Sponsored by TCI International Inc.
05 Aug 22. Rheinmetall Boosts Profitability: Operating Result and Margin Improved Further.
– Consolidated sales increase by €92m to €2,674m
– Consolidated operating result improved from €191 m to €206m – increase of 8%
– Operating margin of 7.7% exceeds previous year’s level of 7.4%
– Growth in orders for the Group
– Annual sales forecast for 2022 updated, earnings forecast confirmed
The Düsseldorf-based Rheinmetall Group continued to strengthen its profitability in the first half of 2022. The consolidated operating result rose to €206m, exceeding the previous year’s record figure by €15m with a similarly improved operating margin. The Rheinmetall Group is updating its annual forecast from March 2022 and now expects organic sales growth of around 15% and an operating margin of over 11% in fiscal 2022.
Armin Papperger, Chief Executive Officer of Rheinmetall AG: “Rheinmetall remains on track for growth. After six months, our sales and operating result are higher than in the previous year. This makes us very optimistic for fiscal 2022 as a whole. We are seeing an increasing order intake – also in the civilian business, where we make important contributions for the technological transformation toward climate-friendly mobility and new forms of energy supply, for example by means of hydrogen technology. And in light of the current security policy situation, our products will help to strengthen defence capabilities in numerous countries in the months and years to come. With our military systems, we bear responsibility for security and thus for peace and freedom.”
Rheinmetall AG: operating margin improved to 7.7%
Consolidated sales increased by €92m or 3.5% year-on-year to €2,674m in the first half of 2022 (previous year: €2,582m).
After six months, the operating result continued to increase year-on-year and reached a new record figure for the first half of the year. At €206m, the operating result exceeded the previous year’s figure of €191m by €15m or 8%. This improvement is based predominantly on sales growth in the high-margin Weapon and Ammunition division. A better product mix and strict cost management also had a positive effect. The operating margin of 7.7% exceeded the previous year’s level of 7.4%.
Earnings per share from continuing operations decreased year-on-year from €2.50 to €2.28 in the first half of fiscal 2022. Adjusted for special effects, earnings per share from continuing operations amounted to €2.63 as at 30 June 2022 (previous year: €2.50).
Vehicle Systems: further improvement in operating margin
At €851m, sales in the Vehicle Systems division in the first half of 2022 were €19m or 2% lower than the previous year’s figure. The order intake decreased by €1,293m as against the prior-year figure to €680m. This decline resulted primarily from large single orders (Challenger 2 upgrade for Great Britain, Puma modernization and armored engineering vehicle for the German armed forces), which increased the previous year’s figure well above average. At €10.3bn, the order backlog as at June 30, 2022, was down €232m or 2% year-on-year.
Despite the slight decline in sales, the operating result improved from €65m to €75lingshotm in the first six months of 2022. This positive trend can be attributed to an improved product mix and strict cost management. The operating margin of 8.8% exceeded the previous year’s level of 7.5%.
Weapon and Ammunition: new order intake record
The Weapon and Ammunition division generated sales of €564m in the first half of 2022, up €93m or around 20% on the figure for the previous year. The high increase in sales mainly resulted from munitions and propellant deliveries to an international customer. In the first half of 2022, the order intake increased to a record level of €1,542m (previous year: €429m).
A munitions order from Hungary particularly contributed to this increase. The order backlog therefore increased by €1.2bn or around 45% to €3.9bn as at June 30, 2022 (previous year: €2.7bn).
The operating result improved by €24m to €71m in the first half of 2022 (previous year: €47 m). This positive development was attributable both to the increase in sales and to higher income from investments. The operating margin was increased to 12.5%, compared with 10% in the previous year.
Electronic Solutions: order backlog increases to €2.7bn
The Electronic Solutions division increased sales by €49m to €411m in the first half of 2022 (previous year: €362 m). The order intake likewise increased significantly by €258m or 58% to €702 m. Major new orders in the first half of 2022 related to combat helmets for the German Bundeswehr and numerous smaller projects. On June 30, 2022, the order backlog amounted to €2.7bn, up around 15% on the previous year’s figure (previous year: €2.4bn).
The operating result declined by €4m to €25m in the first half of 2022 (previous year: €29m), chiefly due to the acquisition of the activities of the drone manufacturer EMT and increased costs for further know-how development in the area of cyber security. The operating margin decreased to 6.1% (previous year: 8.0%).
Sensors and Actuators: stable operating margin in a declining market environment
Sales in the Sensors and Actuators division declined by around €7m year-on-year to €691m in the first half of 2022 (previous year: €697 m). The decline in sales mainly resulted from lower customer call-offs due to the continuing shortage in the supply of semiconductors. Booked business for the first six months of fiscal 2022 was increased by around 50% to a volume of €1,431m (previous year: €951m).
The operating result declined slightly by €1m to €50m in the first half of 2022 (previous year: €51m). At 7.3%, the operating margin remained at the previous year’s high level (previous year: 7.3%).
Materials and Trade: sales increased again
The Materials and Trade division increased its sales to €374m in the first half of 2022, thus exceeding the previous year’s level by €54 m or around 17%. This growth in sales can be attributed primarily to strong aftermarket performance. In the first six months of fiscal 2022, the division generated booked business of €403m. This represents an increase of 23% compared to the same period of the previous year (€327m).
At €27m, the Materials and Trade division’s operating result was at the previous year’s level in the first half of 2022 (previous year: €27m). The operating margin decreased to 7.2% (previous year: 8.5%). While the increased sales had a positive effect, earnings were affected by a decline in the earnings of the Chinese joint ventures accounted for using the equity method.
Outlook: strong sales growth with stable high margins
The annual forecast communicated to the capital market in March 2022 was updated on the basis of current market outlooks. The Rheinmetall Group continues to expect sales to grow in fiscal 2022 and confirms its earnings forecast.
In light of the persistently high risks regarding the development of global automotive production, the company now expects organic sales growth in the current fiscal year to be around 15% and thus at the lower end of the previous forecast range, which projected organic growth between 15% and 20%.
Rheinmetall confirms the current earnings forecast for fiscal 2022, expecting an improvement in the operating result and an operating margin of over 11% in 2022.
04 Aug 22. Flashpoint Acquires Open Source Intelligence Leader Echosec Systems.
The acquisition will bring best-in-class open-source, social media, and geospatial intelligence to Flashpoint, further differentiating Flashpoint’s offerings for national security, public safety, and commercial security teams.
Flashpoint, the globally trusted leader in actionable intelligence, announced today that it has acquired Echosec Systems, a leading provider of open-source intelligence (OSINT) and publicly available information (PAI) for national security, public safety, and enterprise customers. With this acquisition, Flashpoint will significantly expand its OSINT capabilities to drive on-the-ground situational awareness, executive protection, geopolitical risk assessments, counterterrorism, misinformation and disinformation identification and response, and crisis response.
Based in Victoria, British Columbia, Echosec is a leader in collecting and disseminating mission-critical open-source intelligence in support of these goals. Echosec empowers its users to bridge the gap between the digital and physical worlds through OSINT and PAI, including an extensive array of social media and geospatial collections, to protect people, assets, and infrastructure.
For over a decade, Flashpoint has been a leader in delivering an actionable suite of intelligence solutions, derived from PAI, chat services, foreign-language forums, criminal marketplaces, paste sites, and illicit communities across the internet. By leveraging Echosec’s social media collections and geospatial insights, Flashpoint significantly expands its capabilities to deliver the world’s most robust combination of data, analytics, and automation across a wide range of security use cases.
“Intelligence practitioners require a converged, user-focused solution that includes insights derived from both open and closed intelligence sources,” says Flashpoint President Donald Saelinger. “Integrating Echosec’s worldwide social media collections, intuitive interface, and industry expertise into Flashpoint will deliver unparalleled value to our customers, to help them best identify and mitigate all types of risk.”
“We’re thrilled to join Flashpoint and unlock a new dimension in OSINT and risk intelligence,” says Echosec Systems CTO Michael Raypold. “Combining Echosec’s usability and geospatial capabilities with Flashpoint’s differentiated intelligence will enable our customers to understand, contextualize, and respond to emerging threats in an information environment spanning social media, technical and attack surface indicators, vulnerabilities and breaches, and deep and dark web sources.”
- Flashpoint CEO Josh Lefkowitz on the significance of the Echosec acquisition.
- Register for a September 8 webinar, “Protect People, Places, And Assets With Real-Time Open-Source Intelligence.”
- Sign up for a demo to see the Echosec solution in action.
Trusted by governments, commercial enterprises, and educational institutions worldwide, Flashpoint helps organizations protect their most critical assets, infrastructure, and stakeholders from security risks such as cyber threats, ransomware, fraud, physical threats, and more. Leading security practitioners—including physical and corporate security, cyber threat intelligence (CTI), vulnerability management, and vendor risk management teams—rely on the Flashpoint Intelligence Platform, comprising open source (OSINT) and closed intelligence, to proactively identify and mitigate risk and stay ahead of the evolving threat landscape. Learn more at www.flashpoint.io.
About Echosec Systems
Echosec Systems Ltd. provides security and intelligence teams enhanced access to a wide range of open source intelligence in real time. The Echosec Systems Platform and API are trusted by teams worldwide to deliver timely, relevant data for initiatives including geopolitical risk assessments, counterterrorism, brand protection, disinformation monitoring, and crisis response. Learn more at www.echosec.net. (Source: BUSINESS WIRE)
04 Aug 22. Kaman Reports Second Quarter 2022 Results.
Second Quarter 2022 Highlights:
- Continued confidence in full year outlook for earnings, EBITDA and free cash flow while reducing 2022 outlook for sales
- Consolidated backlog growth year to date of 11% to $775m driven by Engineered Products
- Executing on our growth strategy with agreement to acquire Parker-Hannifin Aircraft Wheel & Brake
- Net sales: $161m
- Gross Margin: 32.4%
- Net earnings: $4.m
- Adjusted EBITDA*: $16.4 m; Adjusted EBITDA margin*: 10.2%
- Diluted earnings per share: $0.14 per share, $0.31 per share adjusted*
Kaman Corp. (NYSE:KAMN) today reported financial results for the second fiscal quarter ended July 1, 2022.
“Overall performance was in line with our expectations with sales and margin improvement anticipated in the second half of the year. Order rates continue to be strong for our most profitable products and we continue to benefit from the recovery of the commercial aerospace market with Kaman sales increasing to Boeing and Airbus, for the fourth quarter in a row. In May, we executed on our growth strategy with a definitive agreement to acquire Parker-Hannifin’s Aircraft Wheel & Brake business. This acquisition, which is expected to close in the second half of the year, will expand the breadth of our product offerings, increase our exposure to attractive markets and drive meaningful margin and cash flow accretion,” said Ian K. Walsh, Chairman, President and Chief Executive Officer.
“In the second quarter, our largest and most profitable segment, Engineered Products, benefited from growing demand for bearings in the commercial, business and general aviation markets and for seals, springs and contacts in medical applications. We continued to demonstrate growth with an increase of more than 10 percent in sales, 25 percent in Adjusted EBITDA and approximately 300 basis points in EBITDA margin compared to both last quarter and the second quarter of 2021. Persistent demand is supporting robust order rates with backlog growing broadly across these businesses, increasing 33 percent since the beginning of the year to $225m.”
“In Precision Products, sales and margin declined during the quarter mostly in our fuze programs; however, we are on target to meet our fuze delivery plan for the year. We continue to focus on the transformation of this segment, increasing investment in our air vehicles program. In June, we announced a $10m equity investment in Near Earth Autonomy which will accelerate the development of autonomous technology in our unmanned aerial systems. We have been working with Near Earth for several years and are excited about this opportunity in a growing autonomy market. Additionally, we are still on target for a full scale model demonstration of our new KARGO UAV unmanned aerial system later this year.”
“In our Structures segment, quarterly results were impacted by a disruption of incoming materials due to a fire at one of our suppliers. We expect a partial recovery and improved performance over the course of the year. The facilities consolidation to optimize our cost structure is progressing and we are focusing on winning new business opportunities in complex structural programs,” said Walsh.
“Persistently high demand is driving steady growth in our revenue, margins and backlog for bearings, seals, springs and contacts products in Engineered Products. A significant portion of our sales expectations for the remainder of the year is already in backlog, which gives us confidence in the expected performance for this segment in the third and fourth quarter. Based upon lower than expected order rates in our Structures segment and current pressure from foreign exchange rates, we are revising our sales outlook downward slightly for the full year. The strength in order activity, diversity of our end markets and focus on operations excellence give us confidence in meeting our earnings, EBITDA and free cash flow for the full year 2022, excluding the benefit of the Aircraft Wheel & Brake acquisition.”
“Over the long term, Kaman is in a great position to provide meaningful shareholder returns through M&A and organic growth. In addition to the Aircraft Wheel & Brake acquisition, we continue to invest in our products and will consider smaller M&A opportunities that are tightly aligned with our long term strategy. We will remain disciplined in our approach to capital allocation and thoughtful in our strategy to achieve top quartile EBITDA margin, free cash flow and return on invested capital,” Walsh said. (Source: BUSINESS WIRE)
04 Aug 22. Rolls-Royce largely stems cash outflows. The engine maker expects “modestly positive” cash flow by the year end.
- Reduction in the underlying operating margin
- Engine flying hours on the rise
Rolls-Royce’s (RR) return to profitable growth is taking longer to deliver than expected, with the slow recovery in the market for long-haul travel dampening the recovery of its civil aerospace arm. A big reduction in the company’s underlying operating margin – to 2.4 per cent, from 5.9 per cent a year earlier – meant a 60 per cent drop in its underlying profit to £125mn, which was below analysts’ expectations.
The engine maker made good progress with its attempt to stem the haemorrhaging of cash from the business experienced in recent years, though. Cash outflow in the first six months of the year was £68mn, down from almost £1.2bn in the first half of last year and £2.9bn two years ago. It expects to generate “modestly positive” free cash flow over the full year.
Around £500mn of the £1.1bn cash flow improvement came from the fact that its civil aerospace arm was more active. Although it declared an operating loss of £79mn, the division generated a trading cash flow of £63mn, compared with an outflow of almost £1.1bn a year earlier.
The number of engine flying hours recorded under long-term service agreements increased by 33 per cent year on year, with hours flown by large engines growing by 43 per cent.
This is still only around 60 per cent of 2019 levels but the current trajectory means outgoing chief executive Warren East remains “reasonably comfortable” with its existing guidance of 60-70 per cent for the full year and for a full recovery to pre-pandemic levels by 2024.
Operating profit in its defence arm fell by a third on a 9 per cent decline in revenue, with chief financial officer Panos Kakoullis arguing that it’s a “long-cycle business” that doesn’t immediately benefit from the changing geopolitical picture. The division’s order book grew by £1.4bn to £6.5bn, though, and Kakoullis said it’s bidding for other work, including providing engines for new long-range Dassault aircraft the US Army will use to replace its fleet of Black Hawk helicopters.
Higher spending by western governments should allow it to secure more work on long-term defence programmes, though, bringing in “annuity-like cash flows”, he added.
Its power systems arm was the standout performer in the first half, with revenue up 20 per cent and operating profit trebling to £119mn on much higher margins, although it consumed more cash as it built inventory to overcome supply chain problems.
Despite Rolls-Royce increasing its inventory spend by over £470mn to navigate supply chain challenges, it spent £400mn less on working capital because of an £800mn swing in contract balances between payables and receivables, with the defence businesses receiving advanced payments and deposits for engines. Cash payments on pensions and hedging costs were also around £200mn lower year on year.
Berenberg analysts said the improvement in Rolls-Royce’s cash flow was “the key standout” from the results, and ahead of expectations. Approval by the Spanish government earlier this week of the company’s £1.3bn deal agreed last September to sell its ITP Aero division to Bain Capital should also help it to pay down borrowings – net debt for the six-month period ended flat at £5.1bn.
Like many firms connected to the aerospace sector, Rolls-Royce’s shares have faced headwinds and are down by a third since the start of the year. They trade at 20 times UBS’s forecast earnings for this year, falling to 11 times by 2024 when engine flying hours are due for a full recovery.
On a longer-term basis, the improved outlook for Rolls-Royce’s defence business and the progress made by its consortium to develop small modular nuclear reactors means there’s still plenty of growth potential as its balance sheet improves. Buy. Last IC View: Buy, 104p, 4 Feb 2022. (Source: Investors Chronicle)
04 Aug 22. Can ‘broken’ Rolls-Royce be fixed? Is the engineering business beyond repair or can the incoming CEO turn things around with a bolder strategy?
Rolls-Royce Holdings PLC (LSE:RR.) was termed a ‘broken business’ by analysts today, as its profit margins were squeezed amid an ever-lengthening trajectory to post-pandemic recovery.
Hopes for a second-half revival “could prove forlorn”, said analyst Danni Hewson at AJ Bell, and given the inflationary pressures and impact from conflict in Ukraine, the incoming CEO may need to find a more dramatic fix for a now rather broken business.”
The engineer’s financial results for the first half showed contracted flight hours in its civil aerospace business had only recovered 60% from pre-pandemic levels thus far and are not expected to recover fully until 2024.
Hewson warned that macroeconomic factors that continue to plague the aerospace sector could further slow its post-pandemic recovery.
“Where we’re positioned in terms of the US and Bank of England predicting a recession and inflation peaking at 13%, that just suggests that the recovery for aerospace is unlikely to be where we need [or] the expectation even a couple of days ago,” Hewson told Proactive.
The civil aerospace business has been a real “cash cow” for Rolls-Royce, which has serviced engine agreements for plane manufacturers and airline such as Boeing and Malaysian Airlines. Yet its traditionally core business is declining.
“For a good 10 years it was a real cash cow for them,” Hewson said of the long-term service agreements for its engines. “The more flying hours, the more wear and tear experienced, and the more spares and repairs [are needed].”
Civil aerospace accounted for about half of Rolls-Royce’s business before the pandemic, falling to about 41% last year, Hewson said.
“[Civil aerospace has] taken a kicking,” she said. “They’re (Rolls-Royce) not expecting flying hours to get back to pre-pandemic levels until 2024.”
Where Rolls has succeeded is in servicing the agreements effectively over the lifetime of its engines, dotting the ‘i’s and crossing the ‘t’s. The issue is that LTSAs, while being cash generative for the company, do not allow for flying to be contracted or pre-agreed, meaning they took a hit when travel bans were enforced during Covid-19.
Civil aerospace could once again be a cash cow for Rolls-Royce but its recovery might be delayed due to macroeconomic headwinds, according to Hewson.
Covid-19 was a gamechanger with unprecedented disruption to flights and a challenge for the LTSA model, as flight hours cannot be forced in contracts.
“Nobody expected what happened from Covid,” Hewson said of how it impacted the travel and aviation sector.
“That figure [the number of flying hours] has just absolutely tanked…Getting back to where we were is going to be slow.”
Rolls-Royce will bring on board former BP executive Tufan Erginbilgic as its new chief executive in January next year, and given his track record of growth there are high hopes that he will fix whatever is broken at the company.
With his background in the energy sector, he may choose to focus on growth in the company’s marginal power systems business, which posted a record second quarter but accounts for about a quarter of annual revenue, or look to sell off the asset. The company has split its business before, famously selling off car production rights to BMW and recently hiving off engine manufacturer IPT Aero.
“The new boss coming in might just want to continue going down [Warren East’s] route. Or may want to think about doing something more dramatic,” Hewson said. “We’ve heard a lot about companies that have got too big breaking off parts of the business. We know it’s sold some parts. [He] could consider hiving off the power part.”
Much depends on what opportunities the engineering behemoth pursues for expanding its nuclear reactor segment, and how nuclear energy policy is shaped in the coming months.
“Rolls are looking at creating mini nuclear reactors. That’s technology which could be sent out right around the world. It potentially stands to make an awful lot of money,” Hewson said. “They might think [it is] an area with significant growth to be achieved.” (Source: proactiveinvestors.co.uk)
04 Aug 22. Strong aerospace demand lifts Meggitt’s first-half revenue. British aircraft parts supplier Meggitt Plc (MGGT.L) reported a 21% rise in its first-half revenue on Thursday, as planemakers ramped up their production to serve post-pandemic recovery in air travel.
The London-based company, which supplies to both civil and military aerospace manufacturers including Boeing (BA.N) and Airbus (AIR.PA), said revenue came in at 821 m pounds ($997.35 m) in the six-month period ended June 30, compared with 680 m pounds last year.
Its first-half underlying profit before tax rose 31% to 63.6 m pounds.
Still, major aerospace companies have sounded the alarm on their supply chains with shortages of raw materials and components crimping the industry’s ability to capitalise on roaring travel demand.
Meggitt, which agreed to a 6.3 bn pound buyout offer from U.S peer Parker Hannifin Corp (PH.N), reaffirmed its plan to close the deal by third quarter of 2022 after winning the approval of the European Commision and UK’s antitrust earlier this year.
Smaller rival Senior Plc (SNR.L) stuck to its full-year forecast earlier this week, reflecting higher production of narrow-body jets, U.S defence demand and a recovery in wide-body jet production for long-haul routes expected towards the end of the year. ($1 = 0.8232 pound) (Source: Google/Reuters)
04 Aug 22. Meggitt PLC 2022 Interim results. Meggitt PLC (“Meggitt” or the “Group”), a leading international engineering company specialising in high performance components and sub-systems for the aerospace, defence and selected energy markets, today announces unaudited interim results for the six months ended 30 June 2022.
Tony Wood, Chief Executive, commented: “We delivered a robust trading performance in the first half, with Group organic revenue up 11%, reflecting strong growth in our civil aftermarket and civil original equipment business, as well as a good performance in energy. We ended the half with a Group book to bill ratio of 1.23x. We are encouraged by the strong recovery in passenger demand for our civil business as airlines bring more aircraft into service and the improving prospects for defence as we come out of a period of significant destocking in the aftermarket. The Group has continued to invest in technologies and capabilities to support the decarbonisation of aviation and the delivery of clean energy. In the first half we concluded the acquisition of the remaining 67% of HiETA Technologies which specialises in additive manufacturing and the remaining 30% of our joint venture in Mexico which specialises in aerospace composites. Combined with our recent investments in facilities and the ongoing development of our engineering and manufacturing capabilities, the Group remains well positioned for the future. However, we are mindful of the challenges that our industry continues to face with availability across the supply chain and continued cost inflation on materials and labour. We remain focused on mitigating these effects and the Group is well placed to do so. The acquisition of Meggitt by Parker-Hannifin remains on track for completion in Q3 and I would like to thank all of my global colleagues for their hard work, resilience and dedication in delivering for our customers and wider stakeholders through the first half of the year.”
Summary and Highlights
- Group organic revenue up 11% in the period against the corresponding period last year (down 21% vs. H1 2019) with sequential improvement of 15% in the second quarter versus Q1 22.
- Group book to bill at 1.23x, with book to bill ratio in civil original equipment at 1.40x, civil aftermarket at 1.59x, Defence at 0.82x and Energy at 1.28x.
- Civil aerospace organic revenue up 30% in the first half (down 30% vs. H1 2019) with civil aerospace aftermarket organic orders and revenue up 112% and 36% respectively compared with H1 21.
- Defence revenue 8% lower on an organic basis compared with the first half of 2021. • Underlying operating profit for the first half higher at £78.6m (H1 2021: £61.7m), an organic increase of 13%.
- Statutory operating profit of £10.0m (H1 2021: £49.0m) which includes the impairment of assets relating to the MC21 due to cessation of work following Russia’s invasion of Ukraine.
- Free cash outflow of £44.2m (H1 2021: outflow of £34.5m), reflecting our normal seasonal working capital patterns, but also including inventory build to support growth and mitigate current supply chain challenges.
- Net debt of £885.5m (H1 2021: £822.6m) with ratios of net debt:EBITDA of 1.8x and interest cover of 11.8x at 30 June 2022. Liquidity remains strong with committed facilities of £1,207.5m and headroom of £523.5m.
- In the period, we completed the disposal of our Danish business for a cash consideration of £62.3m, subject to customary adjustments for working capital and net debt.
- Recommended all cash offer of 800 pence per share from Parker-Hannifin approved by shareholders on 21 September 2021 with the transaction still expected to complete in the third quarter of 2022.
- In line with the terms of the previously announced proposed transaction with Parker-Hannifin, the Group is not paying an interim dividend for 2022.
- Since the Group is in an offer period under the UK Takeover Code, we are not providing financial guidance for 2022, nor are we able to comment on expected performance relative to any analyst forecasts that may be available.
04 Aug 22. Xona Secures Investment from First Spark Ventures and Lockheed Martin to Accelerate LEO GPS Alternative. Xona Space Systems, a pioneer in navigation technologies from Low Earth Orbit (LEO), is excited to announce that they have raised an oversubscribed financing round to accelerate the development of their high-performance commercial satellite navigation network, bringing their total funding to over $25M.
The round was led by First Spark Ventures who is joined by numerous new investors including Lockheed Martin Ventures, SRI Ventures (of SRI International), Velvet Sea Ventures, Gaingels, Airstream Venture Partners, and Space.VC. Existing investors also continue to show firm conviction in Xona’s accomplishments and market opportunity with participation from Seraphim Space, Toyota Ventures, 1517 Fund, MaC Venture Capital, and Stellar Ventures.
Xona is focused on the development of Pulsar – a Low Earth Orbit (LEO) satellite navigation system designed to provide resilient and trusted centimeter-level position anywhere on the globe. Within the past year Xona more than doubled their full-time headcount, launched their first orbital mission, and signed agreements with major players across the GPS/GNSS ecosystem such as
A leader in air defense, missile defense and space domain awareness, Numerica is known for solving some of the nation’s most important defense challenges. After several years of innovation and growth, the Colorado company’s space division has been acquired by Slingshot Aerospace, a company focused on building space simulation and analytics products for Space Situational Awareness and Space Traffic Coordination. This divestiture will allow Numerica to focus on innovations in air and missile defense with even greater investment in its short-range air defense product line – including the Spyglass™ short-range surveillance radar and MIMIR™ C2 software.
Numerica’s distinguished space division provides high-quality data and state-of-the-art software solutions that inform operator action to help protect satellites from on-orbit hazards and threats. To help address critical space needs, Numerica has developed market-leading uncorrelated track processing software and transitioned it to multiple space operation centers, deployed a global telescope network to provide a responsive, robust and affordable commercial satellite tracking service and developed the world’s first commercial daytime optical LEO-to-GEO satellite tracking capability.
04 Aug 22. Embraer announces 2nd Quarter Results.
- Firm order backlog ended 2Q22 at US$ 17.8bn (+US$0.5bn versus 1Q22). This is the highest quarter backlog post pandemic, driven by solid order activity. Recent announcement of 20 E195-E2 firm order of Porter will be included in 3Q22 backlog.
- Reported 2Q22 consolidated gross margin of 22.9% higher than 18.2% reported in 2Q21, with y-o-y improvement in most segments due to product mix, pricing increase and overall operational performance, including tax efficiencies.
- Adjusted EBIT and EBITDA were US$ 81.2m and US$ 124.6m, respectively, yielding Adjusted EBIT margin of 8.0% and Adjusted EBITDA margin of 12.2%.
- In 2Q22, Embraer reported Adjusted Net Income (excluding deferred taxes and special items) of US$ 39.4m and Earnings per Share of US$ 0.40.
- Free cash flow (FCF) in 2Q22 was a surplus of US$ 91.2m, representing a significant improvement compared to the US$ 45.1m in FCF in 2Q21, supported by divestment of Évora’s facilities and EVE’s IPO offset by working capital needs and liability management strategy.
- The Company finished the quarter with net debt of US$ 1.198bn, or US$ 0.255bn less than 1Q22 in line with the strategy to improve our capital structure and liability management.
- We reaffirm all aspects of our 2022 financial and deliveries guidance, with no material variation.
MAIN FINANCIAL INDICATORS
2 Adjusted Net Income (loss) is a non-GAAP measure, calculated by adding Net Income attributable to Embraer Shareholders plus Deferred income tax and social contribution for the period, in addition to adjusting for non-recurring items. Under IFRS for Embraer’s Income Tax benefits (expenses) the Company is required to record taxes resulting from unrealized gains or losses due to the impact of changes in the Real to US Dollar exchange rate over non-monetary assets (primarily Inventory, Intangibles, and PP&E). The taxes resulting from gains or losses over non-monetary assets are considered deferred taxes and are presented in the consolidated Cash Flow statement, under Deferred income tax and social contribution. Adjusted Net Income (loss) also excludes the net after-tax special items.
3 Net Debt w/o EVE represents cash and cash equivalents, plus financial investments, minus short and long-term loans and financing, less EVE’s Net Debt.
(B3: EMBR3, NYSE: ERJ). The Company’s operating and financial information is presented, except where otherwise stated, on a consolidated basis in United States dollars (US$) in accordance with IFRS. The financial data presented in this document as of and for the quarters ended June 30, 2022 (2Q22), March 31, 2022 (1Q22), December 31, 2021 (4Q21) and June 30, 2021 (2Q21), are derived from the unaudited financial statements, except annual financial data and where otherwise stated.
REVENUES AND GROSS MARGIN
Consolidated revenues of US$ 1,018.9m in 2Q22 represent a decrease of 9.9% y-o-y mostly driven by lower deliveries in Commercial and Defense & Security and partially offset by higher revenues in Services & Support.
03 Aug 22. Serco surmounts loss of Covid contracts. The outsourcer boosts guidance again after proving its resilience.
- Revenue remains stable
- Net debt falls
Serco (SRP) did very well out of the pandemic. Test & Trace contracts accelerated its sales growth, and the group became governments’ go-to outsourcer during the crisis.
The big concern for investors was that Serco’s success would fizzle out as Covid contracts came to an end. These fears have proved largely unfounded, however. The outsourcer has maintained revenues year on year – despite losing £220mn from the wind-down of Test & Trace – and grew its ‘underlying trading profit’ by 6 per cent. (This figure is defined as operating profit minus amortisation of intangibles arising from acquisitions and other exceptional items.)
Demand for case management in North America, employment services in the UK, and immigration services in both Australia and the UK has helped keep business booming.
Admittedly, these figures are bolstered by the acquisition of WBB, a government services provider, last April. Excluding WBB’s contribution, Serco’s sales fell by 3 per cent and underlying operating profit shrunk by 1 per cent. This remains no mean feat, however, given the powerful impact of Covid on 2021 comparatives.
Over the past six months, Serco has also managed to strengthen its balance sheet, reducing debt to £164m – £61m less than this time last year. Meanwhile, it has upped its half-year dividend by 18 per cent.
The next six months could prove trickier. As a result of the recent surge in inflation, the group is increasing pay faster than it budgeted and intends to distribute an additional £9m in the coming weeks in one-off payments to all staff outside management grades. Pay rises are expected to drive up costs, and drive down profits, in the second half of the year.
Nevertheless, management has felt able to boost its full-year guidance once again. While organic sales growth is still expected to fall by 5 per cent, Serco’s underlying sales profit is now expected to edge up rather than down. The group has also upped its free cash flow prediction, and debt is expected to be lower than previously thought.
Serco’s shares have risen by more than a third since the start of the year, and the stock has made regular appearances on our ‘Shares hitting highs and lows’ table. However, its forward PE ratio is still reasonable at 14.5, compared with a five-year average of 18.9, and its order book remains strong at £14.6bn. Buy. Last IC View: Buy, 127p, 24 Feb 2022. (Source: Investors Chronicle)
03 Aug 22. Numerica’s space division acquired by Slingshot Aerospace. Through the agreement, Slingshot has acquired the following:
- An autonomous global network of proprietary sensors and software comprising more than 150 sensors including 30 telescopes across 20 locations around the globe with advanced data processing capabilities.
- The Numerica SDA team including research scientists, orbital analysts, software engineers and applied mathematicians in remote work settings including Vandenburg Air Force Base as well as the Fort Collins and Colorado Springs, Colo. offices.
- The Numerica office in Colorado Springs.
“We are proud to have developed such an effective global network of proprietary ground-based sensors and software for deep space surveillance and look forward to seeing its continued evolution with an established industry leader like Slingshot Aerospace,” President Jeff Poore said. “This acquisition will help accelerate advancements in spaceflight safety and sustainability during a time of great need, but it will also allow Numerica to strategically focus resources on our growing air and missile defense business.”
The air and missile defense teams at Numerica are dedicated to developing and deploying high-performance command and control systems for applications from theater integrated air and missile defense to tactical counter-UAS. Several of their biggest developments lately have included:
- Launch of Spyglass radar, a purpose-built multi-mission KU-band radar that addresses short-range air defense (SHORAD) missions inclusive of counter-small, unmanned aircraft systems (C-SUAS), ground surveillance and other missions.
- MFATS™, a mature and widely deployed sensor fusion software engine used to generate fire control quality tracks from a network of heterogeneous sensors.
- MIMIR, a software product for integrating networks of sensors and weapons, includes MFATS for sensor data fusion and a lightweight user display for operator engagement.
- An 18-year membership of the Lockheed Martin-led Missile Defense National Team, providing advanced algorithms to assist the U.S. Ballistic Missile Defense System (BMDS).
- A 13-year position providing advanced algorithms and software on the Northrop Grumman-led Integrated Air and Missile Defense Battle Command System (IBCS) program.
- Renovation of a 33,000 square foot facility to support the continued development of Spyglass radar – this new building located at 4450 Denrose Court in Fort Collins is the only location in Colorado that is currently manufacturing radar and one of only a few in the entire country.
About Numerica: Founded in 1996, Numerica focuses on creating innovative solutions to the most pressing technical challenges faced by customers in the areas of air defense and missile defense. Headquartered in Fort Collins, Colo., Numerica’s rapidly growing team of talented research scientists and engineers tackle data science problems by developing advanced algorithms to power mission-critical national security software. This year, Numerica celebrates 25 years of developing state-of-the-art technologies that have been deployed around the world to integrate networks, fuse data, precisely track targets and quantify uncertainty. Learn more at www.numerica.us. (Source: PR Newswire)
03 Aug 22. Triumph Group, Inc. (NYSE: TGI) (“TRIUMPH” or the “Company”) today reported financial results for its first quarter of fiscal 2023, which ended June 30, 2022.
First Quarter Fiscal 2023
- Net sales of $349.4m
- Operating income of $14.7m with operating margin of 4%; adjusted operating income of $32.6m with adjusted operating margin of 9%
- Net loss of $10.3m, or ($0.16) per share; adjusted net income of $7.5m, or $0.12 per diluted share
- Cash flow used in operations of $93.0m; core cash used in operations of $72.0m
Fiscal 2023 Guidance
- Net sales of approximately $1.3bn
- GAAP earnings per diluted share of between $1.51 – $1.71
- Adjusted earnings per diluted share of between $0.28 – $0.48, down $0.12 due to a reduction in non-cash pension income
- Cash used in operations of ($30.0)m to ($40.0)m, includes core cash flow from operations of between $30.0m – $45.0m
“TRIUMPH generated organic sales growth in our continuing operations driven by improving commercial OEM and MRO demand.” said Dan Crowley, TRIUMPH’s chairman, president and chief executive officer. “Our actions to mitigate supply chain constraints and work with our customers and suppliers to ensure continuity and affordability continue to differentiate TRIUMPH. With a growing and profitable backlog, TRIUMPH is well positioned to benefit from continued strength across nearly all of our end markets.”
Mr. Crowley continued, “Consistent with our strategic plan, TRIUMPH recently completed the divestiture of its last remaining large structures operation. Our first quarter results keep us on track to achieve our full year objectives, and with our goal to double profitability over fiscal years 2022 to 2025, driven by improved OEM production rates, expanded MRO volumes, enhanced pricing from recent contract extensions and a lower cost structure. We remain focused on investing in our people, operations, and products for the benefit of all stakeholders.”
First Quarter Fiscal 2023 Overview
Excluding divestitures and exited programs, sales for the first quarter of fiscal 2023 were up 1% organically from the prior year period as increases in commercial narrow-body production offset decreased military rotorcraft volume.
First quarter operating income of $14.7m includes $0.7m of restructuring costs related to our structures facility exits and $17.2m reduction of revenue for consideration payable to customer related to the Stuart divestiture. Cost of sales benefited from the Aviation Manufacturing Jobs Protection Program by $5.0m in the quarter. Net loss for the first quarter of fiscal 2023 was $10.3m, or ($0.16) per share primarily due to the items noted above. On an adjusted basis, net income was $7.5m, or $0.12 per diluted share.
TRIUMPH’s results included the following:
The number of shares used in computing diluted earnings per share for the first quarter of 2023 was 65.3m.
Adjusting for the impact of the Stuart divestiture, backlog, which represents the next 24 months of actual purchase orders with firm delivery dates or contract requirements, was $1.53bn, up 7% from the prior year, primarily on commercial narrow body platforms.
For the first quarter of fiscal 2023, cash flow used in operations was $93.0m.
The Company’s outlook reflects adjustments detailed in the attached tables.
Based on expected aircraft production rates, and the resulting demand on each of our facilities, the Company expects net sales for fiscal 2023 will be approximately $1.3bn.
The Company expects GAAP fiscal 2023 earnings per diluted share of $1.51 to $1.71, up $1.11 from prior guidance due to impacts of the Stuart divestiture and our interim pension re-measurement. The Company expects adjusted earnings per diluted share of $0.28 – $0.48, down $0.12 due to a reduction in non-cash pension income.
The Company expects fiscal 2023 cash used in operations of ($30.0)m to ($40.0)m, including core cash flow from operations of approximately $30.0m to $45.0m and core free cash flow of approximately break-even to $15.0m. (Source: PR Newswire)
03 Aug 22. TRM Equity Acquires Wellman Dynamics. TRM Equity II (“TRM”), the Michigan based private equity fund, has acquired all of the equity of WDC Acquisition LLC, known by its trade name Wellman Dynamics (“Wellman”). The Company, located in Creston, Iowa, is an aerospace supplier known for manufacturing large scale, complex magnesium and aluminum castings for the defense and commercial aerospace markets. The sale closed July 29th, 2022. Wellman has been around for 100 years and has been a long-standing member of the Creston, Iowa community since 1965. Approximately 350 people are employed at Wellman.
Jeffrey Stone, Managing Director for TRM, commented: “Due to Wellman’s unique capabilities and status as a critical supplier, the customer base has been very supportive during the last few years in a challenging environment. Very significant investments have been made to modernize the facility and to support new defense programs since 2018. We are excited to have the opportunity to bring our foundry experience to the business. As a result of this transaction, Wellman is fortunate to have a strong balance sheet as it comes out of the post-Covid/extreme tight labor environment. These challenges are not unique to Wellman, but given its unique set of attributes and the situational benefits previously referenced, we are confident its performance will differentiate it in the years to come.”
TRM Equity Acquires Wellman Dynamics
About TRM Equity
TRM Equity is a private equity firm that seeks controlling investments in situations where the experience of our team can assist companies with operational improvement or transformation. The Firm’s core team has worked and invested together for over 15 years, applying a consistent approach in targeted manufacturing industries, and has a demonstrated track record of above market returns. (Source: PR Newswire)
04 Aug 22. TT Electronics covers expected 2022 revenues.
- Strengthening order intake
- Increased inventory levels
A fortnight after it secured its latest design contract with Honeywell Aerospace, TT Electronics (TTG) released half-year figures detailing a contraction in reported margins set against encouraging order intake.
On the latter point, the electronic components manufacturer revealed that its book-to-bill ratio (orders received to units shipped and billed) stood at 144 per cent through to the 30 June half year, while “23 new significant contract wins” fed through to a record order intake. It meant that its order book more than doubled on pre-pandemic levels and was up 55 per cent against the prior year. Expected revenues for 2022 have already been covered, with improved top-line visibility stretching through into 2023.
The step up in orders predicated an increase in inventory levels and contributed to a £33mn working capital outflow and deteriorating cash conversion. In addition, the net debt to cash profit multiple increased to 2.4 from 1.7 at the 2021 year-end, although management anticipates that it will revert to the target range of 1-2 times by December 2022.
Constant currency revenue growth came in at 10 per cent, driven by strengthening numbers from its GMS and S&SC businesses. Management insists that rising material and freight costs have been largely offset by price increases, “including to the existing order book”, but the fact remains that the gross margin contracted by close to a full percentage point.
A forward rating of 11 times consensus earnings doesn’t appear too daunting, if you assume that the collaborative approach with the likes of Honeywell should generate repeat business over time. However, management admits that revenues from the commercial aerospace segment are lumpy and taking longer to return, and it’s also reasonable to speculate whether this might apply to other corners of the business if macro conditions deteriorate further. Hold. Last IC View: Hold, 189p, 10 Mar 2022. (Source: Investors Chronicle)
03 Aug 22. CIS Secure Completes Merger with Intrepid Solutions and Services. HKW, a middle-market private equity firm focused on growth-oriented companies, today announced that its portfolio company, CIS Secure Computing, Inc. (“CIS Secure” or “Company”), acquired Intrepid Solutions and Services, LLC (“Intrepid Solutions”). The financial terms of the transaction were not disclosed.
Intrepid Solutions provides information technology modernization, data analysis/cybersecurity services, and intelligence training/support, primarily to the defense and intelligence communities.
“The addition of Intrepid Solutions’ robust services portfolio is a significant milestone for CIS Secure. The combined companies will be able to develop, integrate, and deliver critical security solutions for the national security infrastructure,” said Bill Strang, Chief Executive Officer of CIS Secure. “The combination of CIS Secure and Intrepid Solutions is a transformative moment for us all and will greatly benefit our customers, partners, and the entire team,” said Ryan Hebert, Intrepid CEO. “The companies have highly complementary capabilities in defense and intelligence technologies and services. We look forward to working with our new team members at CIS Secure to provide end-to-end solutions to our combined customer set.”
Chris Eline, HKW Principal, stated, “In addition to adding services to CIS Secure’s technology offering, Intrepid Solutions also brings a very talented and like-minded management team. HKW looks forward to supporting the combined business.”
The combination of CIS Secure and Intrepid Solutions will create a vertically integrated organization committed to developing, delivering, and supporting mission-focused technologies. The two companies already share multiple customers throughout their markets and have experienced consistent growth over the past years.
Headquartered in Ashburn, VA, CIS Secure provides secure collaboration, tactical communications, and protected personal mobility solutions, securing the operations of the defense, intelligence, and homeland security communities. Providing hardware and software solutions, CIS Secure aligns with HKW’s Business Services sector focus, notably within the Tech-Enabled Business Services subsector. cissecure.com
HKW is a private equity firm investing in growth-oriented companies with talented management teams in the US and Canada. HKW targets companies in the Technology, Health & Wellness, and Business Services sectors. Since 1982, HKW has sponsored 66 platform transactions of lower middle-market companies throughout North America and 73 add-on acquisitions. For more information on HKW, please visit hkwinc.com. (Source: BUSINESS WIRE)
04 Aug 22. HENSOLDT AG significantly increases revenue and earnings in the first half of 2022 and raises guidance for book-to-bill ratio.
- Strong 40.3 percent revenue growth in first half of 2022 to EUR 682m
- Adjusted EBITDA improved by 37.7 percent to EUR 61m
- Adjusted EBITDA margin of 8.9 percent at similar level to prior-year period
- Strong order intake of EUR 948m in the first half year
- Book-to-bill ratio revised upwards for 2022 financial year
HENSOLDT AG (“HENSOLDT”) accelerated its growth trajectory in the first half of 2022 and took important steps to extend its strategic position in the European security and defence industry. The technology company secured further significant orders and delivered ongoing projects with strong profitability.
HENSOLDT’s revenue climbed by 40.3 percent year on year to EUR 682m (H1 2021: EUR 486m). Adjusted EBITDA reached EUR 61m mid-year, an equally substantial increase of 37.7 percent (H1 2021: EUR 44m). At 8.9 percent, the adjusted EBITDA margin was at previous year’s level (H1 2021: 9.1 percent), despite a larger share of pass-through revenues. The adjusted pre-tax unlevered free cash flow of EUR -157m (H1 2021: EUR -57m) reflects the KPI’s seasonality as well as specifically the systematic implementation of major projects and the associated increase in working capital.
Following the positive business performance in the first half year, HENSOLDT has confirmed its full-year guidance for revenue, adjusted EBITDA, net financial leverage and dividend. Due to enhanced sales pipeline visibility, the company has raised its guidance for the book-to-bill ratio (order intake to revenues) to between 1.1 and 1.2.
Thomas Müller, CEO of HENSOLDT AG, said: “The first half year underscores that HENSOLDT is approaching the massive effort faced by our industry from a position of strength. With parliamentary approval of special funding for the German Armed Forces and of the increased defence budget for 2023, the foundation has been laid to transform the Bundeswehr into a modern, future-proof army. Corresponding tenders are currently being initiated. As a high-tech provider of sensor solutions, we are able to contribute decisively across all segments as well as all security and defence applications. In light of this, we have revised our guidance for the book-to-bill ratio upwards already for the current financial year. I also believe that there can only be one answer to meeting the new challenges in terms of security policy, and that is an intensification of European cooperation. We cannot revert to individual countries going it alone. In this spirit, we are intensifying cooperation with Leonardo in the joint development and production of radars and self-protection systems for the Eurofighter, combat systems for next-generation frigates, networked sensor solutions for land systems and next-generation air defence systems, including for defence from hypersonic missiles. We also see this alliance as the potential nucleus of a broader European collaboration.”
Christian Ladurner, CFO of HENSOLDT AG since 1 July 2022: “We have further stepped up our revenue and earnings growth momentum over the last few months, demonstrating how we consistently translate our record order backlog into earnings. HENSOLDT combines innovativeness with an attractive business model. This has always been one of our company’s major attributes and will remain our focus in the future. We will continue to be very disciplined on the cost side so that our strong profitability allows us to finance our innovation drive and to make targeted investments in further growth. Our business performance will enable us to extend HENSOLDT’s position as a leading solutions provider for optronics and sensors across the electromagnetic spectrum and to further strengthen complementary growth areas with data analytics, sensor fusion and artificial intelligence. Current global developments additionally highlight HENSOLDT’s societal benefit and relevance. This is also reflected in our free float, where the proportion of investors with a clear ESG focus has risen from around 6 percent at the end of 2021 to over 20 percent now.”
Christian Ladurner and Dr Lars Immisch appointed to the Management Board of HENSOLDT AG
Alongside Christian Ladurner, the Supervisory Board of HENSOLDT AG appointed Dr Lars Immisch as a new member of the Management Board on 16 March 2022. Dr Immisch will assume responsibility as CHRO as of 1 October. The new line-up of the HENSOLDT Management Board was announced in the course of long-term succession planning.
Continued positive order trend
With its high-performance solutions, HENSOLDT once again held its place as technology partner for major defence projects in the first half of 2022 and recorded significant incoming orders. For example, the German Navy’s F126 (formerly MKS180) multipurpose frigates are to be equipped with four HENSOLDT TRS-4D radars. The order is worth EUR 186m, with the first F126 frigate expected to be delivered in 2028. A long-term service contract for the Eurofighter worth EUR 270m was also secured in the reporting period. Total order intake in the first half year amounted to EUR 948m, compared with EUR 2.112bn in the prior-year period, which had been bolstered back then by the milestone order for delivery of the PEGASUS signal-capturing and airborne reconnaissance system worth around EUR 1.25bn. The total order backlog increased to EUR 5.364bn at the end of the first half of this year (H1 2021: EUR 5.024bn).
Against the backdrop of the new security situation in Germany, HENSOLDT and Diehl Defence agreed in April to intensify their existing cooperation in the field of ground-based air defence. Based on proven systems currently in production and available for short-term delivery, the two companies aim to provide leading-edge products to defend against new and emerging airborne and missile threats. The jointly developed systems guarantee unrestricted access to national key technologies and offer the highest degree of admissibility, certifiability and security of supply for operation in Germany.
Upward revision of guidance for 2022
Due to enhanced sales pipeline visibility, the company has raised its guidance for the book-to-bill ratio (order intake to revenues) to between 1.1 and 1.2. The guidance for the other key performance indicators remains unchanged: revenue is anticipated to grow by 15 percent to EUR 1.7 bn and adjusted EBITDA to be between EUR 285m and EUR 300m. Net financial leverage is to be decreased further as planned to 1.4x. HENSOLDT expects to pay a dividend of 20 percent of adjusted net income.
03 Aug 22. Rolls secures final clearance for sale of ITP Aero to Bain. Rolls-Royce (RR.L) said on Wednesday it had secured the final regulatory clearance for the sale of ITP Aero to investors led by Bain Capital, with the completion of the 1.8bn euro ($1.8bn) deal expected in the coming weeks.
The approval, from the Spanish government, means Rolls has completed its disposal programme, raising at least 2bn pounds ($2.4bn).
“Upon completion, sale proceeds (excluding any cash retained by Rolls-Royce) of approximately 1.7 bn euros will be used to help rebuild the Rolls-Royce balance sheet, in support of our ambition to return to an investment grade credit profile in the medium term,” it said. (Source: Reuters)
03 Aug 22. Curtiss-Wright Corporation (NYSE: CW) reports financial results for the second quarter ended June 30, 2022.
Second Quarter 2022 Highlights:
- Reported sales of $609m, operating income of $98m, operating margin of 16.1%, and diluted earnings per share (EPS) of $1.83;
- Adjusted operating margin of 16.1%, up 50 basis points;
- Adjusted diluted EPS of $1.83, up 18%;
- New orders of $776m, up 13%, reflecting strong Aerospace & Defense (A&D) market demand, and book-to-bill of 1.27;
- Backlog of $2.4bn, up 9% year-to-date;
- Reported free cash flow (FCF) of $22m; and
- Share repurchases of approximately $12m.
Full-Year 2022 Adjusted Guidance:
- Full-year 2022 guidance updated to include the acquisition of the Safran aerospace arresting systems business (SAA) that was completed on June 30, 2022; the business is expected to generate partial year sales of approximately $40m within the Naval & Power segment and also be accretive to full-year Adjusted diluted EPS;
- Sales increased to new range of 4% to 6% growth (previously 3% to 5%);
- Adjusted operating income increased to new range of 5% to 7% growth (previously 3% to 6%) to reflect organic improvements and the contribution from SAA;
- Maintained Adjusted operating margin range of 17.1% to 17.3%, up 10 to 30 basis points compared with the prior year;
- Adjusted diluted EPS increased by $0.05 to new range of $8.10 to $8.30, up 10% to 13%; and
- Maintained free cash flow range of $345 to $365m, reflecting greater than 110% FCF conversion.
“Curtiss-Wright delivered solid second quarter results, as overall sales were in-line with our expectations and our ongoing focus on operational execution enabled us to generate 50 basis points in operating margin expansion. As a result, Adjusted diluted EPS of $1.83 exceeded our expectations in the second quarter,” said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation. “We also experienced strong order activity, as bookings increased 13% year over year, yielding a book-to-bill of 1.27, driven by increased demand in our defense and commercial aerospace markets.”
“Looking ahead to the remainder of 2022, although near-term headwinds from ongoing supply chain disruption continue to impact the timing of revenue within our defense markets, we are encouraged by the improving trends in our commercial markets which provides confidence in achieving our full-year outlook. We raised our full-year 2022 guidance for total sales growth to a new range of 4% to 6% to reflect the contribution of the recently completed SAA acquisition, and we continue to anticipate solid organic growth of 3% to 5% in our A&D and Commercial markets. We also expect continued operating margin expansion and double-digit Adjusted diluted EPS growth of 10% to 13%, as we successfully execute on our Pivot to Growth strategy to drive long-term shareholder value.”
Financing of $300m in Senior Notes:
- On July 29, 2022, the Company priced a private placement debt offering of $300m for senior notes, consisting of $200m 4.49% notes due 2032 and $100m 4.64% notes due 2034; The offering is expected to close in the fourth quarter; and
- Curtiss-Wright maintains a flexible and conservative capital structure, and has significant capacity for acquisitions, returns to shareholders and other corporate needs.
Second Quarter 2022 Operating Results
- Adjusted sales of $609m were flat compared with the prior year;
- Total A&D market sales decreased 3%, while total Commercial market sales increased 6%;
- In our A&D markets, we experienced reduced sales in our defense markets due to ongoing supply chain headwinds principally for defense electronics components and the timing of naval defense revenues, which were partially offset by modest growth in the commercial aerospace market;
- In our Commercial markets, we experienced solid sales growth within the power & process market, despite the wind down on the China Direct AP1000 program, as well as solid mid-single-digit growth in the general industrial market; and
- Adjusted operating income of $98m increased 3%, while Adjusted operating margin increased 50 basis points to 16.1%, principally driven by increased profitability in the Naval & Power segment, as well as the benefits of our ongoing company-wide operational excellence initiatives; These increases were partially offset by unfavorable overhead absorption on lower revenues in our Defense Electronics segment.
Second Quarter 2022 Segment Performance
Aerospace & Industrial
- Adjusted sales of $209m, up $15m, or 8%;
- Higher commercial aerospace market revenue reflected strong demand for actuation and sensors products, as well as surface treatment services, on numerous narrowbody and widebody platforms;
- Higher general industrial market revenue was driven by increased sales of industrial vehicle products, principally serving off-highway and specialty platforms;
- Lower aerospace defense market revenue principally reflected reduced sales of actuation and sensors products on various fighter jet programs; and
- Adjusted operating income was $32m, up 7% from the prior year, while Adjusted operating margin decreased 10 basis points to 15.6%, as favorable absorption on strong Commercial market sales and the benefits of our ongoing operational excellence initiatives were offset by higher research and development investments.
- Adjusted sales of $150m, down $14m, or 8%, principally reflected the timing of sales within our aerospace and ground defense markets due to ongoing supply chain headwinds and the delayed signing of the FY22 defense budget;
- Higher naval defense market revenue primarily reflected increased revenues on the Virginia-class submarine program;
- Lower commercial aerospace market revenue reflected decreased sales of avionics and flight test equipment on various domestic and international platforms; and
- Adjusted operating income was $24m, down 21% from the prior year, while adjusted operating margin decreased 250 basis points to 16.4%, primarily reflecting unfavorable absorption on lower A&D revenues.
Naval & Power
- Adjusted sales of $251m were essentially flat compared with the prior year period;
- Naval defense market revenue declines primarily reflected lower revenues on the CVN-80 aircraft carrier and Virginia-class submarine programs, partially offset by higher revenues on the CVN-81 aircraft carrier and Columbia-class submarine programs;
- Higher power & process market revenues reflected strong growth in industrial valve sales in the process market as well as higher nuclear aftermarket revenues supporting the maintenance of existing operating reactors; Those increases were partially offset by the timing of production on the China Direct AP1000 program; and
- Adjusted operating income was $50m, up 15% from the prior year, while adjusted operating margin increased 270 basis points to 19.9%, primarily driven by favorable mix in the naval defense and process markets, as well as the benefits of our ongoing operational excellence initiatives.
Free Cash Flow
- Reported free cash flow of $22m decreased $43m, primarily due to the timing of defense revenues and higher working capital;
- Adjusted free cash flow of $22m; and
- Capital expenditures were essentially flat compared with the prior year.
New Orders and Backlog
- New orders of $776m increased 13% and generated a strong book-to-bill of 1.27, principally driven by strong demand for naval defense and commercial aerospace products within our A&D markets, and for nuclear aftermarket and process products within our Commercial markets; and
- Backlog of $2.4bn, up 9% from December 31, 2021, reflects higher demand in both our A&D and commercial markets.
Share Repurchase and Dividends
- During the second quarter, the Company repurchased 87,412 shares of its common stock for approximately $12m; and
- The Company also declared and paid a quarterly dividend of $0.19 a share, an increase of 6% from the previous quarter.
02 Aug 22. Lockheed doubles venture fund’s size to $400m. The world’s largest defense company is further ramping up its “21st Century Security” tech scouting and investment efforts. Four summers ago, Lockheed Martin doubled the size of its emerging technology-focused venture capital fund to $200 m in a push to identify more startup companies whose products are of promise. Lockheed repeated that step this summer with its Tuesday announcement that the fund will double again from $200 m to $400 m so it can help speed up defense innovation through investments in growing tech companies.
“Doubling our ventures fund will allow us to increase the number of start-up companies we can work with to advance ’21st Century Security’ technologies for the benefit of our customers,” Lockheed Chief Financial Officer Jay Malave said in a release.
This increase of the fund’s size comes amid recent efforts by other companies in the government market, including other large defense hardware makers, to up their game on the tech scouting and venture investment front.
L3Harris Technologies has started working with Shield Capital on that front, while AE Industrial Partners has started efforts to raise $250m for its second fund with Boeing already having committed $50m. And Booz Allen Hamilton has formalized its venture capital organization with an initial $100 m allotment. Jacobs, BAE Systems and Northrop Grumman are also involved in venture investments to varying extents.
Malave’s use of the 21st Century Security phrase refers to how CEO Jim Taiclet has spoken about what he believes Lockheed should be: more than just a platform manufacturer, but also a provider of the software and connectivity that links people and systems in the field.
For Lockheed Martin Ventures, that means identifying and investing in companies that are creating the kind of products that can become foundational technologies for defense and national security customers.
The ventures fund has backed more than 70 startup companies since its launch in 2007. Lockheed Martin Ventures so far this year has already invested in 11 new businesses focused on areas such as sensor technology, quantum computing, advanced manufacturing and space services.
“In 2021 alone, Lockheed Martin Ventures screened more than 1,000 start-up companies that are leading advancements in the areas such as artificial intelligence, autonomy and robotics, cyber security, and quantum computing,” said Chris Moran, vice president and general manager for Lockheed Martin Ventures.
“Today’s announcement is about growing the fund, but also about growing our team, our portfolio, and our level of engagement with core Lockheed Martin programs,” Moran added. “This commitment allows Lockheed Martin Ventures to identify, evolve and integrate emerging technology into our national security industrial base on a larger scale and better serve the future needs of our customers.” (Source: washingtontechnology.com)
02 Aug 22. AMETEK Announces Record Second Quarter Results and Raises 2022 Guidance. AMETEK, Inc. (NYSE: AME) today announced its financial results for the second quarter ended June 30, 2022.
AMETEK’s second quarter 2022 sales were a record $1.51bn, a 9% increase over the second quarter of 2021, with organic sales growth of 12%. Operating income increased 15% to a record $364.8m and operating margins were 24.1%, up 130 basis points from second quarter 2021 margins.
On a GAAP basis, second quarter earnings per diluted share were $1.22. Adjusted earnings in the quarter were a record $1.38 per diluted share, up 20% from the second quarter of 2021. Adjusted earnings adds back non-cash, after-tax, acquisition-related intangible amortization of $0.16 per diluted share. A reconciliation of reported GAAP results to adjusted results is included in the financial tables accompanying this release and on the AMETEK website.
“AMETEK delivered excellent results in the second quarter with record sales, operating income and adjusted earnings per share,” commented David A. Zapico, AMETEK Chairman and Chief Executive Officer. “Our results were ahead of expectations driven by strong organic sales growth and continued impressive operating performance. Additionally, end demand remains strong and broad-based with excellent organic orders growth in the quarter. Given this performance, we are raising our earnings guidance for the full year.”
Electronic Instruments Group (EIG)
EIG sales in the second quarter were $1.03bn, up 10% from the second quarter of 2021. EIG’s operating income in the quarter increased 17% to $265.1m and operating income margins were 25.8%, an increase of 150 basis points versus the second quarter of 2021.
“EIG delivered outstanding operating results in the second quarter,” noted Mr. Zapico. “Sales growth was broad-based and stronger than expected while EIG’s operational excellence initiatives drove robust margin expansion in the quarter.”
Electromechanical Group (EMG)
Second quarter EMG sales were a record $486.3m, up 7% from the same quarter in 2021. EMG’s second quarter operating income was $124.4m, up 11% versus the prior year, while operating income margins were 25.6% in the quarter, up 70 basis points versus the prior year.
“EMG had another strong quarter with excellent sales growth and outstanding operating performance resulting in continued strong margin expansion,” commented Mr. Zapico.
“Our businesses again delivered exceptional results in an increasingly challenging environment. This continued success reflects the hard work and commitment of all AMETEK colleagues, the quality of our niche, differentiated businesses, and the proven strength of the AMETEK Growth model. Our flexible operating structure allows us to quickly react to changing economic conditions, while our balance sheet and strong cash flows position us well to continue to deploy capital on value enhancing, strategic acquisitions,” noted Mr. Zapico.
“For 2022, we expect overall sales to be up high single digits compared to 2021. Adjusted diluted earnings per share are now expected to be in the range of $5.46 to $5.54, an increase of 13% to 14% over the comparable basis for 2021. This is an increase from our previous guidance range of $5.34 to $5.44 per diluted share,” he added.
“We expect overall sales in the third quarter to be up mid-single digits versus the prior year. Third quarter adjusted earnings per diluted share are anticipated to be in the range of $1.36 to $1.38, up 8% to 10% compared to the third quarter of 2021,” concluded Mr. Zapico.
02 Aug 22. SES acquires DRS Global Enterprise Solutions for $450m.
DRS GES and SES GS will jointly develop advanced satellite network solutions for the US Government. SES and its subsidiary SES Government Solutions (SES GS) have obtained regulatory approvals and closed the transaction to purchase DRS Global Enterprise Solutions (GES).
DRS GES was previously owned by Leonardo’s US subsidiary Leonardo DRS.
Valued at $450m, the acquisition will see the combination of DRS GES’ business with SES GS.
The joint business is set to operate as SES Government Solutions and expected to draw annual run-rate synergies worth $25m.
SES GS president and CEO David Fields said: “The breadth of our capabilities, now spanning both connectivity and integration, allows for building, managing, and supporting the most advanced satellite networks solutions for our US Government customers.”
With a cross-functional workforce, the new organisation will be capable of integrating multi-orbit, geostationary, and medium earth orbit (MEO) services, and multi-operator network solutions.
The new business will focus on developing a scaled solutions provider to cater to the US Government’s multi-orbit satellite communications needs and support other land, sea, or air-based missions.
SES GS will also provide flexible second-generation MEO services to its government customer base via SES’ O3b mPOWER system.
The business will also use its expertise in cybersecurity operations, customer support, and governance to serve the various needs of its customers.
The SES GS Proxy Board has appointed David Fields from DRS GES to head the combined business.
SES GS Proxy Board chairman USAF (Retired) brigadier general Billy Bingham said: “I am extremely excited about the potential that this combination unleashes, reinforcing our commitment to provide best-in-class satellite network solutions to the US Department of Defense customers.
“We are delighted to welcome Fields, who comes to SES GS with extensive knowledge and expertise in the satellite communications industry and a demonstrated record of achievement in the US Government sector.”
02 Aug 22. Leidos Holdings, Inc. Reports Second Quarter Fiscal Year 2022 Results.
- Revenues of $3.6bn, up 4% year-over-year
- Net Income of $172m; Adjusted EBITDA of $366m
- Diluted Earnings per Share of $1.24, or $1.59 on a non-GAAP basis
- Cash Flows from Operations of $40m; Free Cash Flow of $19m
- Net Bookings of $2.2bn (book-to-bill ratio of 0.6); backlog of $34.7bn up 4% year-over-year
Leidos Holdings, Inc. (NYSE: LDOS), a FORTUNE 500® science and technology leader, today reported financial results for the second quarter of fiscal year 2022.
Roger Krone, Leidos Chairman and Chief Executive Officer, commented, “Leidos remains on track for another year of solid organic growth and core business profitability. The affirmation of our Defense Enclave Services contract award by the Government Accountability Office demonstrates our leadership in digital modernization across the federal government, with strong demand for our technology solutions and services across our diversified business portfolio. We continue to execute on our disciplined and balanced capital allocation strategy to drive shareholder value. And, we are proving our ability to compete successfully for talent with another quarter of robust hiring.”
Summary Operating Results
Revenues for the quarter were $3.60bn, up 4% in total and organically compared to the second quarter of fiscal year 2021. Revenues grew across all reportable segments; the largest contributors were continued growth of the Navy Next Generation Enterprise Network Recompete (NGEN-R) Service Management, Integration and Transport (SMIT) contract and increased deployments on the Defense Healthcare Management System Modernization (DHMSM) program.
Net income was $172m and diluted EPS was $1.24. Net income and diluted EPS were up 1% and 5% year-over-year, respectively, and net income margin decreased from 4.9% to 4.8% year-over-year. Net interest expense increased to $50m from $46m in the second quarter of fiscal year 2021. In addition, the weighted average diluted share count for the quarter was 138 m compared to 143m in the prior year quarter, which benefited from the retirement of 0.3m shares as part of the final settlement of the Accelerated Share Repurchase (ASR) agreement implemented in the first quarter of fiscal year 2022.
Adjusted EBITDA was $366m for the second quarter, up 2% year-over-year. Adjusted EBITDA margin decreased from 10.4% to 10.2% over the same period. Non-GAAP net income was $220 m for the second quarter, which was up slightly year-over-year, and non-GAAP diluted EPS for the quarter was $1.59, which was up 5% compared to the second quarter of fiscal year 2021.
Cash Flow Summary
In the second quarter of fiscal year 2022, Leidos generated $40m of net cash provided by operating activities, used $8 m in investing activities and generated $6 m in financing activities. After adjusting for payments for property, equipment and software, quarterly free cash flow was $19m.
In the quarter Leidos entered into a 364-day term loan credit agreement for a senior unsecured term loan facility in an aggregate principal amount of $380m, and the proceeds were used to repay the $380m senior unsecured term loan entered into on May 7, 2021. As of July 1, 2022, Leidos had $339m in cash and cash equivalents and $5.2bn of debt, including $150m of Commercial Paper Notes outstanding.
After the close of the quarter, Leidos entered into a definitive agreement with private equity firm Advent International to acquire Cobham Aviation Services Australia’s Special Mission business. The acquired business provides Border Force Airborne Surveillance and Maritime Safety Search and Rescue services to the Australian Federal Government. The acquisition is subject to customary closing conditions, including regulatory approvals.
On July 29, 2022, the Leidos Board of Directors declared that Leidos will pay a cash dividend of $0.36 per share on September 30, 2022 to stockholders of record at the close of business on September 15, 2022.
New Business Awards
Net bookings totaled $2.2bn in the quarter, representing a book-to-bill ratio of 0.6. As a result, backlog at the end of the quarter was $34.7bn, of which $7.5 bn was funded. During the quarter Leidos received several particularly important awards:
- Defense Information Systems Agency (DISA) Defense Enclave Services (DES). DISA awarded Leidos a single-award, indefinite delivery, indefinite quantity (IDIQ) contract with a total estimated value of $11.5bn and a four-year base period of performance followed by three two-year option periods. Through the DES contract, Leidos will consolidate enterprise IT services and provide standardized, responsive and cost-effective solutions for more than 370,000 users spanning 22 Department of Defense (DoD) agencies and field activities with over 500 sites both in the U.S. and abroad. This work will focus on mission value and user experience, while improving cybersecurity, network availability and reliability for Fourth Estate agencies.
- Program Executive Office (PEO) Integrated Warfare Systems (IWS) Undersea Warfare Combat System and Product Support. Leidos was awarded a follow-on contract to support the Navy’s PEO IWS Directorate. Under the contract, Leidos will perform a range of support services, including shipboard modernization, curriculum development, training conduct, depot support, technical data, maintenance planning and management. The single award, cost-plus-fixed-fee contract holds an approximate value of $291m and includes a one-year base period of performance with four additional one-year option periods.
- Navy Medical Performance Research. Leidos was awarded a new task order by the Naval Medical Readiness Logistics Command, Detachment Fort Detrick, to support research to maximize warfighter performance and survivability in the aviation, underwater and special warfare environments. Under the contract, Leidos will support research on the human cognitive and physiological factors associated with military operations. The research focuses on motion sickness, aeromedical standards, hypoxia, fatigue assessment, aviation safety and both neurocognitive and neurophysiological effects. The contract holds an approximate value of $53m and includes a one-year base period of performance with four one-year options and one six-month option.
- Punta Cana Security Checkpoint Upgrade. Leidos was selected by the Dominican Republic’s Punta Cana International Airport to upgrade their security checkpoints. Punta Cana hosts more than 4m tourists annually with strong projected growth over the coming years. The Leidos solution will keep passengers and staff safe while enhancing operational efficiencies and increasing passenger throughput. For example, using enhanced screening techniques, passengers will no longer need to remove electronics and liquids from carry-on bags. Implementation will be completed in the first half of 2023.
Leidos is maintaining its fiscal year 2022 guidance as follows:
$13.9 – $14.3
Adjusted EBITDA Margin
10.3% – 10.5%
Non-GAAP Diluted EPS
$6.10 – $6.50
(Source: PR Newswire)
02 Aug 22. SRT Set fair for a profitable passage. A global leader in communications technology used to track and monitor maritime vessels is set to deliver a step change in profits in the current year.
- $50m of new contracts likely to be awarded in the final quarter
- Upgrade likely from shorter implementation of £40mn major contract win
- $180m contract could be awarded by December
Aim-traded SRT Marine Systems (SRT:31p), a global leader in AIS, an advanced identification communications technology used to track and monitor maritime vessels, looks set fair to deliver a sea change in profitability in the current financial year.
Admittedly, the patience of shareholders has been tested after delays in project implementation caused by the Covid-19 pandemic led to the group posting cumulative post-tax losses of £11mn in the past two financial years. A £4.9mn equity placing at 30p a share, a 25 per cent discount to the share price at the time, during the March stock market sell-off hasn’t helped sentiment, either, and is a key reason for the reversal since my last article (‘Hunting down lowly rated tech plays’, 22 February 2022).
However, the rationale for raising funds was sound. The issue being that global supply chain shortages for transceiver components meant that SRT had to source more supply in the grey market (outside authorised dealers) which necessitated immediate payment. The alternative was to delay customer orders. The components are more expensive, but SRT has been able to pass on price rises and there has been minimal impact on the transceiver division’s £3.2m forward order book. This highlights the strong position of SRT’s products in the market and close relationships with its network of local partners.
Despite past disappointment, there are also sound reasons for SRT to achieve house broker FiinnCap’s forecasts of a seven-fold increase in revenue to £56.6m, pre-tax profit of £6.8mn and earnings per share (EPS) of 3.8p in the 12 months to 31 March 2023. In fact, the risk to estimates is skewed to the upside. That’s because the revenue forecast factors include £10.3mn for the transceiver business and £46.3m from system projects including £26m of new contracts from SRT’s £600m validated sales pipeline.
Bearing this in mind, the directors expect $50m (£41m) of new contracts to be awarded in the final quarter of this calendar year based on the advanced stage of the procurement process, with work to start immediately on a 12-month system delivery period. In addition, SRT’s flagship Philippines project (installation of monitoring systems, coast stations, vessel transceivers and satellite data feeds) should contribute £5mn of annual revenue and the £40mn major contract awarded in January a further £15m.
That contract is for delivery of a marine domain awareness (MDA) system to a national coastguard that tracks, monitors and manages all maritime activity in their territorial waters. The project commenced in April 2022, and had been expected to complete over a two-year period, but the client has now requested a faster implementation. Technology analyst Lorne Daniel at FinnCap notes that there could be a material uplift to its current year forecasts, perhaps an additional £15m of revenue if the contract is accelerated. I also understand that SRT is engaged in a much larger contract, worth $180mn over an 18-month period, which could be awarded before the end of December this year. It has not been included in FinnCap’s forecasts, either. Importantly, SRT is funded to deliver on these high-margin software contracts, having gross cash of £6.8mn and £14mn undrawn funding from a £20mn secured loan note programme. Net debt of £0.7m at 31 March 2022 also takes account of a £1.6mn low interest bank loan. FinnCap forecasts net cash of £1.8m at 31 March 2023, albeit if all the new contracts are awarded then this would have a working capital impact, too. However, it would also lead to a major profit upgrade, a possibility that is simply not reflected in a modest prospective price/earnings (PE) ratio of 8.2. Buy. (Source: Investors Chronicle)
02 Aug 22. US-based By Light Professional IT Services has expanded its defence portfolio by acquiring Veraxx Engineering Corporation, which builds flight simulators for military aviation training programmes, the buyer announced on 1 August.
Based in Chantilly, Virginia, Veraxx supports platforms such as the Bell-Boeing V-22 Osprey tiltrotor aircraft, the Sikorsky CH-53K King Stallion heavy-lift helicopter, and the Bell AH-1Z Viper attack helicopter. By Light acquired Veraxx from its founders for an undisclosed sum.
The purchase follows By Light’s acquisition in 2020 of Raydon Corporation, which provides virtual training equipment to simulate functions such as convoy operations and gunnery. By Light has completed six acquisitions since 2018.
By Light is headquartered in McLean, Virginia, and employs about 2,000 people. It is owned by New York City-based private equity firm Sagewind Capital. Sagewind’s other holdings include defence engineering firm Axient, formerly QuantiTech, which is based in Huntsville, Alabama, and has about 2,000 employees. (Source: Janes)
02 Aug 22. Kromek’s record sales visibility is materially undervalued.
A Sedgefield-based radiation detection technology company focused on the medical imaging and nuclear markets has reported the highest level of revenue visibility in its history.
- Annual revenue forecast to rise from £12.1m to £18m in new financial year
- Board budgeting for a small annual cash profit of £0.3m, reversing £1.2mn cash loss reported in 2021/22
- Near-term contract catalysts provide upside to forecasts
Sedgefield-based Kromek (KMK:9.5p), a radiation detection technology company focused on the medical imaging and nuclear markets, has reported its highest level of revenue visibility in its history.
Kromek’s first-half revenue of £4.7m accelerated to £7.3m in the second half (to 30 April 2022), and the board is guiding shareholders to expect a 50 per cent hike in annual revenue to £18m in the new financial year. Around 53 per cent of the revenue budget is now covered by contracted orders (including £2.9m orders that had been delayed due to supply chain shortages), 37 per cent is going through contract negotiations and the remaining 10 per cent is expected to come from regular repeat orders.
Kromek announced $0.75m (£0.61m) of new orders from two existing customers in the medical imaging market, both of which will be delivered in the current financial year. Furthermore, as the only independent manufacturer of cadmium zinc telluride (CZT), Kromek is seeing strong demand from original equipment manufacturers (OEMs) in the medical imaging industry as they adopt CZT technology in their next generation x-ray and gamma ray imaging products. Having increased advanced medical imaging revenue by a quarter to £4.6m last year, analysts at house broker FinnCap expect divisional revenue of £7.5m in the new financial year and hope to see “a second major medical imaging supply contract from an OEM customer during the current year”. That’s certainly not priced in.
Kromek also reports increasing interest for the group’s chemical, biological, radiological and nuclear (CBRN) detectors from governments. It’s hardly surprising given that multiple sovereign states are now scaling up their national security as an urgent priority. FinnCap expects the group’s CBRN detection unit to increase revenue from £5.4m to £7.5m, the anticipated growth backed up by several contracts that are currently going through the legal process.
Although Kromek moved into net debt of £1.4m, half the cash outflow was due to higher level of inventories (up from £6.2m to £10.5m) which included £6.3m of year-end work-in-progress that should be delivered in the current half year. Also, Kromek has an opportunity to unlock cash tied up in the balance sheet resulting from the £13.1m Asian customer amounts recoverable on contract and inventory write-down in 2020. Re-selling the inventory would bring cash into the business. On a sum-of-the-parts basis, FinnCap values Kromek between £119m (27p a share) and £188mn (43p), and sees potential for the valuation to exceed £300m (69p) within three years as large OEMs roll-out their CZT-based detectors in the single-photon emission computerised tomography and computed tomography medical imaging markets. Buy. (Source: Investors Chronicle)
02 Aug 22. Kromek Group plc (“Kromek” or the “Company” or the “Group”) Final Results. Kromek (AIM: KMK), a leading developer of radiation and bio-detection technology solutions for the advanced imaging and CBRN detection segments, announces its final results for the year ended 30 April 2022.
- Revenue increased 16% to £12.1m (2021: £10.4m)
- Gross margin was 46.7% (2021: 48.4%)
- Adjusted EBITDA loss reduced to £1.2m (2021: £1.7m loss)*
- Loss before tax reduced to £6.1m (2021: £6.3m loss)
- Cash and cash equivalents at 30 April 2022 were £5.1m (30 April 2021: £15.6m)
*A reconciliation of adjusted EBITDA can be found in the Financial Review.
- Strong revenue growth with delivery under component supply agreements and increased customer engagement for future projects
- Sustained delivery in medical imaging:
o Ramp up in delivery continued as planned under medical imaging contract expected to be worth US$58.1m over the seven-year life of the contract that was awarded in 2019
o Completed delivery of a US$600k order from an OEM customer for detectors to be used in niche SPECT applications, with further orders expected
o Commenced commercial development engagement with three new strategic OEM customers
- In security screening, the Group completed a two-year US$1.6m project with the US Department of Homeland Security and entered two new commercial development engagements with OEMs
- Signed a seven-year supply agreement, worth up to US$17m, in industrial screening with a US-based OEM and secured a US$250k repeat order from a US-based aerospace and defence company
- Significant momentum in nuclear security, with the winning of new and repeat orders and participation in a greater number of tenders reflecting the growth in global government defence spending:
o Awarded a two-year contract, worth up to US$1.6m, by a US federal entity for the D3S-ID wearable nuclear radiation detector – with a further US$300k order received during the year and US$695k post year end
o Repeat orders received from the European Commission for the D3S-ID
o Received orders from three customers for the D5 RIID
o A four-year contract worth £1.7m was received from a UK government agency customer for CBRN detection products and services
o Invested in developing new channels to market, including the signing, post year end, of a distribution agreement with Smiths Detection Inc. for the North and South American markets
- 32 new customers won in the civil nuclear segment
- Significant progress in the development of bio-security solutions:
o Awarded a US$6m contract extension from the Defense Advanced Research Projects Agency (“DARPA”), an agency of the US Department of Defense, to advance the development of a mobile wide-area bio-security system
o Successfully completed piloting in schools, airports and other locations of an airborne COVID-19 detection system under a project funded by Innovate UK and commenced productisation phase
Procurement, Manufacturing and IP
- Measures implemented to strengthen supply chain, including procurement team expansion and establishing strategic relationships with suppliers
- Increased utilisation of expanded production capacity in the UK and US facilities following enhancement to manufacturing processes in the prior year
- 8 new patents were filed and 9 were granted during the year
Dr Arnab Basu, CEO of Kromek, said: “We are pleased to report a year of good progress as we delivered on existing contracts and development programmes in both the advanced imaging and CBRN detection segments. Our revenues grew by 16% compared to the previous year as we saw increased commercial traction, particularly in the CBRN segment, and ended the year in a better position than we began it. Looking ahead, we entered the new financial year with a higher order book than the previous year and the highest level of revenue visibility in our history. The current geopolitical environment is driving greater interest from government agencies for our CBRN family of products and in advanced imaging we are experiencing heightened engagement with OEMs due to our strategic position as the only commercial independent global supplier of CZT. Consequently, for FY 2023 we anticipate substantial year-on-year revenue growth and we look forward to the future with increased confidence.”
02 Aug 22. Leidos announces acquisition of Cobham Aviation Services Australia’s Special Mission business. Leidos has confirmed that it has entered into a definitive agreement with Cobham Limited for the acquisition of the business unit.
With 14 modified aircraft, Cobham Aviation Services Australia’s Special Mission business delivers an array of services to the Commonwealth, including:
- Civil maritime surveillance capabilities, under contract with the Australian Border Force;
- Fixed-wing search-and-rescue resources for the Australian Maritime Safety Authority;
- A mission aircrew training system, with over 30 mission aircrew taking part annually.
According to a release from Leidos, the acquisition is subject to customary closing conditions including regulatory approvals.
“Cobham’s Special Mission team conducts essential operations that protect Australia’s borders, support law enforcement and environmental protection and save lives,” Roger Krone, chairman and CEO of Leidos said.
“The integration of Special Mission into Leidos Australia will expand the scope of our global airborne ISR capabilities, diversify revenues, and open up new growth avenues.”
According to Kim Gillis, chairman of Cobham Aviation Services, they are a “perfect match.”
“Leidos has remarkably complementary operations to Cobham Special Mission in airborne ISR, as well as deep platform integration expertise, and both organisations uphold exceptional track records of delivering mission critical services to government and defence customers,” Gillis explained.
The acquisition has been applauded by Paul Chase, chief executive of Leidos Australia, explaining that the acquisition would broaden Leidos Australia’s local capabilities.
“I have the greatest respect and admiration for Cobham’s Special Mission team and their performance in service to the Government,” he said.
“The addition of the Special Mission business will bring new, expansive services to our offerings across Australia. I look forward to working with this exceptional team.” (Source: Defence Connect)
02 Aug 22. KBR Announces Strong Second Quarter 2022 Financial Results.
Delivers Excellent Progress Toward 2025 Long-Term Targets.
- Outstanding earnings delivering quarterly net income attributable to KBR of $94m; diluted EPS of $0.61; adj. EPS1 of $0.76, an increase of 31% over 2021; and 12% adj. EBITDA1 margins
- Expanding flexibility with robust quarterly operating cash flow of $125M; added an additional $232m of deployable free cash in the quarter
- Growing platform of long-term, strategic programs; 2.1x book-to-bill2
- Advancing strategic deployment with expanded investment in Mura Technology and acquisition of VIMA Group
KBR, Inc. (NYSE: KBR) today announced its second quarter 2022 financial results and updated its FY 2022 financial guidance.
“Building on strong momentum in attractive end markets, we continue to make excellent progress toward KBR’s 2025 long-term targets,” said Stuart Bradie, President and CEO of KBR. “Themes that favor our capabilities and technologies – national security, defense modernization, global energy security and climate change – continue to be at the forefront of priorities. Combined with the unwavering commitment of our team of teams to deliver on our clients’ missions, I am pleased to report that the company posted another outstanding quarter of superb safety results, earnings growth, cash generation and strategic program awards.”
Bradie also announced KBR continues to prioritize enhancing its position in attractive, differentiated end markets with high barriers to entry through a combination of investments and acquisitions.
“During the quarter, we continued to shape our portfolio and deployed capital in a strategic, accretive, balanced manner,” Bradie said. “Our acquisition of VIMA Group, a leading UK company specializing in digital transformation for clients in the defense sector, advances our growing platform of high-end consulting, engineering and advisory services in the international defense market. Furthermore, the expansion of our investment in Mura Technology, a UK-based pioneer in circular plastics recycling technology, strengthens the alliance between our companies and places KBR at the center of enabling a global plastics circular economy. We welcome our new colleagues and partners into the KBR family and are excited about the opportunities to shape the future together.”
Financial highlights for the quarter ended June 30, 2022
- Revenue of $1.6bn grew 5% compared to the same period in 2021 primarily attributable to increased activity in 2022 in the European Command related to the war in Ukraine as well as the acquisition of Frazer-Nash Consultancy in October 2021, partially offset by activity in 2021 related to our exit from Middle East contingency operations.
- KBR net income attributable to KBR, diluted earnings per share, adj. EBITDA1 and adj. EPS1 increased in line with revenue as well as the following.
- Net income attributable to KBR was $94m and $23m for the three- and six-month periods ended June 30, 2022, respectively, and diluted earnings per share was $0.61 and $0.17 for the three- and six-month periods ended June 30, 2022, respectively. Adj. EBITDA1 was $186 m and adj. EBITDA1 margins were 12% in Q2 2022.
- Government Solutions (GS) delivered excellent earnings and adj. EBITDA1 margins of 12% in Q2 2022.
- GS earnings continue to benefit from favorable international mix, strong project execution, excellent customer performance scores in challenging technical areas that reflect high client satisfaction, core revenue growth and favorable project closeouts.
- GS earnings were favorably impacted by the sale of selected non-core assets for which we received $42m in proceeds and recorded $22m in gains on assets sales that elevated margins by ~165 bps in Q2 2022.
- Sustainable Technology Solutions (STS) delivered excellent earnings and adj. EBITDA1 margins of 18% in Q2 2022.
- STS earnings reflect strong end markets, superior technology offerings, and highly sought-after engineering solutions.
- STS earnings were enhanced by the acceleration of certain project close-outs and other timing items that elevated margins by ~160 bps in Q2 2022.
- STS earnings in Q2 2021 were favorably impacted by a net favorable $16m benefit associated with the settlement of a subcontractor dispute.
- In connection with KBR’s expanded investment in Mura Technology announced in Q2 2022 and other observable third-party transactions, we stepped up the carrying value of our original 5% investment made in 2021 to its fair market value and recorded a $16m unrealized gain on investment. Consistent with the company’s practice, this amount has been excluded from adj. EBITDA1 and adj. EPS1.
- In connection with our announced exit from commercial activities in Russia, we recorded a predominantly non-cash, pretax charge of $12m in Q2 2022. We have excluded the impact of this item from adj. EBITDA1 and adj. EPS1.
- In connection with settlement negotiations between KBR’s JKC joint venture and its client in 2021, KBR recorded a $193 m charge for its proportionate share of unfunded client change orders and claims in Q2 2021. In October 2021, KBR announced that JKC entered into a binding settlement agreement that resolved outstanding claims and disputes, an important de-risking event that reduced future uncertainty. Consistent with the company’s practice, this amount has been excluded from adj. EBITDA1 and adj. EPS1.
- During Q2 2022, KBR received approximately $190m in connection with the settlement of a subcontractor matter. These proceeds are reflected in cash flows from investing activities.
Recent Developments and New Business
In the quarter ended June 30, 2022, the company delivered book-to-bill2 of 2.1x and recorded $2.9bn of awards and options, including the following:
- A new $69m ceiling, five-year best value takeaway to provide research and development for airborne manned reconnaissance aircraft intelligence, surveillance, reconnaissance, and targeting systems for Naval Surface Warfare Center Crane; services include systems engineering, technology improvements, integration, test & evaluation, and training.
- A $95m, five-year expanded recompete win to develop tools to manage maintenance data, monitor trends, and conduct prognostic analysis using DEVSECOPS to improve readiness of naval aircraft. This award is double the predecessor contract.
- A $1.5bn award that represents KBR’s proportionate share of its non-majority joint venture KZJV’s notice to proceed with Phase 1 of Plaquemines LNG for Venture Global LNG, inclusive of KBR services to be provided to KZJV. KZJV will integrate highly modularized, owner-furnished equipment for the 13.33 m tonnes per annum nameplate facility. KBR’s role in the joint venture is project management, engineering, program integration and interface management, and commissioning support under an innovative commercial structure that enhances overall program alignment between KZJV and its client. Consistent with our backlog policy, we have recorded our proportionate share of KZJV’s estimated backlog into KBR’s backlog. As this project is predominantly accounted for as an equity method investment, our proportionate share of the joint venture’s future earnings will be recorded in Equity in earnings of unconsolidated affiliates.
- As announced in Q1 2022, a $640m ceiling Ground Systems and Mission Operations contract to support more than 10 NASA exploration missions, including continued efforts on the James Webb Space Telescope, Lunar Reconnaissance Orbiter and Earth Observing System. KBR will provide systems engineering, launch and early orbit support, flight operations, and flight dynamics support to various NASA missions managed by Space Science Mission Operations and Earth Science Mission Operations at NASA’s Goddard Space Flight Center. This highly strategic and technical win represents KBR’s largest recompete in 2022.
KBR continues to employ a balanced approach to capital allocation, which includes investments that facilitate sustainable, long-term growth and prudent return of capital to shareholders. In the quarter ended June 30, 2022, the company generated $344m of deployable free cash, which included strong quarterly operating cash flows, planned capital expenditures, and the receipt of proceeds from the sale of non-core assets and subcontractor settlements.
- Today, the company completed its acquisition of VIMA Group, a leading UK digital transformation company serving defense clients, for an agreed-upon purchase price of approximately $73m funded from cash on hand, subject to certain working capital and other closing adjustments, $5m of deferred consideration and potential additional cash payments aggregating up to approximately $12m, contingent upon the achievement of certain performance targets. VIMA Group delivers solutions across a number of large-scale, high-priority digital transformation programs to support its clients in ensuring availability of effective digital and information technology as guided by the UK’s Digital Strategy for Defence. VIMA Group is a trusted advisor and a top five supplier to Defence Digital and Navy Digital – both organizations within the UK Ministry of Defence with a number of highly strategic, fast-growing programs. The VIMA Group acquisition is KBR’s third acquisition announced in the UK over the past year and enhances the company’s platform of high-end consulting, engineering and advisory services in this growing defense market. In July 2021, KBR acquired Harmonic Ltd and in October 2021, Frazer-Nash Consultancy.
- In June 2022, we announced an expansion of our investment in Mura Technology, a UK-based pioneer in circular plastics recycling technology. This investment builds on an alliance KBR and Mura entered into in early 2021 whereby KBR became the exclusive licensing partner for Mura’s innovative, proprietary, closed-loop plastics recycling technology powered by super critical water. Not only does this incremental investment increase KBR’s potential ownership percentage in Mura from ~5% to ~18.5%, but it also expands the suite of professional services KBR will deliver to Mura-led projects (e.g., advisory, engineering, project management services).
- In the first half of 2022, KBR returned capital to shareholders through the repurchase of $74m of its common shares, inclusive of share repurchases to satisfy requirements of equity compensation plans and paid $32m in shareholder dividends.
FY 2022 Guidance
KBR combines deep mission understanding, market-leading expertise and technology, and unwavering operational focus to deliver solutions that help solve our clients’ most complex issues. Our 2022 financial guidance is underpinned by favorable market tailwinds, good bookings momentum, a strong first half, and work under contract of over 90% to deliver our 2022 results.
KBR updates its FY 2022 guidance as follows:
- Consolidated revenue: $6.4bn to $6.8bn;
- Adjusted EBITDA1 margin: ~10%;
- Effective tax rate: 24% to 25%;
- GAAP earnings per share (EPS): $1.09 to $1.21 (updated) and adjusted EPS1: $2.53 to $2.65;
- Increasing GAAP EPS guidance to reflect the impact of the appreciation in fair value of our investment in Mura Technology of $16 m, $0.09 per share. Consistent with the company’s practice, this amount has been excluded from adj. EPS;
- Decreasing GAAP EPS guidance to reflect the impact of a $12 m charge recorded in Q2 2022 associated with our announced exit from commercial activities in Russia; and
- GAAP operating cash flow (OCF): $330m to $370m; adjusted OCF1: $360 m to $400m.
01 Aug 22. ISS Aerospace Announces New Shareholder and Investment for Growth. ISS Group Limited trading as ISS Aerospace (ISS) is pleased to announce that it has received investment from the principal shareholders of CE Turner (engineers) Limited, a company associated with multi-capability precision engineering and manufacturing and with a keen interest in defence and aerospace.
Commenting on this announcement, ISS CEO Ryan Kempley said “Having enhanced our uncrewed aerial systems (UAS) platforms over the past year and with an upsurge of interest in our customer value propositions we are well placed to provide clients with highly integrated platform, sensor, and software solutions. This investment allows us to follow through with our growth plan. ISS Aerospace is an established, UK-based company specialising in advanced, autonomous UAS”
Chairman of CE Turner, Jeremy Rowson added, “We have been hugely impressed with the achievements and capability of ISS and see great opportunities for significant growth in an exciting, and specialised sector. Our engineering and manufacturing experience coupled with ISS’s exceptional skill in integrating systems is an ideal match.”
About ISS Aerospace
ISS Aerospace (www.issaerospace.com) is an established, UK-based company specialising in advanced, autonomous UAS with applications in wide-area surveillance in energy, defence & security and utilities markets.
As a highly adaptive developer of disruptive technology ISS has several world firsts to its name and has contracts with major clients in both public and private sectors. These include producing UAS powered by hydrogen fuel cells, integrated with novel sensor technologies and using advanced on-board sensor data processing to enable autonomous missions to be flown to deliver actionable intelligence at pace. This is evidenced by the recent award of ISS’s sixth contract by the MoD/Dstl’s Defence and Security Accelerator.
About CE Turner (engineers) Limited
Established in 1950, CE Turner (engineers) Limited is a high-precision engineering company based in Leicestershire, UK specialising in the machining, welding and fabrication of components and complex assemblies for the defence, aerospace and nuclear sectors. Customers include the principal contractors for the UK’s MoD and the company is also branching out into supplying the electric vehicles and robotics sectors.
01 Aug 22. Senior Plc reports fall in half-year profit. British aircraft parts maker Senior Plc (SNR.L) posted on Monday a lower half-year profit, hurt by supply chain issues and rising costs. The engineering firm, which supplies equipment to planemakers including Boeing (BA.N) and heavy equipment maker Caterpillar (CAT.N), said its profit before tax for the six months ended June 30 was 11.1m pounds ($13.52m), compared with 22.3m pounds a year earlier. (Source: Reuters)
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.