Sponsored by TCI International Inc.
06 Nov 20. Head Above the Parapet. The possibility of cuts in defence budgets resulted in a drubbing. However, confirmation by Germany it is to order 38 Typhoon aircraft may help .restore equilibrium. A measured approach could follow. We remain resolute.
Head above the parapet. In our note of 16 September 2020 – Counterattack: Upgrade to Buy – we took what looks to have been a not-so-well calculated risk. We assumed FY22-FY25 US Defense Budgets would be on average 5% lower than those projected in the FY21 Budget Request. We reduced our forecasts accordingly. The outcome of the US Elections played no role in this; the budget reductions were action to reduce the federal deficit. Indeed, the probable outcome, notably continued Republican control of the Senate, does not force a rethink.
What if? The USA generated FY19 revenue of £8,642m, 43% of Group revenue. Taking 5% of that revenue gives £432m. Call the average EBIT margin on those revenues 12% (a blend of the three US-based divisions), and the related loss of EBIT would be around £52m, or 2.5% of reported FY19 underlying EBIT. To scale the lost revenue of £432m, we estimate it represents around 31% of total FY19 revenue from Combat Vehicles. This is not, however, the main event, which is the need to remove growth from FY22 and/or FY23.
Taking growth out. Since 16 September 2020, Bloomberg consensus FY22 EBIT has fallen from £2,260m to £2,207m (JEFe £2,175m), and the FY22 consensus has fallen from £2,375m to £2,355m (JEFe £2,200m). The FY23 consensus is unchanged at £2,548m (JEFe £2,205m), but it doesn’t look credible, in our view. We will look at FY22 where JEFe EBIT is £155m below consensus. Were that £155m generated by sales with an EBIT margin of 12%, the related sales would be around £1.3bn. There is significant caution in our forecasts. One can debate whether cuts in defence spending impact FY22 or not, but that merely postpones the issue.
Path of the share price. The share price peaked at 669p on 21 Feb 2020, fell to 439p on 23 March as COVID arrived, but subsequently rallied no higher than 558p on 17 April. We believe some enduring impact from COVID was subsequently factored in, possibly recognition the path of defence spending would change. On 30 October, the share price troughed at 397p before rallying to the current 432p. From here, the scenario we do not like is that where the US Defense Budget falls progressively through FY22-FY25. We find that unappealing from an equity market perspective. We believe industry and the DoD would prefer a more immediate adjustment to sort out capital allocation.
Remain resolute. Confirmation Germany is to order 39 more Typhoon aircraft would be welcome. Ally that with accelerated deliveries of Typhoon and Hawk aircraft to Qatar and, say, confirmation Australia’s Hunter class frigate programme is to proceed, and we may have a rallying point. Further, a maintained dividend of 23.2p provides a 5.4% dividend yield. We feel the market went Route 1, perhaps based upon 2008-2014, or by using historical valuation multiples that simply do not reflect today’s construct of BAE. Remarkably, we believe that approach is applied. We got in the way of the big battalions for a time, but remain resolute. (Source: Jefferies)
05 Nov 20. Pacific Defense Acquires Spear Research. Pacific Defense announces the acquisition of Spear Research, a Nashua, New Hampshire based technology company focused on Electronic Warfare, Signals Intelligence, and autonomous networked sensor systems. Spear Research brings an experienced and innovative team of engineers with core competencies in RF engineering, advanced signal processing, autonomous command and control, and system integration. The Pacific Defense platform, including Spectranetix and Perceptronics, brings rapid adoption of best of breed capabilities into AI/ML enabled high-performance Radio Frequency based systems, and Spear is a key enabler to delivering full scale, low risk solutions to the DoD and select international customers.
The addition of Spear Research to the team also furthers Pacific Defense’s leadership role in the defense industry for advanced military open systems architecture Standards including the Army’s C4ISR Modular Open Suite of Standards (CMOSS), and the Air Force’s Sensor Open Systems Architecture (SOSA) specifications. Spear’s expertise in real-time digital signal processing will augment our CMOSS/SOSA systems with SIGINT/ELINT customer applications.
Travis Slocumb, CEO of Pacific Defense said, “Delivered system performance is critical for end-user adoption of our technologies. Spear’s expertise will help us ensure that our customers can port their applications and rapidly get the capabilities and performance they need to pace the growing and complex threat environment.” For more information, please visit http://www.pacific-defense.com.
Michael Sangillo, General Manager of Spear Research said, “We are excited to be a part of Pacific Defense and look forward to working with the team to deliver enhanced capabilities to our customers.”
The lead investors in Pacific Defense are Emerald Lake Capital Management and HCI Equity Partners.
About Emerald Lake Capital Management
Emerald Lake, a private investment firm with over $500m in assets under management, invests in capital efficient businesses with sustainable competitive advantages, secular or cyclical growth trends, and controllable levers to generate returns. The firm’s principals have a flexible approach to transaction structures and experience partnering with management teams to grow businesses throughout market cycles.
About HCI Equity Partners
HCI Equity Partners is a lower middle market private equity firm focused on partnering with family and founder owned manufacturing, distribution and service companies that serve large, fragmented markets in North America. Headquartered in Washington, DC, HCI has extensive experience investing in the Aerospace, Defense and Federal Services sectors.
(Source: BUSINESS WIRE)
06 Nov 20. Rheinmetall Interim report after nine months. Rheinmetall generates high-margin growth in Defence – Automotive anticipates positive operating results.
Consolidated sales down 7% year on year at €4,0bn despite automotive market recovering slightly in the third quarterConsolidated operating result falls by €92m after nine months to €170m – Q3 operating result up on previous year at €101m
Defence still performing well: 12% sales upturn in first nine months to €2.5bn; operating result climbs by €64 m/48% to €197m
Automotive still weaker than in previous year on account of crisis: Sales down 27% at €1.5bn; positive operating result in third quarter reduces operating loss after three quarters to €-12m
Upgraded outlook: Automotive now anticipating positive operating result for the year; 2020 margin forecast for Defence raised
The Rheinmetall Group is starting the fiscal year’s home stretch with a recovery for its Automotive sector and a stronger performance for its Defence sector.
After the coronavirus pandemic cast a shadow over earnings in the Group’s Automotive sector in the first half of 2020, the third quarter saw a return to profitability. Combined with strong margins in the growing Defence sector, in the third quarter the Dusseldorf-based technology group’s consolidated operating result thus outperformed the previous year.
Armin Papperger, CEO of Rheinmetall AG: “Our robust business performance is thanks to the strong Defence sector and strict cost management in Automotive. We were fully prepared for our Automotive customers restarting production following the sector-wide shutdown in spring. In Automotive, this meant that we could really pick up the pace again in the third quarter and offset some of the losses brought about by the pandemic. We are now making every effort to continue this course even under the challenging coronavirus circumstances and to bring Automotive’s operating result for the year as a whole back into profit.”
Armin Papperger: “Defence remains our anchor of stability. We benefit from steady global demand for civilian and military security products. Major orders, like those we received recently in our vehicles business, demonstrate that our technology and highly innovative products ideally position us on global markets. We are increasingly able to boost the margin quality of our Defence projects and bolster profitability with higher business volumes.”
High-margin growth in Defence ensures robust Group business performance
Rheinmetall Group sales declined by €315m or 7.3% year on year to €3,979m in the first three quarters of 2020. Despite the positive impact the global automotive industry’s recovery had on Automotive, particularly in the third quarter, consolidated nine-month figures were still shaped by wide performance disparities between the two sectors, especially in the first half of the year.
The Defence sector considerably stepped up business volumes in the reporting period. While Automotive sales came closer to previous year figures in Q3, after nine months they still fell considerably short of the prior year.
The disparate sales performance of the two sectors was also reflected in the operating result after three quarters: Whereas Defence saw a substantial improvement in its operating result in the first nine months, Automotive’s operating result contracted as general economic conditions remained tough. In total, Rheinmetall generated a consolidated operating result of €170m after three quarters, down from €262m in the same period of the previous year.
The Group’s reported earnings before interest and taxes (EBIT) amounted to €-166m in the first three quarters of 2020, €435 m lower than in the previous year. As well as the declining operating result, the reduction in EBIT is essentially attributable to negative non-recurring effects totaling €337m. These include €300 m in impairment recognized in the Automotive sector in the second quarter of 2020. This resulted primarily from the international automotive industry’s drastically reduced production volume on account of the coronavirus crisis in 2020, as well as experts’ expectations of significantly lower growth for passenger cars and light commercial vehicles also in the medium term. In addition, restructuring provisions of €40 m were recognized in the third quarter of 2020. They mainly cover costs for capacity adjustments and production relocations undertaken to optimize the global network of locations in the Hardparts division, as well as costs for the realignment and the new structural orientation regarding the preparation of an entry into new markets of the Mechatronics division. Non-recurring effects totaling €+3m were also recognized in the Defence sector. These were essentially the net effect of restructuring measures (€-7m) and a subsequent sales price adjustment in connection with the disposal of the unmanned aerial systems business in fiscal 2012 (€+10m).
Earnings per share decreased to €-4.43 in the first three quarters (previous year: €3.77). Rheinmetall again generated positive earnings per share of €1.03 in Q3 2020 (same quarter of previous year: €1.33).
Automotive: Sales and income losses on account of pandemic – upwards trend in Q3
The coronavirus pandemic has had a profound impact on production figures in the automotive industry. Globally, the production of light vehicles (vehicles under 6 tons) slumped by 23% year on year in the period from January to September 2020. The Automotive sector generated sales of €1,528m in the first nine months of 2020, 27%/€571m below the figure for the same period of the previous year (€2,099m).
Following an operating result of €-41m at Automotive in the first half of the year – a result of the crisis – Automotive returned to profitability in the third quarter, reaching €29m. This puts the operating result for the nine-month period at €-12m. The prior year figure was €144m.
The sector’s operating margin decreased to -0.8% (previous year: 6.9%). Strict cost management introduced at an early stage, which focused on staffing, material and administrative costs, helped cushion the negative effects of the pandemic on the sector’s economic performance. Net investment was also cut back substantially to stabilize the liquidity situation, declining by 37% year on year in the first three quarters of 2020.
Reported earnings before interest and taxes (EBIT), which also include the non-recurring effects resulting from impairment and restructuring measures, came to €-352m after the first nine months of the year, also well below the previous year figure of €146m.
Sales in the Mechatronics division were particularly affected by the sharp decline in the production of passenger cars and trucks in all relevant sales markets. In the first nine months of 2020, sales fell by €329m/28% year on year to €838m. The operating result amounted to €6m for the period from January to September 2020 after €92m in the same period of the previous year.
At €506m, sales in the Hardparts division were €225m/31% lower than the figure for the first three quarters of 2019. The operating result in the reporting period came to €-32m, remaining well below the previous year’s figure of €29m. The earnings contributions by joint ventures accounted for using the equity method declined on account of a significant €13m sales decrease to €5m (previous year: €18m).
In the Aftermarket division, sales performance in the first three quarters of 2020 was affected by the partial closure of repair shops and less travel overall. Sales fell by €20m/7.6% against the previous year to €249m. The operating result amounted to €15m, down €10m year on year due to lower business volumes and the first-time allocation of micro mobility activities to the Aftermarket division (previous year: €25m).
Spurred on by the ongoing recovery of Chinese automotive production, sales generated by joint ventures in China – which are not included in the sales figures for the Automotive sector – were almost on par with previous year figures in 2020. At €655m, sales in the first three quarters of 2020 were down 9.4% on the previous year’s figure of €722m. Earnings after taxes in the reporting period came to €28m, after €32m in the previous year.
Sales by the German joint venture KS HUAYU AluTech Group weakened in the first three quarters of 2020 on account of the pandemic. Sales came to €138m, 27% lower than in the previous year. Earnings after taxes also remained considerably lower than in the previous year at €-15 m (previous year: €-2m).
Defence: Growth in all three divisions – operating margin rises to 8.1%
Rheinmetall Defence boosted sales from €2,198m in the previous year to €2,450m in the first three quarters 2020. This represents sales growth of 12%/€252m and is being driven by all three divisions in the sector.
The operating result strengthened substantially against the previous year, coming to €197m after the end of the first three quarters of 2020 – a rise of €64m (48%). The operating margin thus improved to 8.1% in the first nine months of 2020 after 6.1% in the same period of the previous year. Taking into account total non-recurring effects of €+3m, reported earnings before interest and taxes (EBIT) amounted to €200m, also up on the previous year’s figure of €132m.
The Defence sector generated an order intake of €1,960m in the first nine months of 2020, falling 11% short of the €2,201m achieved in the previous year. However, the order intake does not yet include the major order to supply Lynx infantry fighting vehicles to Hungarian armed forces worth well over €2bn that was signed in September 2020. The order backlog after the end of the first three quarters came to €9,754m, 12% above the level in the previous year and thus remaining high (previous year: €8,689m).
The Weapon and Ammunition division generated sales of €668m in the first nine months of 2020. This represents an increase of €87m/15% compared with the previous year. The operating result in the first nine months of 2020 totaled €29m, exceeding the previous year’s figure of €9m by €20m. The division’s sales and earnings growth was driven chiefly by large supplies of munition and additional sales in connection with medical protective equipment, which is also allocated to this area.
The Electronic Solutions division saw a €20m/3.4% year-on-year upturn in its sales to €604m. The division generated an operating result of €53m, a rise of €6m on the prior-year figure (previous year: €47m).
The Vehicle Systems Division increased its sales by €14m or 12% in the first three quarters of 2020 to €1,324m (previous year: €1,179m). The operating result picked up by €42m year on year to €122m. One key successful order in the division was a framework agreement concluded to supply the German armed forces with up to 4,000 swap body trucks.
Outlook for fiscal 2020
Defence earnings outlook raised,
Automotive anticipates positive operating result
Rheinmetall still does not expect the coronavirus crisis to have any material impact on the Defence sector’s business performance in 2020. Accordingly, sales growth of around 6% after adjusting for currency effects is expected for the Defence sector. The operating margin, which was last forecast to be around 10%, is now being raised to between 10% and 11%.
Based on performance in the first nine months of fiscal 2020 and provided there is no second lockdown that shuts down international automotive production again before the end of the year, Rheinmetall anticipates a sales decline of between 20% and 23% in the Automotive sector (adjusted for currency effects). Automotive’s operating result outlook, which was estimated at between
€-30m and break-even at the half-year mark, has improved thanks to the market recovery that begun in the second half of 2020: As things stand at present, a positive operating result of between €10 m and €20m is expected in the Automotive sector.
For the Group, Rheinmetall is anticipating a decline in sales between 6% and 7%, adjusted for currency effects, and – taking into account holding costs – a positive operating margin between 6% and 6.5%.
Forward-looking statements and projections
This publication includes forward-looking statements. These statements are based on Rheinmetall AG’s current estimates and projections and information available at this stage. Forward-looking statements are not a guarantee of future performance. They depend on a number of factors, include various risks and uncertainties and are based on assumptions that may prove to be incorrect. Rheinmetall is under no obligation to update the forward-looking statements in this publication.
05 Nov 20. Ball Reports Strong Third Quarter Results.
– Third quarter U.S. GAAP earnings per diluted share of 72 cents vs. 27 cents in 2019
– Third quarter comparable earnings per diluted share of 89 cents vs. 70 cents in 2019
– Global beverage can volumes up 9% in the quarter
– Aerospace contracted backlog of $2.4bn; won-not-booked backlog of $4.9bn
– Announced new, multi-line Pittston, Pennsylvania, and Frutal, Brazil, beverage can manufacturing facilities
– Ball aluminum cup manufacturing plant production begins in fourth quarter
– Strong balance sheet, liquidity and cash from operations enables additional multi-year growth capital investments
– Positioned to grow diluted earnings per share and return value to shareholders in 2020 and beyond
Ball Corporation (NYSE: BLL) today reported, on a U.S. GAAP basis, third quarter 2020 net earnings attributable to the corporation of $241m (including net after-tax charges of $56 m, or 17 cents per diluted share for business consolidation and other non-comparable items), or 72 cents per diluted share, on sales of $3.1 bn, compared to $92m net earnings attributable to the corporation, or 27 cents per diluted share (including net after-tax charges of $145m, or 43 cents per diluted share for business consolidation and other non-comparable items), on sales of $3.0bn in 2019. Results for the first nine months of 2020 were net earnings attributable to the corporation of $358 m, or $1.08 per diluted share, on sales of $8.7bn, compared to $406m net earnings attributable to the corporation, or $1.19 per diluted share on sales of $8.8bn for the first nine months of 2019.
Ball’s third quarter and year-to-date 2020 comparable earnings per diluted share were 89 cents and $2.15, respectively, versus third quarter and year-to-date 2019 comparable earnings per diluted share of 70 cents and $1.82, respectively.
Third quarter and year-to-date results reflect the 2019 sale of the company’s Argentine steel aerosol business and Chinese beverage can assets, and new segment reporting for the company’s beverage packaging, EMEA business and other non-reportable results. References to volume data represent units shipped, and year-over-year global beverage volumes referenced exclude the impact of the 2019 sale of the Chinese beverage can assets.
“Our team continues to operate safely while responding to significant growth across our businesses. Capital investments are being executed to support sustained growth for our global aluminum packaging portfolio and aerospace technologies. Our company is well-positioned in the current environment, and our focus remains on our employees’ safety and our customers’ success, as well as the efficient and effective startup of our various capital projects in order to deliver significant value to our shareholders,” said John A. Hayes, chairman, president and chief executive officer.
“During the quarter, our company posted 27 percent comparable earnings per diluted share growth on 9 percent global beverage volume growth and 14 percent aerospace contracted backlog growth. In addition, we recently completed our aluminum aerosol acquisition in Brazil, announced new beverage can manufacturing plants in Pittston, Pennsylvania, as well as Frutal, Brazil, and commenced production at our new aluminum cup manufacturing facility in Rome, Georgia. With demand continuing to increase for our sustainable aluminum packaging solutions and critical aerospace technologies, Ball remains well positioned to invest in EVA-enhancing capital projects, grow diluted earnings per share, increase cash from operations, and deliver shareholder returns now and into the future,” Hayes said.
Aerospace comparable segment operating earnings for third quarter 2020 were $44m on sales of $451m compared to $35 m on sales of $374 m during the same period in 2019. For the first nine months, comparable segment operating earnings were $114m on sales of $1.3bn compared to $10 m on sales of $1.1bn. Contracted backlog increased 14 percent to $2.4bn and contracts already won, but not yet booked into current contracted backlog, remains strong at $4.9bn.
Segment results were very strong in the quarter despite inefficiencies created from tighter safety protocols due to COVID-19, and the business is on track to hire 1,000 employees in 2020. The company continues to win and provide mission-critical programs and technologies to U.S. government, defense, intelligence, reconnaissance and surveillance customers. Multiple projects to expand manufacturing capacity, test capabilities engineering and support workspace remain on track.
During the quarter, Ball was chosen by NASA for three studies to explore next-generation technologies for the Landsat Program, a series of Earth-observing satellite missions jointly managed by NASA and the U.S. Geological Survey that is entering its fifth decade of existence. In addition, Ball recently shipped the OMPS instrument for integration onto NOAA’s next polar-orbiting operational weather satellite, the Joint Polar Satellite System-2 (JPSS-2). The OMPS instrument provides critical ozone measurements used by forecasters at the National Weather Service to produce ultraviolet (UV) radiation forecasts, by researchers to track the health of the ozone layer and by policy makers to help improve life on Earth. Ball has successfully built and delivered the two prior OMPS instruments currently in orbit providing critical ozone data.
Third quarter results in non-reportable reflect higher year-over-year undistributed corporate expenses, the impact of the 2019 sale of the Chinese beverage can assets and Argentine steel aerosol business, lower operating results in the remaining non-reportable beverage and aluminum aerosol businesses, and start-up costs in the recently launched aluminum cup business. The current and historical results from the existing facilities in Cairo, Egypt, and Manisa, Turkey, have been consolidated into the beverage packaging, EMEA segment beginning in 2020.
The results for the company’s global aluminum aerosol business and beverage can manufacturing facilities in India, Saudi Arabia and Myanmar and investments in the company’s new aluminum cup business continue to be reported as non-reportable segments. During the quarter, the company’s global aluminum aerosol volumes declined low-teens with growth in India for sanitizing sprays offset by double-digit volume declines for personal care products in North America and Europe. In the third quarter, the company completed the acquisition of an aluminum aerosol manufacturing facility in Brazil and completed construction of its first dedicated aluminum cup manufacturing facility in Rome, Georgia. Multi-channel, retail shipments of aluminum cups are expected to commence in the first half of 2021.
“Our company generates significant cash from operations, and we have the flexibility and opportunity to allocate significant capital to organic growth investments while continuing to return value to shareholders. We continue to foresee 2020 capital expenditures exceeding $900 m, and given additional EVA-enhancing opportunities supported by contracted volumes and backlog, growth investments are expected to be in excess of $1bn in 2021 and beyond,” said Scott C. Morrison, senior vice president and chief financial officer.
“The resiliency of our team and the strength in our businesses has never been more evident. We continue to be on-track to execute multiple growth projects as efficiently and safely as possible with our employees, customers and supply chains. The momentum in our businesses is accelerating and we are well positioned to further broaden our scale to serve future growth with an even higher level of customer service. In 2020 and beyond, we look forward to continuing to grow our cash from operations and EVA dollars on an even larger capital base while returning capital to our shareholders and achieving our long-term diluted earnings per share growth goal of at least 10 to 15 percent,” Hayes said. (Source: PR Newswire)
05 Nov 20. Axon Reports Q3 2020 Revenue Growth of 27%, ARR Tops $200m, Up 44%. Surge in Total Bookings, Up 56%. YOY, Federal Bookings Up 400% YOY.
As 2020 enters the final stretch, Axon is on track to exit the year strong. We are pleased to report a surge in momentum in our business in the third quarter. We drove bookings growth of 62% sequentially and 56% year over year, aided by robust North American demand for body cameras and cloud software, and a rebound in TASER demand driven by the US federal and corrections markets. High-margin annual recurring revenue topped $200m, doubling in two years’ time. And we are on track to exceed our original 2020 financial targets — which is a testament to the mental toughness and dedication of our teams and the market’s reception to our products that solve real problems. In February, we told investors that our strategic priorities in 2020 included continuing to execute in our core market, while expanding to new customer segments and accelerating our path-to-market in new product categories. We are pleased to be executing to plan, even amid the economic and logistical challenges presented by the pandemic.
The following two areas of strength are the direct result of accelerated investments in the US federal law enforcement channel and the development of real-time command-and-control software for public safety.
 Bookings represents the total expected revenue contribution of contracts signed in the quarter that have a five-year length or shorter. We further define this metric under “Statistical Definitions.”
U.S. federal customers generate $38m in quarterly bookings
We are thrilled to report rapid progress in the federal market. As a result of targeted investments in building direct relationships with federal customers, we achieved a record $38m in bookings from federal customers in the third quarter, up 400% year over year. Our successes include the following new programs and contracts, many of which are firsts for Axon:
* We established our first two programs of record with the federal government, including a $13m U.S. Customs and Border Protection order for body cameras and digital evidence management. A program of record is a key milestone because it specifies an appropriated line item in the US discretionary budget. Previously, Axon mainly leveraged distributors for sales into the federal government.
* We signed our first indefinite delivery, indefinite quantity (IDIQ) contract with a federal agency. This type of contract establishes product pricing along with a contract ceiling.
* We signed our first Officer Safety Plan contract with a federal agency. Officer Safety Plan is our integrated subscription bundle that includes TASER 7, Axon Body 3, and a host of cloud software features to empower an agency. This early achievement gives us confidence that the integrated subscription bundle that has proven popular with municipal law enforcement may also be valuable to the federal adjacency.
* We sold body cameras and digital evidence management for the first time to the Department of Defense. We have primarily communicated our bullishness regarding Axon’s ability to sell to federal civilian law enforcement. Selling to the DoD further expands Axon’s federal total addressable market.
* We signed our largest TASER contract in company history, valued at $15.5m, within the Department of Homeland Security.
We announced Axon Respond, our end-to-end platform to power real-time operations
We introduced Axon Respond to the industry at our August user conference. Although we have talked generally with the investment community about our growing suite of dispatch and communications products, the launch of Respond represented our first formal communication to customers about the availability of “real-time operations” — a broader vision for the category. We are now building a book of business for the platform, which comprises a modern cloud-based dispatch system, communications capabilities, real-time situational awareness through GPS-and-LTE-enabled body cameras,
in-car cameras and drones, and integrated light bar and weapon deployment signals, giving everyone a real-time map of what is happening. It is accessible from any device, and is built to evolve, unlike legacy on-premises systems. The Respond platform is made up of several products that work together and are integrated with Axon’s software suite, which includes digital evidence management and Axon Records. Our teams built this platform after conducting more than 1,000 hours of customer research, which uncovered several consistent problems with legacy 911 dispatching operations: Basic usability falls short of modern software design standards that most consumers take for granted, on-premise legacy systems are inherently less reliable than the modern cloud, and upgrades and performance improvements are complex and infrequent rather than seamless and ongoing.
Delayed responses in 911 can be caused by delayed situational awareness — a gap between an event occurring and the system of responders being able to react to the development. Also, officers often have to juggle a rat’s nest of tools — cobbled together from consumer applications, dispatching applications, texting and radio. We have a growing number of customers using components of Respond. And many agencies are using it regularly as part of their routine police work. In a recent survey of more than 200 users by TechValidate, 90% said that Respond has had a “positive” or “extremely” positive impact on officer safety. Respond is also driving situational awareness, efficiency of daily command operations, and improving relationships with communities.
In the past month, more than 200 agencies have used Respond for Devices (previously referred to as Axon Aware), which is the GPS-enabled service that pairs with the Axon Body 3 camera. Customers include the Atlanta and Cincinnati police departments and Toronto Police Service. In addition, over the past six months, we have seen a 6x increase in usage of live-streaming with Respond for Devices.
In April, Arizona’s City of Maricopa Police Department moved over from a competitor and went live on Axon’s cloud-based computer aided dispatch (CAD) solution to power their 911 incident response — representing our first Dispatch customer. We are encouraged by the pipeline of additional Dispatch customers, as we aim to be first in the category in the coming years.
International expansion continues:
Recent milestones in our international expansion include the Toronto Police Service’s deployment of Axon body cameras, the London Metropolitan Police’s upgrade to Axon Body 3 cameras, government approval to sell TASER 7 in the UK, and the first major agency in Ukraine purchasing TASER devices.
International revenue of $23m in the quarter represented 15% year-over-year growth and reflected typical third quarter seasonality. Year-to-date international revenue is up 43%.
“Deciding to go with an Axon body camera program was the best decision for Toronto Police Service because the cameras are just part of the bigger picture. The real value is within the digital evidence management solution, which will allow us to manage and share evidence with ease, speed and less costs.” –Toronto Police Service Superintendent Michael Barsky
“The National Police of Ukraine will start using TASER (devices) for its operations, which is a completely new tool for law enforcement agencies in our country. We have carefully studied the usage of these devices globally and believe that equipping our units with this innovative device will make them more effective in protecting the rule of law and civil order. We look forward to a long-term partnership with Axon and to truly harnessing the power of their network.” –Deputy Minister of Internal Affairs of Ukraine, Mr. Anton Gerashchenko
Environmental, Social & Governance (ESG) update
Axon is a mission-driven company whose overarching goal is to protect life. Our vision is a world where bullets are obsolete, where social conflict is dramatically reduced, and where everyone has access to a fair and effective justice system. We continue to strengthen our focus on ESG.
We see 100% of our revenues as generated by products and solutions that support the UN Sustainable Development Goals, particularly goals 5, 9, 11 and 16. These goals seek to achieve gender equality, build resilient infrastructure and foster innovation, promote safe living conditions in urban areas, reduce violence and death rates, promote the rule of law to ensure everyone equal access to justice, and develop effective, accountable and transparent institutions.
Following the death of George Floyd and this summer’s social unrest, Axon became one of the first companies to announce an action plan, including a commitment to help public safety agencies in their work to address systemic inequity, racism, and injustice. As part of this commitment, Axon added a new strategic goal to our mission — to center racial equity, diversity, and inclusion.
On October 28, we unveiled our first eight product features developed in direct support of this goal, which we built through a company-wide initiative called Sprint for Justice. The features focus on transparency, truth and officer development, and aim to reduce violence and social conflict. Importantly, they increase officer accountability with features such as automatically prioritizing body camera videos selected for random audits based on events such as unholstering a TASER device or spoken keywords from the AI-powered transcription of the audio, a use of force dashboard, virtual reality training to assist in handling high-stakes situations like peer intervention, and replay coaching to revisit body camera footage and promote ongoing learning and development.
Summary of Q3 2020 results:
* Revenue of $166m grew 27% year over year, with broad-based strength driven by demand for almost all product lines.
* Gross margin of 59.0% reflected a favorable product mix relative to our expectations. Shipments of low-to-no margin body camera hardware, which we previously communicated, had about 400 basis points of negative gross margin impact in the quarter.
* Operating expenses of $104m included $26m in stock-based compensation expense and $8.6m in costs related to FTC litigation. (An update on the FTC litigation is below, under “Update on Legal Matters.”)
o SG&A of $74m included $19m in stock-based compensation expense.
o R&D included $6m in stock-based compensation expense.
o Although Axon recognized $17m in expenses that were particularly related to our innovative stock-based compensation plans in the third quarter, no employees or executives have received shares, because no operational milestones have been achieved. Costs are recognized under these plans when future milestones are considered probable of achievement. For more details about these innovative stock-based compensation plans, which were approved by shareholders and align the interests of management and employees with shareholders, please see our online FAQ at investor.axon.com.
* GAAP EPS was ($0.01) based on a net loss of $1m; and Non-GAAP EPS was $0.40.
* Quarterly Adjusted EBITDA grew 40% year over year. Adjusted EBITDA of $34m represented a 20% margin on revenue.
* Cash and cash equivalents and investments totaled $628m at September 30, 2020.
o Uses of cash in the third quarter included:
* $54m to purchase a parcel of land in Scottsdale from the Arizona State Land Department at auction, on which we intend to construct our new manufacturing and office facility. We aim to consolidate five locations and bring more automation to future generations of product hardware. We require physical facilities for not only manufacturing, but also hardware R&D, testing laboratories, wireless calibration, quality testing, and a variety of other functions that require physical collaboration. This land investment provides long-term flexibility, optionality and stability for our physical plant operations, and supports Axon’s growth and expansion plans for the next several decades. The acquired land is walking distance from Axon’s current headquarters and manufacturing operations, giving us flexibility to migrate key manufacturing infrastructure over time, with the benefits of minimal business disruption and operational redundancy.
* $16m tied to building up inventory, which helped us respond to strong product demand while preparing us to stagger factory work schedules due to COVID-19, and prepares us for large shipments in the coming weeks.
* As we first indicated in May, our elevated inventory build over the course of 2020 is a proactive approach to building safety stock in an effort to minimize shipping disruptions. We are committed to working through COVID-19 supply chain challenges as they arise to support our customers and deliver mission critical equipment.
* Finished goods inventory totaled $55m at third quarter end, including TASER devices due for customer shipments in Q4 2020.
* $15m increase in contract assets tied to selling long-term hardware subscriptions, which results in recognizing revenue when we deliver hardware to our customers ahead of invoicing for the full value of that hardware.
* Axon has zero debt.
Financial commentary by segment:
* TASER segment revenue of $84m reflected robust demand for devices, cartridges, and officer training.
* Gross margin increased to 62.9% due to lower discounting and higher-margin training revenue. As higher percentages of our TASER units are sold in integrated bundles, we realize a lower gross margin on the TASER units upon shipment than selling stand-alone, but higher gross profit over the life of the subscription. As we note in the next section, the percentage of TASER units sold on a subscription bundle surged to 75% in the quarter, reflecting the value that customers see in our subscription bundles, and our efforts to evolve TASER from a book-and-ship hardware product to a subscription-based de-escalation platform that includes cloud software and training.
Software & Sensors
* domestic demand for our growing software suite.
* Axon Cloud gross margin of 77% includes some low-to-no margin professional services that support new installations for SaaS customers. The software-only revenue in this segment, which includes cloud storage and compute costs, has consistently carried a gross margin above 80%.
* Sensors & Other revenue grew 46% year over year on strong demand for Axon Body 3 cameras.
* Sensors & Other gross margin was 27.5%. As a reminder, we manage toward a 25% gross margin for camera and sensors hardware, and the gross margin will fluctuate quarter to quarter depending on the customer mix. In the third quarter, we shipped Axon Body 3 cameras at low-to-no margin to our largest customers. We expect Sensors & Other gross margin in Q4 2020 to be about flat with Q3 as we complete shipments to our largest customers. (Source: PR Newswire)
05 Nov 20. Triumph Group Reports Second Quarter Fiscal 2021 Results. Continues Path to Exit Large Structures with Completed Sale of G650.
Maintains Full Year Fiscal 2021 Net Sales Guidance.
Triumph Group, Inc. (NYSE: TGI) (“Triumph” or the “Company”) today reported financial results for its second quarter of fiscal year 2021, which ended September 30, 2020.
Second Quarter Fiscal 2021
* Net sales of $481.8m
* Operating income of $7.4m with operating margin of 2%; adjusted operating income of $21.4m with adjusted operating margin of 4%
* Net loss of $33.5m, or ($0.64) per share; adjusted net loss of $4.3m, or ($0.08) per share
* Cash flow used in operations of ($42.2)m, and free cash use of ($47.3)m
Full-Year Fiscal 2021 Net Sales Guidance
* Net sales between $1.8 – $1.9bn
“For the second quarter of our fiscal year, Systems & Support revenues increased as compared to the first quarter driven by increased military volumes and partial rate recovery on Airbus programs. Organic revenue decreased compared to the prior year period due primarily to expected declines in Aerospace Structures associated with planned reductions from our portfolio transformation and the ongoing COVID-19 pandemic,” stated Daniel J. Crowley, Triumph’s president and chief executive officer. “We continued executing our plan to exit legacy programs in Aerospace Structures with the completion of the sale of our G650 wing kitting and engineering services program to Gulfstream. Furthermore, the sale of our two Composite Structures factories remains on track for later this year.”
Mr. Crowley continued, “Our cash usage for the second quarter improved over our first quarter in line with our expectations as a result of tight working capital management and the benefits of earlier cash-conserving actions. We expect to continue to use cash in the third quarter and be cash positive in the fourth quarter. We have the financial flexibility to support the needs of our customers through this challenging environment. Triumph remains focused on protecting the health and safety of our people, conserving cash and partnering with our customers to ensure we are best positioned for recovery for the benefit of all our stakeholders.”
Second Quarter Fiscal Year 2021 Overview
After accounting for the impact of the divestitures, sales for the second quarter of fiscal 2021 were down 33% organically from the comparable prior year period. The decline was driven by planned reductions on sunsetting and transitioned programs, impacts of the COVID-19 pandemic and resulting production rate decreases primarily on commercial programs, partially offset by increases in military programs.
Second quarter operating income of $7.4m included $13.2m of restructuring costs associated with facility closures, severance arising from reductions in force and third-party consulting costs. Net loss for the second quarter of fiscal year 2021 was $33.5m, or ($0.64) per share. On an adjusted basis, net loss was $4.3m, or ($0.08) per share.
Triumph’s results included the following:
The number of shares used in computing earnings per share for the second quarter of 2021 was 52.0m.
Backlog, which represents the next 24 months of actual purchase orders with firm delivery dates or contract requirements, was $2.4bn, down as expected compared to the prior year period and on a sequential basis due to divestitures, sunsetting programs and recent production rate reductions, but partially offset by military program increases in Systems & Support.
For the second quarter of fiscal 2021, cash flow used in operations was $(42.2)m, reflecting increasing working capital and liquidation of approximately $10.0m in prior period advances against current period deliveries.
In the second quarter of fiscal 2021, the Company changed its method of accounting for the determination of the market-related value of certain assets of the qualified U.S. defined benefit plan. This change in accounting principle is preferable based on U.S. generally accepted accounting principles. The change requires retrospective application. The impact of adoption for the three and six months ended September 30, 2020 was $0.03 and $0.06 per share, respectively and for fiscal year 2020 the impact of adoption was ($0.03) per share.
Lastly, during the quarter, the Company requested approval from the IRS to change its pension plan year from April 1 through March 31, to October 1 through September 30. If approved, the change will take effect on October 1, 2020, and is expected to improve the Company’s projected cash flows used in the determination of the pension plan’s funding.
Based on anticipated aircraft production rates and MRO demand, including the impacts of pending program exits and no additional extended shut-down of operations due to the pandemic, the Company continues to expect that net sales for fiscal year 2021 will be approximately $1.8 to $1.9bn.
The Company anticipates that the trends in cash used in operations that were experienced in the first half of fiscal 2021 to continue, but to a lesser degree in the third quarter, and expects cash flow to be positive in the fourth quarter of the fiscal year. Therefore, the Company expects cash used in operations and free cash use for the full fiscal year to be moderately higher than the first half.
The Company’s outlook excludes the impact of the pending sale of our Composite Structures business and any potential future divestitures. (Source: PR Newswire)
02 Nov 20. Leidos Holdings, Inc. Reports Third Quarter Fiscal Year 2020 Results.
– Revenues: $3.24 bn, year-over-year growth of 14.4%
– Diluted Earnings per Share: $1.13; Non-GAAP Diluted Earnings per Share: $1.47
– Net Bookings: $4.3bn (book-to-bill ratio of 1.3)
– Cash Flows from Operations: $592m.
Leidos Holdings, Inc. (NYSE: LDOS), a FORTUNE 500® science and technology leader, today reported financial results for the third quarter of fiscal year 2020.
Roger Krone, Leidos Chairman and Chief Executive Officer, commented: “Leidos’ third quarter results reflect the hard work and dedication of our employees and close collaboration with our customers as we provided continuity of operations while accelerating our pandemic response plan. This is evidenced by record revenue, solid margins, record backlog and record operational cash generation in the recent quarter. While challenges still remain, we are pleased with the growth and margin trajectory as we enter the fourth quarter and beyond.”
Revenues for the quarter were $3.24bn, compared to $2.84bn in the prior year quarter, reflecting a 14.4% increase. Revenues for the quarter included $302m and $74m related to the acquisitions of Dynetics, Inc. (“Dynetics”) and L3Harris Technologies’ security detection and automation businesses (the “SD&A Businesses”), respectively.
Operating income for the quarter was $258m, compared to $249m in the prior year quarter, reflecting a 3.6% increase. Operating income margin decreased to 8.0% from 8.8% in the prior year quarter. Non-GAAP operating income margin for the quarter was 10.0%, compared to 10.4% in the prior year quarter, primarily attributable to a $54m recovery recognized in the prior year quarter related to the receipt of the Greek arbitration award.
Diluted earnings per share (“EPS”) attributable to Leidos common stockholders for the quarter was $1.13, compared to $1.11 in the prior year quarter. Non-GAAP diluted EPS for the quarter was $1.47, compared to $1.36 in the prior year quarter. The weighted average diluted share count for the quarter was 144m compared to 145m in the prior year quarter.
Defense Solutions revenues for the quarter of $1,951m increased by $357m, or 22.4%, compared to the prior year quarter. The revenue increase was primarily attributable to $302 m of revenues related to the acquisition of Dynetics and program wins, partially offset by the completion of certain contracts and reduced volume on certain contracts due to negative impacts related to the coronavirus pandemic (“COVID-19”).
Defense Solutions operating income margin for the quarter was 7.4%, compared to 6.7% in the prior year quarter. On a non-GAAP basis, operating income margin for the quarter was 8.8%, compared to 7.7% in the prior year quarter. The increase in margin was primarily attributable to higher margins on program wins and lower indirect expenditures.
Civil revenues for the quarter of $771m increased by $38m, or 5.2%, compared to the prior year quarter. The revenue increase was primarily attributable to $74m of revenues related to the acquisition of the SD&A Businesses and program wins, partially offset by the completion of certain contracts, prior year upfront lease revenue recognized on certain programs and reduced volume on certain contracts due to negative impacts related to COVID-19.
Civil operating income margin for the quarter was 7.0%, compared to 5.9% in the prior year quarter. On a non-GAAP basis, operating income margin for the quarter was 10.5%, compared to 8.3% in the prior year quarter, primarily attributable to improved performance on certain programs and a decrease in bad debt expense.
Health revenues for the quarter of $520m increased by $12m, or 2.4%, compared to the prior year quarter. The revenue increase was primarily attributable to a net increase in volumes on certain programs and program wins. This was partially offset by the impact from the sale of our health staff augmentation business in the third quarter of fiscal 2019.
Health operating income margin for the quarter was 14.4%, compared to 12.4% in the prior year quarter. On a non-GAAP basis, operating income margin for the quarter was 16.3%, compared to 14.8% in the prior year quarter, primarily attributable to lower expenditures on certain programs and the impact from the sale of our health staff augmentation business in the third quarter of fiscal 2019.
Cash Flow Summary
Net cash provided by operating activities for the quarter was $592m compared to $349m in the prior year quarter. The increase in cash inflows was primarily due to the timing of payroll payments and higher advance payments from customers in the current year quarter.
Net cash used in investing activities for the quarter was $15m compared to $102m in the prior year quarter. The decrease in cash outflows was primarily due to cash paid related to the acquisition of IMX Medical Management Services, Inc. in the prior year quarter, partially offset by net proceeds received for the divestiture of our health staff augmentation business in the prior year quarter.
Net cash used in financing activities for the quarter was $517m compared to $204m in the prior year quarter. The increase in cash outflows was primarily due to the early repayment of our $450 m senior unsecured notes in the current quarter and the timing of dividend payments, partially offset by stock repurchases in the prior year quarter.
As of October 2, 2020, we had $512m in cash and cash equivalents and $4.5bn of debt.
New Business Awards
Net bookings totaled $4.3bn in the quarter, representing a book-to-bill ratio of 1.3.
Notable recent awards received include:
- U.S. Intelligence Community: The Company was awarded contracts valued at $445 m, if all options are exercised, by U.S. national security and intelligence clients. Though the specific nature of these contracts is classified, they all encompass mission-critical services that help to counter global threats and strengthen national security.
- U.S. Army Saturn Arch Aircraft Operations, Sustainment and Integration Support: The Company was awarded a follow-on contract by the Army Contracting Command – Redstone Arsenal, Ala. to provide the full spectrum of turnkey ground and flight operations for the Saturn Arch aircraft in Outside the Contiguous United States (“OCONUS”) contingency environments. Through the contract, Leidos will leverage the airborne solution operation’s deep expertise in specialized systems to provide aircraft engineering, design, fabrication, modification and installation of DHC-8 aerial intelligence, surveillance, and reconnaissance capabilities. The sole source, cost-plus-fixed-fee contract has a total estimated value of $306 m and includes a one-year base period of performance followed by two one-year option periods with a six-month extension.
- Federal Aviation Administration Enterprise Information Display System Design: The Company was awarded a prime contract by the Federal Aviation Administration to design and develop a system to provide real-time access to essential weather, aeronautical, and National Airspace System (“NAS”) information through a common, NAS-wide Enterprise – Information Display System (“E-IDS”). Through the contract, Leidos will perform the critical activities required to deliver E-IDS, including: program management, systems engineering, design and development, system test and evaluation, training, production and site implementation. The single award contract holds an approximate value of $292 m. It includes a four-year base period of performance and eleven one-year option periods.
Backlog at the end of the quarter was $31.7bn, of which $6.8bn was funded.
As a result of the Company’s year-to-date performance and updated expectations, the Company is revising its fiscal year 2020 guidance as follows:
- Revenues of $12.3 bn to $12.5bn, from $12.2 bn to $12.6bn;
- Adjusted EBITDA margins of 10.6% to 10.8%, from 10.0% to 10.2%;
- Non-GAAP diluted EPS of $5.65 to $5.85, from $5.25 to $5.55; and
- Cash flows provided by operating activities at or above $1.2bn.
The Company’s updated forward guidance reflects the currently expected impacts related to COVID-19. (Source: PR Newswire)
02 Nov 20. Belcan Acquires Telesis, a Leader in Federal Information Technology Services. Acquisition Expands the Capabilities of Belcan’s Government IT Solutions Business.
Belcan, LLC (“Belcan”), a global supplier of engineering, supply chain, technical recruiting, and information technology (IT) services to the Aerospace, Defense, Automotive, Industrial, and Government Services markets, announced today that it has acquired Telesis Corporation (“Telesis” or the “Company”), a leading technology services and solutions firm serving defense and civilian federal government customers. Terms of the transaction were not disclosed.
This marks the 15th acquisition by Belcan under its ownership by AE Industrial Partners, LP (“AEI”), a private equity firm specializing in Aerospace, Defense & Government Services, Power Generation, and Specialty Industrial markets.
Founded in 1998, Telesis provides innovative information technology solutions for large, complex government customers with a focus on highly differentiated services that deliver mission-critical solutions for its customers. Serving U.S. Federal agencies in defense, civilian, health and intelligence markets, Telesis’ primary capabilities include cybersecurity, C4ISR and mission systems, cloud and IT modernization, and managed technology solutions. The Company is headquartered in McLean, VA, with operations across the United States and internationally.
“The acquisition of Telesis is transformational for Belcan’s Government IT Solutions business, immediately adding complementary capabilities and greater scale,” said Lance Kwasniewski, CEO of Belcan. “Telesis not only has close, long-term relationships with leading federal customers, but its solutions and services are well-aligned with future federal spending priorities in the U.S. We look forward to working with the Company’s talented management team to unlock the potential of the combined companies.”
“Joining a large, multi-faceted organization such as Belcan will provide additional integrated services for our customers, as well as greater opportunities for our employees,” said Dave Jefferson, Chief Strategy Officer of Telesis. “Belcan shares our strong commitment to superior customer service and we are excited to work together to grow the business.”
“Spending on IT modernization and solutions is expected to remain a top priority for the U.S. Government,” said Kirk Konert, Partner at AEI. “Together with Telesis, Belcan’s Government IT Solutions business is even more well-positioned to deliver a differentiated set of IT solutions to meet this critical demand. We are excited to add Telesis to our team and look forward to significant growth in the years ahead.”
Kirkland & Ellis LLP served as legal advisor and PricewaterhouseCoopers LLP was the financial advisor to Belcan. Morrison & Foerster LLP served as legal advisor and G Squared Capital Partners LLC was the financial advisor to Telesis.
Belcan is a global supplier of engineering, supply chain, technical recruiting, and IT services to customers in the aerospace, defense, automotive, industrial, and government sectors. Belcan engineers better outcomes for customers – from jet engines, airframe, and avionics to heavy vehicles, automobiles, and cybersecurity. Belcan takes a partnering approach to provide solutions that are adaptable, integrated, and value-added, and has been earning the trust of its customers for over 60 years. For more information, please visit www.belcan.com.
Founded in 1998, Telesis provides innovative technology solutions for the top defense and civilian federal agencies, including cybersecurity, C4ISR and mission systems, cloud and IT modernization, and managed technology solutions. The Company is headquartered in McLean, VA, with operations across the United States and internationally. For more information, please visit https://www.telesishq.com/ (Source: PR Newswire)
02 Nov 20. Leading Defense Industry Supplier of Advanced Tactical Communications Solutions for Battlefield Network Management. Curtiss-Wright Corporation (NYSE: CW) today announced that it has completed the acquisition of Pacific Star Communications, Inc. (PacStar®) for $400m in cash. PacStar is a leading provider of secure 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 acquisition 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. 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 the delivery of best-in-class platform network integration and tactical data link network management to the warfighter. In addition, it ensures that the Company is well-positioned to benefit from the military’s continued investment in robust, secure and integrated battlefield network management.
The business will operate within Curtiss-Wright’s Defense segment. The acquisition supports Curtiss-Wright’s financial objectives for long-term profitable growth and strong free cash flow generation. PacStar is expected to generate sales in excess of $120m in 2020 and is expected to yield significant opportunities for revenue growth. Further, it 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%.
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. The business has secured strong positions on critical U.S. Army and U.S. Marine Corps programs. PacStar employs approximately 145 people.
02 Nov 20. UK retakes control of nuclear weapons contract from Lockheed Martin, Serco group. Britain’s defence ministry will take back direct control of the operation and development of the country’s nuclear weapons from a consortium of Lockheed Martin, Serco and Jacobs Engineering in June 2021, it said on Monday.
Operation of the Atomic Weapons Establishment, which maintains the warheads for the Trident submarine-based nuclear deterrent, was awarded to the AWE Management consortium in 1999 under a 25-year contract.
Lockheed Martin owns 51% and Serco and Jacobs Engineering own 24.5% each of the consortium.
The government said ending the commercial arrangement early would improve its agility in managing the UK’s nuclear deterrent and deliver value for money to the taxpayer.
Serco said it was told about the termination of the contract late on Friday. Shares in Serco fell 13% in early deals.
Based in Aldermaston in southern England, AWE is also required to retain the capability to design a new weapon, should it ever be required.
The company said AWE was expected to contribute about £17m ($22m) to both its underlying trading profit and pretax profit in 2020.
It said, however, assuming a smooth handover of the contract next year, it expected profit in 2021 to remain broadly in line with current consensus and at similar levels to our expectations for 2020.
Sky News, which first reported the news, said it was not clear if the companies would receive compensation for the termination of the 25-year contract.
Analysts at Jefferies said they expected some compensation was likely as the consortium was now meeting its targets after a period of underperformance about five years ago. ($1 = 0.7768 pounds)(Source: Reuters)
30 Oct 20. Honeywell Reports Third-Quarter EPS Of $1.07, Adjusted EPS Of $1.56; Generates Sequential Sales And Segment Profit Growth In All Segments.
– Reported Double-Digit Growth in Defense and Space, Warehouse Automation, Personal Protective Equipment, and Recurring Software Sales
– Generated 320 Basis Points of Sequential Operating Margin Improvement
– Delivered Over $450m of Cost Savings; Funded $124m of Repositioning to Drive Further Savings
– Reinstates Financial Guidance; Expects Fourth Quarter EPS of $1.97 to $2.02 and Full-Year EPS of $6.78 to $6.83, Full-Year Adjusted EPS of $7.00 to $7.05
Honeywell (NYSE: HON) today announced results for the third quarter of 2020, which improved sequentially versus the second quarter of 2020.
The company reported a third-quarter year-over-year sales decline of 14% reported and organic, operating margin contraction of 250 basis points, and segment margin contraction of 130 basis points, with adjusted earnings per share of $1.56.
“I am pleased with the quarter-over-quarter improvements in sales growth, margin expansion and adjusted earnings per share that we delivered in the third quarter,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “We continued to focus on driving sales growth in areas that have not been as impacted by the current downturn, including defense and space, warehouse automation and personal protective equipment, all of which grew by double-digits organically year-over-year. Recurring software sales also grew double-digits organically, continuing our transformation to a premier software-industrial company.
“We also focused on aggressively managing cost, and delivered over $450m in savings in the quarter, bringing our year-to-date total to $1.1bn. We now expect to generate $1.5bn to $1.6bn of cost savings during 2020, up from our previous estimate of $1.4bn to $1.6bn,” Adamczyk continued. “Honeywell’s balance sheet remains strong, with $15bn of cash and short-term investments on hand, and we further enhanced our financial flexibility this quarter by issuing $3bn of bonds at attractive rates and repaying in full the $3bn term loan borrowed earlier this year. Capital deployment remains a focus for us. In the third quarter, we resumed opportunistic share repurchases and announced the 11th consecutive increase to our dividend. We also recently announced two acquisitions that will provide emerging technologies in our Aerospace business. I am confident we are well-positioned for the economic recovery.”
Adamczyk concluded, “Last month we celebrated two significant milestones: Honeywell’s 100th anniversary on the New York Stock Exchange and our return to the Dow Jones Industrial Average. Honeywell is a company that has weathered the toughest of times and emerged from them stronger than before. This crisis is no exception. We have moved very quickly to introduce new offerings to help people get back to the workplace, back to play, back to travel, and back to life, and I am pleased with the strong demand we are seeing for these solutions. We remain focused on cost management and execution, while also investing in new markets and new technologies that will shape the next 100 years for our customers, shareowners and employees.”
Honeywell expects fourth quarter sales of $8.2bn to $8.5bn, representing a year-over-year organic sales decline of 11% to 14%; segment margin of 21.1% to 21.3%, down 10 to 30 basis points; and earnings per share of $1.97 to $2.02, down 2% to 4% adjusted. Full-year sales are expected to be in the range of $31.9bn to $32.2bn, representing a year-over-year organic sales decline of 12% to 13%; segment margin of 20.4% to 20.5%, down 60 to 70 basis points; and adjusted earnings per share1 of $7.00 to $7.05, down 14%.
Honeywell sales for the third quarter were down 14% on a reported and organic basis.
Aerospace sales for the third quarter were down 25% on an organic basis driven by lower commercial aftermarket demand due to the ongoing impact of reduced flight hours and lower volumes in commercial original equipment, partially offset by double-digit growth in Defense and Space. Segment margin contracted 240 basis points to 23.2% driven by lower volumes and sales mix.
Honeywell Building Technologies sales for the third quarter were down 8% on an organic basis driven by lower demand for building products and delays in Building Solutions projects, partially offset by growth in the services verticals. Segment margin expanded 60 basis points to 21.6%. Margin performance was driven by commercial excellence and productivity actions.
Performance Materials and Technologies sales for the third quarter were down 16% on an organic basis driven by delays in Process Solutions services and automation projects as well as volume declines in smart energy; lower gas processing projects, catalyst shipments, licensing, and engineering due to softness in the oil and gas sector in UOP; and lower fluorine products volumes in Advanced Materials, partially offset by packaging and composites growth. Segment margin contracted 220 basis points to 19.6% driven by the impact of lower sales volumes, partially offset by productivity actions. (Source: PR Newswire)
30 Oct 20. Parsons to Acquire Braxton Science & Technology Group. The O’Neil Group Company, LLC announced today that it has entered into a definitive agreement on behalf of investors to sell Braxton Science & Technology Group, LLC (“Braxton”) and its subsidiaries for approximately $300m in cash to Parsons Corporation (NYSE: PSN). Headquartered in Colorado Springs, CO, The O’Neil Group Company (“OGC”) oversees a diversified portfolio of operating companies and real estate investments, which includes Braxton as a spotlight of its portfolio growth and success over the past decade-plus. The sale of Braxton encompasses 5 of the 7 defense entities making up the defense portion of businesses owned and managed by OGC. OGC will shift its resources to focus on continued growth and investment in businesses, real estate and the community in which it operates.
Braxton, headquartered at the Catalyst Campus for Technology & Innovation in downtown Colorado Springs, added more than 300 employees and grew revenue by 25 times since being acquired by the investment group coordinated by, and subsequently managed by, the O’Neil Group. “This was one of our better exits considering that the original investors realized a 9-times return on their investment,” said Keven O’Neil, OGC’s owner and CEO.
Braxton operates at the forefront of satellite operations, ground system automation, flight dynamics, and spacecraft and antenna simulation for the U.S. Department of Defense and Intelligence Community. These capabilities position Parsons to Capitalize on the quickly evolving space missions of its national security space customers and address rapid market growth driven by proliferated low earth orbit (LEO) constellations, small satellite expansion, and space cyber resiliency. Braxton has specific domain expertise with the U.S. Air Force’s Enterprise Ground Services (EGS) effort: a next generation architecture that will unify spacecraft ground control operations across multiple major government agencies.
“The combination of Braxton’s leading defense capabilities, and decades of trusted customer relationships, combined with Parsons’ global scale, cross-industry experience, and disruptive mindset creates a leading space technology provider,” said Ken O’Neil, President of Braxton. “We’re excited to join an organization known for their entrepreneurial spirit, agility, culture of innovation and inclusivity, and successful track record of mergers, acquisitions, and integrations. Parsons is a large company with the operational agility of a smaller organization, which attracted us to them and gives us confidence in our future success together.” (Source: PR Newswire)
29 Oct 20. General Atomics Acquires Guidestar Optical Systems. General Atomics has completed the acquisition of the business of Guidestar Optical Systems, Inc. — the business will be integrated into the General Atomics Electromagnetic Systems (GA-EMS) group.
Guidestar Optical Systems’ innovations in adaptive optics align with GA-EMS’ focus on delivering groundbreaking technologies for the space and defense markets.
Founded in 2013, Guidestar Optical Systems is an optical systems research and development company focused on the design and development of innovative optical solutions for uses in directed energy, free space laser communications and sensing and imaging through optical turbulence.
“We are excited to bring the Guidestar team on board to further enhance our diverse portfolio of laser technologies,” stated Scott Forney, President of GA-EMS. “Guidestar’s expertise in adaptive optics has led to significant advancements in laser communications, high-energy laser technologies, ISR (Intelligence Surveillance and Reconnaissance), and atmospheric measurement and forecasting. This acquisition expands our ability to design, build, test, and deliver an extensive set of optical technologies to our customers.” (Source: Satnews)
TCI International, Inc., is a wholly-owned subsidiary of SPX Corporation. TCI provides turn-key solutions for spectrum management and monitoring, direction finding, geolocation and communications intelligence to civilian, government, military and intelligence agencies as well as antennas for communications and high-power radio broadcasting. TCI is headquartered in Fremont, California, USA. For more information, visit www.tcibr.com.