Sponsored by TCI International Inc.
14 Nov 21. Satellite groups face race to scale up or become space junk. Billionaire enthusiasts and new technology have brought valuations down to earth in a fragmented market. A $7.3bn offer for UK satellite business Inmarsat earlier this month sent tremors through the industry: after years of talk about consolidation, a deal, maybe the first of many, had finally been done. If completed, the takeover by US group Viasat would be the largest for the global satellite sector and will create its biggest player. It also leaves rivals including SES, Eutelsat, Intelsat and EchoStar considering how to scale up in a fragmented market or face becoming corporate space junk. These companies — established businesses that operate large, powerful geostationary, or GEO, satellites that sit 35,000 kilometres above the Equator — have dominated the space communications sector for decades. But their values have slumped in recent years as sources of cash flow — from satellite TV transmission, expensive satellite phones and rural internet connectivity — have started to dry up and terrestrial telecoms networks have expanded and improved. That has coincided with the rise of low-earth orbit satellites, or LEOS, such as Elon Musk’s Starlink, Amazon’s Project Kuiper and the UK government-backed OneWeb. This new generation of companies have launched thousands of low-cost satellites capable of delivering broadband, transforming the space economy in the process. Space Capital, which has tracked the rise in activity, reported $231bn of equity investment in 1,654 companies over the past decade.
The US and China account for more than two-thirds of the spending and just last year the Chinese government filed applications with the International Telecommunications Union for two LEO constellations with almost 13,000 satellites. None of this has helped improve investor sentiment towards the older generation GEO satellite businesses. SES, which is part owned by the Luxembourg government, trades at a fifth of its 2015 market capitalisation, while Eutelsat, 20 per cent owned by the French government, has lost almost two-thirds of its value over the same period. Debt-laden US group Intelsat has yet to exit the bankruptcy process it entered in May 2020 while EchoStar, billionaire Charlie Ergen’s satellite business, has lost half its value since 2017. The industry has long flirted with consolidation but mergers have proved difficult to land, often for political reasons — satellite companies are seen as strategic assets — or on valuation grounds. The sector is littered with bankruptcies and debt levels are high because of the cost of launching satellites. Consolidation has been held back by what industry analyst Chris Quilty calls “shallow pockets”. As a result, some 55 companies are still in the market. That fragmentation and lack of scale has now attracted the attention of outside investors. Inmarsat was taken private last year, and earlier this year Eutelsat turned down an unsolicited takeover offer from billionaire Patrick Drahi. That has helped to focus minds after years of near misses on the consolidation front.
Rajeev Suri, the former Nokia chief executive who was appointed this year to run Inmarsat, told the Financial Times: “The industry structure will change. It is long overdue. It’s a question of when not if.” The industry will boil down to a “handful” of players over the next five to seven years, he predicted. “For the health of the sector, we need consolidation.” Mark Dankberg, executive chair at Viasat. A combined Viasat-Inmarsat would have 19 satellites and 20 per cent of industry revenues © David Paul Morris/Bloomberg Mark Dankberg, executive chair of Viasat, argued that the outside interest in satellites shows the industry’s potential. “The one thing that Drahi’s proposal did was that it highlighted the value in satellites. What people will see value coming from is growth in the market,” he said. Inmarsat’s owners accelerated plans to sell the company because of the effect of the pandemic on its business providing communication services to aviation and shipping. SES had also held talks over a deal for Inmarsat, said two people with direct knowledge of the negotiations. SES declined to comment. The combined Viasat-Inmarsat would have 19 satellites — with 10 to be launched over the coming three years — and 20 per cent of satellite industry revenues. Suri described it as a “scale and scope” deal that will strength its growth prospects in markets including maritime, aviation and government. The combined company will still be GEO-only but the deal could trigger others to consider their plans, especially those looking to build “mega-constellations” offering services from giant GEOs to tiny LEOs. Others are less convinced there will be a mad scramble among Viasat’s rivals. Quilty said: “It remains unclear whether other satellite operators will choose to emulate Viasat’s path or aggressively target Viasat’s customers while the company endures a year-long, challenging regulatory approval process.” Another chief executive in the satellite sector argued there is a more fundamental shift occurring and that billionaires such as Musk, Jeff Bezos and Richard Branson are “distorting the real economics of space” with projects that may never turn a profit. “They buy platforms for unsustainable business reasons but get to play out their childhood passions about being involved in space,” the executive said. “There is a lot of value destruction coming, but it’s probably still a few years away so the party continues for now.” (Source: FT.com)
12 Nov 21. Avon Protection shot down as body armour seems to offer little protection. Avon Protection PLC (LSE:AVON) shares plunged 44% to 1,060p after the company delayed its results in order to carry out a strategic review following testing failures for the US Army body armour plates.
The defence industry supplier formerly known as Avon Rubber had previously been awarded a contract for the US Defense Logistics Agency (DLA) Enhanced Small Arms Protective Inserts (ESAPI) and US Army Vital Torso Protection (VTP) ESAPI body armour plates.
“Disappointingly, the VTP ESAPI plates have encountered a failure in First Article Testing which will significantly delay the likely approval timetable for this product,” Avon said.
“Separately, we have experienced further delays in obtaining final product approvals for the DLA ESAPI body armor plates, with approvals for this product now expected in the second quarter of our financial year ending 30 September 2022.”
Following this major setback, Avon, said the board has launched a strategic review of the body armour business, which was expected to contribute US$40mln of revenue in the current financial year.
The division’s financial contribution is now expected to be “significantly reduced”, though the exact impact depends on the outcome of the review.
Results for the year to September 2021 had been scheduled for 23 November but a revised date is now expected to be in early December and an update on the strategic review and updated guidance for the new year and beyond is promised. (Source: proactiveinvestors.co.uk)
12 Nov 21. UK manufacturer Axis Electronics sold to Swiss group. The acquisition of Axis Electronics in Bedford is the first deal for the Swiss Cicor group to strengthen its position in the strategic target markets and expands its European footprint with a site in the UK.
Axis was founded originally as part of a large electronics business and spun out in 1995 as an independent, UK-based provider of electronic manufacturing services (EMS). Axis has significantly evolved over the years and is used by European companies, particularly in the aerospace and defence sectors.
The purchase boosts Cicor as a top 5 EMS provider in the aerospace and defence sector in Europe. The continued operation of the Bedford site and the inclusion of all 180 employees will ensure continuity for the long-standing blue-chip customer base.
The Axis facility in Bedford is approved by the UK’s Ministry of defence to handle protected information and products with Cyber security controls to support the UK Defence Cyber Protection Partnership (DCCP) Cyber security model, including Cyber Essentials Plus certification and the US Cybersecurity Maturity Model (CMM) aligning with NIST SP 800-171.
As part of its M&A strategy, Cicor plans to integrate Axis into the global engineering and manufacturing network of the Electronic Solutions division and thereby further strengthen Axis’ advantages to increase its market share in the UK and across Europe. The acquisition will increase Cicor group sales by approx. 15 percent a year.
The closing of the transaction is expected in 2021 and is subject to customary closing conditions. The details of the deal were not disclosed, but the Axis management team will individually become shareholders of Cicor and continue in their present roles, guaranteeing the sustainable strategic integration of the company into the Cicor Group. www.cicor.com (Source: Google/https://www.eenewseurope.com/)
12 Nov 21. Mirion Technologies Announces Results for the Fiscal Quarter Ended September 30, 2021.
- GAAP revenues for the fiscal quarter ended September 30, 2021 increased 26% to $144.3m, compared to $114.6m in the prior-year period
- GAAP net loss for the quarter increased 15.8% to ($46.7)m
- Adjusted revenues up 29% to $148m; Adjusted EBITDA up 28% to $30.9m
- Larry Kingsley joins Mirion Technologies as Chairman of the Board after successful completion of business combination with GS Acquisition Holdings Corp II
- Mirion Technologies trading on the New York Stock Exchange under the ticker symbol MIR following successful business combination
Mirion Technologies, Inc. (“Mirion”) (NYSE: MIR), a global provider of detection, measurement, analysis and monitoring solutions to the medical, nuclear, defense, and research end markets, today announced results for the quarter ended September 30, 2021 for Mirion Technologies (TopCo), Ltd (“Legacy Mirion”). Legacy Mirion was the parent company for the Mirion business before the business combination with GS Acquisition Holdings Corp II (“GSAH”) which closed on October 20, 2021.
Revenue for the quarter increased 26% to $144.3m from $114.6m in the prior-year period and adjusted revenues in the quarter increased 29% to $148.0m from $114.6m in the prior-year period. The increase in revenue was largely driven by acquisitions within the company’s Medical segment, partially offset by lower revenue growth in the Industrial segment. Organic growth for the quarter ending September 30, 2021 was (0.1%) versus 8.5% in the prior-year comparable period. Organic growth for the nine-months ended September 30, 2021 was 4.0% versus 3.3% for the prior-year comparable period.
Income (loss) from operations for the quarter was a loss of $8.9m compared to income of $4.6m for the prior period. Income from operations as a percentage of revenue was negative 6.2% compared to a positive 4.0% in the prior year quarter. Adjusted EBITDA was $30.9m, compared to the prior-year period of $24.0 m. Adjusted EBITDA margins as a percentage of adjusted revenue remain flat over the period as the incremental gross margin expansion was offset by higher operating expenses primarily related to the product mix in the medical acquisitions, investments in growth-focused R&D and incremental corporate expenses related to public company requirements.
For the Medical segment, revenue for the quarter was $52.0m and adjusted revenue was $55.7m, a 155% and 173% increase, respectively, over the prior-year period driven by acquisitions. For the Industrial segment, revenue and adjusted revenue for the quarter was $92.3m, compared to $94.2m in the prior-year.
Thomas Logan, Mirion’s CEO commented, “Our team delivered an outstanding result for the quarter ended September 30, 2021. We performed well in a challenging and dynamic environment and are well-positioned to execute on the broad-based demand for our leading product portfolio. We have seen a number of supply chain challenges and logistical delays throughout the COVID pandemic, but have been generally successful in mitigating by supporting suppliers in sourcing critical components, extending our sales and operational planning forecast windows, and leaning on our strong strategic inventory positions. This is an area of significant focus for me and the entire Mirion team, and we are sustaining a vigilant posture toward the evolving challenges. Lastly, I’m very excited as we move forward with our enhanced capital structure following the business combination with GSAH. We expect this new structure will provide us with increased flexibility to drive internal and external stakeholder value by capitalizing on organic and inorganic opportunities, while enhancing margins as we optimize the business and our footprint.”
Larry Kingsley, Mirion’s Chairman of the Board commented, “I am pleased to join Mirion at this exciting inflection point. Mirion is poised to deliver long-term growth through its leading positions across several industries. The company has strong competitive advantages from its technology and opportunities for sustained topline and bottom line improvements over time. Coupled with a diverse and leading product portfolio, a strong R&D platform, and ample room for integration and efficiency initiatives, I am excited about the near and long-term prospects for our internal and external stakeholders.”
On October 20, 2021, Mirion completed its business combination with GSAH and as of October 20, 2021, pro forma for the closing of the business combination, Mirion had liquidity of approximately $230m including $139m in cash and cash equivalents, approximately $90m from an undrawn revolver offset with $8m of letters of credit.
Legacy Mirion previously provided guidance for the twelve months ending June 30, 2022 in connection with the now completed business combination with GSAH and for this period Mirion continues to expect:
- Adjusted revenue of approximately $723m
- Adjusted EBITDA of approximately $179m
Guidance excludes approximately $9m of projected adjusted revenue and $2.5 to $3.0m of projected adjusted EBITDA from the CIRS acquisition – assuming a December 1, 2021 transaction closing date.
Our guidance and projections assume a Euro to U.S. Dollar exchange rate of 1.23, consistent with the previously provided guidance. Additionally, forward-looking non-GAAP financial measures are presented on a non-GAAP basis without reconciliations of such forward-looking non-GAAP measures due to the inherent difficulty in projecting and quantifying the various adjusting items necessary for such reconciliations that have not yet occurred, are out of Mirion’s control or cannot be reasonably predicted. Accordingly, a reconciliation for our guidance of adjusted revenue and adjusted EBITDA is not available without unreasonable effort. Legacy Mirion’s last fiscal year ended June 30, 2021 before the business combination with GSAH. Mirion adopted a calendar year fiscal year in connection with the closing of the business combination. (Source: BUSINESS WIRE)
11 Nov 21. CAE reports second quarter fiscal 2022 results.
- Revenue of $814.9m up 16% vs. $704.7m in prior year
- EPS of $0.04 vs. negative $0.02 in prior year
- Adjusted EPS(1) of $0.17 vs. $0.13 ($0.03 excluding COVID-19 government support programs(2)) in prior year
- Operating income(3)of $39.2m vs. $28.2m in prior year
- Adjusted segment operating income(4)of $90.7 m vs. $79.3m ($44.1m excluding COVID-19 government support programs(5)) in prior year
- Orders(6)of $871.4m for $8.8bn backlog(6) and 1.07x book-to-sales ratio(6)
- Announced agreement post quarter to acquire Sabre’s AirCentre airline operations portfolio
(NYSE: CAE) (TSX: CAE) – CAE today reported revenue of $814.9 m for the second quarter of fiscal 2022, compared with $704.7 m in the second quarter last year. Second quarter net income attributable to equity holders was $14.0 m ($0.04 per share) compared to a loss of $5.2 m (negative $0.02 per share) last year. Adjusted net income(7) in the second quarter of fiscal 2022 was $53.2m ($0.17 per share) compared to $34.2 m ($0.13 per share) last year.
Operating income this quarter was $39.2m (4.8% of revenue), compared to $28.2m in the second quarter of fiscal 2021. Second quarter adjusted segment operating income was $90.7m (11.1% of revenue) compared to $79.3m last year. Adjusted segment operating income excluding COVID-19 government support programs was $90.7m (11.1% of revenue) compared to $44.1m last year. All financial information is in Canadian dollars unless otherwise indicated.
“Our year over year growth in the second quarter was driven by the strengthening of our Civil training business, the continued ramp up of structural cost saving initiatives, and the integration of the L3 Harris Military Training business in our Defence results,” said Marc Parent, CAE’s President and Chief Executive Officer. “Overall, we delivered 16% year over year revenue growth and $0.17 of adjusted earnings per share. We also booked $871m in orders for a book-to sales ratio of 1.07 times and concluded the quarter with an $8.8 bn backlog. In Defence, we closed the acquisition of L3 Harris Military Training in the quarter and it delivered solid revenue with a double-digit margin. We had lower organic performance in Defence this quarter, reflecting delays in orders and program execution, particularly internationally, largely due to the pandemic. And in Healthcare, I am encouraged by our third consecutive quarter of year over year revenue growth in our core, as we pursue scale and profitability with an expanded organization.”
On CAE’s outlook, Parent added, “While COVID-related impacts continue to affect all of our business units, we increasingly see a clearer path to recovery and a larger, more resilient, and more profitable CAE in the future. Specifically, we are currently targeting to reach a consolidated adjusted segment operating margin of approximately 17% by the time our markets are generally recovered, with steady room for further improvement thereafter. We expect to reach this level of profitability on a significantly larger base of business with a post-pandemic capital structure that will allow us to sustain ample flexibility to further invest in our future. We continue to play offence during this period of disruption, as evidenced by our recent announcement of the proposed acquisition of Sabre’s AirCentre business, which marks our ninth accretive acquisition since the pandemic began. As business conditions continue to improve further, we look to extend this posture as it relates to both organic and inorganic growth investment.”
Parent concluded, “Our opportunity set continues to look very attractive, and I’ve never been as excited about CAE’s future as I am today.”
Civil Aviation Training Solutions (Civil)
Second quarter Civil revenue was $362.1 m, stable compared to the second quarter last year on higher utilization in the Americas, and only five full-flight simulators (FFSs)(9) deliveries compared to 10 in the second quarter last year. Operating income was $49.9 m compared to $15.5m in the same quarter last year. Adjusted segment operating income was $65.3m (18.0% of revenue) compared to $51.9 m (14.2% of revenue) in the second quarter last year. Adjusted segment operating income excluding COVID-19 government support programs, of which there was none this quarter, was also $65.3 m (18.0% of revenue) compared to $34.2m (9.4% of revenue) in the same quarter last year. During the quarter, Civil training centre utilization(10) was 53%, and since the end of the quarter, average training centre utilization has been trending to upwards of 60% globally.
During the quarter, Civil signed training solutions contracts valued at $408.9m, including contracts for nine FFSs sales, bringing the first half FFS sales to date to 14. Notable training contracts for the quarter include a five-year aircraft maintenance training partnership agreement with Air Canada, a three-year exclusive agreement with Brussels Airlines, a five-year agreement with Envoy Air, a four-year agreement with PGA Portugalia, and a 5-year agreement with Alaska Airlines. In response to higher customer demand in business aviation training, following the quarter, Civil announced the expansion of its business aviation footprint with the introduction of a new flight-training location in Las Vegas, Nevada. The centre is expected to open in the summer of 2022 and will be Civil’s first west coast training facility in the U.S.
Civil’s digital ecosystem solution has also been selected by Innotech-Execaire Aviation Group (IEAG) to improve efficiency of their operations, marking IEAG as the launch partner for CAE’s innovative suite of digital services in the business aviation market. Furthermore, Civil announced a strategic partnership with BETA Technologies to design and develop a best-in-class pilot and maintenance technician training program for the ALIA eVTOL aircraft, as well as announced a new relationship with Starr Insurance Companies for a first of its kind program that combines a rigorous training regimen and insurance for single-pilot jet owners.
The Civil book-to-sales ratio was 1.13x for the quarter and 0.92x for the last 12 months. The Civil backlog at the end of the quarter was $4.3bn.
In a move to accelerate Civil’s digital strategy and SaaS solutions, CAE announced an agreement following the quarter to acquire Sabre’s AirCentre airline operations portfolio (AirCentre) – a highly valuable suite of flight and crew management and optimization solutions. The agreement, which is valued at US $392.5m excluding post-closing adjustments, includes the Sabre AirCentre product portfolio, related technology and intellectual property as well as the transfer of AirCentre’s highly talented workforce. The closing of the transaction is expected in the first quarter of calendar 2022 and is subject to customary conditions and regulatory approvals.
Defence and Security (Defence)
Second quarter Defence revenue was $417.9 m, up 38% compared to the second quarter last year, which includes $135.1m from L3Harris Technologies’ Military Training business (L3H MT). Operating loss was $8.9m compared to an income of $11.4m in the same quarter last year. Adjusted segment operating income was $26.7 m (6.4% of revenue), including $16.2m from L3H MT, compared to $24.2m (8.0% of revenue) in the second quarter last year. Adjusted segment operating income excluding COVID-19 government support programs was also $26.7m (6.4% of revenue) compared to $7.3m (2.4% of revenue) in the same quarter last year. The organic Defence business (Defence excluding L3H MT) delivered lower sequential and year over year revenue, and adjusted segment operating income this quarter, reflecting delays in product-related orders and program execution, particularly internationally, which have been largely due to the pandemic.
During the quarter, CAE concluded the previously announced acquisition of L3H MT, which is highly complementary to CAE’s core military training business. Defence booked orders for $427.6 m, including its first prime contract award from the US Intelligence Community with the Beyond 3D prototype for the National Geospatial Intelligence Agency (NGA). By integrating capabilities across digital technologies, big data architectures, machine learning and artificial intelligence, this is another example of CAE at the forefront of modeling and simulation expertise for mission and operations support across the multi-domain environment.
Other notable contracts include: the U.S. Army continuing to provide fixed-wing flight training and support services at the CAE Dothan Training Center; the U.S. Air Force (USAF) and Air National Guard to perform a range of simulator upgrades and modifications on F-16 simulators; the Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support (BAAINBw) in Germany to upgrade and modify the Joint Lynx Simulator Training Establishment full-mission flight trainer based at Naval Air Station Nordholz and to upgrade and modify German Army NH90 simulators; the U.S. Navy to perform a range of simulator upgrades and modifications on F/A-18 training devices; the General Headquarters of the United Arab Emirates continuing to provide the UAE Air Force and Air Defence with training services for remotely piloted aircraft; and the USAF to perform a range of simulator upgrades and modifications on C-130H and E-3 Airborne Early Warning & Control training devices as well as continuing to provide Initial Flight Training services.
The Defence book-to-sales ratio was 1.02x for the quarter and 0.90x for the last 12 months (excluding contract options). The Defence backlog, including options and CAE’s interest in joint ventures, at the end of the quarter was $4.6bn. The Defence pipeline remains strong with some $6.5bn of bids and proposals pending customer decisions.
Second quarter Healthcare revenue was $34.9m, down 6% compared to the second quarter last year, which included $7.1m revenue from a contract to supply the Canadian government with ventilators. Excluding revenue from the ventilator contract last year, revenue would have been 17% higher this quarter. Operating loss was $1.8m compared to an income of $1.3m in the same quarter last year. Adjusted segment operating loss was also $1.3m compared to an income of $3.2m (8.6% of revenue) in the second quarter last year. Adjusted segment operating loss excluding COVID-19 government support programs was $1.3m, compared to an income of $2.6m (7.0% of revenue) in the same quarter last year. Healthcare continued to deliver year over year quarterly revenue growth (excluding ventilators), as it ramps up an expanded and reenergized organization with a clear focus on achieving greater scale.
During the quarter, Healthcare launched two updates for CAE Maestro, the latest generation of software driving patient simulators, which significantly expand the value of CAE Maestro and enhance the capabilities of CAE’s products. Furthermore, the standardized CAE Maestro Evolve operating system was expanded to additional simulators, including Lucina.
Healthcare also forged a new collaborative partnership with RCSI University of Medicine and Health Sciences (RCSI) to advance healthcare education, technology, and research through simulation. RCSI was also certified a CAE Centre of Excellence for simulation-based education and training, the first of its kind in Europe.
Additional financial highlights
CAE incurred restructuring, integration and acquisition costs of $51.5m during the second quarter of fiscal 2022, including $35.7m of integration and acquisition costs related to L3H MT, and $13.2m related to the restructuring program in connection with the previously announced measures to best serve the market by optimizing CAE’s global asset base and footprint, adapting its global workforce and adjusting its business to correspond with expected levels of demand for certain products and services. The Company continues to expect significant annual recurring cost savings to ramp up to a run rate of approximately $65 to $70m by the start of fiscal year 2023.
Net cash provided by operating activities was $30.9m for the quarter, compared to $45.6m in the second quarter last year. Free cash flow(12) was $19.4m for the quarter compared to $44.9m in the second quarter last year. The decrease was mainly due to a decrease in cash provided by operating activities due, in part, to cash costs for restructuring, integration and acquisition costs this quarter, partially offset by lower investments in non-cash working capital. CAE normally expect a portion of non-cash working capital investments to reverse in the second half of the fiscal year.
Income tax recovery this quarter amounted to $13.0m, representing a negative effective tax rate of 310%, compared to an effective tax rate of 14% for the second quarter last year. The income tax rate was impacted by restructuring, integration and acquisition costs this quarter, excluding which, the rate would have been negative 1%. On this basis, the decrease in the tax rate was mainly attributable to impacts of changes in tax laws on tax assets, a positive impact of tax audits in Canada and the change in the mix of income from various jurisdictions.
Growth and maintenance capital expenditures(13) totaled $46.7m this quarter.
Net debt(14) at the end of the quarter was $2,481.5m for a net debt-to-capital ratio(15) of 38.2%. This compares to net debt of $1,669.2m and a net debt-to-capital ratio of 33.9% at the end of the preceding quarter. The increase in net debt is mainly attributed to the closing of the L3H MT acquisition and the execution of the related financing.
Adjusted return on capital employed (ROCE)(16) was 6.6% this quarter compared to 6.7% last quarter and 7.2% in the second quarter last year. Adjusted ROCE excluding COVID-19 government support programs was 5.5% this quarter compared to 5.3% last quarter and 6.0% in the second quarter last year.
CAE’s participation in the Government of Canada CEWS program (COVID-19 government support) ceased on June 5, 2021 and accordingly, CAE did not claim any CEWS benefits for wages and salary costs incurred subsequent to June 5, 2021.
Since the start of the pandemic in March 2020, CAE has made several important strategic moves by seizing opportunities arising from market disruption, including raising approximately $1.5bn in equity to pursue a pipeline of growth opportunities, and securing (or announcing) nine accretive acquisitions. At the same time as expanding CAE’s reach externally, the Company embarked on enterprise level initiatives to substantially lower its cost structure and achieve even greater levels of operational excellence, including consolidating its global asset base and innovating digitally enabled processes. CAE has been carrying out a growth strategy with the intent to emerge from the pandemic a larger, more resilient, and more profitable company than ever before. Specifically, the Company is currently targeting to reach a consolidated adjusted segment operating margin of approximately 17% by the time its markets are generally recovered, with steady room for further improvement thereafter. It expects to reach this level of profitability on a significantly larger base of business with a post-pandemic capital structure that will allow the Company to sustain ample flexibility to further invest in its future.
Expected secular trends are favourable for all three of the Company’s core business segments. Greater desire by airlines to entrust CAE with their critical training and digital operational support and crew management needs, higher expected pilot demand (attrition and crisis-induced career shifts) and strong growth in business jet travel demand are enduring positives for the Civil business. The paradigm shift from asymmetric to near-peer threat and recognition of the sharply increased need for digital immersion-based, synthetic solutions in national defence are tailwinds that favour the Defence business. Healthcare is poised to leverage opportunities presented by a growing nursing shortage and rising demand for Public Safety and Security.
The Company believes there is considerable pent-up demand for air travel, and the slope of Civil’s recovery to pre-pandemic levels and beyond depends on the timing and rate at which border restrictions and quarantine measures around the world can safely be lifted. Civil’s strong performance in the Americas, as evidenced by a current near-total recovery in training utilization and strengthening FFS order pipeline activity in that region, provide a compelling blueprint for the potential of a broader global recovery. In fiscal year 2022, the Company expects continued strong growth in Civil, weighted more heavily to the second half.
Given the increasing relevancy of training and simulation, CAE’s Defence segment is also on a multi-year path to becoming a larger and more profitable business. Management is currently focused on the successful integration of L3H MT and expects to fully realize the $35 to $45m of cost synergies by fiscal year 2024. Defence is now more closely aligned with its defence customers’ utmost priorities and is established as the world’s leading platform agnostic, global training and simulation defence pure play business. This is expected to bring increased potential to capture business around the world, accelerated with the expanded capability and customer set the combined entity now possesses. COVID-19 related headwinds persist for international defence business; however, management views them as temporary, and continues to expect to deliver strong growth for fiscal year 2022, with sequential quarterly improvements in Defence revenue and adjusted segment operating income in the second half. It expects this improvement to be driven by a reacceleration of order intake, including for higher-margin product programs, and for its annual Defence book-to-sales ratio to surpass 1x for the first time in the last four years. The Company also expects stronger Defence performance to be driven by higher levels of execution on programs involving products as pandemic-related disruptions ease, and the progressive realization of synergies related to the L3H MT integration.
And in Healthcare, the outlook is for continued quarterly year over year growth, as it ramps up an expanded and reenergized organization with a clear focus on achieving greater scale. The long-term potential is for Healthcare to become a material and profitable business within CAE, and for the current fiscal year, management expects it to deliver top- and bottom-line double-digit growth (excluding ventilators).
Total capital expenditures are expected to exceed $250m in fiscal year 2022, primarily in support of sustainable and accretive growth opportunities. The Company usually sees a higher investment in non-cash working capital accounts in the first half of the fiscal year, and as in previous years, management expects a portion of the non-cash working capital investment to reverse in the second half. The Company continues to target a 100% conversion of net income to free cash flow for the year. In addition to restructuring, integration and acquisition costs related to the L3H MT acquisition in Defence, CAE expects to incur total restructuring expenses related to its ongoing cost saving initiatives of approximately $50m in fiscal year 2022. The Company continues to expect to reach a run-rate annual recurring cost savings of approximately $65 to $70m by the start of fiscal year 2023.
Management’s expectations are based on the prevailing market conditions, the timing and degree of easing of global COVID-19-related mobility restrictions, and customer receptivity to CAE’s training solutions and operational support solutions as well as material assumptions contained in this press release, quarterly MD&A and in CAE’s fiscal year 2021 MD&A. (Source: PR Newswire)
11 Nov 21. QinetiQ Interim Results. Delivering our global ambition through mission-led innovation Results for six months to 30 September 2021 (‘H1 2022’)
* Definitions of the Group’s ‘Alternative Performance Measures’ can be found in the glossary
^ To be consistent with revenue reporting prior year orders has been restated to exclude £1.3m of contribution from Joint Ventures
Good underlying performance impacted by two discrete short-term issues
Orders up 25% on an organic basis, 21% after disposals; with robust backlog of £3.0bn
Revenue up 3% on an organic basis, flat after disposals in the prior year
Underlying operating profit of £53.4m, after £14.5m write-down on a large complex project
Statutory operating profit down 30% due to the write-down
Underlying EPS of 8.1p; 2.3p interim dividend declared – one third of FY21 dividend
On-track to deliver in line with FY22 guidance provided in our October Trading Update
Strategic progress and robust plan to resolve issues
Secured £678m orders across the Group including $184m orders won in US
Excellent growth in Australia and the UK, with revenue growth of 19% and 11% respectively
Major contracts performing well e.g. MSP, LTPA and EDP
Write-down due to risk exposure on a large complex project
Response to US customer’s mission pivot and COVID delivery challenges
Priority to deliver FY results whilst continuing to implement multi-domestic growth strategy
Deliver operational performance, with >90% revenue under contract
Deliver complex project recovery plan to conclusion in-year
Recover US revenue performance, targeting second half revenue in line with FY21 H2
Invest in new customer solutions and strategic acquisitions
Focus to drive profitable growth into our >£20bn addressable market
Steve Wadey, Group Chief Executive Officer said: “Overall I am pleased with the continued strategic momentum through the first half of the year. We continue to deliver for our customers around the world, protecting lives, defending sovereign capability and securing the vital interests of our customers. We have delivered good underlying performance with orders up 25% and revenue up 3% organically and we have achieved a number of strategic wins. Whilst it is disappointing that this good performance has been impacted by two discrete short-term issues, we have a robust plan to resolve both in the second half. We remain focused on delivering the full year whilst continuing to implement our strategy to build an integrated global defence and security company, through both organic growth and strategically-aligned acquisitions.”
12 Nov 21. Avon Protection plc (“Avon Protection” or “the Group”) today provides an update on its body armor business.
Body armor update
Following the contract awards for the U.S. Defense Logistics Agency (“DLA”) Enhanced Small Arms Protective Inserts (“ESAPI”) and U.S. Army Vital Torso Protection (“VTP”) ESAPI body armor plates, we have been engaged with our customers to complete the necessary product approval processes. Disappointingly, the VTP ESAPI plates have encountered a failure in First Article Testing which will significantly delay the likely approval timetable for this product.
Separately, we have experienced further delays in obtaining final product approvals for the DLA ESAPI body armor plates, with approvals for this product now expected in the second quarter of our financial year ending 30 September 2022 (“FY22”).
Strategic review of body armor business
In light of these challenges, the Board has initiated a strategic review of our body armor business.
Our FY22 revenue guidance included approximately $40m of body armor revenue. In light of the above, the financial contribution from our body armor business in FY22 and beyond will be significantly reduced, with the ultimate impact, including any associated cost savings, depending on the outcome of the review process.
These issues and the strategic review are restricted to the body armor business, with the Group’s leading respiratory protection and helmet product portfolios unaffected.
Delay to FY21 results announcement
Our underlying trading results for FY21 are expected to be in line with the guidance set out in the post close trading update of 13 October 2021.
We have delayed the announcement of our FY21 results, initially planned for 23 November 2021, to allow for a review of the carrying value of the assets related to the body armor business and the additional audit work arising from this post balance sheet event.
We will confirm a revised announcement date, which we expect to be in early December, as soon as practicable. We will include an update on our strategic review of our body armor business and provide updated guidance for FY22 and beyond alongside our FY21 results announcement.
11 Nov 21. BAE Systems Announces Intent to Acquire Bohemia Interactive Simulations. BAE Systems has entered into a definitive agreement to acquire Bohemia Interactive Simulations (BISim), a global software developer of simulation training solutions for military organizations. Over the coming months, the company will undertake the customary regulatory and pre-closing activities necessary to complete this type of international transaction.
Founded in 2001 and headquartered in Orlando, Fla., BISim has more than 325 employees, including in the United States, UK, Australia, the Czech Republic, and Slovakia. Using the latest game-based technology, the experienced BISim team of engineers develops high-fidelity, cost-effective training and simulation software products and components to meet the growing demand for defense applications.
With the successful completion of this acquisition, BAE Systems customers would have access to the company’s extensive and proven system integration experience complemented by BISim’s innovative training products and solutions to enhance military readiness for the U.S. and our allies.
DLA Piper is serving as legal counsel to BAE Systems. Raymond James is serving as the exclusive financial advisor to BISim, and Jones Day is serving as legal counsel to BISim. (Source: BUSINESS WIRE)
11 Nov 21. Mirion Technologies, Inc. to Acquire Computerized Imaging Reference Systems, Inc.; Expanding Capabilities in Existing Medical Platform.
Mirion Technologies, Inc. (NYSE:MIR)(“Mirion”), a global provider of detection, measurement, analysis and monitoring solutions to the medical, nuclear, defense, and research end markets, today announced the signing of a definitive agreement to acquire Computerized Imaging Reference Systems, Inc. (“CIRS”), a leading provider of medical imaging and radiation therapy phantoms serving the medical industry.
CIRS specializes in the design, development and commercialization of tissue equivalent medical imaging and radiation therapy phantoms for the radiotherapy and radio-diagnostic markets. The company is headquartered in Norfolk, Virginia and serves a diverse and global customer base including medical imaging and radiation therapy OEMs, and clinicians, with approximately 80 employees.
CIRS, which will be integrated into Mirion’s Medical segment, expects to generate Adjusted Revenue1 and Adjusted EBITDA1,2 of approximately $16 million and $5 million, respectively, for the calendar year 2022. In addition, Mirion expects CIRS margins to improve via synergies over time as it leverages its global platform to catalyze efficiency gains. The acquisition is anticipated to be accretive to Mirion’s adjusted EBITDA margins, excluding one-time costs related to the integration. The transaction is expected to close in the fourth quarter of calendar year 2021 for a purchase price of approximately $54m, subject to the satisfaction of customary closing conditions.
The critical technology of CIRS is used to:
- Calibrate and test diagnostic imaging and radiation therapy equipment;
- Measure radiation dose in specific anatomical geometries;
- Maintain critical quality assurance standards; and
- Improve patient outcomes.
Mirion CEO Thomas Logan said, “I am pleased to welcome the CIRS team to the Mirion family. We are excited to augment our medical segment focus through the integration of CIRS’ product, software, and services capabilities. Together, we will strive to improve patient care and outcomes in both therapeutic and diagnostic applications. This acquisition is part of our broader inorganic growth strategy to add accretive, complementary businesses to enhance our product portfolio and better serve our customers.” (Source: BUSINESS WIRE)
11 Nov 21. Magellan Aerospace Corporation Announces Financial Results. Magellan Aerospace Corporation (“Magellan” or the “Corporation”) released its financial results for the third quarter of 2021. All amounts are expressed in Canadian dollars unless otherwise indicated. The results are summarized as follows:
A summary of Magellan’s business and significant updates
Magellan is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries, controlled entity and joint venture, Magellan designs, engineers and manufactures aeroengine and aerostructure components for aerospace markets, including advanced products for defence and space markets, and complementary specialty products. The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services.
Magellan operates substantially all of its activities in one reportable segment, Aerospace, which is viewed as one segment by the chief operating decision-makers for the purpose of resource allocations, assessing performance and strategic planning. The Aerospace segment includes the design, development, manufacture, repair and overhaul, and sale of systems and components for defence and civil aviation.
Impact of COVID-19
The COVID-19 pandemic has continued to disrupt global health and the economy in 2021 and has created an indeterminate period of volatility in the markets in which Magellan operates. The COVID-19 pandemic impacted Magellan’s operations in 2020 and the first nine months of 2021 at varying times by way of reduced production, either by its customers’ build rate adjustments or due to a broader government directive which resulted in the need to modify work practices to meet appropriate health and safety standards, or by other COVID-19 related impacts on the availability of labour or to the supply chain. Magellan continues to monitor ongoing developments and mitigate risks related to the COVID-19 pandemic and the impact on Magellan’s operations, supply chain, and most importantly the health and safety of its employees.
For additional information, please refer to the “Management’s Discussion and Analysis” section of the Corporation’s 2020 Annual Report available on www.sedar.com.
- Results of Operations
A discussion of Magellan’s operating results for the third quarter ended September 30, 2021
The Corporation reported revenue in the third quarter of 2021 of $166.4m, a $3.0m increase from the third quarter of 2020 revenue of $163.4m. Gross profit and net income for the third quarter of 2021 were $10.6m and $0.5m, respectively, in comparison to a $22.7 m gross profit and breakeven net income for the third quarter of 2020.
Revenue in Canada decreased 5.6% in the third quarter of 2021 compared to the corresponding period in 2020 mainly due to production recovery from work stoppage at the Corporation’s Haley facility, volume decrease for wide-body aircrafts and proprietary products, production delays and unfavourable foreign exchange impact driven by the weakening of the United States dollar relative to the Canadian dollar. On a currency neutral basis, Canadian revenues in the third quarter of 2021 decreased by 2.4% over the same period of 2020.
Revenue in the United States in the third quarter of 2021 remained consistent with the third quarter of 2020. On a currency neutral basis, revenues in the United States increased 5.6% in the third quarter of 2021 over the same period in 2020 mainly driven by volume increases for single aisle aircraft, specifically the Boeing 737 MAX as aircraft build rates increased.
European revenue in the third quarter of 2021 increased 17.9% compared to the corresponding period in 2020 primarily driven by build rate recovery for single aisle aircraft, offset partially by the weakening of the United States dollar relative to the British pound. On a currency neutral basis, European revenues in the third quarter of 2021 increased by 21.1% when compared to the same period in 2020.
Gross profit of $10.6m for the third quarter of 2021 was $12.1m lower than the $22.7m gross profit for the third quarter of 2020, and gross profit as a percentage of revenues of 6.4% for the third quarter of 2021 decreased from 13.9% recorded in the same period in 2020. In the third quarter of 2020, the Corporation recognized $9.7m of recoveries from the Canada Emergency Wage Subsidy (“CEWS”) program and a one-time A320neo cost recovery, which attributed largely to the decreased gross profit for the current quarter when compared to the same quarter in the prior year. In addition, the gross profit in the current quarter was impacted by volume decreases for proprietary products and services, production delays, higher production costs due to manufacturing inefficiencies related to lower revenues and unfavourable foreign exchange impact due to the weakening of the United States dollar relative to the Canadian dollar and the British pound.
Administrative and general expenses as a percentage of revenues was 6.8% for the third quarter of 2021, lower than the same period of 2020 percentage of revenues of 7.0%. Administrative and general expenses were slightly lower than the third quarter of 2020 mainly due to lower salary and related expenses and lower discretionary spending to align with current business volumes, offset in part by lower CEWS program recoveries of $0.7m.
Restructuring costs of $0.6m incurred in the third quarter of 2021 mainly related to the closure of the Bournemouth manufacturing facilities announced in the fourth quarter of 2020. In the third quarter of 2020, the Corporation recorded severance costs of $5.6m related to the cost savings initiatives implemented to reduce operating costs by re-balancing its workforce.
Other for the third quarter of 2021 included a $2.6m foreign exchange gain compared to a $2.5m foreign exchange loss in the third quarter of the prior year. The movements in balances denominated in foreign currencies and the fluctuations of the foreign exchange rates impact the net foreign exchange gain or loss recorded in a quarter. In addition, a $0.3m and a $0.6m gain was recorded in the third quarter of 2021 relating to the disposal of an investment property and the release of an escrow relating to property previously sold, respectively.
Total interest expense of $0.8m in the third quarter of 2021 decreased $0.3m compared to the third quarter of 2020 mainly due to lower accretion charge on long-term debt as principal amounts decreased, and lower discount on sale of accounts receivables due to lower volume of receivables sold in the current quarter. (Source: Google/https://us.acrofan.com/)
10 Nov 21. Sypris Reports Third Quarter Results. Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported financial results for its third quarter ended October 3, 2021.
- Revenue for the third quarter increased 15.9% year-over-year, driven by the 38.3% expansion of shipments at Sypris Technologies, despite the impact of material shortages and supply chain challenges.
- Gross profit increased 12.4% year-over-year, reflecting the 14.5% growth at Sypris Electronics and 10.6% increase for Sypris Technologies. Gross margin increased 460 basis points to 20.8% for Sypris Electronics, while gross margin for Sypris Technologies declined to 12.6% reflecting mix and expenses incurred to increase capacity.
- Backlog for Sypris Electronics increased 24.0% year-over-year and 51.3% year-to-date on the strength of orders in the first nine months of 2021. Similarly, backlog for the energy products of Sypris Technologies increased 38.8% year-over-year and 59.6% year-to-date.
- Sypris Electronics announced a number of important contract awards during the quarter, including the following:
o A contract to manufacture and test embedded circuit card assemblies that will perform certain Cryptographic functions for the Army Key Management System, with production to begin before year-end; and
o A contract to produce and test multiple power supply modules for the upgrade of the electronic warfare suite of certain U.S. fighter jets. The system will deliver fully integrated radar warning, situational awareness, geolocation and self-protection capabilities. Production is expected to begin during the first quarter of 2022.
- The Company updated its full-year outlook for 2021, with revenue now expected to increase 20-25% year-over-year, down from prior guidance due to supply chain challenges. Gross margin is expected to expand 400-500 basis points year-over-year in the fourth quarter and contribute to strong double-digit percentage growth in cash flow generated from operations for the full year.
- The outlook for 2022 remains quite positive, reflecting the continued momentum of new contract awards and strong demand across many of the Company’s markets. Revenue for 2022 is forecast to increase 25%, gross margins are expected to expand 200 basis points, and cash flow from operations is forecast to increase materially year-over-year.
“Both operating segments reported gross profit growth for the quarter, contributing to a strong performance for the Company and positioning the business for further progress. Backlog for Sypris Electronics is up 24.0% from the third quarter of 2020 and up 51.3% since the beginning of the year, while the OEM backlog of Class 8 commercial vehicles is estimated to be up 210% year-over-year,” commented Jeffrey T. Gill, President and Chief Executive Officer.
“Backlog for Sypris Electronics in 2021 remains at its highest point in over a decade, with deliveries now scheduled well into 2023. While shipments during the quarter were impacted by the delayed receipt of material necessary to complete the build of certain products, we expect shipments from our recent contract wins to begin to contribute to revenue in the fourth quarter and provide meaningful growth in the top line going forward. In support of the expected increase in shipments, we secured customer funding for certain key programs to partially fund an increase in our inventories which should help to minimize production disruptions arising from supply chain constraints over the term of the related contracts.
“Demand from customers serving the automotive, commercial vehicle, sport utility, and off-highway markets remains strong, although our revised guidance is primarily driven by customer production levels that are lower than what we had previously anticipated. Freight demand is currently overwhelming industry capacity, with supply chain constraints currently dictating OEM production levels, which is flowing down and impacting demand for our products. Although the near-term outlook remains constrained, we have a clear path to capitalize on our growth objectives going forward as the various challenges facing this industry begin to subside.
“As we discussed on our previous earnings call, activity levels in the oil and gas industry remained challenging during the first nine months of 2021. However, steadily improving commodity prices, gradually reopening economies and increasing pipeline activity have resulted in increased orders recently of our energy related products, and an expected increase in volume during the fourth quarter of 2021 is well supported by a solid backlog of orders.”
Third Quarter Results
The Company reported revenue of $25.7m for the third quarter of 2021, compared to $22.2m for the prior-year period. Additionally, the Company reported net income of $0.3m for the third quarter of 2021, or $0.01 per diluted share, compared to net income of $3.5m, or $0.17 per diluted share, for the prior-year period. Results for the quarter ended October 4, 2020, include an income tax benefit of $3.2m, primarily from the release of a valuation allowance on certain foreign deferred tax assets.
For the nine months ended October 3, 2021, the Company reported revenue of $71.6m compared with $61.7m for the first nine months of 2020. The Company reported net income for the nine-month period of $2.5 m, or $0.11 per diluted share, compared with $2.8m, or $0.14 per diluted share, for the prior-year period. Results for the nine months ended October 3, 2021, include the recognition of a $3.6m gain on the forgiveness of the Company’s PPP loan. Results for the nine months ended October 4, 2020, include net gains of $0.8 m from the sale of idle assets by Sypris Technologies and an income tax benefit of $3.2m, primarily from the release of a valuation allowance on certain foreign deferred tax assets.
Revenue for Sypris Technologies was $16.7m in the third quarter of 2021 compared to $12.1m for the prior-year period, reflecting the positive impact of new programs and the strength of the commercial vehicle market, partially offset by decreased energy related product sales. Gross profit for the third quarter of 2021 was $2.1m, or 12.6% of revenue, compared to $1.9m, or 15.8% of revenue, for the same period in 2020. Gross profit for the third quarter of 2021 was negatively impacted by product mix, increased operating supply spend and equipment maintenance expenses as we prepare for higher production levels anticipated in 2022.
Revenue for Sypris Electronics was $9.0m in the third quarter of 2021 compared to $10.1m for the prior-year period. Shipments during the third quarter of 2021 were lower than the prior-year period as production tapered down on a limited rate production contract for a key program that is expected to ramp up beginning late in the fourth quarter as full rate production is launched. Certain programs have also been impacted by material availability, as receipts of a limited number of specific parts necessary to complete the build of the products were delayed or, in other instances, required us to resource and obtain alternative parts or use alternative suppliers. Gross profit for the third quarter of 2021 was $1.9m, or 20.8% of revenue, compared to $1.6m, or 16.2% of revenue, for the same period in 2020 due to a more favorable mix.
Commenting on the future, Mr. Gill added, “While challenging supply chain conditions impacted our third-quarter results and forecast for the remainder of the year, the overall outlook for the U.S. economy remains positive. Demand is up considerably year-over-year from customers serving the automotive, commercial vehicle and sport utility markets, with Class 8 forecasts showing year-over-year production increases of over 22.9% for 2021, 18.3% in 2022 and an additional 15.5% in 2023. Similarly, demand from customers in the defense and communications sector remains robust. While the energy market continues to be volatile, we continue to secure new orders on important projects around the world.
“We expect the significant growth in orders and strength of our markets to have a substantial impact on our financial results through the remainder of the year and into 2022, with strong increases in revenue, margins and income forecast for the period and continuing going forward.
“We have updated our outlook to include a 20-25% growth in the Company’s top line in 2021, which is down from our previous guidance. Gross margin is forecast to expand in the fourth quarter 400-500 basis points over the comparable period in 2020, which is expected to contribute to strong double-digit percentage growth in cash flow generated from operations for the full year.
“As we close out this year and prepare for 2022, we remain focused on meeting the important needs of our customers who serve defense, communications, energy, transportation, and other critical infrastructure industries. In our initial outlook for 2022, we expect the top line to increase 25% year-over-year as a result of the combined strength of our backlog for Sypris Electronics, the Class 8 industry production forecasts and improving market conditions for our energy products. We also expect to achieve further gross margin expansion in the range of 200 basis points in 2022, while cash flow from operations is forecast to materially increase year-over-year.”
About Sypris Solutions
Sypris Solutions is a diversified provider of truck components, oil and gas pipeline components and aerospace and defense electronics. The Company produces a wide range of manufactured products, often under multi-year, sole-source contracts. For more information about Sypris Solutions, visit its Web site at www.sypris.com. (Source: BUSINESS WIRE)
11 Nov 21. True Velocity to buy LoneStar Future Weapons in $84m deal. The deal will add LoneStar’s weapons and projectile technology patents to True Velocity’s portfolio. Texas-based True Velocity is set to acquire local defence solutions manufacturing company LoneStar Future Weapons in a deal valued at around $84m. The acquisition will add LoneStar’s next-generation weapons and projectile technology patents to True Velocity’s portfolio of more than 340 issued or pending patents in the lightweight ammunition category. The two companies also intend to develop a lightweight medium machine gun in the future. As agreed, LoneStar Future Weapons will operate as a wholly owned subsidiary of TV Ammo, the parent company of True Velocity.
LoneStar Future Weapons chairman Craig Etchegoyen said: “The LoneStar team is extremely excited to work more closely with True Velocity to implement our next-generation weapons, projectile technology and recoil-mitigation technology into the amazing polymer ammunition ecosystem.
“Together, our American-owned, American-based companies will provide our warfighters with the very best weapons and ammunition to protect our nation.”
In April this year, LoneStar Future Weapons and True Velocity forged a partnership to compete in the US Army’s Next Generation Squad Weapons (NGSW) programme.
LoneStar Future Weapons took over the role of the prime contractor from General Dynamics Ordnance & Tactical Systems under the arrangement while True Velocity continued as a subcontractor.
Currently, it is one of the two teams that remain under consideration for the NGSW programme. A decision is expected in January next year.
According to True Velocity, the deal will bring significant synergies in developing weapons and ammunition for the NGSW programme, as well as strengthen the company’s position for future military contracts.
True Velocity Chairman and CEO Kevin Boscamp said: “Incorporating LoneStar Future Weapons’ innovative approach to weapon design and manufacture, along with their significant intellectual property portfolio and licensing expertise, into TV Ammo’s holdings strategically positions our business to have a lasting and meaningful impact on the lethality of US fighting forces.
“It provides a path forward for the development and co-optimisation of advanced weapons and munitions for the US Department of Defense, our international allies, and the domestic commercial market.” (Source: army-technology.com)
10 Nov 21. HENSOLDT AG significantly expands order backlog and generates double-digit revenue growth.
- Order backlog at record high of EUR 5.4bn, up 59% compared to the same period last year
- Revenue of EUR 850m 19% above previous years’ period
- Adjusted EBITDA increased by 7% to EUR 110m
- 2021 full year guidance specified and confirmed in all KPIs
HENSOLDT AG (“HENSOLDT”) further expanded its leading position in the defence electronics market in the first nine months of 2021, particularly due to the strong order intake of EUR 2.821bn (previous year: EUR 2.003 bn). This increases the total order backlog by 59% to EUR 5.363 bn (previous year: EUR 3.379bn). Revenue climbed at a double-digit growth rate (19%) to EUR 850m. The main drivers behind the development are the radars for the Eurofighter as well as PEGASUS in the Sensors and land and high-precision technology systems in the Optronics segment.
Thomas Müller, CEO of HENSOLDT AG, said: “We are very proud of our performance over the past nine months. Our order books clearly reflect that we have set the right strategic priorities within our high-tech portfolio: as technology partner and integrated sensor solutions house HENSOLDT is an integral part of many national and international procurement programs. At the same time, we already have a broad pipeline of cutting-edge technologies and product solutions in place, targeting the emerging fields of cyber security and analytics. Together with an even stronger global presence, we have built a strong foundation for our future success in a steadily growing market.”
Axel Salzmann, CFO of HENSOLDT AG, said: “We are very pleased that we have once again exceeded expectations. In the past nine months, numerous follow-up orders from previously won landmark projects have materialised. At the same time, we are consistently ensuring that our growth does not come at the expense of efficiency. On the contrary, we were even able to improve our profitability. Consequently, we can confirm the 2021 full year guidance in all KPIs.”
Continued strong development in both segments
In the first nine months of 2021 HENSOLDT won numerous orders from a national and international project pipeline, including major orders for the development and production of reconnaissance technology for the PEGASUS programme as well as radar and self-protection systems for the Quadriga programme. In addition, orders in the third quarter included the delivery of long-range radars for the German F-124 frigates worth around EUR 180m and optronic mast systems for German and Norwegian U212 submarines with a volume of EUR 50m.
HENSOLDT is continuously expanding its cutting-edge technology portfolio to secure its growth in the long term. In September, for example, the company introduced the new generation of the AESA naval radar Quadome – a cyber-resilient, software defined and future-proof air and surface surveillance radar.
Double-digit revenue growth with sustained profitability
The continued high order intake is clearly reflected in the revenue development: with an increase of 19% to EUR 850 M (previous year: EUR 712 M), HENSOLDT generated significant growth in revenues compared to the previous year. Adjusted EBTIDA also developed positively and increased by 7% year-over-year to EUR 110 M (previous year: EUR 103 M), despite the costs incurred for the ramp-up of major projects.
Liquidity developed as expected with an adjusted free cash flow before interest and taxes of EUR -48.0 M (previous year: EUR 66 M). This development is mainly driven by investments in working capital.
Outlook for 2021 specified and confirmed in all KPIs
As a result of the strong performance in the first nine months of 2021, HENSOLDT can specify and confirm its 2021 full year guidance in all key performance indicators: HENSOLDT expects currency- and portfolio-adjusted revenues of around EUR 1.5bn (previously: between EUR 1.4bn and EUR 1.6bn) and an adjusted EBITDA margin of over 18% (previously: around 18%; before low value-added business volume related to the ramp-up of major projects). In addition, the company targets to reduce its net financial leverage ratio to below 2x at the end of this year (previously: 2.25x).
The results for the first nine months of 2021 are available on the Investor Relations website of HENSOLDT AG. The preliminary results for the full year 2021 are expected to be published on 23 February 2022.
09 Nov 21. GE, an industrial conglomerate pioneer, to break up. General Electric Co (GE.N) will split into three public companies as the storied U.S. industrial conglomerate seeks to simplify its business, pare down debt and breathe life into a battered share price, the company said on Tuesday.
The split marks the end of the 129-year-old conglomerate that was once the most valuable U.S. corporation and a global symbol of American business power.
GE shares closed 2.6% higher at $111.29 on Tuesday, after reaching a nearly 3-1/2 year high, compared with a 0.35% drop in the broader S&P 500 (.SPX) index. The industrial conglomerate’s shares have gained about 9% since July 30 when the company reduced the number of its traded shares.
In the past three years, GE Chief Executive Larry Culp has focused on reducing debt by selling assets, and improving cash flows by streamlining operations and cutting overhead costs.
“With the progress on the deleveraging, the progress with our operational transformation, the pandemic lifting … there’s no reason to wait a day (for the split),” Culp told Reuters in an interview. “It’s the right thing to do.”
The Boston-based company said the three businesses would focus on energy, healthcare and aviation.
GE will separate the healthcare company, in which it expects to retain a stake of 19.9%, in early 2023. It will combine GE Renewable Energy, GE Power and GE Digital and spin off the business in early 2024.
Following the split, it will become an aviation company, helmed by Culp. The aviation company will inherit GE’s other assets and liabilities, including its runoff insurance business.
A company spokesperson said brands and names of the spun-off units will be decided later.
It is the boldest attempt under Culp, who took GE’s reins in 2018, to simplify the company’s business. Measures taken so far have led to an improvement in GE’s balance sheet, putting it on track to reduce debt by more than $75bn by the end of 2021.
The company now expects to generate more than $7bn in free cash flow in 2023 and is planning to monetize its stakes in Baker Hughes, AerCap and the healthcare unit to cut its net debt to less than $35bn by then.
Culp told Reuters the decision to split the company was paved by GE’s progress in terms of repairing its balance sheet and operational performance.
He did not expect the spinoff to face any regulatory or labor issues and said there was no investor pressure behind the decision.
“Spins create a lot of value,” he said in the interview. “These are moves geared toward making GE stronger, helping our businesses and the teams perform better.”
Culp’s strategy is in stark contrast to the path GE pursued in the 1980s and 1990s under Jack Welch, who expanded the company into an industrial behemoth.
A founding member of the Dow Jones Industrial Average (.DJI) in 1896, GE spent more than a century in that storied stock index before getting the boot in 2018 following years of sliding valuation. It created the first electric cooking range and clothes washer, the first nuclear power plant, and supplied the U.S. space program. Its interests have spanned television, movies and insurance to lightbulbs and locomotives.
However, it has been facing investor skepticism about its ability to turn a corner since the 2008 financial crisis, while struggling with debt. The sagging fortunes prompted the company to fire Chief Executive John Flannery and hand over the reins to Culp.
The company’s revenue for 2020 was $79.62bn, a far cry from the $180 bn-plus in revenue it booked in 2008.
In 2015, activist investor Nelson Peltz took a stake in GE and demanded changes at the company, including moving away from finance operations and toward its industrial roots. On Tuesday, Peltz’s company, Trian, said it “enthusiastically supports this important step in the transformation of GE.”
GE’s aviation business, usually its cash cow, makes jet engines for Boeing Co (BA.N) and Airbus SE (AIR.PA). Questions remain over how the company will fund the unit’s operations, which tend to be very capital-intensive.
The company reckons the aviation unit’s low-cost structure, strong order book and investment-grade balance sheet would let it tap capital markets. But some analysts say the unit’s valuation could suffer as it will also take over GE’s financial liabilities after the split.
“There is clearly a debate among investors as to how much the aviation valuation should be penalized vs peers because of the financial liabilities,” analysts at Barclays wrote in a note.
An industry source, however, said the aviation business has been distracted until now by propping up rest of the company, which took a lot of the unit’s bandwidth. The unit is expected to be valued at more than $100bn after the spinoff, the source added.
Culp also said the split would make different units “more focused” and result in “greater accountability.”
The company expects to take a one-time charge of $2bn related to separation and operational costs and tax costs of less than $500m. (Source: Reuters)
09 Nov 21. Closing of Integration Transaction to Combine Loral with Telesat Currently Expected November 18, 2021 and November 19, 2021. Loral Space & Communications Inc. (NASDAQ:LORL) today announced that the parties to the Transaction Agreement and Plan of Merger, dated November 23, 2020 (the “Transaction Agreement”), currently expect that the two-day closing provided for in the Transaction Agreement will occur on November 18, 2021 and November 19, 2021, subject to the satisfaction or waiver of all the conditions to the closing.
In addition, Loral announced that the deadline (the “Election Deadline”) for holders of Loral’s common stock to deliver their Election Form and Letter of Transmittal (the “Election Form”) whereby Loral stockholders may elect (each such election, an “Election”) the consideration to be received upon the closing of the merger provided for in the Transaction Agreement is 5:00 p.m., Eastern Time, on November 15, 2021. All Election Forms must be received by Computershare Investor Services Inc. by 5:00 p.m., Eastern Time, on November 15, 2021.
Stockholders who do not make an Election with respect to any Loral common stock they hold on or prior to the Election Deadline will receive Class B Shares of Telesat Corporation upon consummation of the merger.
As described in the Election Form, Loral stockholders who hold their shares of Loral common stock in certificated form or whose shares of Loral common stock are registered in their name should follow the instructions set forth in the Election Form and deliver the properly completed Election Form and duly executed transmittal materials included with the Election Form to Computershare Investor Services Inc. via one of the delivery methods set forth in the Election Form.
Loral stockholders who hold their shares of Loral common stock through a broker, investment dealer, bank, trust company or other nominee must make an Election by following the election instructions in the Election Form that such stockholders receive from their broker, investment dealer, bank, trust company or other nominee. Such Loral stockholders should contact their broker, investment dealer, bank, trust company or other nominee with any questions.
There can be no assurance that the closing will occur when currently expected.
About Loral Space & Communications Inc.
Loral Space & Communications Inc. is a satellite communications company. Loral holds a 62.6% economic interest Telesat Canada (“Telesat”), a global operator of telecommunications and direct broadcast satellites used to distribute video entertainment programming and broadband data and to provide access to Internet services and other value-added communications services. Telesat is also developing Telesat Lightspeed, a global constellation of low earth orbit satellites. For more information, visit Loral’s website at www.loral.com. (Source: PR Newswire)
09 Nov 21. ARRIS Raises $88.5m in Series C Funding. Led By XN, New Funding Enables ARRIS To Further Scale Production of Smarter, Lighter, Stronger & More Sustainable Products.
ARRIS, the advanced manufacturer enabling the use of high-performance composites with new design latitudes for mass-market consumer products, transportation, and industrial applications, today announced that it has raised $88.5 million in Series C funding. Led by XN, the round saw participation from new and returning investors, including Modern Venture Partners, New Enterprise Associates (NEA), Taiwania Capital, Bosch, Valo Ventures, and Alumni Ventures Group.
The latest funding will be used to further scale the company’s global operations to fulfill an increasing demand for medium- to high-volume production of products requiring ARRIS’ unique design and manufacturing capabilities. ARRIS has now raised $147 million to date, which includes support from strategic investors across the global manufacturing space, such as Standard Industries, Chuo Malleable Iron, and an undisclosed portable electronics company, in addition to Bosch.
“ARRIS’ Additive Molding technology is transforming how next-generation products are made, enabling significant commercial and sustainability improvements across many of our most critical industries,” said Gaurav Kapadia, Founder of XN. “We are excited to partner with Ethan, Riley, and the entire ARRIS team as they dramatically expand the use of high-performance composite materials throughout the global economy.”
Founded in 2017, ARRIS pioneered the development of a patented end-to-end automated manufacturing technology that combines the best of advanced composites, additive and high-volume manufacturing methods to enable design latitudes not previously possible in mass-produced products.
In 2020, ARRIS expanded its R&D facility in Berkeley, California, to include a dedicated new product introduction center for customers and U.S.-based production capacity. The ARRIS Taiwan production facility broke ground in 2020 and has nearly 45,000 square feet of additional capacity to serve key portable electronics customers who require product assembly overseas.
“Our company is at an inflection point with U.S. manufacturing in full swing, a new mass-production facility overseas, and customers winning design awards and receiving industry-wide recognition for their ARRIS-enabled products. The XN team possesses a deep knowledge of how to scale durable businesses and is the ideal partner to help ARRIS achieve its next level of growth,” said Ethan Escowitz, CEO and Founder at ARRIS.
ARRIS serves world-class customers across the consumer products and sports, consumer electronics, aerospace, drone, government, industrial, and automotive industries. Recent partnerships exemplify the value ARRIS, and its technology can bring to customers:
Leading unmanned aerial vehicle (UAV) manufacturer Skydio announced the use of ARRIS parts in its Skydio X2 drone. ARRIS’ parts allow Skydio to reduce weight and thereby increase the speed and range of its high-performance drones.
The U.S. Army’s Combat Capabilities Development Command Ground Vehicle Systems Center (DEVCOM GVSC) announced a partnership with ARRIS to demonstrate significant vehicle weight reductions through part consolidation, topology optimization, and an aligned continuous carbon fiber composite structure.
ARRIS announced a research project with global commercial aircraft manufacturer Airbus focused on the production of cabin brackets. The project aims to demonstrate significant reductions in aviation emissions by leveraging innovative manufacturing methods and materials, including composites. Replacing metal brackets with ARRIS’ continuous fiber composite parts can achieve more than 75% weight savings, which translates into significant fuel savings.
“We’re working with some of the most recognizable brands across industries to solve the hardest product engineering challenges that demand a new level of performance and design capabilities,” said Riley Reese, CTO and Co-Founder at ARRIS. “This next phase at ARRIS will broaden access to our design and manufacturing tools as we continue to expand the partnerships we have with the world’s most innovative companies.”
“We first met ARRIS in 2018, and were thrilled to have the opportunity to lead their Series A financing,” said Greg Papadopoulos, Ph.D., Venture Partner at NEA. “Our excitement has only grown having seen their customer traction, ability to execute, and leadership as a pioneer in the composites manufacturing space. This progress is a testament to the talent and perseverance of Ethan, Riley, and the team, and we are grateful to partner with them on this next phase of growth.”
With ongoing recruitment across all ARRIS locations, domain experts employ robotics, automation, material development, engineering disciplines, and software development to enable award-winning breakthrough product differentiation for customers. ARRIS was ranked as one of Fast Company’s “10 Most Innovative Manufacturers of 2021.” Additional recognitions include East Bay EDA’s 2021 Innovation Award in Advanced Manufacturing, the Business Intelligence Group’s 2021 BIG Innovation Annual Award, the Chicago Athenaeum’s GOOD DESIGN Award for 2021, and Red Dot’s 2020 Design Concept Award.
Using next-gen manufacturing technologies, ARRIS empowers the world’s leading brands to produce smarter, lighter, stronger, and more sustainable products at scale. In partnership with world-class investors and the biggest brands in the consumer, industrial, and transportation industries, ARRIS uses next-gen design capabilities, manufacturing tools, and material science-driven process innovation to mass-produce the products of the future.
09 Nov 21. Triumph Group Reports Second Quarter Fiscal 2022 Results. Triumph Group, Inc. (NYSE: TGI) (“Triumph” or the “Company”) today reported financial results for its second quarter fiscal year 2022, which ended September 30, 2021.
Second Quarter Fiscal 2022
- Net sales of $357.4m
- Operating income of $16.5 m with operating margin of 5%; adjusted operating income of $28.0m with adjusted operating margin of 8%
- Net loss of $9.1m, or ($0.14) per share; adjusted net income of $6.4 m, or $0.10 per diluted share
- Cash flow used in operations of $36.0m; free cash use of $41.4m
Full-Year Fiscal 2022 Guidance
- Net sales guidance of between $1.5bn – $1.6bn
- GAAP earnings per diluted share of between ($0.15) – $0.05
- Adjusted earnings per diluted share of between $0.68 – $0.88, up $0.27 from prior guidance
- Cash flow used in operations of between $110.0m – $125.0m and free cash use of $135.0m – $150.0m
- Cash flow expected to be positive over the remainder of fiscal 2022
“Triumph’s second quarter results reflect improving margins and cash flows. Our diverse portfolio remains a competitive advantage as we continue to see strong recovery in MRO services and commercial narrow body production rates,” stated Daniel J. Crowley, Triumph’s chairman, president and chief executive officer. “Triumph’s near doubling of profitability year over year on an adjusted basis across both business units reflects our operational progress and supports our improved outlook.”
Mr. Crowley continued, “During the quarter, we pivoted to growth by securing over $1bn in new contracts and investing in our newly formed joint venture with Air France Industries KLM Engineering & Maintenance, xCelle Americas. As we accelerate our organic growth, we remain committed to delivering value to all our stakeholders.”
Second Quarter Fiscal Year 2022 Overview
Excluding divestitures and sunsetting programs, sales for the second quarter of fiscal year 2022 were down 2% organically from the prior year period due to declines in commercial widebody production offset by increased maintenance, repair and overhaul work and commercial narrow body production.
Second quarter operating income of $16.5m, which includes net favorable reserve adjustments achieved through efficiencies and retirement of programmatic risks. Net loss for the second quarter of fiscal year 2022 was $9.1m, or ($0.14) per share. On an adjusted basis, net income was $6.4m, or $0.10 per share.
Triumph’s results included the following:
The number of shares used in computing diluted earnings per share for the second quarter of 2022 was 65.0m.
Backlog, which represents the next 24 months of actual purchase orders with firm delivery dates or contract requirements, was $1.94bn, up 5% on a sequential basis, primarily on commercial narrow body platforms.
For the second quarter of fiscal year 2022, cash flow used in operations was $36.0m.
Based on anticipated aircraft production rates, but excluding the impacts of any potential divestitures, the Company continues to expect net sales for fiscal year 2022 will be approximately $1.5bn to $1.6bn.
The Company continues to expect GAAP fiscal year 2022 earnings per diluted share of ($0.15) to $0.05 and updated its adjusted earnings per diluted share to $0.68 to $0.88, up $0.27 from prior guidance. The Company continues to expect fiscal year 2022 cash used in operations of $110.0m to $125.0m and free cash use of $135.0m to $150.0m. The company expects to be approximately break even cash flow in the third quarter and free cash flow positive in the fourth quarter of the fiscal year. The Company’s current outlook reflects adjustments detailed in the attached tables and excludes the impacts of any potential future divestitures. (Source: PR Newswire)
08 Nov 21. Viasat to buy Inmarsat, plans for polar sats to expand Arctic coverage.
“Viasat has been undergoing an existential crisis as it competes with SpaceX for the satcom market,” one industry source said.
In a surprise move, California-based Viasat this morning announced a plan to acquire UK-based Inmarsat for a cost of some $7.3bn — potentially creating a commercial satellite communications behemoth worth $4.1bn in 2021 revenue, of which 40% is in government sales, including to the Defense Department.
While the acquisition will require approval from regulators, the combined company already is planning an expansion of its on-orbit assets, including two polar orbiting satellites that can bring capacity to the Arctic. As global warming opens the potential for economic activity in the far North, including oil and gas extraction, world powers are jockeying for position there and military tensions are on the rise.
Both companies orbit satellites in Geostationary Orbit, some 36,000 kilometers in altitude, but concentrated on slightly different market sectors.
“We’ve seen GEO operators investing in or acquiring satellite companies to expand their service portfolios and distribute traffic in more efficient ways,” one industry source familiar with both firms told Breaking Defense. “I suspect this will be part of a broader strategy to provide comprehensive service offerings.”
Susan Miller, CEO of Inmarsat Government, told Breaking Defense in an email that together “Inmarsat and Viasat will utilize their highly complementary capabilities and geographies to deliver superior, cost-effective solutions for Inmarsat’s global mobility customers well into the future.” Based in Reston, Va., Inmarsat Government is the British company’s US arm responsible for sales to government agencies.
Inmarsat currently is a major provider of mobile communications for the US military, via Space Force’s Commercial Satellite Communications Office (CSCO), which just announced plans to acquire some $2.3bn in commercial bandwidth, equipment and services in 2022 and 2023. In addition, the Navy in 2016 signed a separate contract for maritime communications services with Inmarsat that runs through the end of this year.
Commercial firms provide the bulk of military communications in both peacetime and wartime. In the first-ever Breaking Defense Space Survey, 53.7% of DoD respondents said commercial SATCOM was “extremely important” during war; another 37.2% said it was “very important.”
“There are no changes to our customers services at this time,” Miller explained. “We have communicated the news to our customers and partners and will keep them informed as to any planned changes as we approach the transaction close.”
That closure is expected to take place in 2022, according to slides presented by corporate officials from both companies to their investors this morning.
Viasat’s four operational satellites provide internet access for commercial and government clients. In addition, much of its work with DoD has primarily focused on hardware, such as ground stations and handheld radios, as well as software to improve cybersecurity and enable 5G mobile communications. For example, the company in September won two awards for an unspecified amount from DoD’s Information Warfare Research Project (IWRP) “to conduct research that will examine the use and implementation of 5G networks on the battlespace,” according to a company press release.
“While Viasat was well positioned before, now we’re even stronger in the fast-growing space-centric global mobility and government markets,” Mark Dankberg, Viasat executive chairman told the investor meeting.
The industry source painted a slightly less rosy picture for Viasat, however, saying it struggles to remain relevant in the market for internet services from space. Because of the distances involved, its GEO-based internet service is much slower than that provided by operators such as SpaceX using lower orbits that can provide high-speed, high-capacity bandwidth with less lag time in data delivery.
“Viasat has been undergoing an existential crisis as it competes with SpaceX for the satcom market,” the source said.
Indeed, the company sued the Federal Communications Commission (FCC) in May to overturn the decision to approve launches by SpaceX to fill out its Starlink constellation, according to a detailed report in Ars Technica, arguing that the FCC didn’t properly take into account the environmental impacts such as debris and light pollution required by the National Environmental Policy Act (NEPA). The US Court of Appeals for the District of Columbia Circuit is scheduled to hear oral arguments on Dec. 3, but the court has already raised a skeptical eyebrow. In July it dismissed Viasat’s petition to block Starlink launches until the lawsuit was resolved.
And while “Viasat has long been a supplier of secure comms to gov/military (including Air Force 1),” the source noted, the company “realizes that they need global coverage to be able to compete.” That is something that Inmarsat, with its constellation of 14 birds, can provide.
From Viasat’s perspective, Dankberg said, they believe the new combined firm can grow substantially as the international commercial SATCOM market expands “because so much of this market is either underserved or totally unserved now.” He explained that collectively, “our total addressable market already very large, at close to a trillion dollars and it’s expected to grow to nearly 1.6trn by 2030.”
The total international government market, worth some $81bn this year and largely representing DoD buys, is expected to grow to $130bn by 2030, he added.
Viasat’s projected market growth after Inmarsat acquisition.
“The combined company intends to integrate the spectrum, satellite and terrestrial assets of both companies into a global high-capacity hybrid space and terrestrial network, capable of delivering superior services in fast-growing commercial and government sectors,” explained today’s joint press release. The combined company will bring several key offerings to customers, the release added, including:
- A broad portfolio of spectrum licenses across the Ka-, L- and S-bands and a fleet of 19 satellites in service with an additional 10 spacecraft under construction and planned for launch within the next three years.
- A global Ka-band footprint, including planned polar coverage, to support bandwidth-intensive applications, augmented by L-band assets that support all-weather resilience and highly reliable, narrowband and IoT connectivity.
- The ability to unlock greater value from Inmarsat’s L-band spectrum and existing space assets by incorporating Viasat’s state-of-the-art beamforming, end-user terminal and payload technologies and its hybrid multi-orbit space-terrestrial networking capabilities. (Source: Breaking Defense.com)
08 Nov 21. Jacobs Invests in Leading Geospatial Analytics Company HawkEye 360. Investment strengthens technologies and solutions in national security, civilian and commercial markets. Jacobs (NYSE:J) has made a strategic investment in HawkEye 360, the industry leader in radio frequency (RF) geoanalytics, providing commercially available precise mapping of global RF emissions.
Jacobs and HawkEye 360 have also entered into a distribution arrangement under which Jacobs will enhance its digital intelligence suite of technologies and solutions with HawkEye 360’s RF spectrum analytics and collection automation offering.
Jacobs’ minority investment in HawkEye 360 signifies its commitment to spectrum-based geoanalytics technologies and its increasingly important role in delivering solutions to address critical challenges for national security, civilian infrastructure, maritime and energy clients around the world. Strategic investment in key partners and corporate venture capital are components of Beyond If, Jacobs’ program for instilling and sustaining its innovation culture.
“Hawkeye 360’s satellite constellation and intuitive RF analytics platform is a game-changer for consumers of geospatial intelligence (GEOINT),” said Jacobs Critical Mission Solutions Senior Vice President of Cyber & Intelligence Caesar Nieves. “Increased spectrum awareness is imperative to near-peer competition and achieving the objectives laid out in the National Security Strategy. Leveraging Jacobs’ expansive global position in defense, intelligence and civilian markets, we will be working collaboratively with Hawkeye 360 to unlock new insights about threats, targets and assets of interest.”
Hawkeye 360’s RF satellite technology is at the forefront of emerging commercial RF and ISR capabilities changing the landscape of GEOINT. Increased RF sensing is essential to provide a more complete picture of the global threat landscape. Hawkeye 360’s existing satellite clusters collect vast swaths of RF data and use AI and machine learning to provide situational awareness of hard-to-track targets.
Jacobs and HawkEye 360 also intend to leverage their new relationship to identify additional opportunities for collaboration.
“Hawkeye 360 is delighted to partner with Jacobs, a world-leading innovator in defense, intelligence and civilian capabilities in space,” said Hawkeye 360 CEO John Serafini. “As investors in our company, we will collaborate with Jacobs to deliver our RF geoanalytics technology to address the critical challenges of a broader set of clients.”
Recent wins demonstrating Jacobs’ leadership within the GEOINT landscape include a $302m, single-award National Geospatial-Intelligence Agency IDIQ contract to provide wide-ranging cyber, digital services and modern software engineering that support GEOINT.
For more on how Jacobs is redefining what’s possible, from space to cyber and intelligence solutions, visit jacobs.com, and read more about Jacobs’ Beyond If innovation program here.
08 Nov 21. HawkEye 360 Raises $145m in Series D Round to Expand Dominance of the Commercial Radio Frequency GEOINT Market. Insight Partners and Seraphim Space lead investment to enable global business expansion and address increasingly high-value mission needs. HawkEye 360 Inc., the world’s leading commercial provider of space-based radio frequency (RF) data and analytics, today announced it has closed $145m in new funding, priming the company to achieve transformational growth in its data and analytical services product line. This Series D round was led by New York-based global private equity and venture capital firm Insight Partners and Seraphim Space Investment Trust (LSE:SSIT), the world’s first listed space tech fund. Additional funding was provided by the Strategic Development Fund (SDF), the investment arm of UAE’s Tawazun Holding. And joining the round were new investors Jacobs, Gula Tech Adventures, 116 Street Ventures, and New North Ventures, as well as existing investors Advance, Razor’s Edge, NightDragon, SVB Capital, Shield Capital, Adage Capital, and others. This brings the total amount of capital raised to date to $302 m.
HawkEye 360 is delivering a revolutionary source of global knowledge based on RF geospatial intelligence to those working to make the world a safer place. The company will use the funding to expand its satellite constellation and complementary infrastructure, accelerating the growth of the company’s services to customers in the humanitarian, environmental, commercial and national security sectors.
“HawkEye 360 is pleased to be welcoming phenomenal new partners to our world class investment family, all of whom share our vision of using revolutionary commercial RF-monitoring capabilities to produce positive impacts for humanity and the environment,” said HawkEye 360 CEO John Serafini. “As a new, well-backed space data and analytics company with a unique dual-use technology, we are ideally situated not only to create great value for the defense, intelligence and national security communities, but also to change the paradigm for organizations confronting complex challenges like illegal fishing, poaching, maritime smuggling and environmental degradation.”
“HawkEye 360 stands out as the clear leader in commercial RF data and analytics,” said Nick Sinai, Managing Director at Insight Partners. “We are excited to partner with HawkEye 360 as the company continues to scale up and to expand its geospatial intelligence technology capabilities for both government and commercial markets.” Nick Sinai will join HawkEye 360’s board.
“We seek to invest into the emerging category leaders building a digital platform in the sky,” said Mark Boggett, CEO of Seraphim Space (Manager) LLP, Seraphim Investment Trust’s investment manager. “We can say with conviction that HawkEye 360 is the undisputed global champion in radio frequency analysis, a market we believe will grow to billions of dollars over the next few years. We’ve carefully built our relationship with HawkEye 360 since 2017, culminating with them participating in the AWS Space Accelerator managed by Seraphim. Our subsequent $25 m investment, as co-lead alongside Insight Ventures, in the D Series reflects the potential we believe this breakthrough technology will have across the environmental and security sectors. We are convinced that HawkEye 360 has both the technology advantage together with the commercial and governmental relationships to transform, reshape and develop the industry on a global scale at speed.”
Increasingly, the lifeblood of the modern digital economy is carried by the electromagnetic spectrum. Many types of objects emit radio frequencies for vital functions such as communication, navigation and security.
The HawkEye 360 constellation detects, characterizes and precisely geolocates these RF signals from a broad range of emitters, including VHF marine radios, UHF push-to-talk radios, maritime and land-based radar systems, L-band satellite devices and emergency beacons. By processing and analyzing this RF data, the company delivers actionable insights and a unique knowledge for operations across a broad range of sectors.
In the years ahead, the company will expand on its proven capabilities to deliver persistent RF data and analytics. This next phase of growth, backed by the latest funding round, will feature faster revisit rates, greater signal collection and enhanced analytics to address a large set of mission needs for clients.
PJT Partners served as exclusive financial advisor and placement agent to HawkEye 360 in connection with the Series D capital raise. WilmerHale acted as legal counsel for HawkEye 360 in connection with the transaction.
About HawkEye 360
HawkEye 360 is delivering a revolutionary source of global knowledge based on radio frequency (RF) geospatial intelligence to those working to make the world a safer place. The company operates the first-of-its-kind commercial satellite constellation to detect, characterize, and geolocate a broad range of RF signals. This unique RF data and analytics equip our global customers with high-impact insights needed to make decisions with confidence. HawkEye 360 is headquartered in Herndon, Virginia. (Source: PR Newswire)
08 Nov 21. Astronics Corporation Reports 2021 Third Quarter Financial Results.
- Sales for the quarter were $111.8m, up 5% over prior-year period
- Net loss of $7.2m continues sequential improvement through 2021
- Adjusted EBITDA* was $2.8m; measurably improved over prior-year period loss and trailing second quarter
- Bookings up 88% over prior-year period and up 22% over trailing second quarter to $153.5m; Achieved book-to-bill ratio of 1.37
- Aerospace segment book-to-bill was 1.49 for the quarter
- Backlog increased 13% sequentially to $354.4m
*Adjusted EBITDA is a Non-GAAP Performance Measure. Please see the attached table for a reconciliation of adjusted EBITDA to GAAP net income.
Astronics Corporation (Nasdaq: ATRO) (“Astronics” or the “Company”), a leading supplier of advanced technologies and products to the global aerospace, defense and other mission critical industries, today reported financial results for the three and nine months ended October 2, 2021.
Peter J. Gundermann, the Company’s President and CEO, commented, “Our core markets are showing improved demand although our sales were hampered by approximately $8 m to $10 m due to supply chain challenges and a tight labor market. Nonetheless, we are encouraged with strong order activity across the business, with bookings exceeding shipments by 37%. This demand promises an improved fourth quarter and solid momentum as we prepare for 2022.”
Third Quarter 2021 Results (compared with the prior-year period, unless noted otherwise)
Consolidated sales were up $5.3m from the third quarter of 2020. Aerospace sales were up $13.2m, or 16.0%, and Test System sales decreased $7.9m. Total sales and volume continued to reflect the ongoing impacts of the COVID-19 pandemic on the global aerospace industry. Supply chain pressures impacted delivery schedules and costs, limiting the Company’s ability to respond to accelerated or quick-turn delivery requests from customers and delayed shipments that otherwise would have been made during the quarter. The Company estimates that revenue would have been $8 m to $10 m higher in the third quarter if its supply chain was functioning normally.
The Company was awarded a grant of up to $14.7 m as part of the Aviation Manufacturing Jobs Protection (“AMJP”) Program. The grant will be recognized ratably over the six-month period of performance. In the third quarter of 2021, $1.1 m was recognized as an offset to cost of products sold.
Consolidated operating loss improved measurably over the prior-year period as higher volume reflecting improvements in the commercial aerospace and the benefit of the AMJP helped to offset the impacts of supply chain constraints.
Consolidated net loss was $7.2m, or $0.23 per diluted share, compared with net loss of $5.3m, or $0.17 per diluted share, in the prior year. The prior-year net loss benefitted from a $3.1 m tax adjustment related to a revised state income tax filing position.
Consolidated adjusted EBITDA was $2.8m, or 2.5% of consolidated sales, compared with adjusted EBITDA of $(0.1)m, or (0.1)% of consolidated sales, in the prior-year period.
Sequentially, compared with the second quarter of 2021, while revenue remained consistent, net loss improved to $(7.2)m from $(8.1)m, and adjusted EBITDA improved to $2.8m from $0.4m.
Bookings were $153.5m in the quarter resulting in a book-to-bill ratio of 1.37:1. Backlog at the end of the quarter was $354.4m. Approximately $113.3m, or 32%, of backlog is expected to ship in the remainder of 2021.
Aerospace Segment Review (refer to sales by market and segment data in accompanying tables)
Aerospace Third Quarter 2021 Results (compared with the prior-year period, unless noted otherwise)
Aerospace segment sales increased $13.2m, or 16.0%, to $95.8m. Commercial aerospace sales were up 30.6%, or $13.5m, and drove the improvement even as sales remain below pre-pandemic levels. Sales to this market were $57.5m, or 51.5% of consolidated revenue in the quarter, compared with $44.1m, or 41.4% of consolidated revenue in the third quarter of 2020. Improving domestic travel, increased production rates including the 737 MAX and higher fleet utilization are driving increased demand for Astronics’ products.
General Aviation sales were down $2.6m, or 17.7%, to $12.1m as higher demand in the business jet market somewhat offset lower VVIP activity. The Company expects the strong demand being realized in the business jet industry to translate into higher demand for its products as production levels begin to increase in 2022.
Military Aircraft sales decreased $1.1m, or 6.1%, to $17.1m. The prior-year period benefited from incremental non-recurring engineering revenue associated with development of new programs.
Other revenue increased $3.4m to $9.0m driven by increased contract manufacturing programs.
Aerospace segment operating profit was $1.9m compared with operating loss of $(6.3)m for the same period last year driven by increased sales and the $1.1m AMJP benefit.
Sequentially, compared with the second quarter of 2021, Aerospace revenue grew 7% and operating profit improved $4.6m to $1.9m.
Aerospace bookings in the third quarter of 2021 were $142.5m for a book-to-bill ratio of 1.49:1. Bookings were up 21% sequentially and up 119% over the comparator quarter of 2020, continuing the strong trend of improvement since the pandemic took hold. Backlog for the Aerospace segment was $285.8m at the end of the third quarter of 2021.
Mr. Gundermann commented, “The commercial aerospace industry is showing solid signs of improvement. Increasing utilization and production rates for narrowbody aircraft are positives for us, and now international travel restrictions are beginning to be lifted, which will help the widebody market as well. Private aircraft OEMs have seen strong orders also which we expect will boost production plans in 2022 and onward.”
Test Systems Segment Review (refer to sales by market and segment data in accompanying tables)
Test Systems Third Quarter 2021 Results (compared with the prior-year period, unless noted otherwise)
Test Systems segment sales were $16.1m, down $7.9m compared with the prior-year period driven by lower defense and transit revenue caused by COVID-related delays.
Test Systems operating loss was $(2.2)m, or 13.7% of sales, compared with operating profit of $0.9m, or 3.9% of sales, in the third quarter of 2020. Operating loss in the third quarter of 2021 was negatively affected by lower volume and $1.0m in legal fees related to infringement claims and contractual disputes. Operating results in 2020 benefited from $0.6m in semiconductor warranty revenue.
Bookings for the Test Systems segment in the quarter were $11.1m, for a book-to-bill ratio of 0.69:1 for the quarter. Backlog was $68.6m at the end of the third quarter of 2021.
Mr. Gundermann noted, “Our Test business continued to experience lower-than-expected bookings in the third quarter, which we continue to believe is caused mostly by the pandemic. We do not believe we are losing opportunities to competition, but schedules are sliding into the future. However, in the month of October we booked more orders than we did in either of the two previous quarters, so things appear to be accelerating in our Test business also.”
Liquidity and Financing
At October 2, 2021, the Company was in compliance with all covenants of its amended credit facility and expects to remain compliant.
Cash used by operations totaled $16.2m in the third quarter of 2021. Cash on hand was $29.1m and net debt was $153.9m at the end of the quarter. Subsequent to October 2, 2021, the Company sold one of its Aerospace facilities for $9.1m. Net cash proceeds were approximately $8.8m. A gain on sale of approximately $5.0m will be recorded during the fourth quarter of 2021.
In September, the U.S. Department of Transportation announced that it had approved for the Company to receive up to $14.7m under the AMJP program. The Company received its first installment of approximately $7.3m in September. The Company expects to receive a second installment in the range of $5m to $6m in the fourth quarter of 2021, and a final installment in the second or third quarter of 2022, upon final confirmation of meeting its award commitments.
The Company expects additional cash inflows over the next several quarters related to an earn out from the 2019 sale of its semiconductor test business, an approximate $10m tax refund and improved sales volumes.
Mr. Gundermann commented, “We are expecting to close 2021 with a higher shipment level in the final quarter. Supply chain challenges introduce a level of uncertainty, but we expect fourth quarter revenues of $115m to $118m. We expect shipping volume to continue to strengthen as we move into 2022, but we are not yet comfortable providing guidance for the year.”
Based on current estimates, the Company expects the AMJP to contribute approximately $7.3m to gross profit as an offset to cost of goods sold in the fourth quarter, with the remaining benefit to gross profit of approximately $6.2m to be recorded in the first quarter of 2022. However, the actual benefit between the two quarters may differ from these estimates based on actual payroll attribution for the eligible employee group.
At the end of the third quarter, the Company had backlog of $354m, of which $113m is expected to ship in the fourth quarter. Planned capital expenditures for 2021 have been reduced to approximately $8m to $9m from previous expectations of $10m to $11m. (Source: BUSINESS WIRE)
08 Nov 21. Arlington Capital Partners’ Portfolio Company, BlueHalo, Announces the Acquisition of Citadel Defense. Arlington Capital Partners (“Arlington”) today announced that its portfolio company, BlueHalo (the “Company”), a leading provider of advanced engineering solutions and technology to the national security community, has acquired Citadel Defense Company (“Citadel”). Headquartered in San Diego, CA, Citadel develops advanced counter unmanned aerial systems (“cUAS”) technology utilized by customers within the Department of Defense and Intelligence Community, as well as civilian, commercial, and international markets. Founded in 2016, Citadel’s team of engineers and data scientists has developed best-of-breed cUAS products that leverage proprietary artificial intelligence and machine learning (“AI/ML”) algorithms to enable operators to locate drone threats, track flight paths, and autonomously neutralize threats. Citadel’s industry-leading solutions create a distinct operational advantage for servicemen and servicewomen on the front lines. When defending against drone swarms and difficult-to-detect threats, Citadel’s AI/ML-powered systems allow operators to identify and terminate enemy UAS threats with unmatched speed, accuracy, and reliability. BlueHalo is a rapidly expanding national security platform with market-leading capabilities spanning directed energy, cUAS, space superiority, space technology, advanced RF, autonomy, and cyber & SIGINT. The acquisition of Citadel complements BlueHalo’s directed energy and layered perimeter defense capabilities where the company delivers a full suite of products including the Locust Laser Weapon System and Argus Perimeter Security Solution. Citadel’s cUAS capabilities coupled with BlueHalo’s existing portfolio of proprietary technology will uniquely enable the company to deliver multi-modal, unified cUAS solutions that support the warfighter and protect critical infrastructure.
“Citadel has established itself as a leader in the cUAS market and continues to innovate at a pace necessary to stay ahead of the rapidly evolving threat environment. We are incredibly excited to partner with the Citadel team as we continue to expand our cUAS capabilities and deliver transformative, market leading solutions to our customers,” said Jonathan Moneymaker, CEO of BlueHalo. “The combination of Citadel and BlueHalo’s unique technologies, deep mission intimacy, and systematic approach to innovation will accelerate our technology roadmap and allow us to rapidly field technologies critical to the warfighter.”
David Wodlinger, a Partner at Arlington Capital Partners, said, “The increasing sophistication and widespread availability of UAS represents a critical and growing threat vector that will increasingly become a top priority for more and more organizations. Citadel has developed an innovative cUAS solution that we believe counters this threat in a differentiated way, positioning the Company to capture an outsized share of this large and growing market.”
Chris Williams, CEO of Citadel, shared, “Under the BlueHalo platform, our new and existing customers will benefit from an expanded set of capabilities, talent, and resources to achieve greater mission impact. We are excited to join an innovative company that we know will continue to push the boundaries of what is possible.”
Henry Albers, a Vice President at Arlington Capital Partners, said, “The Citadel team is passionate about developing cutting-edge technology to address novel security threats, making this acquisition an excellent fit from a cultural perspective. We are excited to welcome these talented engineers to the organization as well as incorporate Citadel’s technology into BlueHalo’s rapidly expanding portfolio of proprietary solutions.”
BlueHalo is purpose-built to provide industry-leading capabilities in the domains of Space Superiority and Directed Energy, Air and Missile Defense and Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR), and Cyber and Intelligence. BlueHalo focuses on inspired engineering to develop, transition, and field next generation capabilities to solve the most complex challenges of our customer’s critical missions and reestablish our national security posture in the near-peer contested arena. www.bluehalo.com
About Arlington Capital Partners
Arlington Capital Partners is a Washington, DC-based private equity firm that is currently investing out of Arlington Capital Partners V, L.P., a $1.7bn fund. The firm has managed approximately $4.0bn of committed capital via five investment funds. Arlington is focused on middle market investment opportunities in growth industries including government services and technology, aerospace & defense, healthcare, and business services and software. The firm’s professionals and network have a unique combination of operating and private equity experience that enable Arlington to be a value-added investor. Arlington invests in companies in partnership with high quality management teams that are motivated to establish and/or advance their Company’s position as leading competitors in their field. www.arlingtoncap.com (Source: BUSINESS WIRE)
09 Nov 21. The woke investment crowd will leave us powerless to defend ourselves. Pressure on companies to pull out of defence projects will lead to a slow but fatal decline of Britain’s armed forces Maintaining nuclear weapons? Forget it. Developing a new range of tanks? Er, no thanks. Producing fighter aircraft, radar systems, or even software to protect a country from cyber attacks? Almost certainly forbidden. The growing movement for “Environmental, Social & Governance” investing – or ESG for short – has started to shift its focus from fossil fuels, slave labour and diversity into boycotting any company that is involved in defence. That is crazy. There is nothing wrong with investors demanding that companies work towards a more equal, sustainable and open society – but there is also nothing immoral or iniquitous about defending yourself. In reality, without strong defence, the environment would be in far worse shape and human rights abuses would be rampant.
As this newspaper reported over the weekend, Serco became the latest company to turn down business because it didn’t match the standards demanded by ESG investors when it pulled out of the bidding to help manage Britain’s nuclear weapons arsenal for the Atomic Weapons Establishment. Apparently City fund managers told the company that taking the contract might mean they had to sell off their shares because of the ESG standards that increasingly determine what they can and can’t invest in. The result? The Ministry of Defence will have fewer private sector contractors to choose from, leading – as you would expect when there is less competition – to higher prices and a worse service. It is easy to sympathise with management’s decision. The City is obsessed with ESG standards. An increasing number of investment mandates insist on them.
If it won the MoD contract, and the shares were then sold off by the ESG funds, Serco’s shareholders would lose a lot more than the value of the work could ever generate.
Serco’s share price growth
Looked at from the finance director’s desk, saying no makes a lot of sense. However, that is far from the whole story. If working on any form of maintenance and management of nuclear weapons is deemed unacceptable, then surely it won’t stop there.
What about guns and military vehicles? Or fighter planes, or naval ships? Or indeed systems to cope with cyber attacks?
And once you start going down that road, what about policing equipment such as water canons, or truncheons, or indeed guns for armed response units? And what about the jails, and all the stuff that has to be purchased to equip them, and keep them safe?
The list just gets longer and longer. Very soon, any form of defence or security contracting may be deemed unacceptable by the box-ticking, self-righteous busybodies of the ESG consultancies.
In truth, it only takes a few moments of reflection to work out this is a very dangerous road to travel down.
Of course, we all understand the drive towards ESG investing. People don’t want to put their pension fund or savings into companies that are wilfully destroying the environment, or which rely on virtual slave labour to keep their supply chains intact, or discriminate against women or minority groups when promoting people.
Nor does anyone think that selling arms or policing gear to dictatorships is a great idea. That is perfectly reasonable. Everyone is entitled to decide where they want their money to go, and if companies work to make the world a more diverse, inclusive and greener place then so much the better.
Here’s the problem, however. There isn’t anything unethical about defending yourself.
In fact, without robust defence, the environment would be in far worse shape, minorities would have far fewer opportunities, and slave labour would be commonplace.
The Soviet Union had the worst record on the environment of any major nation in history – just ask anyone in the Chernobyl area – but the ESG crowd would have frowned on the nuclear build-up that protected the world from its empire-building.
Likewise, presumably they wouldn’t approve of manufacturing the weapons needed to combat the Taliban, despite its despicable views on women’s rights, or indeed anything else.
New threats to Western values of tolerance will inevitably keep on emerging. They will only be kept at bay by robust armed forces capable of protecting and defending the West’s values and interests. And yet self-appointed ESG police will do their best to make it is as hard as possible for that to happen.
That matters. Private companies have always been crucial to the defence capabilities of the UK, and of all our major allies.
The kit is developed, and manufactured, by outside contractors, and always has been.
It is serviced, maintained and improved by those same companies. If they decide it is no longer worth the hassle then two things will happen.
The resources and skills available to our armed forces will steadily start to decline. And with less and less competition for contracts, everything will become a lot more expensive – and defence equipment is rarely cheap to start with – reducing the resources available to the armed forces. Either way, our defence capabilities will be significantly weakened.
In truth, the ESG movement has become far too powerful. It may have started with the best of intentions. But much of it has turned into the kind of platitudinous virtue signalling that even a student union might be embarrassed by. Right now, it is forcing companies to pull out of anything that might incur its wrath without any form of reflection or debate. Without strong private sector involvement, the West’s defences will crumble. And it is hard to see anything ‘ethical’ about that. (Source: Daily Telegraph)
08 Nov 21. US satellite group ViaSat to acquire UK’s Inmarsat in $7.3bn deal. The FT reported today that ViaSat, the California-based satellite company, is taking over Britain’s Inmarsat in a $7.3bn cash and share deal that will create one of the world’s biggest space-based broadband providers. The deal, in which Inmarsat’s private equity owners will hold 37.5 per cent of the combined group, is expected to trigger other bids in a highly fragmented industry. The agreed offer follows a failed approach for rival Eutelsat by French cable entrepreneur Patrick Drahi last month. It comes as investors push up valuations for space-based companies, spurred by falling launch costs and the potential to deliver a range of mobility and data services from cheaper satellites, many at lower earth orbits. However legacy operators of satellites at higher geostationary orbits have suffered from declining broadcast revenues and are facing a huge capacity glut.
Inmarsat has long been seen as a key chip in the consolidation of the sector with rivals EchoStar and Eutelsat having looked at a deal in the past. However the UK company was sold to a consortium led by Apax and Warburg Pincus in 2020. A move this year to appoint Rajeev Suri, the former Nokia chief executive who consolidated the telecoms equipment market, was seen as a move by Inmarsat’s owners to either sell the company or move on a rival. Suri said: “Joining with ViaSat is the right combination for Inmarsat at the right time.”
ViaSat will acquire Inmarsat in a transaction comprising $850m in cash and 46.36m in shares, valued at $3.1bn based on the closing price on November 5, which represents a 37.5 per cent stake in the enlarged company. ViaSat will also assume $3.4bn of Inmarsat’s net debt.
“This is a transformative combination that advances our common ambitions to connect the world. The unique fusion of teams, technologies and resources provides the ingredients and scale needed for profitable growth through the creation and delivery of innovative broadband and IoT services in new and existing fast-growing segments and geographies,” said Viasat’s executive chairman Mark Dankberg. (Source: Proactive)
08 Nov 21. Mercury Systems completes acquisition of Avalex Technologies. Mercury Systems, Inc. (NASDAQ: MRCY, www.mrcy.com), a leader in trusted, secure mission-critical technologies for aerospace and defense, today announced the completion of its acquisition of Avalex Technologies (“Avalex”). Pursuant to the terms of the definitive agreement applicable to the acquisition, Mercury acquired Avalex for all cash, subject to net working capital and net debt adjustments. The acquisition was treated as an asset sale for tax purposes. The acquisition and associated transaction expenses were funded through a combination of cash on hand and Mercury’s existing revolving credit facility.
“We’re pleased that this transaction was completed on schedule; the next step is executing a seamless integration,” said Mark Aslett, Mercury’s president and chief executive officer. “The acquisition is directly aligned with our strategy and will enable us to address and enable the growing demand for digitally converged solutions in the C4I and platform/mission management markets. We welcome the Avalex team to the Mercury family.”
BATTLESPACE Comment: This acquisition bolsters Viasat’s position in the UK market and ongoing MoD present and future contracts. Given that Viasat and Inmarsat are on competing teams for Skynet 6 SDW, Team Atena for Inmarsat and Viasat in the NSSL Team, will the MoD have to put in Chinese walls during the bid process? It also strengthens Viasat’s position in the airline connectivity market and strengthens its worldwide constellation and capacity making it avreyt powerful force in satellite connectivity.
05 Nov 21. Huntington Ingalls Industries reports 33.8% drop in Q3 net earnings. HII’s net earnings in Q3 2021 were $147m, compared to $222m in Q3 2020. US-based military shipbuilding company Huntington Ingalls Industries (HII) has reported a 33.8% drop in net earnings in the third quarter of 2021. In the three-month period that ended on 30 September, the company’s net earnings were $147m. In the same quarter a year ago, the figure was $222m. Diluted earnings per share in the quarter was $3.65, compared to $5.45 in the last year quarter. HII’s operating income was $118m in Q3 2021, down 46.8% from $222m reported in Q3 2020. The operating margin also fell from 9.6% to 5% on a year-on-year basis.
The company attributed the fall to less favourable operating FAS/CAS adjustment. However, the shipbuilder’s quarterly sales and service revenues remained stable and increased marginally to $2.34bn, compared to $2.31bn in the prior-year quarter. The total value of the new contracts secured in the third quarter was around $600m. The total order backlog stood at $50.1bn as of 30 September 2021.
In this quarter, HHI also completed its previously announced acquisition of Alion Science and Technology.
HII president and CEO Mike Petters said: “We are pleased with the third-quarter results that represent another quarter of consistent shipbuilding programme execution while we continue to navigate the challenges posed by the Covid-19 pandemic. During the quarter we closed the acquisition of Alion Science and Technology, and as we work to integrate it into our Technical Solutions division, we remain very excited about the significant growth avenues across the combined business that we believe will drive significant long-term value creation.” (Source: army-technology.com)
02 Nov 21. Nexter unveils the new name of its ammunition brand with the aim of consolidating its position in front of the competition and establishing its position as European leader in ammunition. In 2014, Nexter acquired the Belgian and Italian companies Mecar and Simmel Difesa to develop the group’s ammunition activities alongside Nexter Munitions. This major operation allowed, on the one hand, to enrich the product range on all ammunition segments (artillery, tanks, medium-calibre, naval, infantry and mortars) and, on the other hand, to extend the international footprint of the group. This acquisition contributed to the consolidation of the European munitions industry. Today, the group brings together its three subsidiaries, which are recognised for the performance, reliability and safety of their products, under a single brand that is destined to become the European leader in munitions: Nexter Arrowtech. Present in more than 60 countries, Nexter Arrowtech offers a wide catalogue of ammunition from 20 to 155mm produced to the highest levels of performance and reliability, and covering more than 80% of the NATO ammunition range. Nexter Arrowtech’s products are based on cutting-edge expertise and know-how, recognized by the French armed forces and numerous reference armies throughout the world. Nexter Arrowtech is ready to take up the technological challenges of tomorrow in order to meet its customers’ needs. Nexter Arrowtech is a European company, reliable and innovative, serving its armed forces customers. (Source: www.joint-forcescom)
08 Nov 21. BAE Systems plc – market update BAE Systems plc provides the following update. Charles Woodburn, BAE Systems Chief Executive, said: “We’re evolving our business to be well positioned for growth over the medium term alongside a focus on longer-term value drivers as we ramp up investment in advanced technologies and progress our sustainability agenda. Our continued good operational performance underlines our confidence in the full year guidance for top line growth and margin expansion as well as our three-year cashflow target.
“Demand for our capabilities remains high and we have a strong pipeline of opportunities across our broad geographic portfolio that will enable our skilled, global workforce to deliver capabilities which will support our customers in responding to the evolving threat environment.”
Our 2021 guidance remains unchanged from the improved underlying position outlined at the interim results and is underpinned by continuing good operational performance.
- Sales: +3-5% (2020: £20,862m) – Constant currency +5-7%
- Underlying EBIT: +6-8% (2020: £2,037m) – Constant currency 10%+
- Underlying EPS (1): +3-5% (2020: 44.3p)
- 2021 Free Cash Flow (FCF)(2): >£1.0bn
- Cumulative FCF 2021-2023: >£4bn
(1) Excludes the one-off tax benefit of 2.9p
(2) Before net benefit of c.£200m from the Broughton and Filton sale announced at the 2021 interim results.
Our backlog and programme positions support growth over the medium term, and our pipeline of opportunities remains strong with continued demand for our capabilities.
Whilst uncertainties arising from the COVID-19 pandemic remain, progress continues in combatting the virus under vaccination programmes in our major markets. Meanwhile our continued good programme execution underlines the guidance for sales growth, margin expansion and our three-year cash targets.
We continue to effectively mitigate and manage supply chain pressures having avoided any material impacts on our performance to date. In many cases, we benefit from long-term programme positions and incumbencies with more stable forward visibility for long-lead items allowing us to continue to actively manage supplier lead times against demand requirements.
Electronic Systems secured key wins across its business areas, marked by the Limited Interim Missile Warning System and F-35 electronic warfare system readiness awards. In the second half, our teams have continued to demonstrate technology advances, with key milestones ranging from unveiling the world’s smallest M-Code military GPS receiver, to receiving a DARPA contract to advance autonomy software for multi-domain mission planning. In addition, we have an opportunity to expand our clean energy footprint by demonstrating our proven maritime propulsion solutions for use on the River Thames in London, and we continue to progress technologies that will enable lighter weight, cost-competitive energy storage solutions for hybrid engines in aircraft.
Whilst Platforms & Services continues to invest in next-generation combat vehicles for US and international customers, production across multiple franchise vehicle platforms continues to meet or exceed agreed delivery schedules. Across the US Ship Repair business, good progress is being made on resolving several challenged ship modernisation programmes and recovering from pandemic and other operational disruptions.
The US Intelligence & Security business continues to maintain a robust bid pipeline and was awarded multiple contracts in the second half to sustain its order backlog. One specific highlight was the re-compete win from the US Navy’s Strategic Systems Programs office for systems engineering and integration services over five years.
Applied Intelligence continues to deliver a significantly improved performance this year with profitable growth driven by the ramp-up in Government related business.
Our Air sector is growing this year as a result of production moving towards full rate levels on F-35 rear fuselage assemblies in line with our long term planning assumptions of 150+ sets per annum, higher Typhoon production revenues with the first Qatari jets well into final assembly, higher Typhoon upgrade and support activity and further expansion of our Australian business.
In Maritime, manufacturing levels on Type 26 are increasing with the first three ships in production. Within Submarines we are progressing the build of the remaining Astute class boats, while on the Dreadnought programme, production volumes are increasing with Boats 1 and 2 in build.
Defence Spending outlook in our key markets
Our geographic diversity positions us positively post-pandemic as many of the countries we operate in have published plans to increase their spending to counter evolving threat environments.
In the US, a Continuing Resolution was passed to fund the government through 3 December as Congress continues to debate and advance the Bipartisan Infrastructure Bill, debt ceiling limits, and the fiscal year 2022 budget reconciliation. As the Senate works to pass its version of the National Defense Authorization Act (NDAA), the House passed its version of the NDAA at a spending level of $740 billion, which marks an increase over the President’s request of $715 billion earlier in the year.
Through a range of innovative technologies and proven capabilities, the US business continues to sustain its diverse portfolio of long-term defence programmes for the US Armed Forces and international allies. The business portfolio remains closely aligned with enduring customer priorities and key focus areas outlined in the US National Defense Strategy, all of which have contributed to good performance year to date and support our positive outlook for the full year.
In the UK, the Defence Command Paper renewed commitments to our major long-term programmes in complex warship, submarine and combat aircraft design and build, allowing for long-term investment in these key sovereign capabilities, as well as strong support for cyber. The opportunity pipeline is positive with domestic, export and collaboration opportunities identified, and we have the capabilities to support our UK customer in its space ambitions, furthered by our acquisition of In-Space Missions in September.
Our portfolio is well positioned to benefit from increased defence spending in Asia Pacific through our Australia business, which is already set to grow significantly due to our contracted positions, and through export opportunities from our UK, US and Australian business to the region. The recent AUKUS announcement is strategically significant. As the largest defence provider in the UK and Australia and a top 10 prime contractor to the US DoD we are well positioned to support our Government customers in these nations as discussions progress. This is a clear example of how nations are looking to co-ordinate capabilities in multi domain operations to address the threat environment.
In Europe, nations including Germany and France continue to increase their defence budgets to address the threat environment and move towards their 2% of GDP NATO commitments. We remain well placed through our positions on the Eurofighter Typhoon, our shareholding in MBDA and our BAE Systems Hägglunds land business based in Sweden, and we are pursuing a number of significant opportunities in the region.
In the Middle East, our longstanding relationships at government and company levels, continued regional instability and the nature of our long-term contracts, mean we expect defence and security to remain a priority. The renewal of certain existing long-term support contracts is tracking in line with expectations and we continue to progress a number opportunities with existing customers.
Technology Strategy – Key highlights
In line with our strategy to increase R&D investment and to seek bolt-on acquisitions to augment our existing technology base, we acquired In-Space Missions in September, a UK company that designs, builds and operates satellites and satellite systems. The acquisition will enable us to combine BAE Systems’ experience in highly secure satellite communications with In-Space Missions’ full lifecycle satellite capability. In the US, our radiation-hardened RAD510™ System on Chip (SoC) for space-based computing is entering fabrication. The RAD510 SoC will be the core of a single board computer with twice the performance capability, providing more advanced processing while demanding less power from its spacecraft than the industry standard RAD750® microprocessor.
On 13 October we outlined to our stakeholders the importance of the Group’s Environmental, Social and Governance policies and actions. Our sustainability objectives go hand in hand with our focus on improved performance and we continue to increase and accelerate our ambitions. Since the half year we have:
- Committed to cease handling white phosphorus
- Achieved our accreditation as a real living wage employer
- Published through BAE Systems, Inc. a report entitled A Decade of Progress, to detail progress made over the past ten years toward increasing diversity, equity, and inclusion in the workplace and to outline a strategic path forward to further advance our culture of inclusion
Share Buyback Programme
We have completed £308m of the £500m share buyback programme we announced in our Half-year results statements.
As previously announced, Crystal Ashby joined the Board as a non-executive director of the Company with effect from 1 September 2021.
The Company also announced recently that Ian Tyler, a non-executive director of the Company and Chair of the Remuneration Committee, will retire from the Board with effect from the close of the Company’s AGM to be held on 5 May 2022, when he will have served for nine years. Dame Carolyn Fairbairn will succeed Ian as Chair of the Remuneration Committee, with effect from 1 January 2022.
The 2021 interim dividend of 9.9 pence per share will be paid on 30 November 2021.
Full year results
BAE Systems will announce its financial results for the year ending 31 December 2021 on 24 February 2022.
05 Nov 21. inTEST Reports 46% Revenue Growth and Advances 5-Point Strategy in Third Quarter 2021.
- Net revenue increased 46% over prior-year period to $21.1 m due to strength of semiconductor and industrial markets; multimarket revenue grew 22% sequentially
- Solid margins resulted in earnings per diluted share of $0.20, in line with guidance
- Generated strong cash from operations of $4.3m in the quarter and $8.1 m year-to-date
- Advancing growth strategy with two acquisitions completed subsequent to quarter end; expected to be more than $0.05 accretive to diluted earnings per share in the first year
- Increased financial flexibility with new credit facility and enhanced capital structure with low-cost term borrowing following quarter end
inTEST Corporation (NYSE American: INTT), a global supplier of innovative test and process solutions for use in manufacturing and testing across a wide range of markets, including automotive, defense/aerospace, industrial, life sciences, semiconductor and telecommunications, today announced financial results for the quarter ended September 30, 2021.
“We delivered solid third quarter results that we believe demonstrate that we are successfully executing on our 5-Point Strategy, which is focused on driving growth and diversifying our markets and customer base. Multimarket revenue grew 22% sequentially and while our semiconductor business declined sequentially, it remains at historically high levels. Our strong margins and net income were in our expected range even as we continue to manage the ongoing challenges of supply chain constraints. Of note, we continued to generate strong cash flow in the quarter and improved our financial flexibility subsequent to quarter end with a new credit facility that will support our long-term strategy,” commented Nick Grant, President and CEO.
Mr. Grant added, “Following the end of the third quarter, we successfully closed two acquisitions in support of our 5-Point Strategy. Each adds to our product platform offerings and technical expertise, while expanding our customer base to adjacent, high-growth markets. Importantly, we believe we can scale these businesses with targeted investments and benefit from secular tailwinds in the life sciences markets.
“While acquisitions will continue to be a key element of our 5-Point Strategy, we are also focused on driving organic growth. We believe our new product development efforts combined with a robust pipeline of new customer opportunities provide catalysts for further differentiation of our business and growth in revenue and profitability over the long-term.”
Third Quarter 2021 Revenue
The increase in multimarket revenue reflects the ongoing, broad-based recovery within industrial sectors. The Company also has benefited from new product introductions and the reopening of trade shows, which has resulted in new customer opportunities and wins. The electric vehicle market continues to gain traction with a variety of applications for inTEST’s induction heating technology.
Semi market revenue remained robust as global demand for semiconductors continues to drive investment in the industry.
The Company’s top 5 customers represented approximately 36% of third quarter net revenue with the largest customer representing approximately 14%.
Third Quarter 2021 Operating Results
The sequential change in gross margin reflected higher component material costs not yet fully covered by price improvements as well as changes in product mix and less favorable absorption of fixed manufacturing costs. Year-over-year improvement in gross margin reflects higher volume and improved product mix.
Compared with the second quarter of 2021, selling expense was up $236,000, or 9%, to $2.8 m, primarily reflecting increased headcount, a return to more normal levels of travel as restrictions are lifted, and an increase in spending on new advertising initiatives. Engineering and product development expense remained relatively unchanged compared with the trailing period.
General and administrative expense decreased $149,000, or 4%, compared with the second quarter, while restructuring and other charges decreased $146,000, or 74%, sequentially. The second quarter expense included $347,000 related to non-recurring CFO transition costs. The decrease in CFO transition related costs was partially offset by an increase in expenses related to merger and acquisition activities during the third quarter.
Balance Sheet and Cash Flow Review
Cash and cash equivalents at the end of the third quarter were $18.7 m, up $4.1m, or 28%, from June 30, 2021. During the quarter, the Company generated $4.3m of cash from operations.
In October 2021, inTEST executed a new five-year credit agreement that includes a $25 m non-revolving delayed draw term loan and a $10 m revolving credit facility that replaced its previous $10 m facility, which had no borrowings at the end of the third quarter of 2021. Subsequent to quarter end, the Company used $12 m of its new credit facility and $500,000 in cash for the two acquisitions announced in October, excluding acquisition costs.
Capital expenditures during the third quarter were $114,000, up from $75,000 in the second quarter.
Demand for the Company’s products and solutions remains robust, while the trend of growth has moderated from recent historical highs. The Company has secured new orders in its targeted cannabis and electric vehicle markets and is making inroads in working with original equipment manufacturers (“OEMs”) to support semi market demand.
Approximately 75% of the September 30, 2021 backlog is expected to convert to sales in the fourth quarter.
Executing Acquisition Strategy
On October 7, 2021, inTEST acquired substantially all of the assets of Z-Sciences Corp., a developer of ultra-cold storage solutions for the life sciences cold chain market. This small, tuck-in transaction enhances the Company’s technology, adds new talent, and provides a low-cost entry into this fast growing, fragmented market.
On October 28, 2021, inTEST expanded its process technology offerings with the acquisition of Videology Imaging Solutions (“Videology”), a global designer, developer and manufacturer of OEM digital streaming and image capturing solutions. Videology’s trailing twelve-month revenue as of the end of September 2021 was approximately $10 m and provided comparable gross margins with inTEST. The Company expects the acquisition to be approximately $0.05 accretive to diluted earnings per share in the first year, which is net of one-time acquisition related expenses of approximately $0.03 per diluted share that are expected to be recognized in the fourth quarter of 2021. Both acquired businesses will be integrated into inTEST’s Thermal segment. (Source: BUSINESS WIRE)
05 Nov 21. MBH Corporation plc (MBH), a diversified investment holding company, has today announced it has agreed to the terms for the acquisition of Approved Air Ltd in the UK, as the most recent step in its extensive acquisition drive. With this acquisition and the continued diversification of companies becoming part of the MBH Corporation, the MBH portfolio now stands at 27 companies across 8 industry sectors and five countries. Established by David Williams in 1998 as DWCS in Somerset, UK, and becoming Approved Air in 2010, the company provides high quality validation/verification testing of medical facilities to ensure compliance with Health Technical Memorandums [HTM’s] and as independent specialists gives objective assessments and supports with improvement plans to keep both patients and staff safe. Specific services include particle counting, duct dust sampling, CO & CO2 monitoring, active air sampling and temperature & humidity testing amongst other essential services.
Within healthcare establishments, with the life expectancy of buildings and equipment forever being extended, there is a need for more robust monitoring and management of systems and processes to keep patients and staff safe. Having partnered with several NHS Trusts over many years, Advanced Air delivers a safe and efficient service with the flexibility required within an NHS Trust environment.
Approved Air’s unaudited revenues for full year 2021 were GBP1.7m. The total consideration for the acquisition of Approved Air will be approximately GBP2.7m to GBP3.4m which will be settled by way of a listed bond in accordance with the MBH bond programme with the following terms:
- 5-year maturity with principal payable at maturity; and
- 5% coupon rate per annum payable semi-annually
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.