing new materials with diverse applications in the automotive, aerospace, consumer electronics and medical industries. META has a growing patent portfolio with three core technologies; holographic, lithographic, and wireless sensing, designed for high volume applications. META is headquartered in Dartmouth, Nova Scotia and has offices in London, UK and Pleasanton, California. To learn more visit www.metamaterial.com. (Source: PR Newswire)
21 Sep 20. QuantiTech LLC acquires Dynamic Concepts. QuantiTech LLC (“QuantiTech”), a portfolio company of Sagewind Capital LLC (“Sagewind”), announced today that it has acquired Dynamic Concepts, Inc (“DCI” or the “Company”), a leading provider of high-end engineering and software services for human spaceflight. Financial terms of the transaction were not announced.
Headquartered in Huntsville, Alabama, DCI primarily supports NASA’s Marshall Space Flight Center, Johnson Space Center and Glenn Research Center; the Department of Defense; and commercial space companies. DCI specializes in classical and structural dynamics, digital and hardware-in-the-loop simulation, custom software applications, and control systems design and analysis in support of human spaceflight. The management team and employees of DCI will continue with the business as a part of QuantiTech.
Darryl Wortman, President and CEO of QuantiTech said, “QuantiTech partnered with Sagewind Capital in May because we were searching for a partner that would support our growth as we strive to better support our customers’ critical missions. Only a few months into our partnership, we are thrilled to have closed on our first acquisition. DCI is an excellent addition to QuantiTech as it provides us with a complementary set of high-end specialized services and bolsters our existing relationship with NASA. DCI personnel are shaping the future of human spaceflight and we look forward to supporting them in combination with QuantiTech.”
“We are excited to join the QuantiTech family and to have found a partner that shares our dedication to customers and their critical mission,” said Joseph Clayton, President of DCI. “For almost 25 years, our highly skilled and talented personnel have provided engineering and software solutions to our customers unique and technical challenges. We are excited for their new home within QuantiTech and look forward to the growth opportunities ahead.”
About Dynamic Concepts
DCI specializes in high-end engineering and software services for human spaceflight, primarily supporting NASA within the Marshall Space Flight Center, Glenn Research Center, and Johnson Space Center. The Company provides classical and structural dynamics, digital and hardware-in-the-loop simulation, custom software applications, and control systems design and analysis to respond rapidly and effectively to complex mission requirements. DCI was founded in 1996 and is headquartered in Huntsville, AL. For more information please visit www.dynamic-concepts.com.
QuantiTech is a leading provider of highly technical engineering services to the Army, Air Force, NASA, and various other key defense agencies responsible for maintaining technological superiority. Its capabilities are focused on systems engineering, cybersecurity, test & evaluation and program management for key defense end-markets such as hypersonics, counter unmanned aircraft systems, and human spaceflight. QuantiTech was founded in 1991 and is headquartered in Huntsville, AL. For more information please visit www.quantitech.com.
About Sagewind Capital
Sagewind Capital is a New York-based middle-market private equity firm. Sagewind seeks to partner with exceptional management teams and focuses on significant capital appreciation by helping businesses grow organically and through strategic acquisitions. Since inception, Sagewind has made eight investments across several industries, including government services, aerospace & defense, software, information technology, healthcare and business services. The firm is focused on long-term capital appreciation and has the flexibility to own businesses for extended periods. For more information please visit www.sagewindcapital.com. (Source: BUSINESS WIRE)
21 Sep 20. Pennant’s recovery underway. Pennant (PEN:33p), an Aim-traded supplier of products and services that train and assist engineers in the defence and civilian sectors, had already flagged its interim results in last month’s pre-close trading update (‘In search of value opportunities’, 17 August 2020).
Of far more interest to me than the Covid-19 pandemic induced first half underlying operating loss of £2m on revenue down 14 per cent is the scale of the recovery potential. That’s because the company has a strong order book (up 9 per cent to £36m since May) and an operational structure that can fulfil the order backlog without recourse to capital expenditure, so highlighting its operating leverage as revenue recovers. Chief executive Phil Walker shed some light here during my results call this morning. In particular, 10 contracts in that order book back up second half revenue of £8.3m and a forecast second half operating profit of £1m. They also support revenue of at least £14.4m in 2021 without accounting for any new contract awards.
Pennant has been winning new business, too, around £3m of awards since the 30 June period end including £1.5m of training aids from a long standing Middle East customer “with the expectation of further purchases to follow to a value of £5m in total.” Around half the £3m orders won will be delivered in 2021, so the contracted order for delivery next year is now around £16m. It could be even higher because Mr Walker notes that the “£3.5m balance of the Middle East contract needs to be placed by the end of the first half of 2021.”
Also, the company has repurposed its longstanding contract to provide electro-mechanical trainers and computer-based training for the Ajax fighting vehicles to the British Army. The contract value has increased by £1.5m to £13.5m, of which £2m is scheduled for delivery in the second half, rising to £2.3m in 2021.
Importantly, the order book is supported by two valuable government contracts with the Canadian and Australian defence departments to use Pennant’s Oracle-based OmegaPS software product that reduce the support cost of major capital equipment. These two contracts should contribute £2.75m in second half revenue, rising to £6.1m in 2021. In addition, the delayed contract to design and build a full-size representation of a training aid for Leonardo Helicopters is expected to contribute £400,000 to second half revenue, rising to £2.5m in 2021. The delay in this contract is the main reason for this year’s profit shortfall.
It’s well worth noting that this year’s earnings enhancing acquisition of Absolute Data Group (ADG), a Brisbane-based software company that complements Pennant’s existing OmegaPS software business, is working out well. ADG helps its client base (military aviation, commercial aerospace, and marine, rail, nuclear and automotive sectors) to manage vast quantities of maintenance and training data. Pennant’s chief executive Phil Walker informed me during this morning’s results call that ADG has a contracted order book worth £3.5m, noting that it also has around US$5m of active opportunities in the pipeline, effectively cross selling the software to existing clients of its OmegaPS software business. ADG’s order book already supports revenue of £1.2m in 2021, up from a forecast £1m contribution this year, thus diversifying and enhances recurring revenue and reduces the reliance on substantial engineered-to-order contracts. The software can also be installed remotely.
Pennant’s cash flow generation improved markedly in the first half, too, buoyed by £5.9m of positive working capital movements which offset a £2.1m operating cash outflow. This helps explain why the company ended the six-month period with net cash of £2m (excluding £1m of finance leases), reversing a £2.2m net debt position at the start of 2020. The working capital inflow was buoyed by a £2m payment from General Dynamics after Pennant passed a key design review (for the Hull trainer). Since the period end, the company has passed a second design review (for the Turret trainer), and its £1.8m invoice will be settled next month.
Importantly, Pennant has an untapped £4m low-cost bank facility with HSBC, so has the balance sheet flexibility to fulfil its working capital requirements as business ramps up again. The international spread of contracts is another positive as it not only diversifies customer concentration risk, but offers shareholders exposure to valuable foreign currency earnings in a period of sterling weakness. For instance, ADG’s North American trading subsidiary accounts for two-thirds of its annual sales.
The bottom line is that having taken £1m costs out of the business this year, the full benefit of which will be seen in 2021, and the company continuing to win new contracts, I expect a strong profit rebound in 2021. That possibility is simply not being priced into Pennant’s £11.5m market capitalisation. Although there are no forecasts in the market, assuming the company delivers £16m of revenue in 2021 and factoring in its lower operating cost base, then the company could potentially produce a trading profit of £2.7m to £3m in 2021.
Moreover, with the benefit of £2.8m unrealised tax losses, the corporation tax charge will be minimal. Effectively, Pennant is priced on close to four times 2021 trading profit (according to my financial models), a bargain basement valuation for a company that also announced this morning more than £20m of single sourced contracts in its project pipeline. The shares are primed to make a strong recovery and continue to rate a buy. (Source: Investors Chronicle)
19 Sep 20. Rolls-Royce plans to raise up to £2.5bn as COVID-19 bites. Britain’s Rolls-Royce Holdings Plc RR.L said on Saturday it was looking to raise up to £2.5bn ($3.2bn) in an effort to strengthen its balance sheet. The aero-engine maker said it was considering a variety of options, including a rights issue. Debt and equity issuances are other options being considered, it added.
“We continue to review all funding options to enhance balance sheet resilience and strength,” its statement said.
A Financial Times report said the company was in talks with sovereign wealth funds, including Singapore’s GIC, as part of its efforts to raise funds. An equity raise will be launched in the first weeks of October, the report added.
GIC did not immediately respond to a Reuters request for comment. Rolls-Royce declined to comment beyond its statement.
The Derby-based company has been reviewing funding options for the past few months, after suffering a blow from travel restrictions linked to the COVID-19 pandemic.
It reduced at least 9,000 jobs in May, mainly in civil aviation, due to the slump in air travel and revealed its plans to sell Spanish unit ITP Aero and other assets, last month. In July, the group said it expected a £1bn outflow in the second half of the year after burning through 3bn pounds in the first half. ($1 = 0.7744 pounds) (Source: Reuters)