Sponsored by TCI International Inc.
12 Dec 20. Germany to buy 25% stake in defence supplier Hensoldt – sources. The German government will buy a 25.1% stake in German defence supplier Hensoldt from private equity company KKR for 464m euros ($562m), people with knowledge of the matter said on Saturday. The sources said the purchase is intended to ward off a foreign buyer from taking control of Hensoldt, whose high-tech cameras are used in Tornado fighter jets, and which listed its shares in an initial public offering (IPO) in September. Hensoldt, a former Airbus unit, also supplies radar systems for Eurofighter jets and periscopes for Leopard and Puma tanks. KKR, which bought the company in 2016, retained a stake of more than 60% after the IPO. Hensoldt and KKR declined to comment. ($1 = 0.8257 euros) (Source: Reuters)
11 Dec 20. Airbus, Safran in approach for Eramet’s Aubert & Duval. Airbus, Safran and aerospace-focused fund Ace Aero Partenaires have submitted a non-binding offer for Aubert & Duval (A&D), the superalloys supplier owned by mining group Eramet, two people familiar with the matter said.
Eramet said in June it had launched a strategic review of its specialist A&D subsidiary, after a third of its activity was cancelled by the coronavirus crisis, and would consider all options for the 113-year-old business.
The non-binding offer marks an initial statement of interest and allows access to detailed company data, the people said.
Eramet reiterated it was considering all options for A&D including a sale, but declined to elaborate.
Airbus, Safran and Ace Aero Partenaires declined to comment.
A&D recorded negative free cash flow of 156m euros ($189m) in the first half and Eramet expects its 2020 sales to be down around 15% from 2019 and 34% from 2018.
Its problems are emblematic of the turbulence hitting suppliers in the Occitanie region in southwest France, where a total of 40,000 aerospace jobs are seen at risk.
Its advanced superalloys are used in engines for the French Rafale fighter and the LEAP commercial engine, co-produced for Boeing and Airbus by Safran and General Electric.
Airbus is also A&D’s biggest direct customer.
The unusual decision by Airbus to embark on purchasing one supplier in co-operation with another comes amid concerns over the impact of the pandemic on suppliers and follows Safran’s expansion to become the world’s third-largest aero contractor.
Planemakers have considerable influence over consolidation in the supply chain because of their position at the top of the industry tree and the small number of customers for plane parts.
Although Safran was seen as interested in buying Aubert & Duvall alone, consolidation among big suppliers has rung alarm bells at Airbus and Boeing and Airbus is seen as reluctant to leave full control of A&D to Safran, one of the people said.
French newspaper La Tribune, which first reported the non-binding offer, said each member of the consortium would finance a third of the purchase.
Industry sources have previously said that Airbus and Safran are the most likely contenders to take over A&D with the backing of the French government.
The government holds stakes in Eramet, Safran and Airbus, though its role in the latter is restricted to overseeing defence interests.
Union officials said A&D confirmed the business was for sale in meetings last week as management unveiled a cost-saving plan.
The proposals will be discussed in coming weeks and include cutting 380 out of some 4,000 jobs through voluntary redundancies.
($1 = 0.8249 euros) (Source: Reuters)
11 Dec 20. Rolls-Royce to start sale process for ITP Aero in first half of 2021. Rolls-Royce expects to kick-off the formal sale process for its Spain-based unit ITP Aero, expected to be the largest asset sold as part of a 2bn pound ($2.6bn) disposal plan, in the first-half of next year.
“The first half of next year we’ll see as engaging with the buyer universe around the ITP business,” chief finance officer Stephen Daintith told reporters on Friday.
The company is also prepared for the end of Britain’s transition period with the European Union on Dec. 31, whether the UK leaves with a trade deal or not, said its chief executive Warren East.
“We’re ready for anything as far as Brexit is concerned,” he said.(Source: Reuters)
11 Dec 20. Leonardo signs 200m euro financing deal with EIB. Leonardo has signed a 200m euro ($242.30m) financing deal with the European Investment Bank to support investments in technological development, the Italian aerospace and defence group said on Friday.
The loan will be focused in developing high-tech products, cybersecurity services, advanced manufacturing and production efficiency, the group said in a statement.
It said the accord was aimed at supporting investment projects planned in the group’s industrial plan against the background of the Covid-19 pandemic. (Source: Reuters)
10 Dec 20. Ironwave Purchases Majority Interest in Syntonics LLC. Ironwave Technologies LLC, www.iwtllc.com, a leading provider of RF and Microwave solutions, announced its purchase of a majority interest in Syntonics LLC, a provider of advanced RF-over-Fiber systems and innovative RF technologies.
“Syntonics is entering a period of strong growth,” said Bruce G. Montgomery, President of Syntonics, “and Ironwave’s investment allows us to support several new product initiatives. Our disruptive Sniper Projectile Detection Radar (SPiDR) technology — weaving a web of detection for warfighters —is a significant opportunity that will come to fruition in 2022 with Ironwave’s guidance and support. Our new Command Post Antenna Remoting System (CARS) enables the stealthy operation of highly mobile tactical command posts. CARS addresses a $50+m opportunity with U.S. and allied militaries. In 2021, CARS will participate in Army networking and communication exercises.”
Robert Ferrante, Ironwave CEO, commented: “The Syntonics investment brings Ironwave broad systems engineering experience and a host of new platform products and technologies that are critical to the warfighter. The Ironwave team has the proven ability to capitalize on these RF domain opportunities from the component to the systems level.”
Syntonics LLC, www.syntonicscorp.com, is the leading provider of radio range extension products for mission-critical, 24×7 communications. FOREX equipment extends radio coverage up, down and sideways: from kilometers above the ground on tethered aerostats and drones to hundreds of meters below ground in mine tunnels, and from command posts to remote antennas. SPiDR weaves a web of hostile fire detection for mounted and dismounted warfighters and sensitive facilities.
Mu-Del Electronics LLC, www.mu-del.com, designs and manufactures radio frequency and microwave subsystems and components for national defense purposes including intelligence collection, telemetry, radar signal processing, and communication in airborne, ground-based, and naval platforms.
American Microwave Corporation, www.americanmic.com, is a leader in the design and manufacturing of DC to 40GHZ solid-state control components and subsystems for the communication and EW community.
Ironwave Technologies LLC, www.iwtllc.com, invests in RF and Microwave technologies used in Electronic Warfare, communications, telemetry and surveillance. It has several current investments in this space and is actively pursuing additional acquisitions. (Source: PR Newswire)
10 Dec 20. Leidos to Acquire 1901 Group, Enhancing Cloud and Digital Modernization Capabilities. Transaction Expands Leidos’ Portfolio with New Offerings and Technical Capabilities. Leidos Holdings, Inc. (NYSE: LDOS) (“Leidos”), a FORTUNE® 500 science and technology leader, today announced that it has entered into a definitive agreement to acquire 1901 Group, a leading provider for managed IT services and cloud solutions in the private and public market.
1901 Group delivers leading cloud, cybersecurity and enterprise-scale digital modernization services and capabilities that improve performance and reduce costs. Their unique approach applies technology and process automation to a set of repeatable and reusable services. This provides customers with complete flexibility to tailor their needs across a spectrum of support models – from off-premise managed services to traditional on-premise support, as well as a targeted mix of hybrid models. The company, founded in 2009, was established on the principle that IT can be efficiently delivered as an outcome-based service. 1901 Group brings a strategic, transformative approach to IT service delivery with over a decade of experience delivering IT to the federal marketplace.
The acquisition of 1901 Group will advance Leidos’ position in the digital modernization market and expand its ability to address the accelerating cloud and IT services markets. This will allow Leidos to respond to growing customer demand for more fixed-priced, utility-based business arrangements. Leidos will also leverage 1901’s proven IT, cloud factories and fully-integrated service delivery platforms.
“We are pleased to welcome 1901 Group’s team of digital transformation experts who share Leidos’ commitment to making the world safer, healthier and more efficient through IT,” said Leidos Chairman and CEO Roger Krone. “Leidos and 1901 Group both strive to provide customers with progressive, agile and secure solutions. Together, we will be better positioned to continue successfully providing these critical solutions while navigating growing trends in the IT marketplace.”
“1901 Group will provide substantial new capabilities to enhance the value we bring to existing defense customers and position Leidos to meet the growing demand for cloud-based solutions in the defense market,” said Leidos Defense Group President Gerry Fasano. “The Leidos Defense Group will work to ensure these new capabilities are readily accessible to enhance our offerings and pursuits across the company.”
“1901 Group is very excited about our future with Leidos,” said 1901 Group Founder and CEO Sonu Singh. “We have closely shared values based upon a commitment to our customers, our employees, and our mission of utilizing untapped IT talent across all geographies. The opportunities this acquisition will unlock by combining our Enterprise IT Operations Centers and secure FedRAMP platform with the unmatched depth and scale of Leidos sets us up for great success. We look forward to closing this deal and officially becoming a part of Leidos.”
Leidos expects to fund the $215m purchase price with cash on hand.
Approvals and Timing
The Board of Directors of both companies unanimously approved the transaction. It is expected to close the first quarter of 2021, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals.
Holland & Knight, LLP is serving as legal advisor to Leidos. Pillsbury Winthrop Shaw Pittman LLP is serving as legal advisor to 1901 Group, and Baird served as exclusive advisor to 1901 Group on this transaction. (Source: PR Newswire)
10 Dec 20. Cohort plc, the independent technology group, today announces its half year results for the six months ended 31 October 2020.
- Adjusted* operating profit up 8% to £4.3m (2019: £4.0m).
- Adjusted* earnings per share up 12% to 7.74 pence (2019: 6.94 pence).
- Revenue down 10% to £54.4m (2019: £60.2m).
- Order intake up 15% to £89.2m (2019: £77.2m).
- Closing order book of £218.5m (30 April 2020: £183.3m).
- Net debt of £6.1m (31 October 2019: net debt £6.8m; 30 April 2020: net debt £4.7m).
- Interim dividend increased by 9% to 3.50 pence per share (2019: 3.20 pence per share).
- Acquisition of Wärtsilä ELAC Nautik GmbH (to be renamed ELAC SONAR GmbH) completed on 2 December 2020.
- Continuing social and travel restrictions in response to the COVID-19 pandemic had only a limited impact on the Group.
- Full year performance expected to be in line with market expectations, with a second half weighting.
- Improved revenue visibility; half year order book of £218.5m underpins over £70m of revenue deliverable in the second half, which, taking into account revenue delivered to date, underpins 92% (2019: 83%) of consensus forecast revenue for the full year.
- Prospects for more orders in the second half to further underpin this year and next year are good.
- The acquisition of ELAC SONAR represents a significant strategic step, furthering our expansion in defence products and export markets, particularly the naval sector.
*Adjusted figures exclude the effects of marking forward exchange contracts to market value, amortisation of other intangible assets (£3.3m; 2019: £3.7m) and exceptional items (£1.1m charge; 2019: £nil).
Commenting on the results, Nick Prest CBE, Chairman of Cohort plc said, “Cohort delivered an improved adjusted operating profit in the first half compared to the same period last year, despite lower revenue. This was due to improved performance at MASS and a return to profit at SEA, partially offset by weaker performances at Chess and MCL. Our order book of £218.5m provides solid underpinning for the second half and beyond. In line with our experience over the last few years we expect a much stronger performance in the second half, though we still need to win and deliver some important orders to achieve our targets for the year.”
Investors Chronicle Comment: Revenue dipped by a tenth year-on-year in the six months to 31 October to £54m, but adjusted operating profit climbed by 8 per cent to £4.3m, benefitting from more higher margin service activity at MASS. The order book has expanded by almost a fifth since the April year-end to £219m, underpinning over £70m of revenue for the second half.
09 Dec 20. J.F. Lehman & Company Acquires CodeMettle, LLC. J.F. Lehman & Company (“JFLCO”), a leading middle-market private equity firm focused exclusively on the aerospace, defense, maritime, government and environmental sectors, is pleased to announce that an investment affiliate has acquired CodeMettle, LLC (“CodeMettle” or the “Company”) in partnership with the Company’s founders and management.
Headquartered in Atlanta, GA, CodeMettle provides custom software development and proprietary software solutions for the management of critical communication networks. The Company’s scalable data management software suite and related services are utilized by a variety of defense, government, and commercial customers to assemble a common operating picture across both strategic and tactical network domains.
“We are excited to be partnering with the CodeMettle founders and management team and are pleased to welcome the company to the J.F. Lehman & Company portfolio,” said Alex Harman, a Partner with JFLCO. “CodeMettle is an excellent fit with our investment strategy given their unique, proprietary software solutions that address growing demand for software-enabled, cross-network command-and-control capabilities within the U.S. Department of Defense and other government agencies. We are excited to work with the team in pursuing their next phase of growth.”
Richard Graham, co-founder and CEO of CodeMettle, commented, “J.F. Lehman & Company is the ideal partner for CodeMettle. They offer an excellent combination of unique expertise and relationships as well as capital to accelerate our growth. We look forward to continuing CodeMettle’s track record of providing best-in-class software solutions to the U.S. government and commercial customers.”
Blank Rome served as legal counsel for J.F. Lehman & Company. Mensura Capital, LLC and Mensura Securities, LLC served as financial advisor to CodeMettle, and Sheppard Mullin, Richter & Hampton LLP provided legal counsel to the selling shareholders.
09 Dec 20. Isar Aerospace raises over $90m in biggest European spacetech funding. Isar Aerospace said on Wednesday it had raised 75m euros ($91m) from investors in the biggest funding round by a European space technology startup, which it said would be enough to fund the maiden flight of its launch vehicle.
Munich-based Isar Aerospace is developing a rocket capable of carrying a satellite payload of more than 1,000 kilograms. It has started making a prototype and, in a statement, said it would expand production and testing capacity in 2021.
The Series B funding round was led by Swiss-based venture fund Lakestar, with support from existing backers including Earlybird, Vsquared Ventures, Airbus Ventures and Bulent Altan, a former executive at Elon Musk’s rocket company SpaceX. (Source: Reuters)
09 Dec 20. Kromek Group say two contract extensions prove business is back to normality. Kromek Group PLC’s (LON:KMK) Arnab Basu talks to Proactive London about two contract extensions by a European government-related company for their D3S-related technologies to counter nuclear terrorism.
The contract extensions are worth a total of £460,000 and will be delivered in the current fiscal year. Basu says this news represents the “continuation of the efforts towards the final goal of large scale implementation as the key message”.
“Business, after a period of disruption is getting back to normality, our customers are starting to feel good and as a result we are getting back to being a normal functioning business again in our core segments,” he added.
As its key customers get back to business, as does Kromek, Basu says. (Source: proactiveinvestors.co.uk)
08 Dec 20. AeroVironment Acquires Telerob, a Leader in Ground Robotic Solutions, to Expand Multi-Domain Unmanned Systems Offering and Global Presence.
- Transaction will combine leaders in unmanned aircraft systems (UAS) and unmanned ground vehicles (UGV) for broader, integrated mission solutions in air, near-space, ground and maritime domains
- AeroVironment’s strong partnership with the United States Department of Defense and presence in 50 allied nations, combined with Telerob’s 45 nation footprint and multi-industry customer base, create significant opportunities for growth and value creation
- AeroVironment and Telerob competing for multi-year United States Air Force Explosive Ordinance Disposal (EOD) robotic system program and pursuing multiple additional opportunities
- Acquisition expected to be accretive within two years to AeroVironment GAAP EPS, and accretive to non-GAAP EPS in fiscal year 2022
08 Dec 20. AeroVironment, Inc. (NASDAQ: AVAV), a global leader in unmanned aircraft systems, today announced it has entered into an agreement to acquire Telerob Gesellschaft für Fernhantierungstechnik mbH, a German leader in ground robotic solutions with a global footprint, for approximately $45.4m (€37.5m) in cash, and will pay-off approximately $9.4m (€7.8m) in Telerob’s debt at closing. Telerob’s shareholder has the potential to receive an additional earn-out over three years of up to approximately $7.3m (€6m) based upon achieving specific milestones.
Founded in 1994, Telerob offers one of the industry’s most advanced and comprehensive turn-key unmanned ground robotics solutions, including the telemax and tEODor EVO family of UGVs, fully-equipped transport vehicles and training, repair and support services. Telerob’s cutting-edge solutions safely and effectively perform a variety of dangerous missions, including explosive ordinance disposal (EOD), hazardous materials handling (HAZMAT) and chemical, biological, radiological and nuclear (CBRN) threat assessment. Telerob’s ruggedized UGVs possess all-terrain capabilities and offer some of the most advanced, specialized, precision manipulators, autonomous functionality and intuitive operation to deliver a high degree of mission flexibility. Telerob’s customers span 45 countries and numerous applications, including homeland security, emergency response and defense. Telerob is based near Stuttgart, Germany, with its U.S. office in Erie, PA.
“Acquiring Telerob marks a significant step toward achieving AeroVironment’s goal of offering an integrated portfolio of intelligent, multi-domain robotic solutions in response to evolving threat environments and customer requirements for more effective, rapid and cost-effective capabilities,” said Wahid Nawabi, AeroVironment president and chief executive officer. “Telerob’s advanced, proven ground robotic solutions provide a valuable capability to complement our market leading tactical UAS and tactical missile solutions and address a broader set of missions for our customers.”
“Telerob’s recent track record of strong revenue growth and its culture of innovation and agility align extremely well with AeroVironment. We look forward to welcoming the talented Telerob team to AeroVironment,” Nawabi added. “Together, we will focus on delivering continued growth in our existing businesses, addressing significant new adjacent market opportunities and developing new technologies and combined solutions to drive shareholder value and help our customers proceed with certainty.”
AeroVironment also announced that it recently submitted a proposal in partnership with Telerob to the United States Air Force for its multi-year, EOD robotic system program. AeroVironment’s strong track record supporting the Department of Defense and its proven delivery and support capabilities, coupled with Telerob’s advanced robotic system offering, represent a compelling solution for the Air Force mission. AeroVironment plans to pursue additional, significant domestic UGV opportunities with the United States Navy, Marine Corps, Air National Guard and numerous police forces. Specific international opportunities include UGVs for security at airports in a Middle Eastern allied nation and multiple UAS programs with the German Federal Ministry of Defense, which Telerob’s local presence supports.
“AeroVironment is a leader in unmanned systems, with a compelling vision for integrated robotic solutions that Telerob can help to achieve,” said Norbert Gebbeken, Telerob managing director. “We are excited to become part of the AeroVironment team and look forward to developing and delivering the advanced, integrated robotic solutions that will expand our reach and help our customers succeed. We are confident that working together, we will accelerate the progress underway and create greater opportunities to expand our geographic and customer footprint.”
AeroVironment expects the acquisition to be accretive to GAAP EPS in two years, and to non-GAAP EPS in fiscal year 2022, excluding intangible amortization and integration costs. Upon closing, Telerob will operate as a wholly-owned subsidiary of AeroVironment, which plans to retain its entire team. The acquisition is expected to close by the Spring of 2021, subject to German government clearance.
BNP Paribas Securities and King & Spalding LLP advised AeroVironment on the transaction.
About AeroVironment, Inc.
AeroVironment (NASDAQ: AVAV) provides technology solutions at the intersection of robotics, sensors, software analytics and connectivity that deliver more actionable intelligence so you can proceed with certainty. Celebrating 50 years of innovation, AeroVironment is a global leader in unmanned aircraft systems and tactical missile systems, and serves defense, government and commercial customers. For more information, visit www.avinc.com.
Telerob Gesellschaft für Fernhantierungstechnik mbH is an independent, medium-sized, owner-managed company based in Ostfildern near Stuttgart, Germany, producing defense and homeland security solutions. The product range includes remote-controlled robots for disarming improvised explosive devices and investigating CBRN hazards, fully equipped service vehicles as well as mobile system solutions ensuring the safety and security of critical infrastructure and people. For more information, visit https://www.telerob.com/en/ (Source: BUSINESS WIRE)
08 Dec 20. AeroVironment, Inc. Announces Fiscal 2021 Second Quarter Results. Acquires Telerob GmbH, a leading German robotics company, to expand product offering and customer base.
AeroVironment, Inc. (NASDAQ: AVAV), a global leader in unmanned aircraft systems (UAS), today reported financial results for its second quarter ended October 31, 2020.
“Our team produced second quarter revenue of $92.7m, an increase of 11 percent over last year, despite the unprecedented challenges from the COVID-19 pandemic,” said Wahid Nawabi, AeroVironment president and chief executive officer. “Second quarter earnings per diluted share of $0.09 declined compared to last year, primarily from our HAPSMobile Inc. joint venture’s impairment of its investment in Loon LLC. Non-GAAP earnings per diluted share of $0.48 increased by $0.14 over last year, reflecting the continued strength of our team and our business. In addition, we achieved major milestones this quarter, including the successful stratospheric flight of the solar HAPS Sunglider and its demonstration of broadband connectivity, the introduction of our Switchblade family of loitering missile systems and our larger Switchblade 600, and continued leadership in the global small UAS market. With strong momentum underway, we are confident in our ability to build on our strong foundation and extend our record of financial and operational growth and success.”
AeroVironment today also announced the acquisition of Telerob, a leading German robotics company, for approximately $45.4m in cash plus a three-year, milestone-based earn-out of up to $7.3m and the payoff of $9.4m in debt at closing. The Company expects the acquisition to be accretive to non-GAAP EPS in fiscal 2022 (excluding intangible amortization and integration costs). Upon closing, Telerob will operate as a wholly-owned subsidiary of AeroVironment. The acquisition remains subject to German government clearance and is expected to close by Spring 2021.
“Acquiring Telerob, a leader in ground robotic solutions, gives us the opportunity to offer a broader portfolio of highly complementary robotic solutions to a larger set of global customers. We have already submitted a joint proposal for a multi-year United States Air Force robotics program and have also identified multiple U.S. and international opportunities that we plan to pursue in the future. This acquisition supports our goal of transforming AeroVironment into a global leader in intelligent, multi-domain robotic solutions for defense and commercial customers. Telerob’s ground robotics solutions and global footprint will enhance our offering and customer base, levering our strong financial foundation and positioning us to continue creating long-term shareholder value,” Mr. Nawabi added.
FISCAL 2021 SECOND QUARTER RESULTS
Revenue for the second quarter of fiscal 2021 was $92.7m, an increase of 11% from the second quarter of fiscal 2020 revenue of $83.3m. The increase in revenue was due to an increase in product sales of $8.1m and an increase in service revenue of $1.3m.
Gross margin for the second quarter of fiscal 2021 was $40.9m, an increase of 16% from the second quarter of fiscal 2020 gross margin of $35.2m. The increase in gross margin was primarily due to an increase in product margin of $4.7m and an increase in service margin of $1.0m. As a percentage of revenue, gross margin increased to 44% from 42%. The increase in gross margin percentage was primarily due to an increase in the proportion of product sales to total revenue and a favorable mix.
Income from operations for the second quarter of fiscal 2021 was $13.9m, an increase of $5.8m from the second quarter of fiscal 2020 of $8.1m. The increase in income from operations was primarily a result of an increase in gross margin of $5.7m and a decrease in selling, general and administrative (“SG&A”) expense of $1.3m, partially offset by an increase in research and development (“R&D”) expense of $1.1m.
Other income, net, for the second quarter of fiscal 2021 was $0.2m, as compared to $1.4m for the second quarter of fiscal 2020. The decrease in other income, net was primarily due to a decrease in interest income resulting from a decrease in the average interest rate earned on our investment portfolio.
Provision for income taxes for the second quarter of fiscal 2021 was $2.5m, as compared to $1.1m for the second quarter of fiscal 2020. The increase in provision for income taxes was primarily due to the increase in income before income taxes combined with an increase in the projected fiscal year 2021 effective tax rate.
Equity method investment loss, net of tax, for the second quarter of fiscal 2021 was $9.5m, as compared to $0.9 m for the second quarter of fiscal 2020. Equity method investment loss, net of tax, for the second quarter of fiscal 2021 included a loss of $8.4 m for our proportionate share of the HAPSMobile Inc. joint venture’s impairment of its investment in Loon LLC.
Net income attributable to AeroVironment for the second quarter of fiscal 2021 was $2.1m, as compared to $7.5 m for the second quarter of fiscal 2020. The second quarter of fiscal 2021 included the impairment loss of $8.4m related to HAPSMobile Inc.’s investment in Loon LLC.
Earnings per diluted share attributable to AeroVironment for the second quarter of fiscal 2021 was $0.09, as compared to $0.31 for the second quarter of fiscal 2020. The second quarter of fiscal 2021 included the impairment loss of $8.4m related to HAPSMobile Inc.’s investment in Loon LLC.
Non-GAAP earnings per diluted share was $0.48 for the second quarter of fiscal 2021, as compared to $0.34 for the second quarter of fiscal 2020.
FISCAL 2021 YEAR-TO-DATE RESULTS
Revenue for the first six months of fiscal 2021 was $180.1m, an increase of 6% from the first six months of fiscal 2020 revenue of $170.2m. The increase in revenue was due to an increase in service revenue of $9.2m and an increase in product sales of $0.7m.
Gross margin for the first six months of fiscal 2021 of $76.3m was consistent with the first six months of fiscal 2020. Gross margin for the first six months of fiscal 2021 reflected a decrease in product margin of $4.4m, partially offset by an increase in service margin of $4.2m. As a percentage of revenue, gross margin decreased to 42% from 45%. The decrease in gross margin percentage was primarily due to a decrease in the proportion of product revenue to total revenue and an unfavorable product mix.
Income from continuing operations for the first six months of fiscal 2021 was $26.2m, a decrease from the first six months of fiscal 2020 of $26.9m. The decrease in income from continuing operations was primarily a result of an increase in R&D expense of $3.5 m, partially offset by a decrease in SG&A expense of $2.9m.
Other income, net, for the first six months of fiscal 2021 was $0.4m, as compared to other income, net of $3.1m for the first six months of fiscal 2020. The decrease in other income, net was primarily due to a decrease in interest income resulting from a decrease in the average interest rate earned on our investment portfolio.
Provision for income taxes for the first six months of fiscal 2021 was $3.7m, as compared to provision for income taxes of $3.2m for the first six months of fiscal 2020. The increase in provision for income taxes was primarily due to an increase in the projected fiscal year 2021 effective tax rate.
Equity method investment loss, net of tax, for the first six months of fiscal 2021 was $10.8m, as compared to $2.2m for the first six months of fiscal 2020. Equity method investment loss, net of tax, for the first six months of fiscal 2021 included a loss of $8.4m for our proportionate share of the HAPSMobile Inc. joint venture’s impairment of its investment in Loon LLC.
Net income attributable to AeroVironment for the first six months of fiscal 2021 was $12.2m, a decrease from the first six months of fiscal 2020 net income attributable to AeroVironment of $24.6m. The first six months of fiscal 2021 included the impairment loss of $8.4m related to HAPSMobile Inc.’s investment in Loon LLC.
Earnings per diluted share attributable to AeroVironment for the first six months of fiscal 2021 was $0.50, as compared to the first six months of fiscal 2020 of $1.02. The first six months of fiscal 2021 included the impairment loss of $8.4m related to HAPSMobile Inc.’s investment in Loon LLC.
Non-GAAP earnings per diluted share was $0.91 for the first six months of fiscal 2021, as compared to $1.08 for the first six months of fiscal 2020.
As of October 31, 2020, funded backlog (remaining performance obligations under firm orders for which funding is currently appropriated to us under a customer contract) was $130.6m, as compared to $208.1m as of April 30, 2020.
FISCAL 2021 — OUTLOOK FOR THE FULL YEAR
For fiscal 2021, the Company continues to expect to generate revenue between $390 m and $410m, operating margin of between 12% and 12.5%, and now expects revised earnings per diluted share of $1.28 to $1.48. This financial guidance assumes approximately 7% ownership of the HAPSMobile joint venture. The Company expects non-GAAP earnings per diluted share, which excludes the HAPSMobile Inc. impairment of its investment in Loon LLC, amortization of acquired intangible assets and acquisition-related expenses, to be between $1.74 and $1.94. This forecast earnings per diluted share does not include estimated results of operations, future acquisition-related expenses or amortization of intangible assets for the acquisition of Telerob as the timing of government clearance and close date is uncertain.
The foregoing estimates are forward-looking and reflect management’s view of current and future market conditions, including certain assumptions with respect to our ability to obtain and retain government contracts, changes in the timing and/or amount of government spending, changes in the demand for our products and services, activities of competitors, changes in the regulatory environment, and general economic and business conditions in the United States and elsewhere in the world. Investors are reminded that actual results may differ materially from these estimates. (Source: BUSINESS WIRE)
07 Dec 20. Mercury Systems to Acquire Physical Optics Corporation.
- Continues to scale Mercury’s global avionics & mission systems business
- Complementary capabilities enhance position at forefront of military digital convergence
- Expands platform and mission management content on new and existing airborne platforms
- Broadens mission processing capabilities, adding data transfer and recording solutions
- Leverages investments in embedded security and safety-certifiable avionics processing
Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), a leader in trusted, secure mission-critical technologies for aerospace and defense, today announced that it has signed a definitive agreement to acquire Physical Optics Corporation (“POC”). Based in Torrance, Calif., POC is a leading designer, developer, and integrator of advanced technologies primarily focused on avionics & mission subsystems for defense applications.
Pursuant to the terms of the agreement, Mercury will acquire POC for an all-cash purchase price of $310m, subject to net working capital and net debt adjustments. The acquisition and associated transaction expenses are expected to be funded through a combination of cash on hand and Mercury’s existing revolving credit facility.
POC is currently expected to generate revenue of over $120m for its fiscal year ending December 31, 2020. The acquisition represents a multiple of approximately 13x next twelve months EBITDA and is expected to be immediately accretive to adjusted EPS.
“The acquisition of Physical Optics Corporation adds important capabilities on new and existing airborne programs in the platform and mission management market,” said Mark Aslett, Mercury’s president and chief executive officer. “The combination of Mercury’s safety-certifiable and secure avionics processing solutions with POC’s deep portfolio of data storage, transfer, and encryption technologies will enable us to deliver more complete, pre-integrated avionics subsystems to our customers. POC has a similar growth profile to Mercury, supported by several key design wins that are transitioning into production. We are very excited for POC to join the Mercury team.”
“This acquisition broadens our avionics product and technology portfolio to help our defense Prime customers, the U.S. Navy, Army and Air Force deploy next-generation open-architecture mission computing solutions,” added Amela Wilson, senior vice president, Mercury Mission. “Similar to Mercury, POC is well-positioned in faster-growing segments of the defense market and benefits from secular growth drivers, such as supply chain delayering. Together, Mercury and POC can provide customers new capabilities and subsystem solutions.”
Founded in 1985, POC employs approximately 350 people, including more than 160 highly skilled engineers, and holds over 160 patents worldwide, covering 60 technologies. They support mission-critical programs with common-use products spanning data transfer systems, flight data recorders, mission computers, high-definition data and video recorders, and advanced encryption devices. POC is well-positioned on a wide variety of key airborne and naval defense platforms that are experiencing increased funding for electronics modernization to specifically address digital convergence and combat near-peer threats in line with the National Defense Strategy.
The acquisition is subject to customary closing conditions, including approval pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is currently expected to close during Mercury’s fiscal 2021 second quarter ending January 1, 2021.
07 Dec 20. Raytheon Technologies Board of Directors Authorizes $5bn Share Repurchase Program. Raytheon Technologies’ (NYSE: RTX) Board of Directors authorized today the repurchase of up to $5bn of the company’s outstanding common stock. The new authorization replaces the company’s previous program, approved Oct. 14, 2015. Share repurchases may take place from time to time, subject to market conditions and at the company’s discretion, in the open market, through privately negotiated transactions or other means.
07 Dec 20. Northrop Grumman to Sell Federal IT and Mission Support. Business to Veritas Capital for $3.4bn. Divestiture strengthens Northrop Grumman’s focus on growing core businesses and creates value through portfolio management Northrop Grumman Corporation (NYSE: NOC) and Veritas Capital, today announced that Peraton, an affiliate of Veritas, has signed a definitive agreement to acquire Northrop Grumman’s federal IT and mission support services business for $3.4bn in cash. The transaction is expected to close in the first half of 2021, subject to regulatory approvals and customary closing conditions.
In 2020, this Northrop Grumman business, in aggregate, is expected to generate approximately $2.3bn in revenue.
“This divesture allows us to drive value and reflects our strategy of focus on growing core businesses where technology and innovation are the key differentiators,” said Kathy Warden, chairman, chief executive officer and president, Northrop Grumman. “We expect to create compelling value to our shareholders through this transaction and execution of our capital allocation strategy.”
Northrop Grumman expects to use the sale proceeds primarily for share repurchases, to offset dilution from the transaction, and for debt retirement.
On closing, Veritas expects to combine the Northrop Grumman business with Peraton, a Veritas portfolio company that provides mission critical technology solutions to government customers.
08 Dec 20. NOC Divestiture of Services 10 BPS Dilutive in 2021; 40 BPS of 2022 Accretion. Northrop Grumman Corp. (NOC), BUY, $301.00. Veritas Capital has signed an agreement to acquire NOC’s Global Services business, ~30% of its DS segment, for $3.4bn. The transaction is expected to close in H1:21. We estimate the business was set to generate $2.3bn of revenues and $290m of EBITDA in 2021, implying an 11.7X EBITDA multiple. The sale is $0.03, or 10 bps, dilutive to 2021 EPS of $23.90 assuming a Q1 close and $2.8bn of AT cash proceeds deployed for buybacks, but 40 bps accretive to 2022 EPS.
Sale of Global Services Unit 10 bps Dilutive to 2021 EPS. Veritas Capital has agreed to acquire NOC’s federal IT and mission support services business for $3.4bn in cash, or ~1.5X sales and ~11.7X 2021 EBITDA on our estimates. The sale is expected to close in H1:21. The after-tax proceeds, which could be in the range of ~$2.8bn assuming a 17% tax rate, are expected to be deployed primarily for share repurchases and debt retirement. Assuming all proceeds are deployed for buybacks, the divestiture could be $0.03, or 10 bps, dilutive to 2021 EPS, but ~40 bps accretive to 2022 (Ex. 1).
Global Services Overview. NOC’s Global Services business was a part of the legacy Technology Services segment which was combined into Defense Systems with the segment reorganization in 2020. The business provides IT and Mission Support Services to customers across the defense, civil, and health end markets and made up just over 50% of the legacy Technology Services segment, with our estimates factoring in $2.3bn in 2021 revenues (~6% of total company) with EBIT margins in the 11% range. The outlook for the business is relatively flat, with no major growth drivers. It had previously been under pressure following the loss of several projects, which generated a total of ~$400m in annual sales or 15% of total sales.
The Remaining Defense Systems. The Global Services business contributed ~30% of our 2021 revenue estimate for the Defense Systems segment. The remaining portion of the segment includes the Global Logistics and Modernization business from legacy TS, the defense business from legacy Innovation Systems, and select capabilities from Mission Systems. The segment’s programs are spread across tactical missiles, munitions, and integrated air and missile defense programs. We see the segment growing at a MSD rate through 2023 with the removal of the Global Services business.
Divesting Services Businesses a Trend Among Primes. This is the 5th transaction involving defense primes divesting services businesses, the largest being LMT’s divestment of its IS&GS business to LDOS for $5.2bn in 2017 w/ HRS and L-3 divesting their respective services business in the last decade (Ex. 2). Veritas Capital had previously participated in the trend, purchasing HRS’ Gov’t IT business in 2017 for $690m, or 8.6X EBITDA. The trend has been toward exiting more commoditized businesses in favor of focusing on weapons systems and core platforms with differentiated innovation and technology. (Source: Jefferies)
07 Dec 20. Rolls-Royce kicks off disposal plan with nuclear instrument sale. Britain’s Rolls-Royce has signed a deal to sell its civil nuclear instrumentation and control business for an undisclosed sum, kicking off a plan to raise 2bn pounds ($2.65bn) from disposals to recover from the pandemic. COVID-19 has shattered the aero-engine maker’s finances because it is paid by airlines on a flying-hours basis. It has raised 2bn pounds from shareholders, taken on new debt and said it will raise another 2bn pounds from selling off units.
The company has said it wants to sell its Spain-based ITP Aero business, and analysts have said smaller disposals will make up the remainder of the target.
Rolls-Royce said in a statement on Monday that it had agreed to sell its I&C business, which has operations in France, the Czech Republic and China and employs 550 staff, to French engineering company Framatome.
“This transaction marks a further simplification of our business and contributes towards our target to generate over 2bn pounds from disposals,” said Rolls-Royce chief executive Warren East in the statement.
The I&C business sits in Rolls’ power systems division and had revenues of 94m euros in 2019.
The British company said none of its staff in the UK would be affected by the sale which, subject to regulatory approval, it expects to complete at the beginning of the second half of 2021. ($1 = 0.7536 pounds)(Source: Reuters)
06 Dec 20. American Defense Systems (OTC:ADFS) Releases Plans and Projections for 2021. American Defense Systems Inc. (OTC:ADFS), a renowned armor-making defense contractor since 2002, released its business plan and projections for fiscal year 2021. (Find a complete version of the report at www.adfsnews.com or www.adfsinc.com)
“If the preceding targets are met, total real estate portfolio should be valued at no less than $170m.”
Download a full copy of the American Defense Systems Inc. EOY2020 Report, detailing the small defense contractor’s financial budgets and projections for FY2021.
The report read, in part, that “…during the course of the current fiscal year 2020, the Corporation completed its revival with the State of Delaware; completed the filing of tax returns up to the current fiscal year; established new bank accounts; reactivated our institutional credit history; established a brokerage account; and submitted paperwork for updating of its information with the OTC board…
“The Corporation shall operate in four market segments: ‘Crisis & Disaster Preparation & Aid’; ‘Strategic Investments’; ‘Real Estate Holding’; and ‘Maritime Support Services.’
“Planned Leases & Purchases: Our current commitments for the next year are to: (a) lease pre-existing warehouses with a current budget ceiling of $28,800 per annum, and a respective projected gross income of at least $48,000 per annum; (b) purchase approximately 600 acres of land with a current budget ceiling of $12,500,00, using commercial mortgages, and a respective projected gross income of at least $1,803,000 per annum; (c) purchase approximately 24 acres of land with a current budget ceiling of $13,000,000 for the land, and $96,000,000 for construction, using a commercial mortgage; with a respective projected gross income of at least $13.5m from the land sales, and $132m from home sales; and (d) lease maritime facilities, paying rents from $12,000 to $100,000 per annum, with a renovation budget of $7m; and a respective projected gross income of at least $750,000 per annum after completion of renovation…
“Cashflow Projections: Our current targets for the executive and management teams, for the next year are to: (a) secure approximately $128,540,800 in financing, primarily through private loans and commercial debt in the form of approved mortgages; (b) secure the two respective commercial property leases with a maximum expense of $40,000 for the year; (c) purchase the two respective development properties for a maximum total of $25.5 m; (d) receive a minimum of $1,851,000 in commercial rents; (e) begin $7m in renovations and $96m in new constructions; and (f) execute contracts, and receive a minimum of 10% deposits for the pre-sale of at least 37 housing units for a minimum contract total of at least $71.78m.
“Projected Assets, Liabilities & Revenue: If the preceding targets are met for the Corporation, by the end of the year 2021, we project: (a) total debt, including mortgages, should be less than $130m; (b) total real estate portfolio should be valued at no less than $170m; (c) gross revenue for the year should be a minimum of approximately $9.1m; all subject to unforeseeable market changes or events.
“OER & NOI Targets: (a) In consideration of the management’s recommendations, the Corporation shall target an operating expense ratio of no more than 80% for the year 2021; (b) use the projected 80% OER in our forecasts, to remain conservative; (c) which means, if the Corporation targets a minimum gross revenue of $9.1m for year 2021, the management will target a net operating income of approximately $1.82m for year 2021.
ADFS CEO, Gary Sidorsky stated that additional information on the value of the investments, the respective commercial mortgages, and projected returns will be available after updated inspections, assessments, and appraisals of the targeted real estate investments. According to the CEO, “the Corporation now needs to focus on achieving the following: consolidate and verify shareholder listings; produce an updated audited financial report; secure partnerships to further our market penetration strategies; secure real estate leases, purchases, and subleases to ensure the Corporation has predictable cashflow; fund the Capital Reserve and Brokerage Accounts to improve the liquidity of the Corporation; increase our asset-base to improve the net-worth and valuations of the Corporation; and make the Corporation more attractive to long-term investors.”
In specific reference to how ADFS can achieve its fundraising and liquidity goals without diluting shareholder equity, Mr. Sidorsky noted that “when a stock is dramatically undervalued, the issuing company can repurchase some of its shares at this reduced price and then re-issue them once the market has corrected, thereby increasing its equity capital without issuing any additional shares or further diluting company ownership. So, small public companies, like ours, typically use stock buyback programs for company consolidation, equity value increase, and to look more financially attractive.”
“There’s no doubt that if we initiated a ‘Stock Buyback Program’ under our Strategic Investments Operation, it would positively impact the Corporation’s consolidation, undervaluation, and key financial ratios; as long as we do not finance the Program with interest bearing debt, which can strain cash flow. In such a case we could continue buying back for as long as ADFS’ net income or market share continues expanding.”
The Treasurer, Osita Iroku has also added an announcement of his retirement from the company, saying, “We achieved all we set out to achieve this year, and now it’s time to hand over to a new administrative team to take ADFS to the next level.” The company is set to announce the appointment of new executives and officers later this month, although Gary Sidorsky is scheduled to stay on as CEO. (Source: PR Newswire)
04 Dec 20. Chinese defence giants sign partnership deal. Two of China’s biggest defence industrial enterprises – the China Shipbuilding Corporation (CSC) and the China Aerospace Science and Industry Corporation (CASIC) – have agreed to expand collaboration on military programmes, the groups have announced.
A statement on 2 December said that the ‘strategic co-operation agreement’, which was signed on the previous day in Beijing, will pave the way for closer defence industrial and technology ties between the two state-owned enterprises that between them employ 500,000 people.
Although not confirmed in the statement, it is expected that this collaboration will be focused on C4ISR and missile technologies for naval applications. CSC leads all of China’s major shipbuilding programmes, while CASIC’s focus is on capabilities including advanced weaponry, aerospace technologies, unmanned systems, and military space systems.
According to the statement, the CSC-CASIC partnership will feature “expanding co-operation in new fields of technology and the promotion of improvements in quality and efficiencies”, with the latter a reference to the two corporations’ existing ties.
It added that under the new agreement, CSC and CASIC will “carry out mutually beneficial co-operation in the fields of aerospace-defence, technological innovation, information-technology application, industrial internet technologies, and supporting equipment”. The statement also said that the two corporations would expand collaboration on pursuing defence exports.
The statement said, “The two sides will take this opportunity to … work together to create a world-class military, maritime power, aerospace power, and manufacturing power.” These are direct references to the Chinese government’s stated intentions to support the development of a world-leading military and a world-leading defence industrial base over the coming decades. (Source: Jane’s)
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