BATTLESPACE Updates

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27 Aug 21. Fincantieri in talks about buying Leonardo’s naval gun business. Italian shipyard Fincantieri is holding early talks with Italy’s Leonardo to acquire its naval gun manufacturing operation, formerly known as Oto Melara.

The deal, if concluded, would see Fincantieri take charge of the production of the Leonardo-built 76mm and 127mm naval cannons which it mounts on its warships and which have also been widely exported around the world.

“There are talks, but they are at a very initial stage,” a source familiar with the talks told Defense News after negotiations were first reported by Italian newspaper Il Secolo XIX, which said a deal could be struck by year’s end.

Leonardo’s naval gun and terrestrial turret production was formerly known as Oto Melara, a company owned by Leonardo when it was called Finmeccanica. Today the operation is incorporated into the firm as part of Leonardo’s Defense, Electronics and Security division.

A eventual deal between the two Italian state-controlled firms would mark a continuation of Fincantieri’s campaign to broaden its operations beyond the building of naval, cargo and cruise ships.

In January the company won a nearly 100 m euro contract to supply equipment to the International Thermonuclear Experimental Reactor (ITER), an international program seeking to build an experimental fusion reactor able to produce boundless amounts of clean energy.

The firm previously worked on building a new road bridge in Genoa, Italy, to replace to Morandi bridge which collapsed in 2018, killing 43.

In 2018, Fincantieri tried to buy Italian technology firm Vitrociset, which works on the F-35 program, only for Leonardo to jump in and take over the company first.

Both Fincantieri or Leonardo declined to comment on the reports of talks on a deal concerning naval gun production, but one industry source said that Fincantieri had worked so closely for so long with Leonardo in the sector that a purchase would work smoothly.

The deal could exclude Leonardo’s production of turrets for armored vehicles and tanks which once fell under the remit of Oto Melara and is today grouped in a joint venture between Leonardo and Italian vehicle maker Iveco. (Source: Defense News)

 

26 Aug 21. Serco offers exposure to the growing role of governments.

The company’s price to forward earnings ratio is at a four-year low despite delivering impressive revenue growth with an improving profit margin.

  • Recently acquired a defence business in the US
  • Strong balance sheet gives it opportunity for further acquisitions

Bull points

  • Strong improvement in free cash flow
  • M&A in high-margin US market
  • Go-to government outsourcer during pandemic
  • Rising margins

Bear points

  • Revenue to slow in the second half of the year
  • Lots of political scrutiny

Serco acts as a wingman to governments around the world, offering a wide range of outsourced services from military satellite communications to helping the unemployed back to work. Governments have needed all the help they can get during the past 18 months as the pandemic has raged. Serco has benefited.

Almost unilaterally, governments shut down economies to tackle the threat of Covid-19. This decision to protect the public healthcare systems also forced governments to provide cash to protect the financial health of their citizens. In the case of Australia and the UK, this came in the form of wage subsidies, while in the US unemployment benefits tripled. Last year government spending as a percentage of gross domestic product (GDP) was at its highest level since 1970 in the US, Australia and the UK, according to data provider Trading Economics. Citizens now find themselves more dependent on governments than at any other time in the 21st century.

Victim of its success

Serco’s half-year results to the end of June showed just what a boon this period has been for the group. Its revenue was up 19 per cent while underlying trading profit was ahead by 58 per cent. A key contributor to this success was its £332m test and trace contract, which contributed 17 per cent of sales.

But investors are now preparing for leaner times. The valuation based on the next-12-month (NTM) price/earnings (PE) ratio is the lowest it has been in three years. Meanwhile, based on enterprise value (market cap plus net debt) to LTM sales, the rating is bumping around the bottom third of the three-year range.

While we feel the shares could prove a bargain, it is important to appreciate that there are clear reasons for the lack of enthusiasm. As well as the potential for the group to lose Covid-19-related work as life becomes more normal, in March the company lost a contract to run the Dubai Metro. Meanwhile, its joint venture managing the UK’s nuclear arsenal was recently taken back in-house by the Atomic Weapons Establishment (AWE). And profits for the rest of 2021 will be weighed on by set-up costs associated with a new £350m contract to find jobs for UK unemployed. Consensus forecasts are for earnings to drop back in 2022.

Sentiment will also not be helped by painful memories of the woes experience by the outsourcing sector – Serco very much included – during the 2010s.

However, by focusing on these short-term issues, investors risk losing sight of the significant improvements that have been made to the business over the recent year, Serco’s growing success in winning orders and international growth prospects.

“The new management team has been ultra-client-focused since they assumed control in 2014, as witnessed by the 90 per cent contract retention rate, and has invested significantly in internal processes and systems to manage the contracts more effectively,” said Chris Field, deputy manager of Edinburgh Investment Trust, which counts Serco as one of its holdings.

Haunted by the past

Since 2014, when Serco announced four profit warnings in a year, made a £1.5bn writedown and repaid £69m after overcharging on a contract to provide electronic tagging for offenders, it has made a steady but impressive recovery. This progress has been led by chief executive Rupert Soames, who arrived in 2014 and has since put a lot of emphasis on contract management.

The reason why outsourcers such as Serco and Interserve, which went into administration in 2019, where taking on such low-margin contracts was because governments often selected the lowest-price bidder regardless of the quality of service. This left little room for error, and error is always possible when implementing large, complex, multi-year projects.

By being more discerning about the contracts it takes on, there was a danger Serco’s top-line growth would slow. However, its £3.9bn of revenue at the end of 2020 was 23 per cent higher than at the end of 2015 and broker consensus is for it to be £4.3bn at the end of the 2021.

Two of the most promising aspects of Serco’s recovery are its operating margin and balance sheet health. The reason Interserve went into administration two years ago was because it had wafer-thin margins, just 3.4 per cent for 2018, and a weak balance sheet; its net debt was 4.6 times greater than its cash profit. Serco is currently in a much healthier position. Its operating margin has improved from 2.6 per cent in 2015 to 5.7 per cent in its recent interim results.

Net debt at the half-year stage was just one times its cash profit, despite the company spending £40m on buybacks and £249m on acquisitions in the period. This debt ratio is well below its covenant requirements of 3.5 times.

The balance sheet strength is built on its success over the past three years in turning its profit into cash increasingly effectively. Its underlying cash conversion for the first half of 2021 was 137 per cent, up slightly from the 136 per cent in 2020. But in 2018 its cash conversion was just 48 per cent before rising to 96 per cent in 2019. A sharp drop-off in the use of provisions related to bad contracts has been a key factor in the improvement. This is also reflected in a jump in free cash flow last year from £62m to £135m. Back in 2016 Serco reported a free cash outflow of £33m.

Beyond the pandemic

Serco may have benefited from Covid-19-related spending, but that should not distract from the fact it has a diverse business that provides it with multiple opportunities for future growth. In the first half, it won almost twice as many orders as the work it billed customers for (the so-called book-to-bill ratio stood at 190 per cent) and the order book rose from £1.35bn to £1.41bn.

Defence is its biggest division, accounting for 32 per cent of last year’s revenue. This was followed by citizen services (30 per cent), justice and immigration (17 per cent) and health (9 per cent).

While Serco currently appears to be the go-to service provider for UK government, its business is geographically diverse. It is also significantly more profitable in overseas markets.

In 2020, excluding income from joint ventures, UK & Europe contributed 46 per cent of sales. But with a margin of just 3.9 per cent, this geography accounted for only 32 per cent of trading profit. Thanks to a hearty 9.5 per cent margin, the Americas was the largest contributor to trading profit at 46 per cent of the total despite accounting for just 27 per cent of sales. The next largest geography was Asia Pacific, which was 19 per cent of sales and 15 per cent of profit.

The group is keen to expand outside of the UK, and particularly into the high-margin US market. To that end, in February it purchased WBB, a provider of engineering and advisory services to the US military for £215m – its biggest deal to date. In January, it acquired a facilities maintenance service in Australia for £44m.

New Covid-19 variants and stop-start reopenings also mean Serco’s pandemic boon could last longer than is currently expected, especially when considered in relation to consumer businesses. The US Census Bureau reported that US retail sales in August fell 1.1 per cent compared with July, worse than the 0.3 per cent decline expected by Bloomberg’s economist survey. In the same period, the Office for National Statistics reported that retail sales in the UK were down 2.5 per cent.

Where now?

It’s reasonable to assume the pandemic-related tailwind Serco has recently enjoyed will die down. But there are grounds to think following several years of restructuring, it is a more impressive business and has better prospects than the share price currently suggests.

“[The] concerns miss the point,” says Field. “Serco is being hugely successful in winning significant new contracts. [It has] a very high win rate of over 65 per cent. The new business pipeline is up 40 per cent year on year at £5.8bn. This is as a direct result of their highly efficient platform and customer focus. We believe Serco is able to grow its top line by mid single digits over the medium to long term, which will be supplemented by more targeted acquisitions. Debt levels are low, cash generation is strong and with low capital intensity, returns on that capital are strong.”

With a forecast free cash flow yield of over 7 per cent and with an enterprise value of less than half LTM sales, there is the potential for good upside as investors start to look further out into a post-pandemic world. (Source: Investors Chronicle)

 

25 Aug 21. VTG acquires undersea warfare technologies provider ASSETT. VTG will be able to add AI/ML applications and submarine acoustic expertise to its naval systems portfolio.

Digital transformation solutions provider VTG has acquired undersea warfare and uncrewed systems technologies provider ASSETT.

The companies did not disclose the financial aspects of the deal.

Besides developing artificial intelligence (AI) and machine learning (ML) applications for undersea and uncrewed systems, ASSETT also provides submarine SONAR acoustics and signal processing.

The acquisition will bring AI/ML applications and submarine acoustic know-how to VTG’s naval systems portfolio.

ASSETT has also developed and fielded a prototype integrated control system for combat submersibles as part of mission-critical work to support modernisation in defence.

VTG president and CEO John Hassoun said: “Submarines, unmanned platforms, and AI/ML-enabled C5ISR systems will play an increasingly important role in distributed maritime operations.

“ASSETT is developing the solutions and emerging technologies that will be foundational to this dispersed and networked fleet architecture.

“We look forward to bringing these transformational technologies and expertise to the Navy as well as customers across the defence enterprise and intelligence community.”

ASSETT’s primary capabilities include systems and cybersecurity engineering, software development, and data science.

All these technologies will now be part of VTG’s solutions portfolio, which the company will use for further development, fielding, and commercialisation.

ASSETT president and retired rear admiral Jim Shannon said: “As a result of this acquisition, ASSETT employees will enjoy expanded growth opportunities and our combined clients will have access to a wider array of expertise, tools, and technologies to help them achieve their goals.”

Last month, VTG secured a prime, single-award contract from the US Naval Surface Warfare Center, Port Hueneme Division (NSWC PHD). (Source: naval-technology.com)

 

26 Aug 21. Interim report for AAC Clyde Space AB (publ) January – June 2021.

Second quarter, April–June 2021 (compared with April–June 2020)

  • Net sales increased 156% to SEK 47.4m (18.5) Omnisys Instruments, which was acquired on 30 April, accounted for SEK 15.5m
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to SEK -3.5m (-7.5) and to SEK -1.8m (-7.5) excluding acquisition costs of SEK 1.7 (0)m
  • Earnings before interest and tax (EBIT) amounted to SEK -7.7m (-10.3), excluding acquisition costs
  • The loss after tax was SEK -9.6 m(-10.5) Omnisys Instruments, which was acquired on 30 April, contributed a profit of SEK 3.02m to earnings after tax
  • Basic and diluted earnings per share amounted to SEK -0.06 (-0.11)
  • Cash flow from operating activities totalled SEK +5.9m (-0.4).
  • The order backlog increased 152% to SEK 413m (164).

January–June 2021 (compared with January–June 2020)

  • Net sales increased 99% to SEK 84.2m (42.4) Net sales excluding companies acquired during 2020 and 2021 increased 21% to SEK 51.4m (42.4)
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to SEK -3.9m (-13.7) and to SEK -2.3 M (-13.7) excluding acquisition costs of SEK 1.7 (0)m
  • Earnings before interest and tax (EBIT) amounted to SEK -12.1m (-19.5), excluding acquisition costs
  • The loss after tax was SEK -13.6m (-20.0)
  • Basic and diluted earnings per share amounted to SEK -0.08 (-0.21)
  • Cash flow from operating activities totalled SEK -14.9m (-6.5)

Significant events in the second quarter of 2021

  • AAC Clyde Space entered into a GBP 8.4m (approx. SEK 100m) contract to deliver Space Data as a Service to Canadian Earth observation company Wyvern Inc.
  • AAC Clyde Space was honoured to be visited by Her Majesty The Queen and Her Royal Highness The Princess Royal at the Glasgow facility.
  • AAC Clyde Space received a USD 135,000 order (approx. SEK 1.1m) to continue operating the SeaHawk-1 satellite from its Operations Centre in Glasgow for a further 12 months.
  • Horizon Space Technologies Ltd. placed a GBP 4.6m (approx. SEK 54 M) order for a full turn-key solution, including two new satellite launches, operations and data delivery.
  • AAC Clyde Space won a USD 1.0 M (approx. SEK 8.3m) order for subsystems for the ice-drilling mission IM-2 led by the US company Intuitive Machines.
  • AAC Clyde Space’s US subsidiary SpaceQuest received an order of USD 0.55m (approx. SEK 4.6m) for global navigation satellite systems (GNSS) receivers and antennas to be delivered to a customer in Asia.
  • AAC Clyde Space was selected by Astroscale UK Ltd to co-engineer their UK-based space debris removal programme known as End-of-Life Services (ELSA-M). The contract is valued at GBP 0.26 M (approx. SEK 3 M).
  • Nicole Robinson was newly elected to the Board of Directors at the 2021 Annual General Meeting.
  • AAC Clyde Space was selected by the Mohammed Bin Rashid Space Centre in the United Arab Emirates to deliver a EUR 0.2m (approx. SEK 2m) computer system for the Rashid lunar rover.
  • AAC Clyde Space acquired all of the shares in Omnisys Instruments AB on 30 April 2021. The company was consolidated into the financial reporting from 1 May 2021.

Significant events after the end of the reporting period

  • AAC established AAC Space Africa in South Africa to join Africa’s quickly growing space sector.

Comments from the CEO, “It’s been a challenging but rewarding second quarter, as our global team has come together to drive sales and advance our ambition to become a world leader in commercial small satellites and services from space. The huge progress we have made is reflected in our orderbook, which has grown markedly across all three segments of the business and now stands at SEK 413M – over four times FY2020 revenues. I’m particularly delighted to see our Space Data as a Service (SDaaS) order book growing strongly, and our overall pipeline growing on the back of our recent acquisitions. In June, we secured our largest SDaaS contract to date: a four-year, SEK 100M agreement with Canadian Earth observation company Wyvern Inc. AAC will design, manufacture, and own the satellites and simply provide Wyvern with the data – specifically, hyperspectral images of Earth.  They will be used across various sectors, including agriculture, where they will help to optimize yields and detect invasive plants, pests, and changes in soil makeup – a great example of how high-quality, timely data from space can be used to improve life on Earth and our ability to feed a growing population. As well as securing new contracts, our existing partnerships are moving from strength to strength – a testament to the AAC client experience. This includes the SEK 55M order from Horizon Technologies to expand its Amber constellation, dedicated to delivering Maritime Domain Awareness intelligence data. The order includes two new CubeSat launches, operations and data delivery – and has the potential to be extended to include more than 10 additional CubeSats. These satellites will be able to locate and track vessels worldwide by geolocating and demodulating RF signals in a system that can be used to fight piracy, illegal fishing, and refugee smuggling, amongst other purposes. It also includes a SEK 8m follow-on subsystems order from Intuitive Machines for an ice-drilling mission (IM-2) to the Moon. AAC recently delivered the flight models for Intuitive Machine’s IM-1 mission, the first lander in NASA’s Commercial Lunar Payload Services initiative, focused on the exploration and use of natural resources of the moon. We will deliver our most potent and efficient power system, Starbuck, to the IM-2 mission, scheduled for launch in late 2022. The mission data will help scientists in the search for water at the Moon’s pole, as they try to pave the way for a sustainable human presence on the Moon by the end of the decade. In addition to IM-2, our lunar missions experience continues to grow with the exciting news that we have been selected by UAE’s Mohammed Bin Rashid Space Centre to deliver a SEK 2M computer system for the Rashid lunar rover. This is a hugely exciting time for AAC – the use of systems developed for small spacecraft in these types of mission is proof that the small satellite industry has truly come of age. In June, we were honoured to host Her Majesty The Queen and Her Royal Highness The Princess Royal at our Glasgow facility, in celebration of our contribution to the UK’s thriving space sector. We look forward to helping the country fulfil its commitment to becoming a global leader in the space industry, STEM (Science, Technology, Engineering and Mathematics) promotion and the development of sovereign capabilities, including the UK’s first orbital spaceport. As we move into the third quarter, we remain committed to working with our clients and partners across the globe to realise the full potential of small satellites to build a safer, healthier, and more efficient planet. That means investing for the future, which is why we are expanding our team: headcount has increased by 35 per cent since the end of 2020. It also means encouraging collaboration and innovation: our new company newsletter, SPAACE TALK, not only rounds up the latest news from across the Group, but also explores the most exciting themes in New Space. Finally, it means proactively helping to solve the challenges we face as an industry: for example, we have been selected by Astroscale in the UK to participate in its mission to remove space debris, one of the main threats to the sustainability of the space environment itself. Financially, we remain on track to be EBITDA positive in 2022 and achieve target revenues of SEK 500m by 2024, with a 53 per cent improvement in EBITDA compared to Q2 2020 and net sales up by 156 per cent to SEK 47.4m over the same period. Delays from subcontractors in major projects mean that revenues will be shifted from the third quarter to the fourth quarter of 2021. In total for the second half of the year, we expect continued growth and reach net sales of approximately SEK 200 million for the full year 2021. These results should give stakeholders confidence in both our team and our strategy.” Luis Gomes, CEO. (Source: PR Newswire)

 

27 Aug 21. The Opportunity Set: CANES, CROWS, and NGAT. USA Aerospace & Defense Electronics. We highlight three upcoming programs: CANES, CROWS, and NGAT. CANES and CROWS are likely to be follow-on work with current contractors, while NGAT represents a new opportunity following a start and stop for the program in 2019. Likely competition includes Kratos, Sierra Technical Services, and other prime contractors.

Insights

NGAT Gets Some Life. USAF issued an RFI for its Next Generation Aerial Target (NGAT) program. The targets are expected to replicate the performance and signatures of adversaries’ fifth-generation aircraft and support both radio frequency and electronic attack emissions. The RFI reenergizes the program after an RFI in 2019 led to it being pulled over budgetary issues. Updated responses are due Oct. 19. The program targets development costs <$300MM, with an avg. unit production cost of <$10MM. While the scope of the program is unchanged since 2019, the new effort seeks “insight into any new technologies, and maturity of existing technologies that may have emerged/progressed” over the last two years. Likely bidders include KTOS, Sierra Technical Services, and potentially BA, NOC, or LMT based on their capabilities. We think the opportunity is most significant for KTOS, given its target business, with the overall Unmanned business 28% of revenue.

Recompeting CROWS. The Army has begun a competition for the Common Remotely Operated Weapon Station (CROWS). The system is a stabilized mount that contains a sensor suite and fire control software fostering on-the-move target acquisition and first-burst target engagement. The solicitation was issued Aug. 23 and could be valued at up to $1.5BB over five years. The award is expected to be a hybrid firm fixed price, ID/IQ. The scope covers multiple variants, including Abrams CROWS-Low Profile, Navy Mk-50, USMC Amphibious Remote Weapon Station and Stryker version. Bids are due Nov 22. The current incumbent is Kongsberg Defense, which initially received a $970MM contract in 2012 for 3,000 CROW weapons stations as the incumbent at the time. In the recompete bid, the company beat out NOC/Electro-Optic Systems among others. Since that time, Kongsberg received contract modifications of $499MM in May 2021 and $498MM in Sept 2018 for continued development, engineering, and sustainment. Potential competitors could include GD and NOC, but Kongsberg is well positioned given its strong incumbent position.

CANES Getting a Refresh in 2022. The US Naval Information Warfare Systems Command (NAVWAR) expects to issue an RFP at the end of FY21/early FY22 to maintain the Navy’s Consolidated Afloat Networks and Enterprise (CANES). This is a follow-on contract to the $2.5BB award in 2014. The 10-year contract is expected to be a multiple award, ID/IQ with competition for future CANES production units, software development, and spare parts. The program consolidated a number of the Navy’s existing, separately managed shipboard and operations networks. CANES overall is a Commercial-Off-The-Shelf Systems integration modernizing the afloat C4I and cybersecurity onboard ships and submarines. The existing contract runs through August 2022, with current contractors including BAE, GD, NOC, Global Technical Systems, and Serco. (Source: Jefferies)

 

25 Aug 21. Rocket Lab Completes Merger with Vector Acquisition Corporation to Become Publicly Traded End-to-End Space Company.

Rocket Lab’s common stock to commence trading on the Nasdaq under the ticker “RKLB” on August 25, 2021.

Gross proceeds to Rocket Lab totaled $777 m, combining funds held in Vector Acquisition Corporation’s trust account and concurrent PIPE financing.

Transaction proceeds expected to accelerate growth in the space systems market, fund the development of the new reusable, 8-ton payload class Neutron rocket, and support further organic and inorganic growth in the Space Systems ecosystem and potential future space applications initiatives to deliver data and services from space.

Rocket Lab USA, Inc. (Nasdaq: RKLB) (“Rocket Lab” or the “Company”), a global leader in launch services and space systems, today announced that it completed its previously announced merger with Vector Acquisition Corporation (Nasdaq: VACQ) (“Vector”) to take Rocket Lab public. Vector’s shareholders approved the merger at an annual general meeting of Vector’s shareholders on August 20, 2021. The combined company will retain the Rocket Lab USA, Inc. name and will commence trading on the Nasdaq Capital Market on August 25, 2021, with its common stock and warrants trading under the new ticker symbols, “RKLB” and “RKLBW”, respectively.

The gross amount of cash that Rocket Lab will receive from Vector’s trust account and PIPE financing that closed substantially concurrently with the merger, before transaction expenses, equals approximately $777 m. The proceeds are expected to accelerate organic and inorganic growth in Rocket Lab’s space systems business, drive the development of the Company’s reusable 8-ton payload class Neutron rocket, and support potential future expansion into space applications enabling Rocket Lab to deliver data and services from space.

“Our team is motivated by the enormous impact we can have on Earth by making it easier to get to space and to do incredible things there. We are excited to be making that a reality by embarking on our next chapter as a public company,” said Rocket Lab founder and Chief Executive Officer, Peter Beck. “With our Electron rocket and Photon spacecraft, we’ve simplified space, making it easy and affordable for companies, scientists, governments, and entrepreneurs alike to get their ideas to orbit. Today, we take the next step toward unlocking the full potential of space, paving the way for our larger Neutron launch vehicle which will deploy the constellations of the future, and supporting our potential future expansion into space applications. I am thrilled to declare space open for business.”

“As a leader in democratizing access to space, Rocket Lab is well positioned to capitalize on exciting opportunities in commercial and government-sponsored space industry innovation,” said Alex Slusky, CEO of Vector and Founder & Chief Investment Officer of Vector Capital. “We are confident in Rocket Lab’s ability to deliver outstanding performance and reliability to drive long-term value for shareholders.”

Mr. Beck will continue to lead the combined company. Mr. Slusky will join the Board of Directors of the combined company alongside existing Directors Sven Strohband of Khosla Ventures, David Cowan of Bessemer Venture Partners, Matt Ocko of DCVC, Mike Griffin, Merline Saintil and Jon A. Olsen.

As a public company, Rocket Lab’s position as a leader in end-to-end space services spanning launch, spacecraft manufacture, and on-orbit spacecraft management is further strengthened. Since Rocket Lab’s first orbital launch in 2018, the Company’s innovative Electron launch vehicle has become the second most frequently launched U.S. rocket annually. To date, Rocket Lab has delivered 105 satellites to orbit for more than 20 public and private-sector organizations and technology-leading constellation operators. Rocket Lab’s customer base is evenly split across government and commercial organizations including the National Aeronautics and Space Administration (NASA), the National Reconnaissance Office (NRO), and the Defense Advanced Research Projects Agency (DARPA), as well as commercial satellite leaders.

Rocket Lab has an established space systems business that develops satellite and spacecraft solutions for a range of commercial and government missions, from low-Earth orbit constellations to high-complexity deep space and interplanetary missions. Rocket Lab’s Photon spacecraft family delivers a satellite-as-a-service solution that eliminates the typical high cost, time and complexity customers face when building their own satellites. With Rocket Lab, customers can buy a launch, satellite, ground services and on-orbit management as a turn-key package, resulting in a disruptive reduction in cost and time to orbit. Rocket Lab has two operational Photons on orbit, with additional missions to the Moon, Mars and Venus planned, including the CAPSTONE mission to lunar orbit in support of NASA’s Artemis program.

Morgan Stanley & Co. LLC is serving as sole financial advisor to Rocket Lab, with Goodwin Procter LLP serving as legal counsel to the Company. Morgan Stanley & Co. LLC is also acting as the lead placement agent for Vector on the PIPE and capital markets advisor. Deutsche Bank Securities is serving as sole financial advisor and capital markets advisor to Vector as well as placement agent on the PIPE, with Kirkland & Ellis LLP serving as legal advisor. Canaccord Genuity, Cowen and Stifel also acted as capital markets advisors to Vector. (Source: BUSINESS WIRE)

 

25 Aug 21. InVeris Training Solutions Acquires SURVIVR, Enhancing Virtual Reality Expertise. InVeris Training Solutions, the leading provider of integrated virtual and live-fire training systems and services for domestic and international law enforcement customers, announced today that it has acquired SURVIVR, a privately held, Dallas-based Public Benefit Corporation devoted to public safety. With the addition of SURVIVR to its industry-leading readiness training solutions portfolio, InVeris continues to build on its long-standing commitment to deliver effective, reliable, and innovative products and services for when split-second decisions matter.

“SURVIVR’s premier virtual reality police training system and patented technology complements recent research and development by InVeris. It will be incorporated into our VR-DT solution to expand future capabilities,” said InVeris CEO Al Weggeman. “All police forces – large and small, urban and rural – need and deserve the most realistic, effective training. This acquisition by InVeris strengthens our product offering to better prepare law enforcement officers for real-life situations in their community.”

“SURVIVR’s virtual reality technology has been chosen by various law enforcement departments and the U.S. Air Force Security Forces,” noted Brian Hoang, the company’s co-founder who will now serve as InVeris’ director of VR/AR strategy. “Joining InVeris enables us to combine the best aspects of both systems, providing an unrivaled solution for existing and future customers.”

Simulation training, which provides trainees with real-to-life experiences, has been an important component of law enforcement and defense training for decades. Combining InVeris’ BlueFire® simulated weapons technology with SURVIVR and InVeris’ VR-DT virtual reality de-escalation and safety training solutions will form a new generation of immersive, 3D, scenario-based training. Similarly, instructors can use dynamic branching for a wide range of responses based upon the trainee’s verbal statements and physical actions. The objective for these solutions is simple but critical to all concerned: Good training saves lives.

About InVeris Training Solutions

InVeris Training Solutions combines an agile approach with unmatched expertise in training technology to design and deliver customized, cutting-edge, first-rate training solutions that keep law enforcement, private and commercial range clients safe, as well as military prepared and ready to serve. With a portfolio of technology-enabled training solutions, and a team of 400 employees driven to innovate, InVeris Training Solutions is the global leader in integrated live-fire and virtual weapons training solutions. With its legacy companies, FATS® and Caswell, InVeris Training Solutions has fielded over 15,500 live-fire ranges and 7,500 virtual systems globally during its 95-year history. The company is headquartered in Suwanee, Georgia and partners with clients in the U.S. and around the world from facilities on five continents.

 

24 Aug 21. Austal reports 24.6% drop in FY2021 revenue on pandemic impact. Austal’s revenue in FY2021 was A$1.57bn, compared to A$2.09bn in the previous fiscal.

Australia-based shipbuilding company and defence contractor Austal has reported a 24.6% fall in annual revenue in the Fiscal Year 2021 (FY2021) due to the impact of the Covid-19 pandemic.

In the 12 months that ended on 30 June 2021, the company recorded total revenue of $1.14bn (A$1.57bn). The figure was $1.51bn (A$2.09bn) in the previous fiscal.

Austal’s earnings before interest & tax (EBIT) fell 12.1% in FY2021 to $82.85m (A$114.6m) from $94.27m (A$130.4m) in FY2020.

Net profit after tax (NPAT) was $58.63m (A$81.1m), compared to $64.34m (A$89m) a year ago.

In addition to the pandemic, other factors that affected FY2021 performance are appreciation in the average USD to AUD exchange rate and reduction in Littoral Combat Ship (LCS) volume among others.

Despite the fall, Austal’s FY2021 results are the second-highest on record.

The board also declared a final dividend of 4 cents per share, which brings dividends related to FY2021 to 8 cents per share.

Austal also decided not to provide EBIT guidance for FY2022 at this point as it anticipates that the Covid-19 situation will continue to remain dynamic.

Austal CEO Paddy Gregg said: “Our robust earnings and bottom line were underwritten by increased shipbuilding margins at both our US and Australasia operations, as we continued to deliver across our naval programmes.

“Subsequently, we have been able to maintain total FY2021 dividends at 8 cents per share with a final dividend of 4 cents per share.

“This is a testament to the durability of our operations and our ability to maintain a robust financial base, even amidst the challenges of a Covid-19 impacted environment in FY2021.”

(Source: army-technology.com)

 

25 Aug 21. Nexon Asia Pacific Acquires Cyber Security Firm. The technology firm has announced a new deal aimed at enhancing its cyber security offering.

Nexon Asia Pacific has acquired Equate Technologies — a Brisbane-based cyber security, risk, and consulting solutions firm.

The deal aims to fortify Nexon’s offering in response to the changing threat landscape, with malicious activity surging in lieu of mass digitisation off the back of the COVID-19 pandemic.

“With over eight years of experience delivering integrated cyber security solutions, Equate Technologies has invested in local cyber security talent and technologies in supporting the company’s commitment to improve the performance, productivity, and protection for their clients,” Barry Assaf, Nexon Asia Pacific CEO, said.

“Cyber threats are more sophisticated, coordinated, and targeted today. Our clients require the expertise and capabilities to secure their environments with access to next-generation capabilities.

“Equate Technologies augments our offering and capability to deliver scalable, end-to-end proactive cyber security services as part of our comprehensive advisory and managed services.”

Equate’s integrated security offerings are expected to support government, not-for-profit, and mid-market customers.

Stephen Richards, managing director at Equate Technologies, welcomed the deal, which he said would expand the company’s market footprint.

“Our extensive experience in delivering world-,class onshore managed and professional security services to some of Australia’s fastest growing businesses has always been a strong differentiator,” Richards added.

“With Nexon, we have the platform, resources and financial backing to extend our geographic reach and expand our service offerings to clients.” (Source: https://www.cybersecurityconnect.com.au/)

 

24 Aug 21. Arlington Capital Partners Announces the Acquisition of MCR. Arlington Capital Partners (“Arlington Capital” or “Arlington”), a Washington, DC-area private equity firm, today announced it has signed a definitive agreement to acquire MCR, LLC (“MCR” or the “Company”). Founded in 1977 and headquartered in McLean, Virginia, MCR provides cost analysis and engineering and software development expertise to customers in defense, intelligence and critical civilian governmental agencies in the US as well as customers internationally. MCR’s senior management team has invested alongside Arlington in the transaction.

David Wodlinger, Partner at Arlington, said, “MCR has established itself as a preeminent provider of differentiated systems engineering and integration solutions that address critical national security objectives in the space, cyber, and missile defense domains. We are partnering with MCR to increase investment in these core areas, as well as to pursue strategic acquisitions to enhance and broaden the differentiated capabilities that MCR can bring to bear for its customers and to provide additional career opportunities for the Company’s employees. We see enormous demand in the market for MCR’s services and we believe that with our investment in the business, MCR is very well positioned for the significant growth in front of it.”

“Throughout MCR’s over 40-year history, our global employee base has strived to become trusted advisors and technical partners to support our customers’ success across the spectrum of critical mission challenges. This has resulted in MCR’s consistent growth and positioned us to help meet future challenges,” said Bill Parker, CEO of MCR. “We have found a partner in Arlington, a firm that we have known for many years, that understands what makes MCR special and will remain committed to this mission as the Company enters its next phase of growth.”

Ben Ramundo, Vice President at Arlington, said, “MCR has built a reputation for technical excellence and commitment to the mission, making the Company an employer of choice for high caliber professionals. We are excited to partner with the MCR management team to build on that tradition and accelerate the Company’s growth by investing in new capabilities as well as pursuing strategic acquisition opportunities in complementary markets.”

Sheppard Mullin served as legal advisor to Arlington. Houlihan Lokey and Holland & Knight served as financial and legal advisors to MCR, respectively. (Source: BUSINESS WIRE)

 

24 Aug 21. Savi Technology Restructuring to Better Support the Warfighter. Savi, with a 30-year legacy supporting the warfighter, closes commercial software business to re-focus on core strengths.

Savi®, an innovator in supply chain visibility software and sensor technology, made the difficult decision to close the commercial software business and file for Chapter 11 bankruptcy protection while they restructure to focus on their Government contracts and customers. Savi is the sole awardee for the active RFID (aRFID) V contract, which has a $42m ceiling for Savi to equip the U.S. Department of Defense (DoD) and other government agencies with a comprehensive, cutting-edge array of hardware and software products and support services. Products include aRFID tags, readers, satellite communications (SATCOM) and portable deployment kits (PDKs).

Part of the Internet of Things (IoT), Savi’s aRFID infrastructure provides “always on” information on the location and condition of in-transit supplies and equipment to enable critical situational awareness for emergency response or military operations. These smart technologies and connected devices support mission readiness in even austere, hostile environments, enabling warfighters, first responders and military logisticians to efficiently manage and track personnel, equipment and sustainment cargo around the world.

“For more than 30 years, the DoD has trusted Savi to support its complex and critical logistics needs around the world and we are proud to continue this strong partnership,” said Rosemary Johnston, Savi’s CEO. “Our asset tracking technology and in-transit visibility services, along with our pioneering leadership in military RFID systems, will provide warfighters with the logistics tools they need to fulfill the mission today and tomorrow.” Savi’s Chairman, Sean McGuinness, added, “We expect to reorganize and emerge from bankruptcy as a stronger and leaner operation.”

We want to reassure our customers that Savi will continue to honor our commitments for exceptional service, products, and support as we restructure the business and focus on delivering intransit visibility and asset tracking capabilities to the warfighters.

(Source: BUSINESS WIRE)

 

24 Aug 21. Denel owes staff and suppliers R1.5bn. Denel is technically insolvent and owes staff R636m and suppliers R900m, the embattled state-owned company has told Parliament’s Standing Committee on Public Accounts (SCOPA), as it pins its hopes on a new turnaround plan.

Denel on Tuesday morning briefed SCOPA on the progress of Special Investigating Unit (SIU) investigations into the company. In explaining its current state, Acting Group CEO William Hlakoane noted that the year to date balance sheet shows Denel is technically insolvent and available cash is insufficient to meet operational requirements, including the payment of salaries and suppliers.

Denel currently owes R636m to employees and related costs and approximately R900m to suppliers. The latest cash flow projections for the 2021/22 financial year indicate a negative R600 m, if no mitigation action is taken.

“The uncertainty on Denel’s future state has impacted the current customers who are concerned about Denel’s ability to deliver on contracts on hand leading to a possible call on prepayment and performance guarantees (circa R1.4 bn),” Denel’s presentation stated.

The company’s troubles have caused it to receive a below investment grade rating from Fitch Ratings – Denel’s National Long and Short-Term Ratings are ‘CC(zaf)’ and ‘C(zaf)’, respectively. Reasons cited for the poor rating are the group’s severely constrained liquidity and a lack of visibility on future additional government support.

Another issue with Denel’s finances is that it does not have tax clearance status due to the non-payments of PAYE, VAT etc. Any entity conducting business with the state must be tax compliant, meaning Denel will struggle to do business without tax clearance. Denel has been engaging with the South African Revenue Service (SARS), which yesterday stated it was willing to give Denel tax clearance as long as it had paid PAYE and VAT by the end of this month.

Denel’s financial problems have attracted legal action and Denel is currently defending an application for liquidation by Saab. The matter is still in court whilst parties continue to find an amicable resolution, Denel said.

Due to the non-payment of salaries, this has led to applications in court by unions. The matter has been postponed to December 2021 allowing Denel time to comply with an August 2021 court order on salary payment. “Some employees in their individual capacity have submitted court application for the amounts owed to them. This poses a threat to Denel’s assets as execution orders to attach assets have been granted by the courts,” Denel stated.

“The threat of other supplier[s] making a similar application persists as increased letters of demand are delivered to Denel.”

Salary non-payment has seen hundreds of staff leave Denel, with only 2 529 people employed at the company at present – 138 people left Denel between April and June, with many of these being technical workers. The business continues to lose skills, and operational activity is at low levels.

Denel is implementing a turnaround plan but the 2019 plan “is untenable as the time frames to implement are too long and [the 2019 turnaround plan] does not solve the current liquidity issues.” Finalisation of the tasks identified in the plan to generate the required funding, i.e. disposal of assets and engaging in equity partnerships, have been difficult to implement due to non-alignment of stakeholders.

The February 2019 turnaround plan has “so far proven to be insufficient to deliver a profitable Denel in the short term” and has been replaced by the Denel 5.Y Strategy to improve and accelerate the 2019 plan through restructuring into a lean operating model, repurposed for profitability and sustainability.

Under a new operating model, Denel will be split into Engineering and Maintenance & Manufacturing divisions while intellectual property will be exploited and unprofitable divisions and entities exited or transferred. Exiting joint ventures like Barij and Hensoldt Optronics will generate immediate capital.

Hlakoane presented to SCOPA a ten-year roadmap to sustainability. This requires R335 m in funding in the next five months to unbundle, amalgamate and relocate the business and right-size resources. Combining and structuring the new divisions will take around eight months. Denel estimates it will take a year to stabilise, focus and repurpose the company and five years to develop new technologies to further new business. (Source: https://www.defenceweb.co.za/)

 

24 Aug 21. Science Group ups stake in TP Group following rejected buyout offer. Services and product development firm Science Group has snapped up another chunk of TP Group after its 5.8p per share acquisition attempt was said to have “significantly” undervalued the company.

Science Group now holds 140.52m shares in TP Group, giving it 18.03% of the company’s voting share capital.

TP also rejected Science Group’s revised offer of 6.5p per share, a price it insisted was more than generous given that it represented a premium of close to 67% on the stock’s price when Science made its initial investment.

Science has also pushed for a general meeting to replace TP’s chairman and a non-executive director with members of its own board but TP Group assured it had “no intention of engaging with Science Group”.

However, today’s purchase will make Science Group much more difficult to ignore, with the rejected suitor slamming TP’s board, claiming that it had “consistently failed” to make “value for shareholders”.

“The TP Group board seeks to blame the poor performance of the company on the Covid-19 pandemic. Yet, while the performance of TP Group has been weak, Science Group has reported resilient performance over the past two years,” said Science Group.

“Science Group has informed the TP Group board that it does not intend to increase its indicative offer above 6.5p per share hence its offer of 6.5p per share is therefore final but reserves the right to do so if a third party announces an offer or possible offer for TP Group.”  (Source: Sharecast)

 

23 Aug 21. Carbonix Raises $4.5m in Late Seed Funding. CarbonicBoats Pty. Ltd. (“Carbonix”), a designer, manufacturer and operator of unmanned aerial data capture solutions based in Sydney, Australia, has raised AU$6.3m in late seed funding. The round, which was oversubscribed, includes listed Defence aerospace manufacturer Quickstep Holdings Limited who invested $1m – adding a strategic dimension to the mix of individuals and small funds taking up the opportunity.

Carbonix uses technology and expertise originating from sailing’s America’s Cup competition to develop Unmanned Aerial Vehicles with unmatched capabilities. Combining lightweight composite airframes with proprietary avionics, the Carbonix UAVs are able to deliver high quality aerial images and scans in real-time at attractive costs.

Practical Vertical Take Off and Landing (VTOL) capabilities and flight endurance of up to 10 hours make their systems easy to deploy and able to cover large areas whilst carrying high-resolution sensors. Carbonix has already completed over 1,500 hours of flight testing. This puts it in the lead when it comes to the race to capture the unmanned VTOL surveying and surveillance market.

The funding enables Carbonix to scale both its production and service offerings. The company plans to expand its Drone-as-a-Service (DaaS) concept into North America after consolidating presence in the Australian market.

Carbonix CEO Stephen Pearce noted:

“DaaS is a unique delivery model aimed at removing pain points associated with adopting aerial data solutions. We offer a bundled package on a subscription basis that includes the UAV system and payload, training, maintenance and upgrades, compliance, even insurance, thus providing a turnkey solution for our clients. This is possible because Carbonix has years of experience building and operating UAV systems in-house”.

Quickstep CEO Mark Burgess added:

“We see participation in this round as a way for Quickstep to gain exposure to the rapidly growing unmanned aerospace services market. Quickstep contributes to the partnership a proven capability that will help Carbonix scale manufacturing, right here in Australia”.

Long Range Capability for Ausgrid. (Source: UAS VISION)

 

23 Aug 21. Leading Global investors buy minority stake in QuEST Global. Quest Global, a global product engineering and lifecycle services company, announced that leading global investors – ChrysCapital, True North Managers LLP, and other institutional investors – have invested a total of approximately US $150m to purchase minority stakes in the Company. The investors have completed the purchase of a portion of the shares held by the co-founders and management team of QuEST. The existing investors – Bain Capital, Advent, and GIC, continue to remain invested. O3 Capital acted as the sole financial advisor to the transaction.

Commenting on the investment in QuEST, Sudip Nandy, Sr. Advisor. Enhancin, ChrysCapital, said, “ChrysCapital has a strong track record of over 20 investments in the Technology Services sector, which has been an integral part of our portfolio across funds. QuEST is one of the leading players in the engineering services space and has consistently outperformed its peers and demonstrated the ability to scale accounts in a fragmented industry, by becoming the core engineering partner to most of the top global firms across its target industry verticals. We are excited to back Ajit and the executive team at QuEST and look forward to working with them on the journey ahead.”

“QuEST is one of the top five players in the pure-play ER&D space and has built unique and deep expertise in an industry that is undergoing unprecedented digital disruption. As a leader in the engineering services space, QuEST has been offering strategic services to its customers rather than just a scale or merely cost differential. We were very impressed by the depth of engineering expertise and the diverse industries and emerging technologies in which QuEST is helping customers. We believe the ER&D space will continue to see significant growth and innovation in the years ahead, and we look forward to working with QuEST’s management team to capture these opportunities,” said Prasad Thrikutam – Partner, True North.

Ajit Prabhu, Chairman & CEO, QuEST Global, said, “We started QuEST with the vision of becoming the most recognized and trusted global engineering partner for our customers across industries. The investment by three of the most respected global investors, despite the ongoing pandemic crisis, is a testament to our ability to build and grow our business to become the most trusted thinking partner to customers. It also crystallizes the value we have created for our shareholders and employees who have placed their belief in us and partnered with us in this journey.”

Ajit further added that as the industrial world bounces back into pre-pandemic days, enterprises would need help from companies like QuEST – to bridge the gap between the industrial and digital world – and rebuild the lost traction. “Our focus will be to develop capabilities in hi-tech, software, digital segments along with other industries and help our customers solve their engineering challenges,” he said.

With the pandemic accelerating digital transformation across industries, enterprises are investing heavily in digital solutions to lead and take advantage of this wave of software product engineering. Being a trusted thinking partner to its customers, QuEST has been helping solve some of the toughest problems they face by creating new products, opening new market opportunities, and maximizing efficiency. The company also provides an opportunity to its employees to learn and grow without limitations, develop expertise, collectively achieve aspirations and experience a rewarding journey.

About QuEST Global

For more than 20 years, QuEST Global has been a trusted global product engineering and lifecycle services partner to many of the world’s most recognized companies in the Aerospace & Defense, Automotive, Energy, Hi-Tech, Medical Devices, Rail, and Semiconductor industries. With a presence in 13 countries, 54 global delivery centers, and 11,250+ personnel, QuEST Global is at the forefront of the convergence of the mechanical, electronics, software, and digital engineering innovations to engineer solutions for a safer, cleaner, and sustainable world. QuEST Global’s deep domain knowledge and digital expertise help its clients accelerate product development and innovation cycles, create alternate revenue streams, enhance consumer experience and make manufacturing processes and operations more efficient. (Source: PR Newswire)

 

23 Aug 21. Virgin Orbit brings Boeing on board for $3.2bn spac deal. Branson’s reusable launch venture is aiming for Nasdaq listing Virgin Orbit is tapping into growing investor appetite for rapidly expanding space-based opportunities. Boeing will become an investor in Richard Branson’s satellite launch company Virgin Orbit when it goes public in a merger with a special purpose acquisition company in a deal that values it at more than $3bn. Virgin Orbit, a spin-off from Branson’s Virgin Galactic tourism company, will merge with the blank cheque entity NextGen Acquisition II co-founded by a former Goldman Sachs banker, resulting in a listing on New York’s Nasdaq exchange. The deal will bring up to $483m in new capital to Virgin Orbit, including $100m private investment in public equity, or Pipe, financing led by US aerospace giant Boeing and space business investor, AE Industrial Partners. Virgin Orbit intends to use the proceeds to expand its services and accelerate launches, with six expected next year. Virgin Orbit is the latest company to tap into growing investor appetite for rapidly expanding space-based opportunities, following the deals struck earlier this year by earth observation companies Planet Labs and Spire Global. Both are merging with spacs to go public with multibn-dollar valuations. Virgin Orbit was founded in 2017, as Elon Musk’s SpaceX began to open up space to private enterprise by forcing down the costs of launch with reusable rockets. Morgan Stanley predicts the space sector will expand from $350bn a year in 2016 to more than $1tn by 2040.  Unlike SpaceX, Virgin has chosen to focus on horizontal launch services, using a modified 747 aircraft as a mobile launcher and a reusable first stage. After flying to the upper atmosphere on the 747, Virgin’s LauncherOne rocket is sent into space, carrying several smaller satellites of about 300 kgs each. The group has already sent satellites to space for Nasa and won US military contracts. Virgin Orbit is also one of the companies chosen by the British government to help drive its ambition to launch satellites from UK spaceports from next year. The transaction values Virgin Orbit at an implied pro forma enterprise value of about $3.2bn. It is expected to close around the end of the year. After the deal completes, Branson’s Virgin group will hold about 68 per cent of Virgin Orbit. Abu Dhabi’s sovereign wealth fund, Mubadala Investment Company, is an existing investor in Virgin Orbit and will have about 17 per cent, while the Pipe and other private investors will hold about 15 per cent of the group. Boeing’s share was not disclosed. (Source: FT.com)

 

23 Aug 21. BATM Advanced Communications Limited (“BATM” or the “Group”) Interim results for six months ended 30 June 2021. Demand for high margin diagnostic products to drive better-than-expected growth for FY 2021 – EBITDA to be significantly ahead of market expectations. BATM (LSE: BVC; TASE: BVC), a leading provider of real-time technologies for networking solutions and medical laboratory systems, announces its interim results for the six months ended 30 June 2021.

Operational Summary

Bio-Medical Division (77.1% of total revenue (H1 2020: 64.6%))

  • •Revenue increased by 10.2% to $55.1m (H1 2020: $ 50.0 m), driven by sales of COVID-19 diagnostic kits, more than offsetting the contribution to H1 2020 revenues from the exceptional critical care ventilators contract

o Revenue increased by 36.4% when excluding the contribution to the prior period from the ventilator contract

  • •Gross margin improved by 570bps to 37.6% (H1 2020: 31.9%), due to product mix, including the increased contribution from new molecular diagnostics tests
  • •Diagnostics Unit

o Significant sales growth driven by strong global demand for COVID-19 test kits (reagents) and diagnostic instruments throughout the first half of the year

o Expanded COVID-19 diagnostics portfolio with launch of new solutions that enhance speed, accuracy and ease of use of the Group’s offering: a test that uses self-collected saliva samples and the RAPiDgen® SARS-CoV-2 Ag test

o New molecular diagnostics kit that tests for multiple respiratory pathogens simultaneously has received CE certification and is being prepared for sale in winter 2021

o Iso-thermal method, being developed by the Group for the rapid and comprehensive diagnosis of tuberculosis, received the backing of the Stop TB Partnership, an international alliance

  • •Eco-Med Unit

o Delivery resumed on contracts for the installation of the Group’s ISS-based pathogenic waste treatment solution, with significant progress made in projects with Ceva Animal Health in Hungary and an agri-food conglomerate in Taiwan

  • •Distribution Unit

o Increased revenue driven by the distribution of several molecular tests and of COVID-19 diagnostic reagents and equipment

Networking and Cyber Division (22.9% of total revenue (H1 2020: 35.4%))

  • Revenue was $16.4m (H1 2020: $ 27.4 m), reflecting the sale of the Group’s non-core NG Soft Ltd (“NGSoft”) subsidiary in March 2021
  • Revenue from ongoing operations (excluding the contribution of NGSoft in both periods) was $9.1m (H1 2020: $9.4m)
  • Gross margin improved by 480bps to 30.6% (H1 2020: 25.8%), primarily reflecting the reduced contribution to revenue from NGSoft
  • Recorded a capital gain of $13.0m from the sale of NGSoft
  • Networking Unit

o Edge Computing and network function virtualisation (“NFV”):

  • •Launched, post period, Edgility brand of products and services for NFV and Edge Computing based on the Group’s NFV operating system, Edgility OS (formerly NFVTime)
  • •Successful proof-of-concepts conducted with several potential customers and partners worldwide, which the Group expects will translate to orders in H2 2021
  • •Established two new partnerships in EMEA to boost Edgility sales and market presence through the offering of joint solutions
  • •Expanded addressable market with enhancement of Edgility OS to enable compatibility with, and received certification of use for, public cloud environments

o Carrier Ethernet:

  • •Increase in carrier ethernet revenue as normal business practices began to resume
  • •Selected by tier 1 telecommunications operator in APAC to provide demarcation units for connecting business and enterprise customers – becoming the preferred supplier
  • •Cyber Unit

o Awarded a $4.1m cyber security contract from the Group’s long-standing government defence department customer, of which more than half is expected to be delivered in the current year

o Post period, received a $10m multi-year contract from the same customer for the delivery of an advanced cyber security solution containing elements of NFV protection

Commenting on the results, Dr Zvi Marom, Chief Executive Officer of BATM, said: “This is an excellent set of results for BATM, driven by significant demand for our high-margin diagnostic solutions, especially for COVID-19, as well as the value creation through the sale of a non-core subsidiary. Equally, on an underlying basis from ongoing operations, we achieved over 8% growth in revenue and almost 30% if also excluding our exceptional ventilator contract delivered last year. We continued to innovate and launch new products in diagnostics and networking that address the complex challenges faced by the world today. At the same time, our teams are advancing the development of disruptive technologies across our portfolio that have received important recognition as well as several patents and which will support our future growth.

“Looking ahead, we entered the second half with a strong order book and receiving sustained demand for our diagnostic solutions. We also continue to expect to generate revenue this year from the roll-out of Edgility OS by PCCW Global. As a result, we anticipate achieving better-than-expected revenue for the full year and EBITDA to be substantially ahead of market expectations with growth of over 40% year-on-year. Consequently, and supported by a robust balance sheet, the Board of BATM continues to look to the future with great confidence.

“I want to thank our Board of Directors and our teams for their dedication over this period and doing an excellent job despite the challenges of the pandemic. We are all very enthusiastic to keep striding forward and I believe that we will achieve truly great results.”

 

23 Aug 21. BATM Advanced Communications: On the earnings upgrade.

Earnings momentum is the key driver of share prices which is why our small-cap stock picking expert targets companies that are likely to overdeliver. Three companies on his active watchlist have done exactly that.

Earnings momentum is the key driver of share prices which is why I am always on the look-out for companies that are likely to overdeliver. BATM Advanced Communications (BVC:91p), a provider of medical laboratory systems, diagnostic kits, cyber security and network solutions, has done just that. Buoyed by high single-digit underlying revenue growth on sharply higher profit margins, the board has upgraded annual cash profit guidance by 20 per cent.

House broker Shore Capital raised full-year cash profit estimates from $23.5m to $28.4m, up from $19.9m in 2020, on revenue of $138m (£101m). On this basis, expect 2021 pre-tax profit to rise by 70 per cent to $23m and deliver earnings per share (EPS) of 3c. Admittedly, a non-core business disposal boosts the profit number, but on a like-for-like basis analysts still upgraded their cash profit estimate by 16 per cent to $15.4m.

Moreover, they pushed through high single-digit cash profit upgrades for 2022 (to $18.1m) and 2023 (to $25.9m). Strip out net cash of $59.6m (10p a share), and BATM is rated on 18 times 2023 cash profit estimates even though analysts expect “further upgrade opportunities in coming reporting periods.” The upgrade cycle has further to run. It’s not the only one either.

BATM’s massive earnings upgrades

  • Cash profit guidance raised by 20 per cent, implying 40 per cent year-on-year growth, leads to major earnings upgrades.
  • Strong order book with diagnostic division seeing sustained demand for Covid-19 diagnostic kits.
  • Completion of proof of concept trials of BATM’s new Edgility product suite set to deliver second half orders.
  • Roll-out of Edgility by Hong Kong based PCCW.

In the first half, BATM’s gross margin surged from 29.7 per cent to 36 per cent, a reflection of a trebling in higher margin diagnostic revenue (from $6m to $17.8m), as the group continues to benefit from strong global demand for its Covid-19 testing kits and instruments. The product suite has been expanded to include a test that uses self-collected saliva samples and a rapid flow test that can deliver results within 8-15 minutes with 95 per cent efficiency.

BATM has also received CE certification ahead of the forthcoming winter flu season for a new molecular PCR diagnostic test that can identify the specific cause (pathogen) of a respiratory illness, enabling the correct treatment or action to be rapidly implemented. It can detect all prominent respiratory viruses as well as the bacteria that cause the serious pulmonary illnesses that are believed to be a secondary infection of Covid-19, such as pneumonia and Legionnaires’ disease. It’s likely to be in high demand in the second half, and beyond. BATM is also anticipating “substantial year-on-year growth” from the rest of diagnostics business, too.

BATM’s edge computing and network function virtualisation product suite, Edgility, is gaining momentum, too. That’s because telecom operators and service providers are now deploying their own virtualised software-based networks to leverage the benefits of 5G through Edge computing and are providing differentiated services to their enterprise customers. BATM’s focus on Edge compute (whereby data processing takes place at the network edge, nearer to the end device, to improve response times and save bandwidth) addresses their needs and is fundamental in enabling Internet of Things (IoT) technologies.

Bearing this in mind, chief executive Dr Zvi Marom expects several successful proof-of-concept trials with potential telecom operators and partners to translate into orders in the second half. Partnerships with albis-elcon, the premier brand of UET United Electronic Technology AG (XETRA: UET), a publicly listed German technology group, and Stem Connect, a network provider which services enterprise and telecom customers in France, South Africa and the UK, significantly increase the group’s market presence.

Importantly, Edgility is compatible for use in public cloud environments (Amazon Web Services and Microsoft Azure). In addition, expects revenue to gain traction from BATM’s licensing strategic partnership agreement with Hong-Kong-based PCCW Global, the Asia-based Tier1 group that is present in more than 160 countries and in 3,000 cities in the Americas and EMEA.

The directors point out that Edgility network revenue produces 85 per cent plus gross margin, and is set to become a multi-m dollar revenue business. Growth from Edgility, ongoing demand for BATM’s diagnostic suite and cyber security contracts (two major government contracts wins worth $14.1m during the summer and a planned move to target large corporations in 2022) explain why analysts forecast strong underlying profit growth in the years ahead.

BATM’s share price is up from the 80p level when I suggested buying ahead of the results, taking the total gain to 402 per cent since I included the shares in my 2017 Bargain Shares portfolio. I maintain my 170p sum-of-the-parts valuation (‘Technology winners for the new normal’, 18 January 2021). Strong buy. (Source: Investors Chronicle)

 

23 Aug 21. Broker cheers BATM Advanced Communications strong balance sheet and big opportunities. “Strong underlying operating development is now visible,” says analyst Robin Speakman. Shore Capital sees positive ‘long-term upgrade potential’ for BATM Advanced Communications Ltd (LSE:BVC) which today released upbeat interim results.

“With a strong balance sheet, BATM is addressing large market opportunities demanding technology-based solutions with clients and partners keen to tap into its emerging technologies,” Shore Capital analyst Robin Speakman said in a note.

“Strong underlying operating development is now visible across both Networking & Cyber and Bio-Medical (which includes Diagnostics) divisions.“

BATM this morning said that the full-year outcome is expected to be significantly ahead of market expectations, driven by demand for its high-margin diagnostic solutions.

The provider of real-time technologies for networking solutions and medical laboratory systems managed to grow underlying earnings (EBITDA) by 325% in the first half of 2021 despite a dip in revenue.

EBITDA jumped to US$22.7m from US$5.3m in the first half of 2020 even after a 7.7% slide in revenue to US$71.4m from US$77.4m the year before. Profit before tax soared to US$19.8m from US$1.9m the previous year.

The Bio-Medical division accounted for 77.1% of total revenue, up from 64.6% the year before, as its turnover increased by 10.2% to US$55.1m from US$50.0m, driven by sales of COVID-19 diagnostic kits, which more than offset the contribution to revenues in the first half of last year from the exceptional critical care ventilators contract; stripping out the ventilator contract, revenues surged 36.4% year-on-year.

In the Networking and Cyber division, revenues tumbled to US$16.4mln from US$27.4m the year before, largely reflecting the sale of the group’s non-core NG Soft Ltd subsidiary in March 2021. Excluding NG Soft, revenue dipped to US$9.1mln from the previous year’s US$9.4mln.

Chief executive Zvi Marom said: “Looking ahead, we entered the second half with a strong order book and receiving sustained demand for our diagnostic solutions. We also continue to expect to generate revenue this year from the roll-out of Edgility OS by PCCW Global. As a result, we anticipate achieving better-than-expected revenue for the full year and EBITDA to be substantially ahead of market expectations with growth of over 40% year-on-year. Consequently, and supported by a robust balance sheet, the board of BATM continues to look to the future with great confidence.” (Source: proactiveinvestors.co.uk)

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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.

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