Sponsored by TCI International Inc.
29 Jul 22. Moog Inc. Reports Third Quarter Results.
Moog Inc. (NYSE: MOG.A and MOG.B) announced today financial results for the quarter ended July 2, 2022.
Third Quarter Highlights
- Sales of $773m were up 9% from a year ago;
- GAAP diluted earnings per share of $1.57 included $0.03 per share in restructuring and impairment charges;
- Non-GAAP diluted adjusted earnings per share of $1.61, after rounding, up 44% from earnings per share a year ago;
- GAAP effective tax rate of 15.7% including the benefit of $0.15 per share from prior year provision to return adjustments;
- GAAP operating margins of 10.3% with adjusted operating margins of 10.5%; and
- $4m GAAP cash flow from operating activities and $15m adjusted cash flow from operating activities.
Aircraft Controls segment revenues in the quarter were $318m, 17% higher year over year. Commercial aircraft revenues were $137m, a 43% increase. Sales to commercial OEM customers were $86m, driven by increases in sales for the Boeing book of business and strength in business jet sales. Commercial aftermarket sales increased 87% on very strong repair and overhaul activity, a one-time retrofit program, and acquired sales from the TEAM Accessories acquisition.
Military aircraft sales were $181m, 3% higher year over year. Military OEM sales were up 3%, to $132m, with increased funded development and helicopter sales compensating for lower fighter aircraft sales and lost sales from the divested Navaids business. Military aftermarket sales were mostly unchanged.
Space and Defense segment revenues were $224m, an increase of 9% year over year. Defense sales of $135m increased 14%. Higher sales of the RIwP® turret, tactical missile applications, and defense components more than offset lower sales for international vehicle programs. Space sales were 3% higher, at $88m, as growth in sales of propulsion and avionics product lines, and integrated space vehicles, offset the winding down of hypersonic development activity.
Industrial Systems segment revenues in the quarter were $231m, in line with a year ago. Excluding the impact of foreign exchange movements and lost sales from portfolio shaping activities, underlying organic sales increased 8%, with rate-adjusted sales higher in each of the four submarkets. Sales of products for industrial automation applications were $111m, driven by demand for factory automation equipment. Energy sales were $31m, with higher sales in both exploration and generation applications. Sales of simulation and test products were $25m, tied to increased sales of flight simulation products. Medical product sales were $63m, driven by growth of enteral feeding products.
Consolidated 12-month backlog was $2.2bn, up 10% from a year ago.
“It was another good quarter for our business, with operational performance in line with our forecast and a tax benefit driving outsized EPS growth,” said John Scannell, Chairman and CEO. “The second half of our fiscal year is playing out as we anticipated. Our sales forecast for Q4 is in line with Q3, and our EPS forecast for Q4 is unchanged from 90 days ago. Demand for our products is strong across all our major markets and we’re managing well through the challenges posed by supply chain constraints, inflation, and labor availability.”
Fiscal 2022 Outlook
The Company updated its fiscal 2022 projections and adjusted figures provided 90 days ago.
- Forecasted sales of $3.0bn, unchanged from 90 days ago;
- Forecasted GAAP diluted earnings per share of $5.36, and adjusted diluted earnings per share of $5.65, both
plus or minus $0.15;
- Forecasted GAAP operating margins of 9.9% and adjusted operating margins of 10.3%;
- Forecasted cash flow from operating activities of $276 m and adjusted cash flow from operating activities
of $176m; and
- Forecasted GAAP effective tax rate of 22.3%.
(Source: BUSINESS WIRE)
29 Jul 22. Loar Group acquires all shares in SCHROTH from Perusa and co-investors. LSCHROTH Safety Products has been acquired by the Loar Group Inc. (“LOAR”). Perusa Partners Fund 2, L.P. (“Perusa”), a private equity fund advised by Perusa GmbH, and co-investors have agreed to sell all shares in SCHROTH International GmbH and SCHROTH Management GmbH (together “SCHROTH” or the “Company”) to LOAR, a leading platform of companies specializing in the design and manufacture of aerospace and defense components.
SCHROTH, with its engineering and manufacturing sites in Arnsberg, Germany, and Fort Lauderdale, FL, USA, is a global leader in the development and manufacturing of occupant protection systems for applications in aerospace, defense, and motorsports.
SCHROTH specializes in technical occupant restraint systems, passenger lap belts for all major commercial aircraft, structural airbag systems for Airbus and Boeing platforms, and cockpit safety equipment. SCHROTH also provides restraint systems for the business jet, general aviation, helicopter, military, and racing markets.
Perusa acquired SCHROTH from Transdigm International, Inc. in a management buyout transaction in January 2018. Since then, SCHROTH has considerably strengthened its foothold in the global commercial aviation industry, has expanded into the Asian market, and has invested into the development of innovative products such as an advanced lap belt airbag solution for commercial aviation and new energy-absorbing seating solutions for armored vehicles. Even throughout the Covid pandemic
pandemic, the Company has demonstrated remarkable resilience and has been able to substantially improve its financial performance.
Martin Nadol, CEO of SCHROTH, says: “Under Perusa’s ownership, our company has not only seen continuous growth but at the same time has become a much stronger competitor in all our core markets. The acquisition of SCHROTH by LOAR could not come at a better time. We are excited to become part of the LOAR Group, which will provide just the right framework and add further momentum to SCHROTH’s continuing global expansion and success.”
Dr. Hanno Schmidt-Gothan, Founding Partner at Perusa GmbH and advisor to Perusa Partners Fund 2 LP, comments: “The fund advised by us has supported the company throughout the recent turbulent times in commercial aviation and it was very impressed by the staff of SCHROTH and the resilience of the business model. We wish the business all the best under the new strategic ownership and we will look out for its products in all our travels”. Raphael Weller, Partner at Perusa GmbH, adds: “I especially thank Martin Nadol for the trust he has placed in Perusa and for his continuous effort in building an exceptional and highly successful company with a great future potential.”
28 Jul 22. Textron Reports Second Quarter 2022 Results.
- EPS from continuing operations of $1.00, up $0.19 from the second quarter of 2021
- Aviation backlog $5.8bn, up $708m from the first quarter of 2022
- Net cash from operating activities of $364 m in the second quarter of 2022
- $282 m returned to shareholders through share repurchases in the second quarter of 2022
Textron Inc. (NYSE: TXT) today reported second quarter 2022 income from continuing operations of $1.00 per share, compared with $0.81 per share in the second quarter of 2021.
“We saw another solid quarter of earnings and cash generation in the second quarter,” said Textron Chairman and CEO Scott C. Donnelly. “At Aviation, we saw continued growth, strong execution and ongoing order momentum.”
Net cash provided by operating activities of the manufacturing group for the second quarter was $364m, compared to $572m last year. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $309m for the second quarter, compared to $509m last year.
In the quarter, Textron returned $282m to shareholders through share repurchases.
Textron reiterated its full year earnings per share expectation of $3.80 to $4.00. Textron now expects 2022 cash flow from continuing operations of the manufacturing group before pension contributions to be in a range of $800 to $900m, up $100m from the previous outlook.
Second Quarter Segment Results
Revenues at Textron Aviation of $1.3bn were up $12m from the second quarter of 2021, largely due to higher aircraft and aftermarket volume.
Textron Aviation delivered 48 jets in the quarter, up from 44 last year, and 35 commercial turboprops, up from 33 in last year’s second quarter.
Segment profit was $155m in the second quarter, up $59m from a year ago, due to the impact from higher volume and mix of $25 m, a favorable impact from performance of $19 m and favorable pricing, net of inflation of $15m.
Textron Aviation backlog at the end of the second quarter was $5.8bn.
Bell revenues were $687m, down $204m from last year, due to lower military revenues of $170m, primarily related to the H-1 program, and lower commercial revenues of $34m.
Bell delivered 34 commercial helicopters in the quarter, down from 47 last year.
Segment profit of $63m was down $47m from last year’s second quarter, primarily reflecting the lower volume and mix, partially offset by a favorable impact from performance of $16m, which included lower operating expenses, partially offset by an unfavorable change in net program adjustments.
Bell backlog at the end of the second quarter was $5.3bn.
Revenues at Textron Systems were $293m, down $40m from last year’s second quarter due to lower volume of $44m, primarily reflecting the impact of the U.S. Army’s withdrawal from Afghanistan on our fee-for-service and aircraft support contracts.
Segment profit of $42m was down $6m, compared with the second quarter of 2021, primarily due to the lower volume and mix.
Textron Systems’ backlog at the end of the second quarter was $2.1bn.
Industrial revenues were $871m, up $77m from last year’s second quarter, primarily due to a favorable impact from pricing and higher volume and mix, principally in the Specialized Vehicles product line.
Segment profit of $41m was up $9m from the second quarter of 2021, primarily due to the higher volume and mix.
Textron eAviation segment revenues were $5m in the second quarter of 2022 and segment loss was $8m in the quarter.
Finance segment revenues were $14m, and profit was $10m. (Source: BUSINESS WIRE)
29 Jul 22. Telit and Thales announce the creation of a leading western IoT solutions provider: Telit Cinterion.
- Telit and Thales jointly announce intended transaction whereby Telit incorporates Thales’s cellular IoT products business and goes forward under Telit leadership
- Combined company, to be called Telit Cinterion, is a leading western IoT provider, supporting customers with expanded IoT portfolio of products, services, and bundles comprising hardware, software and connectivity solutions
- Telit Cinterion will leverage Thales’s expertise in IoT security across SIM technology, modules and connectivity
- Through this intended transaction, Thales will transfer its cellular IoT modules assets to Telit and receive a 25% stake in Telit Cinterion
Telit, a global leader in the Internet of Things (IoT), and Thales (Euronext Paris: HO), a global leader in Aerospace, Defence and Digital Identity & Security, today jointly announced they have entered into a binding agreement under which Telit intends to acquire Thales’s cellular IoT products. The intended transaction includes Thales’s portfolio of cellular wireless communication modules, gateways, and data (modem) cards, ranging from 4G LTE, LPWAN to 5G.
The intended transaction establishes California-based Telit Cinterion as a leading Western provider of IoT solutions, expanding the company’s presence in growing industrial IoT segments and end markets including payment systems, energy, e-health and security. It also enhances the company’s ability to respond more expertly to growing demand for cybersecure IoT solutions in modules and cellular connectivity, thanks to leading technologies from Thales.
Paolo Dal Pino, Telit’s CEO, remarked: “Innovation, scale and efficient IoT solutions are key for success. This transaction with Thales is arguably the most impactful one for Telit competitiveness. While it will boost our ability to address customer needs more precisely from a richer portfolio, it will also enable us to deliver all new offerings derived from the experience, expertise and the DNA of two companies that have made security and quality part of their brand promise from the very beginning.”
Philippe Vallée, Thales’s EVP Digital Identity and Security, added: “The Thales and Telit combination brings together complementary strengths. The business will provide a unique value proposition in a highly competitive global IoT market and will allow Thales to focus its investments on its three core activities in aerospace, defence and security and digital identity and security. The new combination will rely on a unique set of expertise brought by Thales and Telit employees. It will also benefit from leveraging both companies’ strong and complementary product portfolio and Thales’s experience in cellular connectivity.”
With approximately 550 employees across 23 countries, Thales’s cellular IoT module business services many of the world’s top brands. It generated sales of more than €300m in 2021. The intended transaction will be submitted to the relevant Thales works councils. With the transaction expected to close in Q4 2022, subject to entering a binding share transfer agreement, regulatory approvals and other customary closing conditions, Thales becomes a shareholder in Telit Cinterion, controlled by asset manager DBAY Advisors and led by Telit CEO Paolo Dal Pino.
Thales’s cellular IoT products business and Telit’s customers and partners will continue to receive the outstanding supply, support and service to which they have been accustomed. All relevant parties will receive regular updates throughout the transaction, upon closing and ensuing integration periods.
To sharpen focus on Industrial IoT, Telit Cinterion plans to spin off the automotive IoT unit after closing.
Deutsche Bank acted as exclusive financial advisor to Thales, and Rothschild & Co as exclusive financial advisor to Telit, DBAY Advisors.
Telit simplifies onboarding of connected ‘things’ with a portfolio of enterprise-grade wireless communication and positioning modules; cellular MVNO connectivity plans and management services; edge and cloud software, and data orchestration, IoT and Industrial IoT platforms. With over two decades of pioneering IoT innovation experience, Telit delivers award-winning, secure, integrated IoT solutions for many of the world’s largest enterprises, OEMs, system integrators and service providers, so they can connect and manage IoT at any scale.
For more information, follow us on YouTube, Twitter, LinkedIn and Facebook or visit www.Telit.com.
Copyright © 2022 Telit Communications LTD. All rights reserved. Telit, Telit OneEdge and all associated logos are trademarks of Telit Communications LTD and its affiliated companies in the United States and other countries. Other names used herein may be trademarks of their respective owners.
28 Jul 22. Italy’s Leonardo confirms guidance as defence spending rises. Italy’s Leonardo confirmed (LDOF.MI) on Thursday its full-year guidance on the back of increasing profit margins and rising orders in all of its units, as demand for weapons surged globally after Russia’s invasion of Ukraine.
New orders grew 9.4% year-on-year to 7.3bn euros ($7.4bn) in the first six months of the year, with volumes increasing significantly, in all of its business areas and despite “no jumbo orders”, the group said in a statement.
“The increased demand for security linked to the current geopolitical environment creates positive prospects for the defence sector,” Leonardo added, though warning that issues linked to the supply chain and the labour market could be challenging.
Earnings before interest, taxes and amortisation (EBITA) were up 4.5% to 418m euros in the period to June.
The rise in EBITA was more pronounced, up 11.8%, if compared to a restated value which accounts for the recurring costs and charges the group had to face due to the COVID emergency.
“In addition to the positive business and financial performance in the first half, (Leonardo) finalised important long-term strategic transactions,” Chief Executive Alessandro Profumo said, citing the acquisition of Germany’s Hensoldt (HAGG.DE) and the listing of U.S. unit DRS. The state-controlled group has said it expects new orders for 15bn euros and revenues between 14.5bn and 15bn by the end of 2022. EBITA is forecast between 1.18bn and 1.22bn and free cash flow is seen more than doubling to about 500m euros at the end of December. ($1 = 0.9842 euros) (Source: Google/Reuters)
28 Jul 22. Leonardo working on OTO Melara “combination”, needs new govt first – CEO. Leonardo (LDOF.MI) is still at work to reach a deal for its OTO Melara cannon maker unit, but will need a new government in Rome to be able to finalise any potential agreement, the Italian defence group’s CEO said on Thursday.
State-controlled Leonardo had indicated late last year it was ready to put on the block both OTO Melara and its naval torpedo unit Wass, but it has failed so far to reach a deal for either business.
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Given that the sector is strategic, any transactions need clearing by the government. Italy holds general elections on Sept. 25.
Reuters reported in June that Germany’s Rheinmetall (RHMG.DE) had sent an offer for a minority stake in OTO Melara valuing the whole business at almost 430m euros ($462m). The government had been informed but Rheinmetall still needed to secure Rome backing. read more
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CEO Alessando Profumo told analysts in a post-results call that any potential deal would not be a disposal, adding Leonardo was looking for a “combination that will create a stronger player”, without elaborating. (Source: Reuters)
28 Jul 22. MILDEF Interim report for January – June 2022.
Financial development Q2 2022
- Net sales increased by 46% to SEK 118.5m (81.3).
- Gross margin amounted to 49% (48).
- Adjusted EBITDA amounted to SEK -9.6m (-2.3), equivalent to an adjusted operating margin of -8.1% (-2.8).
- Operating profit (EBIT) amounted to SEK -15.0m (-10.5) including non-recurring items of SEK 0.0m (-3.4).
- Order intake increased by 41% to SEK 256.4m (181.7).
- Operating cash flow amounted to SEK -49.0m (-0.1).
Financial development January – June 2022
- Net sales increased by 96% to SEK 259.8m (132.3).
- Gross margin amounted to 48% (43).
- Adjusted EBITDA amounted to SEK -3.3m (-17.2), equivalent to an adjusted operating margin of -1.3% (-13.0).
- Operating profit (EBIT) amounted to SEK -14.8m (-33.4) including non-recurring items of SEK 0.0m (-7.1).
- Order intake increased by 38% to SEK 360.3m (261.2).
- Order backlog increased by 44% to SEK 913.4m (634.0).
- Operating cash flow amounted to SEK -5.6m (-20.1).
Summary of significant events in the second quarter, April – June 2022
- MilDef signed a 7-year framework agreement with the Swedish Defence Materiel Administration (FMV). The value of the agreement’s future deliveries is estimated to reach SEK 870m.
- MilDef won its single largest contract in the USA, with an order value of around SEK 50m.
- The 2022 Annual General Meeting decided to distribute a dividend to the shareholders of SEK 0.75 per share for the 2021 financial year.
Summary of significant events after the end of the period
- At the beginning of July MilDef won an order with the Norwegian Defence Materiel Agency (FMA). The total value of the order is SEK 82m.
- MilDef entered into a credit facility agreement with SEB bank for a total of SEK 325m to finance future acquisitions.
Statement by Björn Karlsson, CEO MilDef Group
96% growth in first six months of the year
“During the second quarter MilDef was navigating its growth journey with confidence in a time that was otherwise one of uncertainty. Strong key ratios for the period are valuable, but the Company’s long-term contracts are more important for future growth. During the period, MilDef signed a framework agreement with the Swedish Defence Materiel Administration (FMV) worth SEK 870m and the Company secured its largest contract to date in the USA, worth just over SEK 50m. In addition, MilDef won a digitalization contract in Norway worth SEK 82m. All of these events, as well as Sweden’s upcoming NATO membership, are important milestones which I will come back to shortly.”
As reported earlier, we have not seen any direct effects yet from increased defense appropriations on our order intake. Our assessment is that this is still one or more quarters away. We increased our order intake by 41% to SEK 256.4 during the quarter, compared with the same period the previous year. Compared with the first quarter of 2022, the order intake is up 147%.
Although the second quarter’s operating profit of SEK -9.6m (adjusted EBITDA) is weaker than the comparison quarter, significant improvements were delivered in the first half of the year. The adjusted EBITDA was SEK -3.3m compared with SEK -17.2m, and EBIT was SEK -14.8m compared with SEK -33.4m. The lower operating profit for the second quarter, despite the growth achieved, is explained by continuing investments in staffing and in strengthening our delivery capacity to handle future growth. The costs for these are according to plan. Despite the current inflation situation, MilDef has maintained its gross margin – both in the first half of the year (48% compared with 43% in 2021) and in the second quarter (49% compared with 48% in 2021).
Growth despite ongoing component shortage
The previously reported challenges associated with the component shortage remain, but their impact is reduced by the new business opportunities and significantly improved key ratios that the Company is delivering. MilDef’s half-year sales growth totals 96%, compared with the same period in 2021, with organic growth of 34%.
A Swedish framework agreement worth more than money
In May MilDef signed its to date largest framework agreement with the Swedish Defence Materiel Administration – a 7-year agreement with an estimated value of SEK 870 m. But the benefits of this agreement go beyond financial value. With a period of growth on the way, it is of utmost importance to have stable business relationships that facilitate cooperation, partnership and an open dialogue. We have now established these for our entire offering – a combination of hardware, software and digitalization services – for the long term.
MilDef is becoming an increasingly integrated part of the growth that is planned within the Swedish armed forces, where digitalization and tactical IT are key components.
Our biggest contract in the USA
Our US operations are clearly experiencing their best year since the start in 2016. The single largest contract for MilDef’s North American operations was won in June and is worth over SEK 50 m. Through one of the largest military defense groups, MilDef will deliver 400 customized laptops for use by the US army. Significantly growing order intake indicate that MilDef’s US operations will generate solid growth and strong operating profit for 2022.
New digitalization order in Norway
Just after the end of the second quarter the Norwegian FMA (equivalent to Sweden’s FMV) placed a tactical IT order worth SEK 82m for delivery in 2022 and 2023. Digitalization of the Norwegian armed forces is based on cutting-edge technology and uses the full spectrum of MilDef’s portfolio. MilDef already has a multi-year framework agreement with FMA and thus also a long-term strategic partnership.
Focusing on an active acquisition agenda
During the period we intensified our efforts to acquire companies that will help MilDef to grow in prioritized areas. No transactions have been executed, but we are optimistic about the work that has been done and the opportunities that exist to build an even stronger MilDef in cooperation with other excellent companies. Our objective to implement at least one acquisition a year is still in place. With a balance sheet that remains strong, we have the financial muscle to act when we identify opportunities.
Value of NATO membership
In answer to questions I’ve been asked about the significant of Sweden’s NATO membership, I’ve mentioned, among other things, a hidden currency where the Swedish defense industry has an opportunity to complement its cutting-edge technology with international security policy capital that we have not had in the past. The new dynamic in MilDef’s markets requires and deserves its own strategy to maximize the potential that exists in cooperation between NATO countries.
In this context, I would like to highlight our OneCIS software, a system for automated rollout of IT systems. OneCIS is equipped with special compatibility support for Federated Mission Networking (FMN), a NATO standard for interoperability between nations. We see great potential here for internationalization of our unique offering. We need to remember that the NATO issue is part of a larger context in which Russia continues its full-scale invasion of Ukraine while causing human suffering and enormous problems – both financially and from a security policy perspective. The consequences of this are deeply negative, long-lasting and hard to grasp.
The ways in which we are trying to contribute in a positive way in this global crisis are as follows: We are doing our utmost to securely and reliably deliver a technical advantage to total defense – for Sweden, the Nordics, the EU and NATO.
27 Jul 22. Boeing profit drops as charges in defence unit offset commercial jet recovery. Aerospace group expects to achieve positive free cash flow in 2022. Boeing took a combined charge of $240m related to programmes in its defence and space business. Boeing reported encouraging trends in its commercial aeroplane segment, but further charges in its defence business weighed on net profits in the latest quarter. Helped by an increase in deliveries of the 737 Max, chief executive David Calhoun said Boeing remained on track to achieve positive free cash flow in 2022, but combined charges of $400m, mostly related to two of its defence programmes, reflected continued production challenges at the company. The aerospace giant reported total revenue of $16.7bn, down 2 per cent from a year ago, and below Wall Street forecasts for almost $17.6bn. Net income dropped 72 per cent to $160mn. Adjusted for pension payments and other expenses, Boeing suffered a loss of 37 cents a share, missing analysts’ estimates of an adjusted loss of 14 cents a share, as polled by Refinitiv. In the company’s defence, space and security unit, where revenues fell 10 per cent from a year ago to $6.2bn, Boeing took a $147m charge related to its MQ-25 refuelling aircraft. It also took a $93m charge related to Starliner, its space capsule that successfully completed a round trip to the International Space Station in May. Costs also increased for the T-7A Red Hawk pilot trainer and Air Force One, chief financial officer Brian West told analysts on Wednesday. Last quarter, the defence segment had more than $1bn in charges because of these two programmes. Many defence deals are structured at fixed prices, meaning that any cost overruns are Boeing’s to shoulder. “We continue to work through hurdles on our fixed-price development [defence] programmes amidst a challenging macroeconomic environment, which had an impact on our results,” Calhoun wrote in a message to employees. Elsewhere, commercial aeroplane deliveries rose 53 per cent, driven by the 737 Max aircraft, which had been grounded after two fatal crashes in 2018 and 2019. But Boeing now expects deliveries of the 737 Max in 2022 “to be closer to the low 400s”, down from a forecast of about 500 made in January. The company has been unable to resume 737 Max deliveries to China, where the aircraft has not been cleared to fly, even though half the inventory is destined to be shipped there. Resumption “does require a bit of a thawing and geopolitical break between China and the US”, Calhoun told analysts. Crucially, “we continue to experience real constraints” in the supply chain, particularly for “engines, raw materials and semiconductors”, the chief executive added. In an encouraging sign, Calhoun said the company was “in the final stages of preparing to restart deliveries” of its 787 wide-body jet as it works towards Federal Aviation Administration certification following production flaws. (Source: Google/FT.com)
28 Jul 22. France’s Safran posts higher H1 profit despite supply chain woes. French jet engine maker Safran (SAF.PA) posted higher first-half earnings and raised some forecasts as airlines bought more spare parts to serve a recovery in air travel – but acknowledged fragile supply chains were causing problems in its factories.
The world’s third largest aerospace contractor, whose products range from wheels to wiring, and commercial engines to thrusters for satellites, said recurring operating profit rose 59% to 1.047bn euros ($1.1bn) as revenue rose 24% to 8.56bn.
It upped full-year forecasts for revenue to 18-2-18.4bn euros from 18.0-18.2bn and for free cashflow to 2.4bn euros from 2.0bn. First-half free cashflow more than doubled to 1.665bn euros as advances poured in for Rafale fighters, for which Safran builds the M88 engines.
Together with General Electric (GE.N), Safran co-owns the world’s largest civil jet engine maker by the number of units sold, CFM International, which supplies Airbus and Boeing. Both planemakers are receiving fewer engines than planned this year.
“Our ability to ramp up production rates is somewhat constrained by a fragile supply chain as the world emerges from the pandemic and we are working hard to ensure timely delivery to airframers,” Safran Chief Executive Olivier Andries said.
Safran is also cutting costs to counter inflation.
The widely watched civil aftermarket – or demand for spare parts and services – rose 47% in dollar terms in the first half.
That is mainly the result of demand for spare parts for the CFM56, the predecessor to the LEAP engine which powers all Boeing 737 MAX and about half of the Airbus A320neo fleet for which CFM competes with Pratt & Whitney (RTX.N).
Demand for travel on these workhorse, medium-haul jets is increasing everywhere except China, Safran said, adding that demand related to wide-body jets was growing more slowly.
Delayed deliveries of Boeing’s 787 squeezed Safran’s wiring and landing gear activities, though Boeing said on Wednesday it was close to ending a year-old drought in 787 deliveries. Safran’s loss-making aircraft seats business is also suffering from supply chain gaps and cost overruns, while a recovery in other cabin equipment is on track, it said.
Safran’s engine partner GE on Tuesday posted higher quarterly profit as aviation’s partial recovery buoyed its jet engine business, but the Boston-based conglomerate said it too was having to deal with supply-chain issues. R ($1 = 0.9800 euros) (Source: Reuters)
27 Jul 22. VSE Corporation Announces Second Quarter 2022 Results.
Revenue Increased 38% Year-over-Year; Record Setting $105m Revenue Quarter for Aviation.
VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a leading provider of aftermarket distribution and maintenance, repair and overhaul (“MRO”) services for land, sea and air transportation assets for government and commercial markets, today announced results for the second quarter 2022.
SECOND QUARTER 2022 RESULTS
(As compared to the Second Quarter 2021)
- Total Revenues of $241.7m increased 38%
- GAAP Net Income of $7.5m increased $19.9m
- GAAP EPS (Diluted) of $0.59 increased $1.56
- Adjusted EBITDA of $22.9m increased 21%
- Adjusted Net Income of $9.6m increased 25%
- Adjusted EPS (Diluted) of $0.75 increased 25%
Aviation segment revenue increased 121% year-over-year to a record $105.0m in the second quarter 2022. The year-over-year revenue improvement was attributable to share gains within the Business and General Aviation (B&GA) market and continued commercial end-market recovery. Aviation distribution and repair revenue increased 177% and 37%, respectively, in the second quarter 2022 versus the prior-year period. The Aviation segment reported operating income of $6.5m in the second quarter, compared to an operating loss of $22.3m in the same period of 2021. Segment adjusted EBITDA increased by 198% in the second quarter to $11.9m, versus $4.0m in the prior-year period. Adjusted EBITDA margin was 11.4%, an increase of 293 basis points versus the prior-year period, driven by execution of new program awards and end-market recovery.
Fleet segment revenue increased 12% year-over-year to $64.7m in the second quarter 2022. Revenues from commercial customers increased 48% on a year-over-year basis, driven by growth in commercial fleet demand and e-commerce fulfillment sales. Commercial revenue represented 40% of total Fleet segment revenue in the period. Segment adjusted EBITDA increased 10% year-over-year to $7.7m, while adjusted EBITDA margin was 12.0%, flat with the prior-year period.
Federal and Defense segment revenue increased 3% year-over-year to $72.0m in the second quarter 2022, driven by growth in the Foreign Military Sales (FMS) program with the U.S. Navy along with a steady increase in Defense Logistics Agency (DLA) distribution services, offset by the expiration of a certain U.S. Army contract. Segment adjusted EBITDA declined 58% year-over-year to $3.4m in the period, given a higher mix of cost-plus contracts. Funded backlog decreased 1% year-to-date to $183m while bookings decreased 9% year-to-date, primarily driven by the expiration of a certain U.S. Army contract.
During the second quarter, VSE continued to effectively execute its business transformation roadmap, with a focus on developing a market-leading aftermarket parts distribution and MRO services platform supporting higher-growth end-markets. Building long-term sustainable revenue channels, growing adjusted EBITDA, and optimizing legacy programs remain key focus areas for value creation. The Company’s second quarter results demonstrate strong execution on recently awarded new business, organic investments to drive growth, and the continued optimization of legacy programs.
Building Long-Term, Sustainable Revenue Channels:
- During the second quarter, Aviation achieved its first-ever quarter exceeding $100M of revenue, growing more than 121% year-over-year, supported by growth in distribution and MRO revenue channels, and growth within both commercial and business and general aviation (B&GA) customer markets.
- More than 50% of Aviation second quarter revenue is a result of the successful implementation of more than $1.5B of new awards signed in the last 18 months, and contributions from the 2021 Global Parts Group Inc. acquisition. VSE Aviation successfully launched new programs with a specific focus on the B&GA market. These programs expanded VSE’s B&GA customer base from 100 in 2020 to over 3,000 unique B&GA customers in 2022. Further, all programs and integrations are performing ahead of initial expectations.
- Aviation MRO revenue increased 37% versus the prior-year period, driven by higher B&GA flight activity and maintenance, as well as recovery within commercial MRO customers. New, organic repair capability additions and share of wallet expansion in the B&GA space contributed to this outperformance.
- During the second quarter, Fleet continued to generate strong revenue growth across its commercial fleet and e-commerce fulfillment businesses, resulting in a 48% year-over-year increase in commercial revenue. The continued diversification strategy is reflected in commercial revenue now comprising 40% of Fleet segment total revenue, up from 10% in 2019. These results are driven by sustained program execution and strong end-market demand. The Fleet segment continues to expand operations and supply chain capabilities to meet growing demand.
- The Federal and Defense segment won $4m of new Distribution and Logistics Agency (DLA) awards in the second quarter, representing a 2.5x book-to-bill ratio year-to-date. This revenue channel builds on new capabilities, allowing the Federal and Defense segment to serve its customers by providing more comprehensive solutions for their global supply chain.
Growing Adjusted EBITDA:
- Aviation segment adjusted EBITDA grew to $11.9m in the second quarter, an increase of 198% versus the prior-year period. Increased MRO activity continued to drive margin expansion. Commercial MRO revenue remains at approximately 75% of 2019 levels, in line with commercial airline end-market activity, and is anticipated to recover by 2024.
- Fleet segment adjusted EBITDA grew to $7.7m, up 10% year-over-year. The segment’s strong focus on commercial growth continues, underpinned by robust class 4-8 and heavy-duty vehicle aftermarket activity.
Optimizing Legacy Programs:
- Fleet segment’s USPS revenue grew to $36.9m, up 4% in the second quarter versus the prior-year period. Servicing all vehicle types in the 230,000+ USPS vehicle fleet, the Fleet segment continues its long history of serving as an essential part of USPS maintenance operations in support of their complex supply chain.
- Federal and Defense revenue on the Naval Sea Systems Command (NAVSEA) contract increased 43% year-over-year in the second quarter of 2022, primarily resulting from efforts related to Foreign Military Sales (FMS) support in Bahrain.
“During the second quarter, we continued to advance our growth and diversification strategy, while demonstrating focused execution on new program wins, both of which contributed to strong year-over-year growth in revenue and profitability,” stated John Cuomo, President and CEO of VSE Corporation. “We delivered another record-revenue quarter within both Aviation and commercial Fleet, leveraging our customer-centric aftermarket distribution and MRO value proposition. Our results for the first half of 2022 demonstrate the strength and resiliency of the VSE team, and the demand for our products and services in the growing, fragmented markets we serve.”
“Our Aviation segment reported a record quarter, as revenue increased 121% on a year-over-year basis to more than $105m, while adjusted EBITDA margin increased 293 basis points to 11.4% in the second quarter,” continued Cuomo. “This performance was supported by a combination of recent market share gains, together with improved demand within both commercial aviation and B&GA end-markets. The Aviation segment continues to execute with excellence on both legacy and new programs wins.”
“Within our Fleet segment, commercial revenue increased 48% on a year-year basis in the second quarter, supported by demand across both our commercial fleet and e-commerce channels,” continued Cuomo. “We will continue to make investments in this growing market, as our customers value our team’s ability to solve their complex supply chain distribution challenges.”
“We generated strong momentum across all of our business segments in the first half of 2022,” stated Stephen Griffin, CFO of VSE Corporation. “Our second quarter adjusted EBITDA of $22.9m, up $4.0m year-over-year, supports the growth and profitability outlook we communicated in first quarter 2022,” continued Griffin. “As previously communicated, we expect to generate positive cash flow for the full year, as well as a corresponding improvement in net leverage. We look forward to updating shareholders on the progress of our strategy during our Investor Day later this year.”
FINANCIAL RESOURCES AND LIQUIDITY
As of June 30, 2022, the Company had $91m in cash and unused commitment availability under its $350m revolving credit facility maturing in 2024. As of June 30, 2022, VSE had total net debt outstanding of $308m and $84.3m of trailing-twelve months adjusted EBITDA. (Source: BUSINESS WIRE)
27 Jul 22. Amphenol Reports Second Quarter 2022 Record Results.
Second Quarter 2022 Highlights:
- Record sales of $3.137bn, up 18% in U.S. dollars and organically compared to the second quarter 2021
- Record GAAP diluted EPS of $0.76, up 29% compared to prior year
- Record Adjusted Diluted EPS of $0.75, up 23% compared to prior year
- Operating Margin of 20.7%
- Record Operating and Free Cash Flow of $543m and $452m
- Announces acquisition of NPI Solutions, Inc.
- Returned $305m to shareholders through dividends and buybacks
Amphenol Corporation (NYSE: APH) today reported second quarter 2022 results.
“We are pleased to have closed the second quarter of 2022 with record sales and Adjusted Diluted EPS, both of which exceeded the high end of our guidance,” said Amphenol President and Chief Executive Officer, R. Adam Norwitt. “Sales increased from prior year by a strong 18%, supported by robust growth across nearly all our end markets, as well as contributions from the Company’s acquisition program which were offset by the impact of the strengthening US dollar. Despite facing continued inflationary pressures and supply chain disruptions, we realized strong profitability, with Operating Margin reaching 20.7% and Adjusted Diluted EPS growing by an impressive 23% from prior year. We are very proud of the Company’s outstanding performance in this challenging and dynamic quarter.”
“During the second quarter, Amphenol continued to deploy its financial strength in a variety of ways to increase shareholder value. The Company purchased 2.7m shares of its common stock for $186m. The Company also paid dividends of $119m, resulting in total capital returned to shareholders during the second quarter of $305m.”
“We remain focused on expanding our growth opportunities through a deep commitment to developing enabling technologies for customers across our served markets, an ongoing strategy of market and geographic diversification and an active and successful acquisition program. To that end, we are excited to have closed on the acquisition of NPI Solutions, Inc. (“NPI”) in June. Based in Morgan Hill, California and with annual sales of approximately $65m, NPI is a manufacturer of cable assemblies and value-add interconnect assemblies for industrial applications with a particular focus on semiconductor manufacturing equipment. The acquisition further strengthens our capabilities and enhances our product offerings in the industrial market, while adding another talented management team to the Amphenol family.”
Third Quarter 2022 Outlook
The current market environment remains highly uncertain, with continued supply chain and inflationary challenges as well as ongoing disruptions associated with the COVID-19 pandemic. Assuming conditions do not meaningfully worsen and assuming constant exchange rates, for the third quarter of 2022, Amphenol expects sales to be in the range of $3.040bn to $3.100bn, representing 8% to 10% growth over the third quarter of 2021. Adjusted Diluted EPS is expected to be in the range of $0.73 to $0.75, representing 12% to 15% growth over the third quarter of 2021.
“Despite the ongoing challenges and uncertainties around the world, we are very pleased with the Company’s strong second quarter results,” Mr. Norwitt continued. “The revolution in electronics continues to accelerate, creating exciting and dynamic long-term growth opportunities for Amphenol across each of our diversified end markets. Our ongoing drive to leverage our competitive advantages and create sustained financial strength, as well as our initiatives to expand our product offerings, both organically and through our acquisition program, have created an excellent base for the Company’s future performance. I am confident in the ability of our outstanding entrepreneurial management team to continue to dynamically adjust to changing market conditions, to capitalize on the wide array of growth opportunities that arise in all market cycles and to continue to generate sustainable long-term value for our shareholders and other stakeholders. Most importantly, I remain truly grateful to our team for their extraordinary efforts in navigating the myriad of challenges around the world and continuing to strongly support our customers and drive outstanding operating performance.” (Source: BUSINESS WIRE)
27 Jul 22. Teledyne Technologies Reports Second Quarter Results.
- Record second quarter sales of $1,355.8m, an increase of 20.9% compared with last year
- Organic sales growth was 8.2% including the negative impact of foreign currency translation
- Record second quarter GAAP diluted earnings per share of $3.59
- Non-GAAP diluted earnings per share of $4.43
- Revising full year 2022 GAAP earnings outlook to $15.13 to $15.45 diluted earnings per share, compared with the prior outlook of $15.34 to $15.66, and full year non-GAAP earnings outlook to $17.45 to $17.70, compared with the prior outlook of $17.75 to $18.00
- Quarter-end Consolidated Leverage Ratio declined to 2.5x
- Capital deployment included repurchases of fixed-rate debt and the recent acquisition of a majority interest in NL Acoustics
Teledyne today reported second quarter 2022 net sales of $1,355.8m, compared with net sales of $1,121.0m for the second quarter of 2021, an increase of 20.9%. Net income was $171.3m ($3.59 diluted earnings per share) for the second quarter of 2022, compared with $64.7m ($1.48 diluted earnings per share) for the second quarter of 2021, an increase of 164.8%. The second quarter of 2022 net sales included $167.6m in incremental net sales from the acquisition of FLIR Systems, Inc. (“FLIR”), which was acquired midway through the second quarter of 2021. The second quarter of 2022 also reflected net discrete income tax benefits of $1.0m compared with net discrete income tax expense of $4.1m for the second quarter of 2021. The second quarter of 2022 included $51.3m of pretax acquired intangible asset amortization expense and $0.6m of acquisition related tax expense. Excluding these charges, non-GAAP net income for the second quarter of 2022 was $211.3m ($4.43 diluted earnings per share). In the second quarter of 2021, Teledyne incurred pretax expenses of $150.7m, which included $42.3m of transaction and integration-related costs, $52.2m for the settlement of FLIR employee and director stock awards, $32.8m in acquired intangible asset amortization expense and $23.4m in acquired inventory step-up expense. Excluding these charges, non-GAAP net income for the second quarter of 2021 was $201.0m ($4.61 diluted earnings per share). Operating margin was 16.9% for the second quarter of 2022, compared with 9.3% for the second quarter of 2021. Excluding acquisition-related transaction and purchase accounting expenses, non-GAAP operating margin for the second quarter of 2022 was 20.7%, compared with 22.8% for the second quarter of 2021.
“The demand environment for Teledyne remained strong in the second quarter. In fact, we achieved record quarterly orders and ended the quarter with over $3.0bn of backlog. Consolidated book to bill was 1.08x with particular strength at Teledyne FLIR, where orders were 25% greater than sales,” said Robert Mehrabian, Chairman, President and Chief Executive Officer. “Despite increased foreign currency headwind, organic sales growth accelerated and was 8.2% in the second quarter. Free cash flow improved from the first quarter, but inventory levels remained elevated to counter supply chain risk. Given the recent and significant appreciation of the U.S. dollar, ongoing supply chain constraints and inflation, we believe it is prudent to revise our reported revenue and adjusted earnings outlook modestly for the remainder of the year. Nevertheless, we continue to see mid-single digit organic sales growth in the second half and full year 2022 including the impact of foreign currency translation. We remain highly confident in our balanced and resilient mix of commercial and government businesses across a broad range of geographies and end markets. Finally, having reached our targeted leverage range, we are again pursuing acquisitions and are pleased to have recently completed our first bolt-on acquisition at Teledyne FLIR.”
Review of Operations
Comparisons are with the second quarter of 2021, unless noted otherwise. In the current year, gain (loss) on debt extinguishment was presented as separate line item on the income statement. Prior year amounts were reclassified to conform to current year presentation.
The Digital Imaging segment’s second quarter 2022 net sales were $775.8m, compared with $579.5m, an increase of 33.9%. Operating income was $117.9m for the second quarter of 2022, compared with $84.6m, an increase of 39.4%.
The second quarter of 2022 net sales increase included $167.6m of incremental net sales from the FLIR acquisition as well as strong organic sales growth from industrial and scientific sensors and cameras and X-ray products. The increase in operating income in the second quarter of 2022 reflected the contribution from the FLIR acquisition as well as the impact of organic sales growth during the period. Operating income in the second quarter of 2021 reflected the concentration of FLIR net sales which were disproportionately higher than the operating expenses following the May 2021 closing date. The second quarter of 2021 also included $24.0m of FLIR integration-related costs and $23.4m in FLIR inventory step-up expense. Acquired intangible amortization expense for the second quarter of 2022 was $46.4 m compared with $27.4m and reflected the timing of the FLIR acquisition midway into the second quarter of 2021.
The Instrumentation segment’s second quarter 2022 net sales were $312.5m, compared with $291.1m, an increase of 7.4%. Operating income was $73.6m for the second quarter of 2022, compared with $64.6m, an increase of 13.9%.
The second quarter of 2022 net sales increase resulted from higher sales across all external product lines. Sales of marine instrumentation increased $10.4m, sales of test and measurement instrumentation increased $8.3m, and sales of environmental instrumentation increased $2.7m, respectively. The increase in operating income primarily reflected the impact of higher sales and favorable product mix.
Aerospace and Defense Electronics
The Aerospace and Defense Electronics segment’s second quarter 2022 net sales were $168.8m, compared with $152.4m, an increase of 10.8%. Operating income was $44.1m for the second quarter of 2022, compared with $28.4m, an increase of 55.3%.
The second quarter 2022 net sales reflected higher sales of $12.3m for aerospace electronics and $4.1m for defense electronics. Operating income in the second quarter of 2022 reflected the impact of higher sales and favorable product mix, primarily driven by the stronger sales of aerospace electronics in the quarter.
The Engineered Systems segment’s second quarter 2022 net sales were $98.7m, compared with $98.0m, an increase of 0.7%. Operating income was $8.6m for the second quarter of 2022, compared with $11.0m, a decrease of 21.8%.
The second quarter 2022 net sales reflected higher sales of $0.9m for energy systems, partially offset by lower sales of $0.2m for engineered products. The lower sales for engineered products primarily reflected decreased sales from electronic manufacturing services products and space programs, partially offset by higher sales from marine and other manufacturing programs. Operating income in the second quarter of 2022 primarily reflected the impact of decreased sales and lower gross margins for electronic manufacturing services products.
Additional Financial Information
Cash provided by operating activities was $196.9m for the second quarter of 2022, compared with $211.3m. The second quarter of 2022 reflected higher purchases of inventories and higher income tax payments compared with the second quarter of 2021. Depreciation and amortization expense for the second quarter of 2022 was $82.7m compared with $59.7m and reflected the timing of the FLIR acquisition midway into the second quarter of 2021. Non-cash inventory step-up expense related to FLIR was $23.4 m for the second quarter of 2021, and there was no comparable amount recorded in the second quarter of 2022. Capital expenditures for both the second quarter of 2022 and 2021 were $20.8m.
Teledyne repaid $187.0m of debt during the second quarter of 2022, including making $112.0m of floating rate debt payments which reduced its term loan due May 2026 by $80.0m and reduced its outstanding credit facility balance by $32.0m. In addition, during the second quarter of 2022, Teledyne repurchased and retired $75.0m of its Fixed Rate Senior Notes due August 2030 and April 2031, recording a $10.6m non-cash gain on the extinguishment of this debt. During the second quarter of 2022, Teledyne terminated and re-designated certain cross-currency swaps, receiving $18.3m of cash which is included in cash provided by financing activities. Teledyne received $4.8m from the exercise of stock options in the second quarter of 2022 compared with $5.1m.
As of July 3, 2022, net debt was $3,666.9m which is calculated as total debt of $3,945.7m, net of cash and cash equivalents of $278.8m. As of January 2, 2022, net debt was $3,624.7m and included total debt of $4,099.4m, net of cash and cash equivalents of $474.7m. As of July 3, 2022, approximately $1,004.0m was available under the $1.15bn credit facility, after reductions of $125.0m in outstanding borrowings and $21.0m in outstanding letters of credit.
The effective tax rate for the second quarter of 2022 was 22.7%, compared with 29.8%. The second quarter of 2022 reflected net discrete income tax benefits of $1.0m, which included a $1.8m income tax benefit related to share-based accounting. The second quarter of 2021 reflected net discrete income tax expense of $4.1m, which included $11.5m expense related to foreign tax rate changes, partially offset by a $5.3m income tax benefit related to the release of a valuation allowance and a $2.1m income tax benefit related to share-based accounting. Excluding the net discrete income tax items in both periods, the effective tax rates would have been 23.1% for the second quarter of 2022, compared with 25.3%.
Corporate expense decreased to $14.7m for the second quarter of 2022, compared with $84.2m. Corporate expense in the second quarter of 2021 included $70.5m of transaction costs related to the FLIR acquisition. Stock option expense was $3.6m for both the second quarter of 2022 and 2021. Non-service retirement benefit income was $2.9 m for the second quarter of 2022 compared with $2.8m. Interest expense, net of interest income, was $22.5 m for the second quarter of 2022 compared with $21.2m.
Based on its current outlook, the company’s management believes that third quarter 2022 GAAP diluted earnings per share will be in the range of $3.36 to $3.54 and full year 2022 GAAP diluted earnings per share will be in the range of $15.13 to $15.45. The company’s management further believes that third quarter 2022 non-GAAP diluted earnings per share will be in the range of $4.20 to $4.35 and full year 2022 non-GAAP diluted earnings per share will be in the range of $17.45 to $17.70. The non-GAAP outlook excludes acquired intangible asset amortization for all acquisitions and benefits or charges for acquisition-related tax matters. The company’s annual expected tax rate for 2022 is 23.1%, before discrete tax items. (Source: BUSINESS WIRE)
28 Jul 22. Cohort plc announced its unaudited results for the year ended 30 April 2022.
- Trading performance in line with previous guidance
- Divisional overview:
o MASS was the largest profit contributor and improved on last year
o Another year of growth at MCL
o Stronger result at SEA
o Strong first full year contribution from ELAC, ahead of expectations
o As expected, weaker result at EID
o Disappointing performance at Chess, but 2022/23 has started better
- Net funds at £11m, as previously disclosed. Robust cash generation
- Strong order intake of £186.4m (2021: £180.3m)
- Total dividend increased by 10%
- Record year end order book of £291.0m: underpins nearly £128m of current year revenue, representing 78% (2021: 64%) of current consensus forecast for the year
o Coverage has risen to 90% in early July 2022 following contract wins in first two months
- Performance for 2022/23 expected to be ahead of 2021/22
- Expect lower (but positive) net funds at 30 April 2023 as a result of planned capital expenditure and expansion of working capital
Commenting on the results, Nick Prest CBE, Chairman of Cohort plc said: “Performance for 2021/22 was in line with our revised expectations, with robust cash generation, and a record closing order book with strong cover for the coming financial year. It is hard to predict the duration of the conflict in Ukraine and any direct benefit to the Group’s short-term trading. In the longer term we believe a more sustained growth in defence budgets is likely, both in NATO and in other parts of the world where security threats remain. Overall, we continue to expect that our trading performance for 2022/23 will be ahead of that achieved for the year ended 30 April 2022. Our order book is not only growing in value, but its longevity continues to increase. We now have orders across the Group stretching out to 2030. We are optimistic that the Group will make further progress in 2023/24, based on current orders for long-term delivery and on our pipeline of opportunities.”
27 Jul 22. Rheinmetall cuts sales forecast on car sector woes. German arms maker Rheinmetall (RHMG.DE) lowered its sales guidance on Wednesday in light of persistently high risks in global automotive production, the company said. It now expects organic sales growth in the current fiscal year of around 15%, at the lower end of its previously set guidance range of 15-20%. Rheinmetall confirmed its previous earnings guidance for fiscal 2022, with the operating result expected to improve and the operating margin expected to come in at over 11%. The German automotive industry has been struggling with supply-chain disruptions and semiconductor shortages for some time, with the fallout of the war in Ukraine and recent COVID-19 lockdowns in China only adding to the sector’s woes. (Source: Reuters)
28 Jul 22 BAE Systems plc Half-yearly Report 2022 Results in brief.
Financial performance measures as defined by the Group1
Financial performance measures derived from IFRS2
Six months ended 30 June 2022
Charles Woodburn, Chief Executive, said: “Trading in the first half has been in line with expectations delivering strong order intake and good operational performance. Our diverse portfolio, together with our focus on programme execution, cash generation and efficiencies are helping us navigate the current macroeconomic challenges and position us well for sustained top line and margin growth in the coming years. We see further opportunities to enhance the medium- and long‑term outlook as our customers commit to increased defence spending to address the elevated threat environment. The positive outcome of the UK pension triennial review, along with our performance and confidence in the outlook enable us to maintain our guidance, continue to invest in our business and progress our ESG agenda whilst increasing returns to our shareholders. Good operational performance, execution on our strategy and confidence in the outlook enables us today to announce a 5% increase in the interim dividend as well as initiating a new, three-year share buyback programme for up to £1.5bn.”
Guidance for 2022
The Group’s full year 2022 guidance across all metrics is unchanged from that provided at the Preliminary announcement on 24 February 2022, which was provided on the basis of an exchange rate of $1.38: £1 for the year.
- Sales +2% to +4% (2021: £21,310m)
- Underlying EBIT +4% to +6% (2021: £2,205m)
- Underlying EPS3 +4% to +6% (2021: 47.8p)
- 2022 Free Cash Flow (FCF) >£1bn
- Cumulative FCF 2022-2024 >£4bn
Should the current dollar rate persist, this will be a tailwind to earnings with sensitivity to EPS being around 1 pence for every 5 cent movement.
The guidance is based on the measures used to monitor the underlying financial performance of the Group. Reconciliations from these measures to the financial performance measures derived from International Financial Reporting Standards for the six months ended 30 June 2022 are provided in the Group financial review on pages 12 to 18.
Financial performance measures as defined by the Group1
- Sales increased by 2.8% on a constant currency basis5 to £10.6bn.
- Underlying EBIT of £1,112m increased by 4.4% on a constant currency basis5.
- Underlying earnings per share increased by 11.9% to 24.5p3, excluding the impact in 2021 of the one-off tax benefit. The Group’s underlying effective tax rate for the first half of the year was 19%.
- Free cash inflow of £123m (2021 £461m inflow, including £250m receipt in respect of the Filton and Broughton site disposals).
- Net debt (excluding lease liabilities) at £3,135m (£2,160m at 31 December 2021).
- Order backlog of £52.7bn (£44.0bn at 31 December 2021).
Financial performance measures derived from IFRS2
- Revenue increased by 4.3% to £9.7bn.
- Operating profit decreased by 21.1% to £1,028m.
- Basic earnings per share decreased to 19.6p (2021 31.3p).
- Net cash inflow from operating activities of £493m (2021 £623m inflow).
- Order book of £42.5bn (£35.5bn at 31 December 2021).
The directors have declared an interim dividend of 10.4p per share in respect of the half year ended 30 June 2022. This dividend will be payable on 30 November 2022. The directors have also approved a new share buyback programme of up to £1.5bn over the next three years, which will commence immediately.
The Group’s share of the accounting net post-employment benefits obligations has improved by £3.0bn moving from a deficit as of 31 December 2021 of £2.1bn to a surplus of £0.9bn, which is presented after deducting withholding tax which would be levied prior to the future refunding of any surplus.
- We monitor the underlying financial performance of the Group using alternative performance measures. These measures are not defined in International Financial Reporting Standards (IFRS) and, therefore, are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. Accordingly, the relevant IFRS measures are also presented where appropriate. For alternative performance measure definitions see glossary on page 9.
- International Financial Reporting Standards.
- A one-off tax benefit of £94m was recognised in 2021, in respect of agreements reached regarding the exposure arising from the April 2019 European Commission decision regarding the UK’s Controlled Foreign Company regime. Growth rate disclosed excludes the impact of the 2021 one-off tax benefit.
- Interim dividends declared (see note 7).
- Current period compared with prior period translated at current period exchange rates.
Operational and strategic key points
- Closely engaged with our global customers to provide on-going support wherever requested.
- Delivering on programme specific mission critical requirements of our customers.
- Kept an agile and flexible business response to the ever-evolving situation.
- Focus remained on employee safety and well-being whilst maintaining delivery on our customer commitments.
Group Portfolio actions
- UK Triennial pension review completed.
- Acquisition of Bohemia Interactive Simulations (BISim) completed in March.
- Agreement signed in July for the sale of BAE Systems’ financial crime detection business from Cyber & Intelligence, with completion expected in the next few months.
- Reflecting the changes in operational reporting lines effective from the beginning of the year, the BAE Systems Australia business has moved from being reported in the Air segment to the Maritime segment. Additionally, the Group has established a new Digital Intelligence business, bringing together the non-US digital and data capabilities to further strengthen how we deliver these services and capabilities to our customers. Digital Intelligence is reported within the Cyber & Intelligence segment.
- Cumulatively, over 1,100 electronic warfare systems have been delivered on the F-35 programme.
- Deliveries continue of next-generation EW Eagle Passive Active Warning Survivability System to support upgrade of US Air Force F-15 platform and testing on F-15E and F-15EX test aircraft.
- Awarded $176m (£145m) for Airborne High Frequency Radio Modernization programme.
- Selected to design, test and supply energy management components for GE Aviation’s megawatt class hybrid electric propulsion system supporting NASA’s Electrified Powertrain Flight Demonstration project.
Platforms & Services
- M109A7 programme is consistently delivering at full rate production levels and received a $299m (£246m) contract.
- Deliveries of all five variants of Armored Multi-Purpose Vehicles to the US Army continue.
- Amphibious Combat Vehicle deliveries to US Marine Corps continue, with design and development under way for new mission variants.
- Bradley vehicle upgrade work continues on contracts for 459 vehicles.
- BAE Systems Hägglunds is ramping to perform on multiple contracts for CV90 and BvS10.
- CV90 wins Slovakia’s competitive evaluation for its Infantry Fighting Vehicle programme.
- US Ship Repair profitability was significantly impacted by the COVID-19 pandemic, but continues to recover.
- Production on F-35 is at full rate levels. 74 rear fuselage assemblies have been completed in the period.
- The Qatar Typhoon and Hawk programme is progressing well. The first Typhoon deliveries will commence in the second half of 2022.
- Work continues on the Typhoon programme and the production programme has been extended further following the award in June of 20 further aircraft for Spain.
- The future electronically scanned European Common Radar Solution continues in line with the Typhoon plan.
- The sector continues to work closely with industry partners and the UK government to continue to fulfil contractual support arrangements in Saudi Arabia.
- The Future Combat Air System (FCAS) programme continues as anticipated with the initial Concept & Assessment Phase contract underway across national and international partners.
- Saudi British Defence Co-operation Programme five-year renewal support funding agreed.
- £2.5bn of further contract funding awarded as part of Delivery Phase 3 for the Dreadnought programme.
- New Submarine Build Capability contract maintains BAE Systems’ role as the lead for the design and build of nuclear submarines within the UK submarine enterprise.
- The Submersible Ship Nuclear Replacement (SSNR) programme has moved into its Functional Design phase.
- Ongoing support to the Royal Navy’s Portsmouth-based flotilla and the operation of HM Naval Base Portsmouth under the UK Ministry of Defence’s Future Maritime Support Programme, including support to the UK’s two aircraft carriers.
- The Hunter Class Frigate programme in Australia continues to make strong progress through the prototyping phase.
- HMAS Toowoomba, the fifth ANZAC Class frigate to move through the ANZAC Mid Life Capability Assurance Programme (AMCAP) was returned to the Australian Navy following successful completion of the dry production phase of AMCAP.
- Mobilisation of the Challenger 3 and Mechanised Infantry Vehicle contracts secured by the RBSL joint venture is advancing well.
- Transition to the Next Generation Munitions Supply Solution (NGMS) contract is ongoing.
Cyber & Intelligence
Intelligence & Security
- Strong operational performance and integration of Bohemia Interactive Simulations progressing well.
- Awarded an 18-year contract to continue supporting the sustainment of U.S intercontinental ballistic missiles (ICBMs).
- Won a $699m (£575m), five-year contract for operations, maintenance, and management services for the US Army’s Defense Supercomputing Resource Center.
- Ongoing integration and transformation of the newly-formed business.
- Increasing underlying profitability supported by strong programme execution, productivity and cost base optimisation.
- Continued integration and growth of the acquired In-Space Missions business, a UK-based satellite and satellite systems company, to accelerate our space capabilities.
- Repayment of £400m bond in June from existing resources.
28 July 22. Orders roll in for BAE Systems. Dividend upped by 5 per cent to 10.4p.
- Three-year, £1.5bn buyback announced
The standout number in BAE Systems’ (BA) half-year results which perhaps best tells the tale of the changed nature of the world since it last reported numbers is the increase in new orders – up 70 per cent, to £18bn, taking its order backlog up to a record high of £52.7bn.
Of course, some of this was anticipated and is part of longer term programmes – for instance, £4.9bn-worth of contracts providing training and support to the Royal Saudi Airforce and £1.8bn of orders linked to the European MBDA missile systems joint venture, in which BAE Systems has a 37.5 per cent stake.
Many of the countries in which the company operates “have announced or are making plans to increase spending to counter the elevated and evolving threat environment”. In Europe, particularly, BAE Systems describes shifts in planned defence spending since Russia’s invasion of Ukraine in late February as being “profound,” given Germany’s pledge to meet its NATO commitment of allocating 2 per cent of its budget to defence spending and the hurried attempts to admit Sweden and Finland into the alliance.
The sales figure favoured by BAE Systems increased by 5 per cent year-on-year to £10.6bn, which was 1 per cent above consensus forecasts, analysts at Berenberg said. Underlying earnings per share was also 6 per cent ahead of consensus forecasts at 24.5p. Even its triennial pension review turned up good news, moving from a deficit of £1.9bn on assumptions made in 2019 to a surplus of £900mn this time around.
The company left its full-year guidance, of a 2-4 per cent increase in sales and a 4-6 per cent rise in underlying earnings, unchanged and said it expects to generate £1bn of free cash flow this year, despite higher investment in R&D to keep pace with a threat environment that is “constantly evolving”.
Little wonder, then that after increasing its interim dividend payout by 5 per cent the company felt confident enough to launch a £1.5bn, three-year share buyback programme.
BAE Systems’ shares have jumped by around 40 per cent so far this year to trade at 14.5x consensus forecast earnings, higher than their five-year average of 12x but by no means prohibitive. More importantly, the orders currently rolling in, and its embedded position within existing defence programmes, should allow the company “to grow our sales profitably and increase cash conversion in the coming years”, it said. We agree and maintain our buy. Last IC View: Buy, 632p, 24 Feb 2022. (Source: Investors Chronicle)
28 Jul 22. Northrop misses sales estimates as supply chain issues hamper production. Northrop Grumman Corp (NOC.N) missed estimates for quarterly sales on Thursday, as sustained labor shortages and global supply chain issues dent deliveries for the U.S. weapons maker.
An acute labor shortage triggered by the Omicron variant of COVID-19 at the beginning of 2022 continues to hamper production and deliveries across the aerospace sector. read more
Labor challenges were broad-based, Northrop’s Chief Financial Officer Dave Keffer said in an interview with Reuters, but “after a fairly flat first quarter in terms of net adds to our headcount, we did add a thousand net employees in the second quarter, particularly late in the quarter,” he said.
Northrop’s total sales fell to $8.80bn in the second quarter, below Wall Street estimates of $9.07bn, as delays from suppliers in deliveries of essential parts for the company’s products continued.
Sales at the company’s aeronautics unit, which makes military planes, were down 13% at $2.53bn in the quarter ended June 30.
Northrop, which led the industry team that made NASA’s James Webb telescope, reported an 8.4% rise in revenue in its space systems business, party offsetting a fall in total revenue.
Keffer said recent Pentagon contract awards for missile sensing and tracking as well as communications satellites were “good examples of our work in national security space where we really see an outstanding demand environment.”
Earlier this month, the U.S. House of Representatives passed a bill paving the way for the defense budget to exceed $800 billion next year, authorizing $37bn in spending on top of the record $773bn proposed by President Joe Biden.
The Falls Church, Virginia-based company reaffirmed its full-year outlook for the second time as it expects the labor market to start easing in the second half, projecting sales between $36.20 billion and $36.60 billion, and transaction-adjusted earnings per share in the range of $24.50 to $25.10.
Last week, Northrop’s peer Lockheed Martin Corp (LMT.N) lowered its 2022 revenue outlook as sales of its F-35 jets took a dip.
Northrop’s quarterly adjusted net earnings fell to $946m, or $6.06 per share, from $1.04bn, or $6.42 per share, a year ago.
28 Jul 22. Honeywell (NASDAQ: HON) today announced results for the second quarter, which met or exceeded the company’s guidance. The company also raised the low end of its full-year organic growth and adjusted EPS guidance ranges and raised its full-year segment margin guidance range.
- Sales Growth and Margin Expansion in Aerospace, Honeywell Building Technologies, and Performance Materials and Technologies
- Reported Sales up 2%, Organic Sales up 4%, Exceeding High End of Guidance Range
- Earnings Per Share of $1.84, Adjusted Earnings Per Share1 of $2.10, Exceeding High End of Guidance Range
- Orders up 12%; Backlog2 up 12% to $29.5bn, Led by Our Long-Cycle Businesses
- Deployed $2.3bn in Capital, including $1.4bn to Share Repurchases
The company reported second quarter organic sales growth of 4%, or 7% excluding the impact of lower COVID-mask volumes and the wind down of operations in Russia,3 exceeding the high end of the company’s guidance range. Operating margin contracted by 20 basis points to 17.9% primarily due to an additional charge related to Russia. Segment margin expanded by 50 basis points to 20.9%, or 80 basis points excluding the year-over-year impact of Quantinuum. Adjusted earnings per share1 was $2.10, up 4% year over year and 2 cents above the high end of the company’s guidance range. Operating cash flow was $0.8bn, down 38% year over year, and free cash flow was $0.8bn, down 43% year over year, due to higher working capital as expected ahead of anticipated volume growth in the back half.
“Honeywell met or exceeded guidance for all metrics in the second quarter despite a challenging macroeconomic backdrop,” said Darius Adamczyk, chairman and chief executive officer of Honeywell. “Organic sales grew 4% led by strong double-digit growth in our commercial aerospace, building products, advanced sensing technologies, and advanced materials businesses. Aerospace, Honeywell Building Technologies, and Performance Materials and Technologies all grew organically and expanded margins in the quarter. While we recognize macro crosscurrents are clouding the global economic growth outlook, we remain confident in our demand outlook for the back half of the year with orders up 12% year over year and closing backlog2 of $29.5bn, up 12% year over year, led by our long-cycle businesses, which will help drive growth for quarters to come. We once again demonstrated our operational agility by staying ahead of the inflation curve, enabling us to expand margins and beat the high end of our adjusted EPS guidance. We also continued to execute on our capital deployment strategy, deploying $2.3bn in the quarter, including $1.4bn of share repurchases.”
Adamczyk continued, “As we have shown, our rigorous operating principles enable us to mitigate external challenges and deliver results that maximize shareholder value. The continued recovery of our key commercial aviation, defense, energy, and non-residential end markets, our commercial excellence, and our technologically differentiated portfolio of solutions will allow us to capitalize on near-term growth opportunities and remain highly resilient amid ongoing uncertainties.”
As a result of the company’s second-quarter performance and management’s outlook for the remainder of the year, full-year sales are now expected to be in the range of $35.5bn to $36.1bn, up 5% to 7% organically, or up 7% to 9% excluding the one-point impact of COVID-driven mask sales declines and one-point impact of lost Russian sales. Segment margin expansion4 is now expected to be in the range of 30 to 70 basis points, including an approximate (30) basis point impact from investments in the Quantinuum business. Adjusted earnings per share4,5 is now expected to be in the range of $8.55 to $8.80. Operating cash flow is expected to be in the range of $5.5bn to $5.9bn, and free cash flow is expected to be $4.7 bn to $5.1bn.
Honeywell sales for the second quarter were up 2% year over year on a reported basis and 4% year over year on an organic basis.
Aerospace sales for the second quarter were up 5% year over year on an organic basis. Commercial aftermarket demand improved in the second quarter as flight hours continued to increase, resulting in approximately 20% growth in both air transport aftermarket and business and general aviation aftermarket. Business and general aviation original equipment grew double digits, while air transport original equipment grew over 25% year over year as we continue to see strong build rates. Growth in commercial aerospace was partially offset by lower defense volumes. Segment margin expanded 80 basis points to 26.5% in the second quarter, led by commercial excellence partially offset by cost inflation.
Honeywell Building Technologies sales for the second quarter were up 14% on an organic basis year over year driven by strength in both building products and building solutions. Orders were up double digits for the second consecutive quarter, led by building projects, building management systems, and security products. Segment margin expanded 110 basis points to 23.5% due to pricing actions partially offset by cost inflation.
Performance Materials and Technologies sales for the second quarter were up 10% on an organic basis year over year despite an approximately 3% headwind from Russia. Sales growth was led by solid pricing and greater volumes in advanced materials, as well as strength in petrochemical catalyst shipments and thermal solutions, which both grew over 20% in the quarter. This growth was partially offset by lower equipment volumes and lost Russian sales in UOP. Segment margin expanded 150 basis points to 22.3%, primarily driven by price actions partially offset by cost inflation.
Safety and Productivity Solutions sales for the second quarter decreased 10% on an organic basis year over year as strength in advanced sensing technologies and productivity solutions and services was offset by lower personal protective equipment and warehouse automation volumes. Excluding the impact of lower COVID-mask volumes, organic sales decreased by 5% in the quarter. Advanced sensing technologies grew 25% and productivity solutions and services grew 19%, demonstrating excellent execution in a difficult supply constrained environment. Segment margin contracted 140 basis points to 12.6%, primarily driven by lower volume leverage, cost inflation, and a one-time write-down of excess COVID-related mask inventory, partially offset by pricing and a favorable licensing agreement with a competitor. (Source: PR Newswire)
28 Jul 22. Babcock starts to turn the ship around.
Asset sales bring in £447m to help shore up balance sheet
- Contract backlog grows by £1.7bn to £9.9bn
- Underlying operating margin widens to 5.8 per cent
Things are looking brighter for defence contractor Babcock (BAB) than they were a year ago, when a reassessment of contract profitability and carrying values on its balance sheet led to it incurring an impairment charge of £1.3bn, contributing to a pre-tax loss of £1.8bn.
Chief executive David Lockwood set about repairing its fragile balance sheet, pledging to raise £400m from asset disposals.
It has exceeded this, raising £447mn from four sales – Frazer Nash Consultancy for £291mn, the power business for £50mn, an oil and gas arm for £10mn and its 15.4 per cent share of plane-to-plane refuelling business Air Tanker Holdings for £96mn.
The sales have helped to bring its covenant net debt (excluding leases) down by over £200m to £617m, or 1.8x cash profit – below a target it had set of 2x.
The reduction gives it some leeway to fix other things – gearing could temporarily rise again to over 2x cash profit to allow it to make catch-up payments of £100mn on its pension deficit and to pay back a further £45mn of debts owed to suppliers.
Lockwood said the turnaround had made progress “despite geopolitical volatility and a challenging economic environment”.
That volatility has also been a blessing, though – allowing it to win more work as governments allocate more money to defence spending.
Its contract backlog has grown by £1.7bn to £9.9bn as it secured several big wins, including a £3.5bn five-year contract to provide engineering support to the Royal Navy and a €500m (£418m), 11-year deal to provide training to French air defence customers.
It’s also managed to do this profitably, growing its underlying operating margin by 30 basis points to 5.8 per cent.
In past articles, we’ve said we’d find it difficult to change our sell recommendation until a clearer picture emerged of its long term future. The work it has done so far, and the improved outlook for the defence industry, has given it a much better chance of securing that.
It is by no means guaranteed, though, which is why the company’s share price rebound of 7 per cent so far this year has lagged peers. Around half of its total borrowings are short-term, including a €550m bond due in October. The asset sales mean it has the cash to pay this off in full if it sees fit but they also mean its growth prospects are more limited. Move to hold. (Source: Investors Chronicle)
28 July 22. Babcock International Group PLC full year results for the year ended 31 March 2022.
David Lockwood, Chief Executive Officer, said: “The first year of our turnaround has seen us deliver as we said we would, despite geopolitical volatility and a challenging economic environment. We have successfully stabilised the business; strengthening our balance sheet and driving cultural change across the Group. The demand for our solutions remains strong, with significant contract wins in the year, and we see more opportunities ahead. When we perform as we should, we offer our customers availability, affordability and capability; enabling them to deliver for their stakeholders in this uncertain world. I am encouraged by our progress this year, but I am determined to continue to drive increasingly profitable growth and improved cash flow in FY23 and beyond.”
Financial highlights (note ii)
- Contract backlog up 21% to £9.9bn, including £3.1 bn of the c.£3.5 bn Future Maritime Support Programme (FMSP) contract
- Revenue up 5% organically to £4,102 m, excluding one-off CPBS adjustments of £88 m in FY21. Increase driven by recovery from COVID-19 impacts in the prior year across the Group and growth in Marine and Nuclear
- Underlying operating profit of £237.7m was up 13% organically, excluding one-off CPBS adjustments of £250m in FY21. This reflects revenue growth, COVID-19 recovery, and improved performance from our new operating model, including achieving our target savings of £20m
(£40m annualised). Improved profitability in Marine, Land and Aviation offset a decline in Nuclear, due to £22 m contract write-off
- Group underlying operating margin increased 30bp to 5.8%
- Statutory operating profit of £226.8m compares to a £1,736.7m loss in FY21, which included £1,815. m of charges from the CPBS review
- Underlying basic earnings per share of 30.7p (FY21: (24.6)p) up significantly, reflecting higher profitability and one-off CPBS adjustments in the prior year
- Underlying free cash flow of £(191.3)m better than expected due to lower net capex and a cash tax inflow from the settlement of open years with the authorities. Also, the favourable timing of customer receipts and prepayments, allowed us to accelerate the unwind of the past practice of period end working capital management
- Balance sheet strengthened: Net debt to EBITDA (covenant basis) down to 1.8x (FY21: 2.4x) in line with FY22 target of below 2.0x
Strategy – strong progress on FY22 priorities
- Portfolio – focused the group: Generated gross proceeds of £447m from four completed disposals, above our targeted minimum of
£400m. Disposal of part of our Aerial Emergency Services (AES) business signed in July 2022 after year end for a cash consideration of c.£115m. Footprint expanded in Australia with acquisition of the remaining 50% interest in our Australian Naval Ship Management (NSM) joint venture
- Operating model – implemented: Streamlining processes and structures and improving controls drove a c.£20 m benefit in FY22
(c.£40m annualised), as expected. Internal business reporting lines flattened. We continue to focus on improved execution to deliver efficiencies
- People strategy – culture transforming: New people strategy developed, including roll-out of Group Principles and agile working
- ESG strategy – developing: Expanded our corporate commitments to incorporate broader environmental targets and created new policies and guidance to support the governance of our sustainability programmes
- Growth – developing opportunities: Good order momentum including the signing of export agreements with Indonesia and Poland for the Arrowhead 140 (AH140) naval ship design (the base for the UK’s Type 31 programme) and new defence contracts in Australia, France and the UK (see below).
- Contract backlog at 31 March 2022 was up 21% at £9.9bn (FY21 restated: £8.2bn). FY21 was restated for the removal of pass-through revenue of around £0.6bn. Excluding disposals of around £0.7bn, backlog up 32%
- Significant wins:
o FMSP, a c.£3.5bn five-year contract award (of which c.£3.1bn has been booked), continues our through-life, naval engineering support for the UK Royal Navy across ships, submarines and naval bases
o Contract for defence aviation training activities in France worth up to €500 m over 11 years (including options). c.€170m booked c.£100m, nine-year contract to deliver the new Defence Strategic Radio Service (DSRS) for critical UK MOD operations c.£100 m, 13-year, contract for the design, manufacture, delivery, commissioning and in-service support to the Maritime Electronic Warfare Systems Integrated Capability (MEWSIC)
o 10-year contract to provide dry-dock maintenance for the Royal Navy’s Queen Elizabeth class (QEC) aircraft carriers
o Naval exports – secured two design contracts for our AH140 frigate: a two-ship licence order for Indonesia and selection by Poland for it MIECZNIK (Swordfish) three-ship frigate programme
o Selected by the Australian Government as the preferred tenderer to upgrade and sustain the Defence High Frequency Communication System (DHFC) to support the Australian armed forces over at least the next decade
- Market: The market backdrop is very dynamic. Rising geopolitical uncertainty has led to increased national defence requirements and potentially more opportunities, while macro factors such as inflation and supply chain stress increase delivery challenges
- Inflation: The Group’s main exposure to inflation is via rising employment costs. We have sought to manage the short-term impact of inflation through an innovative and progressive pay deal with our UK workforce (details on page 5), which gives us visibility around the near-term cost base. We plan to offset this and other input cost inflation through operating improvements and efficiencies as we further embed our new operating model
- Free cash flow: We have taken material steps to address the balance sheet and quality of our cash flows. We expect cash outflows associated with items such as pension deficit catch-up payments and the unwind of historical management of working capital at period end to reduce significantly in FY23
- Balance sheet: Having achieved our previous target of leverage under 2.0x, we are now implementing a medium-term gearing ratio target of 1.0x to 2.0x, although we expect the ratio could increase above 2.0x in the short term. This reflects the pension deficit catch-up payments (c.£100m) and unwind of the remaining historical creditor deferrals (c.£45m), the bulk of which are expected within the first half of FY23
- •••• FY23 and beyond: The second year of our turnaround will build on the strategic actions taken in FY22, with a focus on execution and growth, including an expected c.£20 m further restructuring benefit. As we continue to make further operational progress through the disciplined execution of our strategy, the Board is confident of delivering on its expectations of increasingly profitable growth and improved cash flow for FY23 and into the medium term
28 July 22. Northrop Grumman Reports Second Quarter 2022 Financial Results.
- Awards of $13.0bn, Book to Bill of 1.48
- Backlog Increases 6% to $80bn During the Second Quarter
- Sales of $8.8bn
- Operating Margin Rate of 10.8 Percent, Segment Operating Margin Rate1 of 12.2 Percent
- Diluted Earnings per Share of $6.06
- 2022 Company-Level Guidance Unchanged for Sales, EPS, and Transaction-adjusted
Northrop Grumman Corporation (NYSE: NOC) reported second quarter 2022 sales of $8.8bn, as compared with $9.2bn in the second quarter of 2021. Lower sales reflect continued headwinds from the macroeconomic environment, including a tight labor market and extended material lead times, which are affecting the timing of sales. Second quarter 2022 net earnings totaled $946m, or $6.06 per diluted share, as compared with $1.0bn, or $6.42 per diluted share, in the second quarter of 2021. Second quarter 2022 net earnings reflect solid segment margins and lower sales as well as a $51m, or $0.33 per diluted share, reduction for negative returns on marketable securities related to our non-qualified benefit plans and other non-operating assets.
“Northrop Grumman’s strategy to provide differentiated solutions in our customers’ highest priority areas is delivering results. In the second quarter, we had outstanding bookings and backlog growth, and strong segment operating margins,” said Kathy Warden, chair, chief executive officer and president. “Demand for Northrop Grumman products and our operational performance remain strong. We are affirming our full year guidance, as we see the tight labor market, that has impacted our growth in the first half, beginning to ease in the second half of the year.”
Net earnings during 2022 and the second quarter of 2021 were not impacted by the sale of the company’s IT services business and do not include any transaction-related adjustments. Transaction-adjusted net earnings1 and transaction-adjusted EPS1 are measures the company uses to compare performance to prior periods and for EPS guidance.
Second quarter 2022 sales decreased $350 m due to lower sales at Aeronautics Systems, Defense Systems and Mission Systems, partially offset by 8 percent growth at Space Systems. Second quarter 2022 sales reflect continued headwinds from the macroeconomic environment, including a tight labor market and extended material lead times, which are affecting the timing of sales. Operating Income and Margin Rate Second quarter 2022 operating income decreased $90m, or 9 percent, primarily due to a $69m reduction in the FAS/CAS operating adjustment and lower sales. Second quarter 2022 operating margin rate declined to 10.8 percent due to the lower FAS/CAS operating adjustment, partially offset by lower unallocated corporate expense. Segment Operating Income and Margin Rate Second quarter 2022 segment operating income decreased $44m, or 4 percent due to lower sales. Second quarter 2022 segment operating margin rate was comparable to the prior year period and reflects higher operating margin rates at Mission Systems and Defense Systems, offset by lower operating margin rates at Space Systems and Aeronautics Systems. Federal and Foreign Income Taxes The second quarter 2022 ETR decreased to 17.7 percent from 20.4 percent in the prior year period. The second quarter 2021 ETR was impacted by a change made in tax revenue recognition on certain long term contracts, which increased taxable income in years prior to the 2017 Tax Cuts and Jobs Act at a rate above the current statutory rate. Cash Flows Second quarter 2022 net cash used in operating activities was $197m compared to net cash provided by operating activities of $1.0bn in the prior year period. This change reflects increases in trade working capital due, in part, to unexpected delays in the timing of customer payments near the end of the quarter, which pushed certain cash receipts into the early part of the third quarter. In the second quarter of 2022, the company made approximately $450 m of federal tax payments related to Section 174 of the Internal Revenue Code. Beginning in 2022, Section 174 requires research and development expenditures to be amortized over five years; however, this provision is being considered for deferral by Congress. In the second quarter of 2021, the company made $390m of tax payments related to the IT services divestiture. Second quarter 2022 transaction-adjusted free cash flow1 decreased $1.7 bn principally due to the decrease in net cash from operating activities described above
Awards and Backlog
Second quarter and year to date 2022 net awards totaled $13.0bn and $21.5bn, respectively, and backlog totaled $80.0bn. Significant second quarter new awards include $3.5bn for F-35 at Aeronautics Systems, largely related to Lots 15-17, $2.2bn for restricted programs (at Aeronautics Systems, Space Systems and Mission Systems), $2.1bn for GEM63 solid rocket boosters, largely related to Amazon’s Project Kuiper, and $0.5bn for Triton.
Segment Operating Results
Three Months Ended June 30
Second quarter 2022 sales decreased $379m, or 13 percent, due to lower volume in both Manned Aircraft and Autonomous Systems, including restricted programs, F-35, Global Hawk, and the NATO Alliance Ground Surveillance (AGS) program, as Full System Handover occurred early in the second quarter of 2022.
Second quarter 2022 operating income decreased $42m, or 14 percent, primarily due to lower sales. Operating margin rate decreased to 10.2 percent from 10.3 percent primarily due to lower net EAC adjustments, principally associated with restricted work and close-out of an international program, partially offset by a $38m gain on a property sale.
Three Months Ended June 30
Second quarter 2022 sales decreased $133m, or 9 percent, primarily due to completion of a Joint Services support program, lower scope on an international training program, and wind down of the UKAWACS and JSTARS programs.
Second quarter 2022 operating income decreased $9m, or 5 percent, due to lower sales, partially offset by a higher operating margin rate. Operating margin rate increased to 13.0 percent from 12.4 percent primarily due to improved performance in Battle Management and Missile Systems.
Three Months Ended June 30
Second quarter 2022 sales decreased $72m, or 3 percent, primarily due to lower volume on Navigation, Targeting and Survivability programs, the Joint Counter Radio-Controlled Improvised Explosive Device Electronic Warfare (JCREW) program, and airborne radar programs. These decreases were partially offset by an increase in restricted sales in the Networked Information Solutions business area and higher volume on Ground/Air Task-Oriented Radar (G/ATOR) and Surface Electronic Warfare Improvement Program (SEWIP).
Second quarter 2022 operating income increased $5m, or 1 percent, due to a higher operating margin rate. Operating margin rate increased to 16.4 percent from 15.8 percent principally due to a $33m benefit recognized in connection with a contract-related legal matter, partially offset by lower net EAC adjustments at Maritime/Land Systems and Sensors.
Three Months Ended June 30
Second quarter 2022 sales increased $231m, or 8 percent, primarily due to higher sales in the Launch & Strategic Missiles business area due to ramp-up on development programs, including a $123m increase on the Next Generation Interceptor (NGI) program and a $95m increase on the Ground Based Strategic Deterrent (GBSD) program. Sales in the Space business area were comparable with the prior year period and reflect higher volume on restricted programs and the Space Development Agency (SDA) Tranche 1 Transport Layer (T1TL) program, partially offset by lower volume on the James Webb Space Telescope after its successful launch in December 2021.
Second quarter 2022 operating income increased $9m, or 3 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 10.4 percent from 11.0 percent primarily due to higher volume on early-stage development programs, such as NGI and GBSD.
27 Jul 22. Airbus reports Half-Year (H1) 2022 results.
- 297(1) commercial aircraft delivered in H1 2022
- Revenues €24.8bn; EBIT Adjusted €2.6bn
- EBIT (reported) €2.6bn; EPS (reported) €2.42
- Free cash flow before M&A and customer financing €2.0bn
- A320 Family monthly production rate target of 75 for 2025 unchanged; adjustment to 2022 and 2023 ramp-up trajectory
- 2022 guidance updated to around 700 commercial aircraft deliveries
- 2022 guidance maintained for EBIT Adjusted and FCF before M&A and customer financing
Airbus SE (stock exchange symbol: AIR) reported consolidated financial results for the Half-Year (H1) ended 30 June 2022.
“Airbus delivered a solid H1 2022 financial performance in a complex operating environment, with the geopolitical and economic situation creating further uncertainties for the industry. The supply chain challenges are leading us to adjust the A320 Family ramp-up steps in 2022 and 2023, and we now target a monthly rate of 65 in early 2024. Our aircraft delivery target for 2022 has been updated accordingly. The earnings and free cash flow guidance are maintained, underpinned by the H1 financials,” said Guillaume Faury, Airbus Chief Executive Officer. “The Airbus teams are engaged with suppliers and partners to ramp up towards an A320 Family monthly production rate of 75 in 2025, backed by strong customer demand.”
Gross commercial aircraft orders increased to 442 (H1 2021: 165 aircraft) with net orders of 259 aircraft after cancellations (H1 2021: 38 aircraft). The order backlog amounted to 7,046 commercial aircraft on 30 June 2022. Airbus Helicopters booked 163 net orders (H1 2021: 123 units), including 14 Super Puma Family and in Q1 it was awarded the contract for the Tiger MkIII attack helicopter upgrade programme. Airbus Defence and Space’s order intake by value increased to €6.5bn (H1 2021: €3.5bn), corresponding to a book-to-bill ratio of around 1.3. Second quarter orders included the contract to deliver 20 latest generation Eurofighter jets to the Spanish Air Force.
Consolidated revenues totalled €24.8bn (H1 2021: €24.6 bn). A total of 297(1) commercial aircraft were delivered (H1 2021: 297 aircraft), comprising 25 A220s, 230 A320 Family, 13 A330s and 29 A350s. Revenues generated by Airbus’ commercial aircraft activities were broadly stable. Airbus Helicopters delivered 115 units (H1 2021: 115 units), with revenues rising by 6 percent mainly reflecting growth in services and a favourable mix in programmes. Revenues at Airbus Defence and Space increased 11 percent, mainly driven by the Military Aircraft business and following the Eurodrone contract signature in February. Four A400M airlifters were delivered in H1 2022.
Consolidated EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – was broadly stable at €2,645m (H1 2021: €2,703m).
EBIT Adjusted related to Airbus’ commercial aircraft activities was broadly stable at €2,276m (H1 2021: €2,291m). It included the non-recurring positive impact from retirement obligations recorded in Q1, partly offset by the impact from international sanctions against Russia which was reduced as compared to Q1 2022 following good progress on the remarketing of some aircraft. The net positive impact from these two non-recurring elements was largely offset by a less favourable currency hedging rate compared to H1 2021.
On the A320 programme, production is progressing towards a rate of 75 aircraft per month in 2025 as previously communicated. Given the current supply chain challenges, the Company is adapting the ramp-up trajectory and now targets a monthly rate of 65 in early 2024, around six months later than previously planned. The first flight of the A321XLR took place in June, representing an important milestone towards the aircraft’s entry-into-service that is expected to take place in early 2024. On widebody aircraft, the Company is exploring, together with its supply chain, the feasibility of further rate increases to meet growing market demand as international air travel recovers.
Airbus Helicopters’ EBIT Adjusted increased to €215m (H1 2021: €183m), partly driven by the growth in services and a favourable mix in programmes. It also reflects the non-recurring elements booked in Q1, including the positive impact related to retirement obligations.
EBIT Adjusted at Airbus Defence and Space decreased to €155m (H1 2021: €229m). This mainly reflects the impairment related to the Ariane 6 launcher delay, the impact of rising inflation in some long-term contracts across the Division’s portfolio and the consequences of international sanctions, partly offset by the positive impact related to retirement obligations booked in Q1.
On the A400M programme, development activities continue towards achieving the revised capability roadmap. Retrofit activities are progressing in close alignment with the customer. In Q2 2022, a charge of €0.2bn was recorded, mainly reflecting the updated assumptions of inflation on the launch contract. Risks remain on the qualification of technical capabilities and associated costs, on aircraft operational reliability, on cost reductions and on securing export orders in time as per the revised baseline.
Consolidated self-financed R&D expenses totalled €1,256m (H1 2021: €1,262m).
Consolidated EBIT (reported) amounted to €2,579m (H1 2021: €2,727m), including net Adjustments of €-66m.
These Adjustments comprised:
- €+226m related to the dollar pre-delivery payment mismatch and balance sheet revaluation, of which €+36m were in Q2;
- €-218m related to the A400M programme, of which €-217m were in Q2;
- €-33m related to the Aerostructures transformation in France and Germany, of which €-26m were in Q2;
- €-7m related to the A380 programme, of which €+4m were in Q2;
- €-34m of other costs including compliance, of which €-29m were in Q2.
The financial result was €107m (H1 2021: €-30m). It mainly reflects the positive net impact from the revaluation of certain equity investments, partially offset by the revaluation of financial instruments as well as the net interest result of €-136m. Consolidated net income(3) was € 1,901m (H1 2021: €2,231m) with consolidated reported earnings per share of €2.42 (H1 2021: €2.84).
Consolidated free cash flow before M&A and customer financing was €1,955m (H1 2021: €2,051m), reflecting the profit translated into cash. It also included a favourable timing of cash receipts and payments partly offset by an increase in inventory. Consolidated free cash flow was €1,646m (H1 2021: €2,012m). The 2021 dividend of €1.50 per share, or €1.2bn, was paid in Q2 2022 while pension contributions totalled €0.4bn in H1 2022. On 30 June 2022, the gross cash position stood at € 21.6bn (year-end 2021: €22.7bn) with a consolidated net cash position(4) of €7.2bn (year-end 2021: €7.7bn).
The liquidity position remains strong, standing at €27.6bn at the end of June 2022. In June, the Company bought back a portion of its bonds maturing between 2024 and 2028 for a total amount of €1bn to reduce the gross debt position, optimise the balance sheet and regain financial flexibility. In July, liquidity was further improved through the upsizing of the undrawn Revolving Syndicated Credit Facility from €6bn to €8bn, while the tenor was increased to 5 years with 2 extension options of 1 year. The pricing of this facility benefitted from improved conditions in the loan market and continues to be linked to sustainability criteria.
As the basis for its 2022 guidance, the Company assumes no further disruptions to the world economy, air traffic, the Company’s internal operations, and its ability to deliver products and services.
The Company’s 2022 guidance is before M&A.
On that basis,
- The Company now targets to deliver around 700 commercial aircraft in 2022.
- The Company maintains its target of around €5.5bn of EBIT Adjusted and around €3.5bn of Free Cash Flow before M&A and Customer Financing in 2022.
27 Jul 22. General Dynamics Reports Second-Quarter 2022 Financial Results.
- Net earnings of $766m on revenue of $9.2bn
- Operating margin 10.6%, up 20 bps year over year, 90 bps sequentially
- Diluted EPS of $2.75, up 5.4% year over year
- Continued strong Gulfstream demand
General Dynamics (NYSE: GD) today reported second-quarter 2022 net earnings of $766m on revenue of $9.2bn. Diluted earnings per share (EPS) were $2.75, a 5.4% increase from the year-ago quarter.
“Demand in the quarter was very strong in Aerospace, with margins showing steady improvement year over year.” said Phebe N. Novakovic, chairman and chief executive officer. “Our defense segments demonstrated solid operating performance and had several important wins.”
Net cash provided by operating activities in the quarter totaled $659 m. During the quarter, the company invested $224m in capital expenditures, paid $349m in dividends, and used $800m to repurchase shares, ending the quarter with $2.2bn in cash and equivalents on hand. For the first half of the year, net cash provided by operating activities totaled $2.6 bn, or 176% of net earnings.
Orders remained strong across the company with a consolidated book-to-bill ratio, defined as orders divided by revenue, of 1.1-to-1 for the quarter, with particular strength in the Aerospace segment driven by strong order activity for Gulfstream aircraft. In addition to company-wide backlog of $87.6bn, estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $38.7bn. Total estimated contract value, the sum of all backlog components, was $126.4bn at the end of the quarter.
Significant awards in the quarter for the three defense segments included $410m with a maximum potential value of $1.1bn from the U.S. Army to begin low-rate initial production (LRIP) of the Mobile Protected Firepower vehicle; $295m for various munitions and ordnance with additional option value of $465m; $525m from the Army to upgrade Stryker vehicles; $500m from the U.S. Navy for long-lead materials to support construction of two additional John Lewis-class (T-AO-205) fleet replenishment oilers; $355m to produce Abrams main battle tanks in the system enhancement package version 3 (SEPv3) configuration for Australia; $160m with a maximum potential value of $325m from the U.S. Space Development Agency to build and operate ground systems for the new low earth orbit (LEO) satellite network; $315m from the Navy for submarine industrial base development and expansion for the Columbia-class submarine program; a contract with a maximum potential value of $300 m for development and sustainment of applications and websites for the Administrative Office of the United States Courts; and $545 m for several key classified contracts.
27 Jul 22. General Dynamics revenues miss as profit rises on jet demand. Gulfstream jet maker General Dynamics Corp (GD.N) on Wednesday posted a 3.9% rise in second-quarter profit as business jet demand remained strong, but revenues missed forecasts as supply chain problems continued to hamper the defense industry.
Shares were up 1.6% in early trading after the Reston, Virginia-based company posted quarterly revenue of $9.2bn, a 0.3% drop over last year, missing Wall Street’s $9.4bn estimate.
Business jet demand in the quarter remained robust as wealthier passengers opted for charter planes to avoid flight cancellations from regular carriers. Virginia-based General Dynamics reaffirmed expectations it would deliver 123 aircraft in 2022, chief financial officer Jason Aiken said during a call with analysts.
Aiken also flagged a strong growth in flight service activity driving up revenue and the outlook for its aerospace business.
Meanwhile, the company faces a shortage of skilled labor to work in the U.S. Navy’s Virginia-class attack submarine program. “The supply chain has stumbled a little bit more,” said Aiken.
The company delivered 22 Gulfstream business jets, up from 21 jets a year earlier, showing some signs of supply chain recovery for that segment of the business.
Sales in its aerospace unit rose to $1.86bn from $1.62bn a year earlier, while overall revenue fell to $9.19bn from $9.22bn.
General Dynamics’ Combat Systems business unit which makes tanks, saw its revenue fall 12% compared to the same period a year ago.
Net earnings rose to $766m, or $2.75 per share, in the second quarter, from $737m or $2.61 per share, a year earlier.
Revenues at weapons makers are expected to increase in the coming years as military spending globally spurred by the conflict in Ukraine hits the bottom line. (Source: Reuters)
27 Jul 22. Thales acquires full ownership of Advanced Acoustic Concepts (AAC).
- Thales Defense & Security, Inc. (TDSI) has acquired full ownership of Advanced Acoustic Concepts (AAC), their joint venture with Leonardo DRS.
- As a US industry contractor, AAC has a history of providing successful, innovative systems and solutions across the US Navy’s Undersea Warfare domain.
- With AAC, TDSI will increase its engineering and industrial footprint in the US defense market, with reinforced US-based teams and capabilities.
Thales subsidiary TDSI has acquired full ownership of AAC, their joint venture with Leonardo DRS.
TDSI serves the defense, federal, and commercial markets as a US provider of mission-critical systems, providing innovative solutions for the ground tactical, airborne and avionics, naval/maritime, and security domains. As a subsidiary of Thales, TDSI operates in accordance with a Proxy Agreement approved by the US Department of Defense to mitigate concerns associated with Foreign Ownership, Control, or Influence (FOCI).
With a well-recognized technology portfolio, TDSI serves as a gateway, leveraging proven Thales solutions from around the world – such as combat management systems; airborne, ship and ground radars; helmet mounted displays; missile fuzes; and battlefield sensors – to address US requirements.
AAC is one of the main US technical players in the fields of advanced sonar, training and knowledge management systems. The company delivers modernization systems for the US Navy through an open business, open systems technology insertion model. With more than 200 employees, AAC generated $80 m (~€70 M) sales in 2021.
“AAC’s skills and experience in surface ship Anti-Submarine Warfare (ASW), airborne ASW, and mine countermeasures will strengthen our support of the US DOD,” said Mike Sheehan, CEO of Thales Defense & Security, Inc. “Further, since its formation, the company has achieved solid performance while supporting the needs of the US Navy. We expect AAC to continue this success under TDSI ownership.”
Financial terms of the deal are not being disclosed.
28 Jul 22. Thales makes deal meant to bolster foothold in US defense market. Thales Defense and Security has acquired full ownership of Advanced Acoustic Concepts in an effort to improve its position in the U.S. defense market.
AAC, a joint venture of Thales and Leonardo DRS, specializes in undersea warfare technology for the U.S. Navy and expands Thales’ naval work. Thales did not disclose the terms of the deal.
“AAC’s skills and experience in surface ship Anti-Submarine Warfare (ASW), airborne ASW, and mine countermeasures will strengthen our support of the U.S. [Department of Defense],” Mike Sheehan, the chief executive of Thales Defense and Security, said in a statement.
Advanced Acoustic Concepts has more than 200 employees and generated roughly $80m in 2021 revenue. The deal comes as the U.S. Army recently selected Thales, along with L3Harris Technologies, to provide radios in a potential $6.1bn radio contract. More than 1,100 radios have been ordered, according to the Army’s Program Executive Office for Command, Control and Communications-Tactical. (Source: Defense News Early Bird/Defense News)
27 Jul 22. Raytheon Technologies venture capital group invests in VerdeGo Aero. Raytheon Technologies’ (NYSE: RTX) corporate venture capital group, RTX Ventures, today signed an agreement to invest in VerdeGo Aero to accelerate the development of hybrid-electric propulsion technologies for advanced air mobility applications. This investment will also provide opportunities for VerdeGo Aero to collaborate with Pratt & Whitney on future product development.
Established in 2017, the Daytona Beach, Fla.-based company specializes in delivering powerplants that efficiently convert jet fuel or sustainable aviation fuel into electric power, enabling greater performance and mission capability for a wide range of electric aircraft segments including drones, electric vertical-take-off-and landing (eVTOL), short-take-off-and-landing (STOL) aircraft, regional aircraft, and high-speed VTOL airframes. VerdeGo Aero’s current hybrid powertrain programs range from 150kW up to multiple megawatts of continuous electrical output.
“Delivering sustainable aviation technologies to help our customers bend the emissions curve remains one of Raytheon Technologies’ most important priorities,” said Daniel Ateya, managing director of RTX Ventures. “Our investment represents one of the ways we’re working to deliver a more sustainable future.”
RTX Ventures is the lead investor in VerdeGo Aero’s $12m Series A funding round, which will support VerdeGo Aero’s expansion and development of its growing portfolio of hybrid-electric powertrain systems, including the VH-3 185kW powerplant. Other investors participating in the funding round include DiamondStream Partners, Avfuel Technology Initiatives Corporation, Seyer Industries, and Standish Spring Investments.
“VerdeGo Aero is excited about the opportunity to continue to develop technologies that convert aircraft engines into hybrid powerplants, and to expand our portfolio offerings and customer base,” said Eric Bartsch, CEO of VerdeGo Aero. “As VerdeGo continues its recruiting of technical and commercial aerospace experts, our growing team is looking forward to leveraging a strong relationship with Pratt & Whitney to address the needs of the hybrid-electric aircraft segment at multiple power levels.”
VerdeGo Aero is currently developing its third generation of full-scale hybrid-electric powerplant hardware, having already delivered pre-production powerplants for flight test operations. Employing a high-speed development culture, the company is significantly expanding its team of industry-leading electric propulsion experts, creating numerous opportunities for engineering, marketing, finance, and project management professionals working among a world-class team of innovators.
“VerdeGo Aero is helping to pioneer the emerging field of hybrid-electric propulsion technology, which has an important role to play in enabling the aviation industry’s goal of reaching net zero CO2 emissions by 2050,” said Graham Webb, chief sustainability officer at Pratt & Whitney. “This investment has promising potential to enhance our technology and capability in segments of our small engine business while moving quickly and nimbly to advance our hybrid-electric propulsion strategy.”
27 Jul 22. Boeing Reports Second-Quarter Results.
Second Quarter 2022
- Operating cash flow of $0.1bn; continue to expect positive free cash flow for 2022
- Increased 737 production to 31 per month; working with FAA on final actions to resume 787 deliveries
- Successfully completed CST-100 Starliner uncrewed Orbital Flight Test-2 (OFT-2)
- Revenue of $16.7bn; GAAP earnings per share of $0.32 and core (non-GAAP)* loss per share of ($0.37)
“We made important progress across key programs in the second quarter and are building momentum in our turnaround,” said Dave Calhoun, Boeing President and Chief Executive Officer. “As we begin to hit key milestones, we were able to generate positive operating cash flow this quarter and remain on track to achieve positive free cash flow for 2022. While we are making meaningful progress, we have more work ahead. We will stay focused on safety, quality and transparency, as we drive stability, improve performance, and continue to invest in our future.”
Operating cash flow improved to $0.1bn in the quarter, reflecting higher commercial deliveries and timing of receipts and expenditures.
Cash and investments in marketable securities decreased to $11.4bn, compared to $12.3bn at the beginning of the quarter, primarily driven by debt repayment. The company has access to credit facilities of $14.7bn which remain undrawn.
Total company backlog at quarter-end was $372bn.
Commercial Airplanes second-quarter revenue increased to $6.2bn, driven by higher 737 deliveries, partially offset by lower 787 deliveries. Operating margin of (3.9)% also reflects abnormal costs and period expenses, including higher R&D expense.
Boeing has nearly completed the global safe return to service of the 737 MAX and the fleet has flown more than 1.5m total flight hours since late 2020. The 737 production rate increased to 31 airplanes per month during the quarter.
On the 787 program, the company continues to work with the FAA to finalize actions to resume deliveries and is readying airplanes for delivery. The program is producing at a very low rate and will continue to do so until deliveries resume, with an expected gradual return to five per month over time. The company still anticipates 787 abnormal costs of approximately $2bn, with most being incurred by the end of 2023, including $283m recorded in the quarter.
Commercial Airplanes secured orders for 169 737 MAX airplanes and 13 freighters, including seven 777-8 Freighters from Lufthansa Group. Commercial Airplanes delivered 121 airplanes during the quarter and backlog included over 4,200 airplanes valued at $297bn.
Defense, Space & Security
Defense, Space & Security second-quarter revenue decreased to $6.2bn and second-quarter operating margin decreased to 1.1 percent, primarily driven by charges on fixed-price development programs, including MQ-25 and Commercial Crew, as well as unfavorable performance on other programs and lower volume on derivative aircraft programs. The MQ-25 program recorded a $147m charge primarily due to higher costs to meet certain technical requirements. The Commercial Crew program also recorded a $93 m charge, primarily driven by launch manifest updates and additional costs associated with OFT-2.
During the quarter, the CH-47F Chinook Block II was selected as the German government’s future heavy-lift helicopter. Defense, Space & Security also successfully completed the CST-100 Starliner uncrewed OFT-2.
Backlog at Defense, Space & Security was $55bn, of which 33% percent represents orders from customers outside the U.S.
Global Services second-quarter revenue increased to $4.3bn and second-quarter operating margin increased to 16.9 percent primarily driven by higher commercial services volume and favorable mix.
During the quarter, Global Services received a contract for airlift flight dispatch services from the U.S. Air Force and was awarded a contract for avionics upgrades and cybersecurity support for the U.S. Navy. Global Services also delivered the first A-10 wing set to the U.S. Air Force.
Additional Financial Information
At quarter-end, Boeing Capital’s net portfolio balance was $1.6bn. The change in loss from other unallocated items and eliminations was primarily due to the recognition of deferred compensation income as compared to expense recorded in the second quarter 2021. The second quarter effective tax rate primarily reflects tax expense on pretax earnings and an increase to the valuation allowance.
27 Jul 22. IFS reports sharp increase in Annual Recurring Revenue +33% YoY.
- Shift in revenue mix with 71% of Total Revenues YTD now Recurring
- ARR uplift driven by a rapid increase in the share of Cloud* (68% of ACV) and Subscription (78% of ACV) YTD.
- Software Revenues YTD representing 76% of Total
IFS, the global cloud enterprise software company, today reported its financial results for H1 as of June 30, 2022, with its share of Recurring Revenue reaching 71% of Total Revenues and Software Revenues reaching 76% of Total Revenues.
Growth in H1 2022 came from winning net new customers as well as from the IFS install base who continue to upgrade to IFS Cloud. In the first 12 months of IFS Cloud’s general availability, the company reported the same number of new users as it secured over a 25 year period with previous generation software. Not only is the IFS proposition attractive to businesses wanting a composable solution specific to their needs, but also Cloud environments are being staged in days and implementation times are surpassing industry benchmarks to drive faster time-to-value. In line with this trend, more and more customers are looking to IFS to manage and deliver services throughout their journey with IFS, which has led to a 203% year on year increase for IFS Success services YTD.
IFS CEO Darren Roos commented: “Our H1 results establish the importance of investing in the things our customers care about—a quality solution that end-users enjoy using, that is implemented quickly and effectively.” Roos continued: “Building a strong and healthy business, while delivering growth has been a key theme for the first half of the year as we see macro economic challenges starting to emerge. Our differentiation of empowering our customers to deliver amazing moments of service to their customers is compelling, but in the immediate term, the speed and extent of the value we can return to a customer in how they navigate the headwinds is key.”
IFS Chief Financial Officer, Constance Minc, commented: “Our H1 performance demonstrates we have built further resilience into our business with a significant increase in our ARR driven by an uplift in the share of Cloud ACV at 68% and Subscription ACV at 78% YTD. Our H1 Net Revenue also shows an increase of 14% YoY, a strong result aligned to our strategy of moving more consulting revenue to our growing partner ecosystem. In addition to our organic growth, we are acquiring businesses with strong foundations as well as a proposition that will add functionality and choice to benefit our customers.”
Following the close of H1 2022, IFS announced the acquisition of Ultimo, a provider of Cloud Enterprise Asset Management (EAM) software. IFS is a leader in the EAM space, thanks to its ability to uniquely offer customers Intelligent Asset + Service capabilities. In H1 2022, Gartner named IFS as the #1 vendor in its Global EAM Market Share report for 2021, in addition winning the Gartner Peer Insight Customers’ Choice Award for EAM software.
Other industry analyst accolades from H1 2022 included being named a Leader in three IDC MarketScape reports (Worldwide Manufacturing Service Life-Cycle Management Platforms 2022, Worldwide Field Service Management Solutions for Utilities 2022 and Worldwide SaaS and Cloud-Enabled Manufacturing ERP Applications 2022), as well as being listed in the Constellation Research Shortlist for Field Service Management and Product-Centric Cloud ERP 2022.
Financial and Operational Highlights for H1 FY2022 (January-June 2022):
- H1 2022 Software Revenue was SEK 2.8bn an increase of 22 percent versus H1 2021
- H1 2022 Cloud Revenue increased 56 percent versus H1 2021
- H1 2022 Net Revenue was SEK 3.7bn, an increase of 14 percent versus H1 2021
- Annual Recurring Revenue is equiv. SEK 4.5bn an increase of 33 percent YoY
*Note: all figures based in Swedish Krona and reported in constant currency. Cloud mix of ACV includes all of IFS Cloud (including IFS Cloud Remote) and cloud deployment of other products.
In line with WorkWave establishing itself as a standalone business at the end of Q2 2021, the performance reported above excludes WorkWave’s contribution to the IFS Group.
27 Jul 22. Seraphim Space Investment Trust plc (LSE: SSIT), the world’s first listed SpaceTech investment company, today provides a trading update to the 30 June 2022.
Full Year Results
The audited results for the financial year ended 30 June 2022 and associated audited NAV will be published in October 2022.
Despite the macro-economic backdrop, investment activity in the global space domain remained strong in the period. Global security, food security and humanitarian support remain key drivers underpinning growth in the space domain, followed by climate and sustainability themes.
The Seraphim Space Index, which reports on global private funding in the space domain is published quarterly by SSIT’s investment manager, Seraphim Space Manager LLP (the “Manager”), showed total private funding in the year to 30 June 2022 of $12.2bn, which was broadly in line with the previous calendar year.
As at 31 March 2022, the Company had net assets of £250m, comprising £188m of investments (75% of NAV) and cash of £62.3m (25% of NAV). The top 10 holdings, the focus of this trading update, represented 91% of the portfolio at fair value as at 31 March 2022.
During the quarter ended 30 June 2022, SSIT made three new unlisted investments with an aggregate cost of £5.3m and two follow-on unlisted investments with an aggregate cost of £2.4m. As at 30 June 2022, the Company had cash of £57.7m.
The NAV weighted average revenue and booking figures for these unlisted businesses in the top 10 holdings as at 30 June 2022 are set out below:
Notes: Weighted average based on unaudited NAV of unlisted holdings in SSIT’s portfolio as at 31 March 2022. H1 is the six months ended 30 June in the relevant year. 12 months compares the 12 months ended 30 June 2022 to the 12 month ended 30 June 2021.
We are particularly pleased with the solid growth rates of bookings (contracted future revenues) which reflect the strong underlying performance of the businesses as they develop their commercial operations.
Most of the portfolio is in the early stages of making an impact on their sizeable addressable markets and, in light of the key trends underpinning the growth of SSIT’s portfolio, namely global security, food security, humanitarian, climate and sustainability drivers, we expect these companies to scale up significantly.
The Manager has undertaken a review of the cash runways and funding plans of the private companies in SSIT’s portfolio and those companies’ own expectations. Based on this analysis:
- the companies are well capitalised having, on average, sufficient cash to deliver against their growth strategies, for at least the 12-month period to June 2023, without further capital;
- of the three companies that may require funding before June 2023, two have additional forms of financing expected to close shortly that would extend their runway beyond June 2023. The remaining one portfolio company, Altitude Angel (1.5% of net assets at 31 March 2022), will need to raise equity capital prior to Q2 2023; this business has recently announced a major commercial milestone in relation to an initial 265km drone superhighway in the UK, in partnership with BT, connecting airspace above Reading, Oxford, Milton Keynes, Cambridge, Coventry and Rugby over the next two years, with the option to expand the corridor to many other locations in the country;
- SSIT intends to reserve approximately two-thirds of current cash available for investment (having taken into account SSIT’s estimated operating costs for the period ending 31 December 2023) (“Net Cash”) to support the next funding rounds of portfolio companies through to 31 December 2023, including Altitude Angel; and
- the remaining Net Cash is currently expected to be available for new investments.
The Company’s two listed investments in the top 10 assets, Arqit Quantum and Spire Global, represented 14.3% of NAV as at 31 March 2022, both previously having merged with listed special purpose acquisition companies (“SPACs”). Their share prices fell substantially (59% and 66% respectively) during the quarter ended 30 June 2022, in common with other SPAC-merged companies. As at 30 June 2022, the aggregate value of these investments was £16.2m (31 March 2022: £35.7m).
The Manager remains confident in the prospects for both companies which during the quarter ended 30 June 2022, both reported positive commercial performance.
- Arqit Quantum: Having commenced commercialisation and begun generating revenue in the first half of its financial year ended 30 September, Arqit Quantum reported significant commercial progress and generated operating income of $12.3m (key clients included the European Space Agency, Virgin Orbit and AUCloud) during the first half of its financial year ending 30 September 2022 ($30m YE22 revenue guidance). At 31 March 2022, Arqit Quantum had a cash balance of $82.2m (30 September 2021: $87.0m).
- Spire Global: In respect of the first quarter of its financial year ending 31 December 2022, the Spire Global reported revenue of $18.1m (86% year over year (“YoY”) growth), annual recurring revenue of $81.6m ($10.9m of sequential and 134% YoY growth), improved full year guidance (increased ARR low end range; lowered operating loss) and reaffirmed remaining guidance. At 31 March 2022, Spire Global had a cash balance of $91.6m (31 December 2022: $109.3m).
Mark Boggett, Chief Executive Officer, Seraphim Space Manager LLP, said:
“It has been just over a year since SSIT’s IPO and, whilst the space sector is not immune to the macro-economic backdrop, the last six months have demonstrated the crucial role space plays in global defence, food security and humanitarian support as well as addressing longer-term climate and sustainability solutions. Portfolio commercial performance has been robust, the underlying companies are well capitalised and SSIT retains cash reserves to continue to support the portfolio growth ambitions during the year ahead”.
27 Jul 22. Iridium Announces Record Second-Quarter 2022 Results; Updates 2022 Outlook.
- Increases 2022 service revenue growth outlook to between 7% and 9%
- Increases 2022 operational EBITDA outlook to between $410m and $420m
Iridium Communications Inc. (Nasdaq: IRDM) (“Iridium”) today reported financial results for the second quarter of 2022 and updated its full-year 2022 outlook. Net income was $4.6m, or $0.04 per diluted share, for the second quarter of 2022, as compared to net income of $3.8m, or $0.03 per diluted share, for the second quarter of 2021. This change in net income was primarily the result of growth in total revenue, which was broad based. Operational EBITDA (“OEBITDA”)(1) for the second quarter was up 12% to a record $105.9m, as compared to $94.8m for the prior-year period, representing an OEBITDA margin(1) of 61%.
Iridium reported second-quarter total revenue of $174.9m, which consisted of $132.9 m of service revenue and $42.0m of revenue related to equipment sales and engineering and support projects. Total revenue increased 17% from the comparable period of 2021, while service revenue grew 10% from the year-ago period. Service revenue, which represents primarily recurring revenue from Iridium’s growing subscriber base, was 76% of total revenue for the second quarter of 2022.
The Company ended the quarter with 1,875,000 total billable subscribers, which compares to 1,616,000 for the year-ago period and is up from 1,781,000 for the quarter ended March 31, 2022. Total billable subscribers grew 16% year-over-year driven primarily by growth in commercial IoT.
“2022 is shaping up to be a blockbuster year for Iridium, as demand for equipment and new subscriber activations drove record revenue growth in the second quarter,” said Matt Desch, CEO, Iridium. Desch continued, “We’re seeing momentum across all commercial product areas. In addition to ongoing strength in IoT and broadband, we are also seeing outstanding growth in service offerings like Iridium® Push-to-Talk and Iridium GO!®”
Commenting on Iridium’s increased guidance, Desch added, “Based upon the momentum that we continue to see from our extensive global ecosystem of business partners, we are raising our full-year outlook for service revenue growth to between 7% and 9%, and for OEBITDA to between $410m and $420m in 2022.”
Iridium Business Highlights
Service – Commercial
Commercial service remained the largest part of Iridium’s business, representing 61% of the Company’s total revenue during the second quarter. The Company’s commercial customer base is diverse and includes markets such as maritime, aviation, oil and gas, mining, recreation, forestry, construction, transportation and emergency services. These customers rely on Iridium’s products and services as critical to their daily operations and integral to their communications and business infrastructure.
- Commercial service revenue was $106.4m, up 11% from last year’s comparable period due to an increase in revenue from voice and data services, IoT and broadband.
- Commercial voice and data revenue was $48.5m, up 12% from the year-ago period. Commercial voice and data subscribers were up 8% from the year-ago period to 394,000. Commercial voice and data average revenue per user (“ARPU”) increased to $42 during the second quarter, compared to $40 in the prior-year period.
- Commercial IoT data revenue was $30.6m, up 13% from the year-ago period. Commercial IoT data subscribers grew 22% from the year-ago period to 1,323,000 customers, driven by continued strength in consumer personal communications devices. Commercial IoT data ARPU was $7.96 in the second quarter, compared to $8.69 in last year’s comparable period. The decrease in ARPU resulted primarily from customer mix, including the effect of the growing proportion of personal communications subscribers within IoT, who typically utilize lower ARPU plans.
- Commercial broadband revenue was $12.1m, up 14% from $10.6m in the year-ago period on increasing activations of Iridium Certus® broadband service. Commercial broadband ARPU was $292 during the second quarter, compared to $289 in last year’s comparable period.
- Iridium’s commercial business ended the quarter with 1,731,000 billable subscribers, which compares to 1,463,000 for the year-ago period and is up from 1,635,000 for the quarter ended March 31, 2022. IoT data subscribers represented 76% of billable commercial subscribers at the end of the quarter, an increase from 74% at the end of the prior-year period.
- Hosted payload and other data service revenue was $15.2m in the second quarter, compared to $14.4m in the prior-year period, primarily related to increased usage for payload services and precision timing and location services.
Service – Government
Iridium’s voice and data solutions improve situational awareness for military personnel and track critical assets in tough environments around the globe, providing a unique value proposition that is not easily duplicated.
Under Iridium’s Enhanced Mobile Satellite Services contract (the “EMSS Contract”), a seven-year, $738.5m fixed-price airtime contract with the U.S. Space Force signed in September 2019, Iridium provides specified satellite airtime services, including unlimited global standard and secure voice, paging, fax, Short Burst Data®, Iridium Burst®, RUDICS and Distributed Tactical Communications System services for an unlimited number of Department of Defense and other federal government subscribers. Iridium also provides maintenance and support work for the U.S. government’s dedicated Iridium gateway under two other contracts with the U.S. Space Force. Iridium Certus airtime services are not included under these contracts and may be procured separately for an additional fee.
- Government service revenue was $26.5m in the second quarter compared to $25.8m in the prior-year period, reflecting increased revenue from a contractual step up in the EMSS Contract on September 15, 2021.
- Iridium’s government business ended the quarter with 144,000 subscribers, which compares to 153,000 for the year-ago period and was down from 146,000 for the quarter ended March 31, 2022. Government voice and data subscribers decreased 3% from the year-ago period to 62,000 as of June 30, 2022. Government IoT data subscribers decreased 8% year-over-year to 82,000 and represented 57% of total government subscribers, compared to 58% at the end of the prior-year period.
- Equipment revenue was $33.8m during the second quarter, compared to $21.8m in the prior-year’s quarter.
- In 2022, the Company expects considerably higher equipment sales than in 2021.
Engineering & Support
- Engineering and support revenue was $8.3m during the second quarter, compared to $6.8m in the prior-year quarter, primarily due to the episodic nature of contract work for the U.S. government and a rise in commercial activity.
- The Company expects Engineering and Support revenue to be higher than in prior years for the remainder of 2022 and in coming years, resulting from a new contract awarded by the Space Development Agency to General Dynamics Mission Systems, with Iridium as a subcontractor.
Capital expenditures were $17.5m for the second quarter, which includes $0.5m of capitalized interest and an initial payment for the launch of up to five ground spare satellites. The Company ended the second quarter with gross debt of $1.61bn and a cash and cash equivalents balance of $227.2m, for a net debt balance of $1.39bn.
During the quarter ended June 30, 2022, the Company repurchased approximately 1.0m shares of its common stock under its previously announced share repurchase program at a total purchase price of $35.0m. As of June 30, 2022, $267.5m remained available and authorized for repurchase under this program.
The Company updated its full-year 2022 outlook for total service revenue and OEBITDA and currently anticipates:
- Total service revenue growth between 7% and 9% for full-year 2022 (previous outlook was for total service revenue growth between 5% and 7% for full-year 2022). Total service revenue for 2021 was $492.0m.
- Full-year 2022 OEBITDA between $410m and $420m (previous outlook was for full-year 2022 OEBITDA between $400m and $410m). OEBITDA for 2021 was $378.2m.
- Negligible cash taxes in 2022. Cash taxes are expected to be negligible through approximately 2024.
- Net leverage of between 2.5 and 3.5 times OEBITDA at the end of 2023, assuming the completion of the Company’s total $600 m in authorized share repurchases. Net leverage was 3.4 times OEBITDA at December 31, 2021. (Source: PR Newswire)
27 Jul 22. iPronics raises €3.7m to accelerate the adoption of programmable photonic chips. iPRONICS, the pioneering photonic computing company that has developed the first general-purpose photonic processor that is reconfigurable by software, today announced a €3.7m investment led by Amadeus Capital Partners, with participation from Caixa Capital Risc.
Emerging technology trends in autonomous vehicles and LIDAR, 5G signal processing, deep learning and AI, cyber security, DNA sequencing, and drug discovery require much faster, more flexible, power-efficient computation.
Although advanced electronic chips (e.g. GPUs, TPUs or FPGAs) have increased their capabilities, they still cannot keep up with performance requirements, and today’s hardware has become the bottleneck. Computational photonics (i.e. photonic chips) is becoming the solution because it provides lower latency, lower power consumption (photons/light consume less energy than electrons), higher bandwidth, and higher density.
iPronics has introduced a new generation of photonic circuits where common hardware can be programmed using software for a wide variety of applications through a mesh of on-chip waveguides and tunable beam couplers. The reconfigurability of the chip unlocks new commercial applications by delivering faster time to market with lower total cost and risk mitigation while delivering on the promises of photonic processing: lower power consumption and latency, and faster computational speed. It also democratizes the adoption of photonic technology by enabling its use by software engineers without expertise in hardware or photonics.
The company, a spinoff of the Technical University of Valencia and beneficiary of an EIC Transition Grant, has developed seven patents on the technology and has published at least four seminal papers in the journal Nature. The capital will be used to expand the engineering team and product development to bring to market the company’s Field Programmable Photonic Gate Array (FPPGA) chip.
“We know that photonic computing is the answer to many of the bottlenecks of new killer applications, but designing and building one photonic chip for each of those applications is not practical,” said Prof. Jose Capmany, Fellow of the IEEE and Optical Society of America, and co-founder of iPronics. “Reconfigurability of photonic chips with software is the answer.”
Amelia Armour, Partner at Amadeus Capital Partners, added: “As long term investors in disruptive chip design technology, we are excited to back the team that pioneered the concept of programmable photonics and first demonstrated it in the lab. We look forward to helping the team to bring the chip to market at scale”.
Previous strategic angel investors include successful tech executives and entrepreneurs from Google, Facebook, Carto, Freshly, Endeavor, Oracle, Deloitte, Ferrovial, and Clicars among others. The company had previously received €1m in funding from co-founder and tech entrepreneur Inaki Berenguer.
iPronics is making the computational power of photonics commercially affordable. They have pioneered the field of programmable photonics and developed the first general-purpose photonic processor capable of programming high-speed light signals on-chip with unprecedented flexibility. iPronics processors share a common hardware platform that is reconfigurable by software. This cost-effective solution enables the same hardware to be applied to limitless commercial applications with a voracious appetite for computational power, including 5G communication, data centers, artificial intelligence, autonomous driving, quantum computing, and IoT. Find out more here and on LinkedIn and Twitter.
About Amadeus Capital Partners
A trailblazer for three decades, we invest in people who create transformational technologies and sustainable businesses. We back early stage and growth companies in Europe and Latin America, from our locations in Cambridge, London and Oxford, San Francisco and São Paulo. Find out more here and on LinkedIn and Twitter.
About Caixa Capital Risc
Caixa Capital Risc is one of the main multi-stage venture capital investors in Spain, with more than fifteen years of experience and divestments to global technology companies such as Apple, Meta (Facebook) and Airbnb. Through its specialized technology funds, Caixa Capital Risc invests in innovative companies with a B2B business model and a strong technological component, led by committed entrepreneurs, with scalable value propositions and a vocation to build a global business.
26 Jul 22. 3M Subsidiary Aearo Technologies Takes Action to Efficiently and Equitably Resolve Litigation Related to Combat Arms Earplugs.
- Aearo Technologies and related entities have voluntarily initiated chapter 11 proceedings
- 3M has committed $1bn to fund a trust to resolve all claims determined to be entitled to compensation
3M (NYSE: MMM) today announced it is taking action to resolve litigation related to Combat Arms Earplugs Version 2 (“Combat Arms Earplugs”). Aearo Technologies and related entities (“Aearo Technologies”), all of which are wholly-owned 3M subsidiaries, have voluntarily initiated chapter 11 proceedings seeking court supervision to help establish a trust – funded by 3M – to efficiently and equitably resolve all claims determined to be entitled to compensation.
3M and Aearo Technologies believe the Combat Arms Earplugs were effective and safe when used properly, but nevertheless face increasing litigation, including approximately 115,000 filed claims and an additional 120,000 claims on an administrative docket as of June 30, 2022. The well-established chapter 11 process is intended to achieve an efficient and equitable resolution, reduce uncertainty, and increase clarity for all stakeholders, while reducing the cost and time that could otherwise be required to litigate thousands of cases. 3M and its other businesses have not filed for chapter 11 and will continue to operate as usual. Aearo Technologies will also continue to operate in the ordinary course.
“We have great respect for the brave men and women who protect us, and remain committed to the military as an active partner and valued customer going forward,” said 3M chairman and chief executive officer Mike Roman. “We determined that taking this decisive action now will allow 3M and Aearo Technologies to address these claims in a way that is more efficient and equitable than the current litigation.”
The company believes that, absent the actions taken today, the claims could take years, if not decades, to litigate on a case-by-case basis. With this change in strategy, this process is intended to resolve claims related to Combat Arms Earplugs in a manner that is more efficient and equitable to all parties.
- Aearo Technologies was acquired by 3M in 2008 and has since operated as a wholly-owned subsidiary of 3M.
- 3M has entered into a funding agreement with Aearo Technologies to establish a trust to resolve all claims determined to be entitled to compensation, and to support Aearo Technologies as it continues to operate during the chapter 11 process.
- The claims largely relate to the previous generation Combat Arms Earplugs manufactured by Aearo Technologies, as well as discontinued Aearo Technologies mask and respirator products utilized to reduce workplace exposure to asbestos, silica, coal mine dust or occupational dusts.
- Aearo Technologies has indemnified 3M for obligations related to the claims.
- 3M has committed $1bn to fund the trust, based on the analysis of an experienced estimator of claims in chapter 11.
- 3M has also committed an additional $240m to fund projected related case expenses.
- 3M will provide additional funding if required under the terms of the agreement.
As a result, 3M recorded a total pre-tax charge of $1.2bn, or $1.66 per share, and reflected it as an adjustment in arriving at its results, adjusted for special items.
In conjunction with the chapter 11 process, Aearo Technologies will file customary first day motions with the bankruptcy court seeking authority to continue operating in the normal course of business, without interruption or disruption to its customers, vendors, and employees.
The Aearo Technologies chapter 11 cases were filed in the U.S. Bankruptcy Court for the Southern District of Indiana. Additional information is available on resolvingearpluglitigation.com and www.3mearplugsfacts.com. Court filings and information about the chapter 11 cases are available on a separate website administered by Aearo Technologies’ claims agent, Kroll; information is also available by calling (855) 639-3375 (Toll-Free US/Canada) or +1 (347) 897-3818 (International); or by emailing .
Kirkland & Ellis LLP is serving as legal counsel and AlixPartners LLP is serving as restructuring advisor to Aearo Technologies. PJT Partners is serving as financial advisor and White & Case LLP is serving as legal counsel to 3M.
Planned Spin-Off of Health Care Business
In a separate press release issued today, 3M announced its intent to spin off its Health Care business, resulting in two world-class public companies well positioned to pursue their respective growth plans.
To access the press release, please visit our press release page here.
Q2 2022 Earnings Results and Conference Call
In a separate press release issued today, 3M announced its second-quarter 2022 results and updated its outlook for the full-year 2022. Please see the company’s second-quarter earnings press release for more details.
(Source: PR Newswire)
26 Jul 22. US defence contractors squeezed by shortages of labour and parts. Warning on fall in sales by Raytheon follows that of Lockheed despite new orders after Russia’s invasion of Ukraine. Two leading US defence contractors have reported sales pressures even as the war in Ukraine boosts demand for their weaponry, with production hamstrung by shortages of parts and labour. Raytheon, which manufactures the Stinger missile used by Ukrainian soldiers fighting Russian forces, on Tuesday reported sales in its missile and defence division fell by 11 per cent to $3.6bn in the second quarter compared to the same period of 2021. It also trimmed the division’s sales and profit outlook for the year. The announcement came a week after Lockheed Martin, which jointly produces the Javelin missile with Raytheon, lowered its revenue outlook for 2022 by $750mn to $65.25bn, mostly due to supply and labour pressures in its aeronautics division. The defence industry is preparing for an influx of orders as governments increase military spending following Russia’s invasion of Ukraine. Western governments are seeking to replenish stockpiles of weapons they are providing to Kyiv while bolstering their own arsenals. The demand — including the Pentagon’s first Stinger order in two decades, for 1,300 missiles worth $662mn — has collided with historic tightness in US labour markets and shortages of components such as computer chips and rocket motors. Raytheon’s missile and defence division had $4.5bn in bookings in the second quarter.
“We’re certainly not satisfied with the performance in our defence business this quarter. There is much to do. Bookings were outstanding; execution, not so much,” Raytheon chief executive Greg Hayes told analysts during an earnings call on Tuesday. “We have been, I would say, caught off guard a little bit by how much pressure there is in the supply chain,” particularly for labour, Hayes added. Raytheon shares were down 3.5 per cent at $91.27 on Tuesday. Raytheon and Lockheed have said they have been unable to recoup ground lost to employee absences in early 2022, when infections from the Omicron coronavirus variant were surging. Neither expects labour and supply chain issues to be resolved this year. “While we’ve seen improvement in . . . our operations, we still have yet to figure out how to recover what was lost,” Jay Malave, Lockheed’s chief financial officer, told the Financial Times. In its earnings, Lockheed posted a $945mn drop in sales of its marquee F-35 fighter jet, with supply chain problems responsible for $600mn of the fall. Normally, all the parts needed in Raytheon’s plants are present and ready to be assembled 90 to 95 per cent of the time. But in the second quarter, availability fell to 50 per cent because of supply chain constraints, Hayes said. Despite the hit to its defence business, Raytheon reaffirmed full-year revenue guidance of $67.75bn to $68.75bn as a recovery in summer air travel boosted demand within its commercial jet engines and parts businesses. Raytheon reported quarterly net profit of $1.3bn, up 25 per cent from the same period of 2021, resulting in earnings of 88 cents a share, missing analyst estimates of 92 cents, as polled by Refinitiv. Raytheon and Lockheed remained bullish on sales in the long term as western governments place more orders. Hayes said that the US government has signalled further interest for Stingers, Javelins, Tomahawk cruise missiles and the Next Generation Jammer, an electronic attack system. Poland has asked for accelerated delivery of Patriot missile batteries. (Source: Google/FT.com)
26 Jul 22. Dassault Systemes raises annual targets after sales beat. French software maker Dassault Systemes (DAST.PA) on Tuesday raised its annual forecasts after reporting second-quarter revenue above analysts’ expectations driven by its industrial business.
The group, which sells software used by carmakers, planemakers and industrial firms, now expects to report 2022 sales in a range of 5.49bn to 5.54bn euros ($5.61bn to $5.66bn), and earnings per share between 1.08 euro and 1.10 euro.
It had previously forecast full-year sales of 5.36bn to 5.41bn euros and EPS of 1.04 euro to 1.06 euro.
The company reported an 11% jump in sales to 1.38bn euros in constant currencies for the April-June period, beating the 1.33bn euro forecast in a company-provided poll.
“We have demonstrated once again the resilience of our strategy against a challenging macroeconomic and geopolitical backdrop, with an impact from Russia and China,” Chief Operating Officer Pascal Daloz said in a statement.
The company said the industrial business was one of the main drivers for growth, with Catia, Enovia and Delmia brands all delivering double-digit growth.
The group’s medical unit Medidata also maintained its strong velocity, the group said.
Strong growth of Medidata, which has been used in hundreds of COVID-related clinical trials, had already helped the firm boost its annual profit target earlier this year.
The group added it had a successful quarter in terms of hiring and investments, with an 8% headcount growth year-on-year.
In April, Dassault Systemes laid out a succession plan which would see Chief Executive Officer Bernard Charles take over as chairman when Charles Edelstenne, 84, retires next January, while Chief Operating Officer Pascal Deloz would become deputy CEO. ($1 = 0.9781 euros) (Source: BUSINESS WIRE)
26 Jul 22. GE posts higher earnings on recovery in aviation industry. General Electric Co (GE.N) on Tuesday surprised Wall Street with higher quarterly profit and positive cash flow as recovery in the aviation industry propelled its jet engine business, sending its shares higher.
The Boston-based industrial conglomerate, however, said it was still grappling with supply-chain disruptions and inflationary pressures, which would pressure earnings this as well as next year.
“It is a challenging operating environment,” Chief Executive Larry Culp told Reuters in an interview.
Supply-chain bottlenecks have made it tougher for the company to deliver products to customers on time. To get around the problem, it is holding higher levels of inventory.
GE said supply-chain and macroeconomic pressures shaved off 5 percentage points from its revenue in the quarter through June.
It reiterated that its full-year results this year were on track to hit the low end of its forecast, but trimmed the full-year free cash flow forecast by about $1bn.
In January, it projected adjusted profit in 2022 to be in the range of $2.80 to $3.50 per share and expected to generate $5.5bn to $6.5bn in free cash flow.
Culp said a “more conservative view” on part of the company was warranted due to economic and policy uncertainties.
The company’s shares were up 5.12% at $71.86 in morning trade.
While GE has yet to put out an earnings forecast for next year, Culp said profit and free cash flow in 2023 are now expected to be lower than its previous estimate.
A strong recovery in air travel, meanwhile, has bolstered demand at its engine business, which is the company’s cash cow. The unit reported a 27% year-on-year jump in revenue in the second quarter on the back of higher shop visits and spare part sales.
GE expects demand at its aviation unit to remain strong, resulting in more than 20% revenue growth and $3.8 to $4.3bn operating profit this year.
Raytheon Technologies Corp (RTX.N), whose Pratt & Whitney segment makes jet engines, has also reported a jump in demand for its engines and aftermarket services.
Profit at GE’s healthcare unit, however, is expected to suffer this year due to supply chain disruptions, and freight and raw material inflation.
Those issues along with the expiration of a U.S. wind energy production tax credit have taken a toll on the company’s renewable energy business. As a result, GE said it no longer expects an improvement in the business in the second half of the year.
Adjusted profit for the quarter through June came in at 78 cents a share, above analysts’ expectations. Quarterly revenue at $18.6bn also topped Wall Street estimates. The company reported $162m in free cash flow in the second quarter. (Source: BUSINESS WIRE)
26 Jul 22. Raytheon misses revenue estimates hit by supply chain snags.
- Sales $16.31bn (Wall Street estimates: $16.60bn) Adjusted EPS $1.16 (Refinitiv estimates: $1.12)
- Shares down 2.7% in early trade
Raytheon Technologies Corp (RTX.N) on Tuesday reported lower-than-expected second-quarter revenue, as global supply chain issues dented production at the aerospace and defense firm.
Higher costs, supply chain snags, and early spring COVID-19 outbreaks have negatively impacted output both at Raytheon and its suppliers.
Raytheon shares were down 2.7% to $91.84 in early trading.
“We’re obviously working through some of these, supply chain inflation and labor availability challenges that we’ve talked a lot about. We expected supply chain to ease up this year in the second quarter. And we just did not see that happen,” Chief Financial Officer Neil Mitchill told Reuters in an interview.
The Arlington, Virginia-based company reported net sales of $16.31bn in the quarter, missing Wall Street estimates of $16.60bn.
However, adjusted earnings of $1.16 per share beat estimates of $1.12, Refinitiv data showed.
For the full year, Raytheon reaffirmed its previously provided outlook for revenue and profit.
Its Collins Aerospace unit, which makes both commercial and military jet parts, reported a 10.3% rise in quarterly sales.
On a post-earnings conference call, Raytheon CEO Greg Hayes said Russian sanctions and resulting titanium supply chain challenges meant the company’s Pratt and Whitney engine unit would fall short on deliveries for business jet customers but recover by mid-2023.
On the defense side, Mitchill expected the second half of the year to remain a challenge due to rocket motor supply chain problems as well as labor and microprocessor shortages.
The company is seeing requests for more missile defense products, Mitchill said, but does not expect that interest to turn into revenue in the near term. (Source: BUSINESS WIRE)
26 Jul 22. Raytheon Technologies Reports Q2 2022 Results. Commercial Aerospace continues to drive sales and EPS growth; Q2 defense book-to-bill of 1.35
Raytheon Technologies Corporation (NYSE: RTX) reported second quarter 2022 results.
Second quarter 2022
- Sales of $16.3bn, up 3 percent versus prior year including 4 percent organic growth
- GAAP EPS from continuing operations of $0.88, up 28 percent versus prior year, including $0.28 of acquisition accounting adjustments and net significant and/or non-recurring charges
- Adjusted EPS of $1.16, up 13 percent versus prior year
- Operating cash flow from continuing operations of $1.3bn; Free cash flow of $807m
- Achieved approximately $80m of incremental RTX gross cost synergies
- Repurchased over $1.0bn of RTX shares
Outlook for full year 2022
- Confirms sales of $67.75 – $68.75bn
- Confirms adjusted EPS to $4.60 – $4.80
- Confirms free cash flow of approximately $6.0bn. Assumes the legislation requiring R&D capitalization for tax purposes is deferred beyond 2022.
- Confirms share repurchase of at least $2.5 bn of RTX shares
“A strong start to the summer travel season drove continued top-line growth and adjusted EPS that exceeded our expectations,” said Raytheon Technologies Chairman and CEO Greg Hayes. “Resilient end-market demand along with our differentiated technology solutions generated over $24bn of awards in the quarter. Looking ahead, while we expect the global supply chain environment, labor availability and inflation will remain challenging near term, we are actively engaged with our customers and suppliers to meet demand and remain cost competitive. We continue to be focused on strategic investments in technology and innovation that will drive our industry leadership today and into the future.”
See “Use and Definitions of Non-GAAP Financial Measures” below for information regarding non-GAAP financial measures.
Second quarter 2022
Raytheon Technologies reported second quarter sales of $16.3bn, up 3 percent over the prior year, including 4 points of organic sales growth partially offset by 1 point of net acquisitions and divestitures headwind. GAAP EPS from continuing operations of $0.88 was up 28 percent versus the prior year and included $0.28 of acquisition accounting adjustments and net significant and/or non-recurring charges. This includes $0.23 of acquisition accounting adjustments primarily related to intangible amortization, $0.04 related to the disposition of non-core businesses at Collins Aerospace, and $0.01 of restructuring. Adjusted EPS of $1.16 was up 13 percent versus prior year.
The company recorded net income from continuing operations in the second quarter of $1.3bn, up 25 percent versus prior year and included $418m of acquisition accounting adjustments and net significant and/or non-recurring charges. Adjusted net income was $1.7bn, up 10 percent versus prior year. Operating cash flow from continuing operations in the second quarter was $1.3bn. Capital expenditures were $479m, resulting in free cash flow of $807m.
Backlog and Bookings
Backlog at the end of the second quarter was $161bn, of which $96bn was from commercial aerospace and $65bn was from defense.
Notable defense bookings during the quarter included:
- $4.0bn for F135 production Lots 15 and 16 at Pratt & Whitney
- $1.2bn of classified bookings at Raytheon Intelligence & Space (RIS)
- $662m for Stinger replenishment for the U.S. Army at Raytheon Missiles & Defense (RMD)
- $648m for Standard Missile-3 (SM-3) for the Missile Defense Agency (MDA) at RMD
- $423m for a SPY-6 Hardware Production and Sustainment contract for the U.S. Navy at RMD
- $408m for F135 sustainment services at Pratt & Whitney
- $253m on the Development, Operations and Maintenance (DOMino) cyber program for the Department of Homeland Security (DHS) at RIS
- $217m for Tomahawk for the U.S. Navy at RMD
The company’s reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).
Collins Aerospace had second quarter 2022 adjusted sales of $5,011m, up 10 percent versus the prior year. The increase in sales was driven by a 25 percent increase in commercial aftermarket and a 14 percent increase in commercial OE, which more than offset a 6 percent decline in military. The increase in commercial sales was driven primarily by the recovery of commercial air traffic which has resulted in higher flight hours, aircraft fleet utilization, and narrowbody OE volume. This was partially offset by lower material receipts on military programs and expected declines in F-35 volume.
Collins Aerospace recorded adjusted operating profit of $617m in the quarter, up 19 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket, which more than offset higher SG&A expense, the absence of prior year favorable contract settlements, and lower military sales volume.
Pratt & Whitney
Pratt & Whitney had second quarter 2022 adjusted sales of $4,969m, up 16 percent versus the prior year. The increase in sales was driven by a 26 percent increase in commercial aftermarket, a 22 percent increase in commercial OE, and a 5 percent increase in military. The increase in commercial sales was primarily due to higher shop visits and related spare part sales and favorable large engine mix and volume. The increase in military sales was driven primarily by the timing of the award for the Lot 15 and 16 F135 production contract in Q2 and higher F135 aftermarket volume.
Pratt & Whitney recorded adjusted operating profit of $303m in the quarter, up 216 percent versus the prior year. The increase in adjusted operating profit was primarily driven by drop through on higher commercial aftermarket sales volume, favorable commercial OE mix, and higher military sales volume. This was partially offset by higher SG&A and R&D.
Raytheon Intelligence & Space
RIS had second quarter 2022 adjusted sales of $3,570m, down 6 percent versus the prior year. The decrease in sales was primarily driven by the divestiture of the Global Training and Services business. Excluding the impact of acquisitions and divestitures, sales were down 1 percent versus prior year. Lower expected sales in Command, Control and Communications as well as lower sales within Sensing and Effects were partially offset by higher sales in classified cyber programs within Cyber, Training and Services.
RIS recorded adjusted operating profit of $315m, down 24 percent versus the prior year. The decrease in adjusted operating profit was primarily driven by lower net program efficiencies, including unfavorable development program adjustments, the impact of the Global Training and Services divestiture, and the absence of a prior year land sale.
Raytheon Missiles & Defense
RMD had second quarter 2022 adjusted sales of $3,558m, down 11 percent versus prior year. The decrease in sales was primarily driven by continuing supply chain constraints and expected declines on certain Land Warfare and Air Defense programs, which were partially offset by higher volume on SPY-6 production and Next Generation Interceptor development.
RMD recorded adjusted operating profit of $348m, down 35 percent versus the prior year. The decrease in adjusted operating profit was driven primarily by lower net program efficiencies across various programs resulting from continued supply chain constraints, unfavorable program mix and lower volume primarily in Land Warfare and Air Defense programs.
About Raytheon Technologies
Raytheon Technologies Corporation is an aerospace and defense company that provides advanced systems and services for commercial, military and government customers worldwide. With four industry-leading businesses ― Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence & Space and Raytheon Missiles & Defense ― the company delivers solutions that push the boundaries in avionics, cybersecurity, directed energy, electric propulsion, hypersonics, and quantum physics. The company, formed in 2020 through the combination of Raytheon Company and the United Technologies Corporation aerospace businesses, is headquartered in Arlington, Virginia.
25 Jul 22. OneWeb merger with Eutelsat. Government statement on the planned merger of OneWeb and Eutelsat. OneWeb, a Low Earth Orbit (LEO) satellite constellation of which the UK Government is a minority shareholder, has today signed a Memorandum of Understanding with Eutelsat Communications to merge the two companies, with the objective of creating a single, powerful global player in connectivity.
Eutelsat will add its 36-strong fleet of Geostationary Orbit (GEO) satellites to OneWeb’s LEO constellation, with 428 satellites already in orbit, to generate combined revenues of €1.2bn and address an even wider range of customer requirements.
The merger is positive news for UK taxpayers: having made a $500m investment in OneWeb 2 years ago, the UK Government will now have a significant stake in what will become a single, powerful, global space company, working on the sound financial footing needed to make the most of the technological advantages it has to compete in the highly-competitive global satellite industry, against companies around the world.
The UK Government will retain the special share and its exclusive rights over OneWeb – securing the company’s future at the centre of the combined group’s global LEO business, national security controls over the network, and first-preference rights over domestic industrial opportunities.
- A range of national security rights, including over security standards of the OneWeb network and use of the OneWeb network for national security purposes;
- The UK secured as the preferred location for future OneWeb launch capabilities; and
- A guarantee of OneWeb preferring procurement for manufacturing from businesses in the UK
Trading under its existing name, OneWeb will continue to operate the LEO business of the combined group and OneWeb’s headquarters will remain in the UK.
Eutelsat will continue to be listed on Euronext Paris and will apply for admission to listing on the London Stock Exchange.
The deal will be subject to UK and international regulatory approvals – including through the National Security and Investments Act – and the approval of Eutelsat’s shareholders. The merger is expected to complete in the first half of 2023. (Source: https://www.gov.uk/)
25 Jul 22. EndureAir Systems secures investment worth INR135m. Indian unmanned aerial systems (UAS) developer EndureAir Systems has secured funding worth INR135m (USD1.7m) from private investors. Rama Krishna, the company’s CEO, told Janes that the funding will support Noida-based EndureAir’s efforts to develop UAS systems and expand manufacturing capability. He added that the funding saw a focus on establishing EndureAir as a UAS supplier to organisations including Hindustan Aeronautics Limited (HAL), the Defence Research and Development Organisation (DRDO), and the National Disaster Response Force (NDRF).
The gasoline version of the company’s Vibhram UAS was previously supplied to the DRDO and the NDRF. EndureAir’s Hawk nano UAV has also been supplied to the Indian Special Forces. An electric version of the Vibhram, recently unveiled by the company, has also completed Indian Army trials. EndureAir was also recently shortlisted under an Indian government investment initiative – named the Production-Linked Incentive – to encourage UAS manufacturing in the country. (Source: Janes)
26 Jul 22. Horizon Aircraft Successfully Completes AFWERX HSVTOL Challenge Phase 1. Horizon Aircraft Inc. (“Company” or “Horizon”), an innovative leader in hybrid electric Vertical Take-off and Landing (VTOL) aerial vehicles, has successfully completed Phase 1 of the AFWERX High Speed Vertical Takeoff and Landing (HSVTOL) Challenge. The highly competitive Phase 1 contract award included significant non-dilutive financial aid that helped Horizon accelerate development of their innovative Cavorite X-series VTOL aircraft.
Earlier this year the US Air Force selected a small group of companies, of which Horizon Aircraft was one, to proceed with the conceptual development of a HSVTOL aircraft. The initiative is supported by AFWERX, the Air Force’s innovation hub, and US Special Operations Command (USSOCOM). The HSVTOL program aims to develop an aircraft that could replace the Air Force’s CV-22 Osprey, one that can fly on the order of 400 kts (740 km/h) and conduct a range of missions such as personnel infiltration and extraction, tactical mobility, and aeromedical evacuation.
The HSVTOL initiative attracted proposals from over 200 companies. These were narrowed down to 35 solutions of which 11 (that included the Cavorite X-series VTOL aircraft) were ultimately selected for investment in Phase 1 of the program.
Brandon Robinson, CEO of Horizon Aircraft said, “the AFWERX program is a great example of how the US Department of Defence is leveraging the agility of private industry to increase military capability in an extremely cost-effective manner. We were honoured to partner with the elite AFWERX team that offered many valuable technical insights throughout Phase 1. We are looking forward to exploring the opportunity to deepen this partnership in Phase 2 and Phase 3 of this challenge.”
Horizon Aircraft will continue with its testing while progressing with detailed design of a full-scale VTOL aircraft that will have significant commercial and military capability.
25 Jul 22. Hanwha considers merging defence businesses. South Korea’s Hanwha Group is considering a merger of its various defence businesses to enhance efficiencies and productivity, the corporation told Janes on 25 July.
A spokesperson for the company said, “The company is considering various measures including [the creation of a new] defence sector division and a merger of related companies to enhance corporate value.”
“But nothing has been confirmed so far. We will announce details within one month or when [the restructure] is decided,” the spokesperson added.
Janes understands that options under consideration include Hanwha Aerospace absorbing the defence division of the Hanwha Corporation. However, the spokesperson did not confirm this at the time of publication.
Hanwha’s defence activities are led mainly by Hanwha Aerospace, which manufactures engines and military aerospace parts. Hanwha Aerospace is also the parent of Hanwha Defense and Hanwha Systems, which produce a range of military land platforms and electronics, respectively.
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.