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20 Jul 23. Dassault Aviation says supply chain issues weigh on production. Rafale fighter jet maker Dassault Aviation (AM.PA) on Thursday said supply chain issues had deteriorated further since last year and made it more difficult to process its orders.
“This situation has an impact on the development and production of our aircraft, while we need to ramp up to meet our commitments,” it said in a statement.
While the French group said it did not receive new orders for Rafale jets in the first half year, India’s defence ministry gave initial approval to purchase 26 of these fighter jets just last week.
Dassault’s order backlog stood at 34.42bn euros ($38.31bn) per end-June and included 160 Rafale warplanes and 90 Falcon business jets, the group said.
New orders in the first half year reached 1.68bn euros ($1.87bn) for twelve Falcon business jets. Last year, that number stood at 16.29bn euros and included 80 Rafales.
Chief Executive Éric Trappier said the Rafale success continued to generate new prospects from abroad, adding that India’s plan to equip the Indian Navy with these jets “illustrates this”.
The group said its adjusted operating income for the January-June period fell 24.5% to 151m euros and adjusted net sales decreased 25.8% to 2.30bn euros. ($1 = 0.8984 euros) (Source: Reuters)
21 Jul 23. Qinetiq on track after strong first quarter. Updating on first-quarter trading, the defence and security specialist said order intake had been “strong” and it was “pleased” with its revenue, profit and cash performance.
Visibility on revenue under contract for 2024 increased to £1.3bn, from £1.1bn in April, and it was consequently “confident” of meeting full-year expectations.
Steve Wadey, chief executive, said: “The global security situation continues to highlight the importance of defence and security, and we remain focused on our three home countries, who have share defence and security mission under the trilateral partnership Aukus [Australia, the UK and US].
“We continue to see a significant opportunity from the widening threat spectrum, with our six distinctive offerings well-aligned to areas of defence and security budgets where greatest priority and funding is being directed.”
Key business wins during the quarter included a $40m research and engineering contract award in the US, from the Prototypes and Experiments Director for the Under Secretary of Defense for Research and Engineering.
— QinetiQ also won a £38m contract extension with Defence Digital in the UK, and has a $86m backlog on its Joint Adversarial Training and Testing Services contract in Australia. (Source: Google/https://www.sharecast.com/)
21 Jul 23. Safran Agrees to Buy Raytheon Aerospace Assets for $1.8bn.
Safran SA agreed to buy an aerospace business from Raytheon Technologies Corp. in cash for an enterprise value of $1.8bn, adding flight-control and actuation activities alongside 3,700 employees.
The planned purchase, ranking among Safran’s biggest in recent years, follows an announcement early last month by Safran that it was in talks with Raytheon about a transaction. In a statement on Friday, Safran said the deal will add sales of about $1.5bn and an Ebitda of $130 million in 2024, with expected synergies of about $50m.
Bloomberg News reported in January that Arlington, Virginia-based Raytheon was exploring a sale of the unit. Led by Chief Executive Officer Gregory Hayes, Raytheon consists of the Pratt & Whitney aircraft engine unit, Collins Aerospace and a large defense portfolio spanning missiles, space systems and intelligence products.
Safran also makes engines in collaboration with General Electric Co., and the company has products in its portfolio that include commercial aircraft galleys, landing gear and missiles. (Source: News Now/Bloomberg L.P.)
21 Jul 23. France’s Thales upgrades sales outlook after solid first half. France’s Thales (TCFP.PA) upgraded its full-year revenue forecast after posting faster-than-expected growth for the first half on Friday, buoyed by a recovery in civil aerospace and growth in its digital identity and security business.
Europe’s largest defence electronics company, which also supplies civil avionics, satellites and identity systems, said its like-for-like mid-year sales rose 7.7% to 8.716bn euros ($9.71bn).
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The intake of fresh orders fell 23% to 8.563bn euros after a major order for French Rafale fighter jets, for which Thales builds radars, boosted the first half of 2022. Thales said orders excluding Rafale remained at around record levels, thanks in part to strong demand for ground-based defence radars.
First-half operating profit rose 13.1% on a constant basis to 993 m euros as margins rose to 11.4% from 10.8%.
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Thales narrowed its forecast range for full-year sales growth to 5-7% from 4-7%, suggesting revenue of 17.9bn-18.2bn euros, and reaffirmed other financial targets.
GROUND TRANSPORT SALE TIMING
Chief Executive Patrice Caine said Thales expected to hear from UK authorities in coming weeks on remedies required in return for approval of the delayed sale of ground transport activities to Hitachi Rail (6501.T) for 1.66bn euros.
Britain’s Competition and Markets Authority aims to complete its probe by Aug. 11 after provisionally finding the sale could reduce choice for state-owned Network Rail.
The two parties have called the finding “legally unsound,” according to a redacted copy of their joint response. Britain’s RMT rail union says it firmly opposes the deal, which was originally expected to close in late 2022 or early 2023.
“We are advancing and passing the steps one by one,” Caine told reporters.
“(CMA) is the next step. Once we have that – given that things are fairly clear on the European Commission side – I think we will have a clear picture of the definitive timeline,”
Thales said the second half would also be affected by supply chain tensions and the euro’s weakening against the dollar.
Chief Financial Officer Pascal Bouchiat said the supply of semi-conductors had improved following a global chip crisis but that sourcing circuit boards and especially mechanical hardware remained very challenging.
“There are elements which are improving and others which really remain under stress,” he said. ($1 = 0.8977 euros) (Source: Reuters)
21 Jul 23. Thales reports its 2023 half-year results.
• Order intake: €8.6bn, down 24% (-23% on an organic basis1)
• Sales: €8.7bn, up 5.6% (+7.7% on an organic basis)
• EBIT2: €993m, up 11.4% (+13.1% on an organic basis)
• Adjusted net income, Group share2: €819m, up 13%
• Consolidated net income, Group share: €649m, up 15%
• Free operating cash flow2: €99m
• Full year 2023 guidance upgraded:
o Book-to-bill ratio3 above 1
o Organic sales growth between +5% and +7%4
o Unchanged EBIT margin target: 11.5% to 11.8%
Thales’s Board of Directors (Euronext Paris: HO) met on July 20, 2023 to review the financial statements for the first half of 20235.
“The first half of 2023 confirms Thales’ strong sales momentum in its various markets. With a 7% increase in the order book compared to June 30, 2022, the Group further reinforced its ability to deliver sustainable growth over the coming years.
Organic sales growth was above 7%, ahead of the full-year guidance, driven by the on-going recovery in the civil aeronautics business and the strong performance of the Digital Identity & Security operating segment.
The Group‘s EBIT margin continued to rise, reaching a new record at 11.4%.
Given the solid outlook for most of our businesses in the second half of the year, we have decided to raise our full-year sales growth guidance.
All Thales teams are committed to taking the action needed to support sustainable growth. This includes recruiting the talents of tomorrow, supporting our supply chain and investing in our R&D and production capabilities.
Lastly, Thales further strengthened its leadership positions on its markets thanks to two acquisitions: Tesserent in cybersecurity and Cobham Aerospace Communications in cockpit connectivity”
Patrice Caine, Chairman & Chief Executive Officer
Order intake in the first half of 2023 totaled €8,563m, down 24% from H1 2022 (-23% on an organic basis, i.e. at constant scope and exchange rates). The Group continued to enjoy very strong sales momentum in all of its businesses, with the decline in order intake explained by the jumbo contract for the supply of Rafale aircraft to the United Arab Emirates recorded in the first half of 2022. At June 30, 2023, the consolidated order book totaled €41bn, up 7% compared to the first half of 2022.
Sales totaled €8,716m, up 5.6% from H1 2022, and up 7.7% at constant scope and exchange rates. The growth in sales benefited in particular from a solid performance in Avionics, driven by the continued recovery in civil aeronautics activities, which were heavily affected by the health crisis, and strong momentum in the Digital Identity & Security operating segment.
In the first half of 2023, the Group posted EBIT of €993m (11.4% of sales), compared to €891m (10.8% of sales) in the first half of 2022, an increase of 11.4% (+13.1% on an organic basis).
At €819m, adjusted net income, Group share6 was up 13%, in line with the EBIT increase.
Consolidated net income, Group share amounted to €649m, up 15% compared to H1 2022, driven by the increase in adjusted net income.
Free operating cash flow6 amounted to €99m, compared with €820m in the first half of 2022. In the first half of 2023, Thales recorded an increase in working capital requirements due to higher inventories. This is due to the significant production increase, the effect of inflation and the building up of inventories of products for which Thales is seeking to increase its resilience.
Net debt stood at €781m at June 30, 2023, down €113m year-on-year.
Order intake in H1 2023 amounted to €8,563m, down 24% compared to H1 2022 (-23% at constant scope and exchange rates9). The book-to-bill ratio was 0.98, versus 1.36 in the first half of 2022, which benefited from the recording in the order book of the jumbo contract for the supply of Rafale aircraft to the United Arab Emirates.
In H1 2023, Thales booked nine large orders with a unit value of over €100m, for a total amount of €1,671m (€5,155m in H1 2022):
• Three large orders booked in Q1 2023:
o The order of satellites for the Italian Earth observation constellation IRIDE;
o The order of a new tranche of the I-HAB module for the lunar orbital station;
o The order of a submarine subsystem for a military customer.
• Six large orders booked in Q2 2023:
o The order of an autonomous robotic vehicle for an In-Orbit Servicing demonstration mission, on behalf of the Italian Space Agency (ASI);
o 3 amendments to the contracts related to the Galileo European navigation satellites;
o The order of a sensor suite and Above-Water Warfare System for the new Belgian and Dutch frigates;
o An order linked to the production of Aster anti-air defense missiles for France;
o The order by Indonesia of 13 GM400 Alpha radars and a Skyview Air Command and Control System;
o An amendment to the contract for the supply and support of CONTACT next-generation tactical radios for the French Army.
Orders with a unit value of less than €100 m totaled €6,893m, up 14% compared to the first half of 2022, driven in particular by orders with a unit value between €10m and €100m in the Defense & Security segment, which increased by 52% compared to the first half of 2022. Orders with a unit value of less than €10 m remained strong, with an increase of 8%, thanks in particular to the recovery in civil aeronautics and passport production activities.
From a geographical10 point of view, the order intake in emerging markets came to €1,633m, down 64% at constant scope and exchange rates, affected by a high basis for comparison: Three contracts worth more than €100m were recorded in the first half of 2022, including the jumbo contract for the UAE Rafale order. At €6,931m, order intake in mature markets remained strong (+6% at constant scope and exchange rates).
Order intake in the Aerospace segment totaled €2,344m, versus €2,393m in H1 2022 (-4% at constant scope and exchange rates). This slight decline reflects two separate trends:
• A fall in the order intake of Thales Alenia Space, affected by a high comparison base in the first half of 2022;
• The confirmed recovery in civil aeronautics, in both the original equipment business and aftermarket.
Order intake in the Defense & Security segment totaled €4,603m compared to €7,150m in H1 2022, reflecting a strong level of business, including the five large orders with a unit value of over €100m mentioned above. The 36% decrease at constant scope and exchange rates reflects the recording of the jumbo contract for the supply of Rafale aircraft to the United Arab Emirates in the order book in the first half of 2022. The segment’s order book thus reached €31bn, representing nearly 3.4 years of sales.
At €1,594m, order intake in the Digital Identity & Security segment was as usual in line with sales, considering that most businesses in this segment do not book long-term orders. The order book is therefore not significant.
Sales for the first half of 2023 amounted to €8,716m, compared with €8,256m in the first half of 2022, an increase of 5.6%, or +7.7% at constant scope and exchange rates, benefiting from a solid performance across all segments.
From a geographical point of view11, sales increased sharply in both mature markets, which achieved organic growth of +7.5%, and emerging markets, which posted organic growth of +8.6%.
Sales in the Aerospace segment amounted to €2,465m, up 11.5% compared to H1 2022 (+10.1% at constant scope and exchange rates). This reflects the confirmed rebound in civil avionics, both in aftermarket and the original equipment business, which both posted double-digit growth in the first half of 2023.
Sales in the Defense & Security segment totaled €4,626m, up 5.6% compared to H1 2022 (+5.3% at constant scope and exchange rates). This segment grew consistently in the first two quarters of 2023, with organic sales growth of 5.2% in Q2, confirming the good momentum of most businesses in this operating segment. Cyber-defense, intelligence, surveillance and detection solutions, airspace protection systems, electronic warfare systems, infrastructure networks and systems, and critical information systems posted organic growth of more than 10% in the first half of the year.
In the Digital Identity & Security segment, sales were up 11.7% at constant scope and exchange rates to €1,595m. After another very dynamic first quarter (+20.1%), Q2 growth (+4.7%) was in line with expectations, reflecting the slowdown in demand and the price effect on smart cards after five quarters of exceptionally strong growth, and the return to normal of the secure document business (particularly passports).
In H1 2023, the Group posted EBIT12 of 993m (11.4% of sales), compared with €891m (10.8% of sales) in H1 2022.
The Aerospace segment posted EBIT of 171m (7.0% of sales), versus EBIT of €97m (4.4% of sales) in H1 2022. The increase in the segment’s EBIT margin was driven by the good performance of aeronautics activities, whose profitability returned close to pre-health crisis levels, while the space business continued to be impacted by production delays caused by persistent supply chain tension.
In the Defense & Security segment, EBIT amounted to €567m, versus €545m in H1 2022 (+3.3% at constant scope and exchange rates). The segment’s margin was stable against last year, at 12.3% (12.4% in the first half of 2022).
At €253m (15.9% of sales), versus €201m (12.3% of sales) in the first half of 2022, the EBIT margin in the Digital Identity & Security segment continued to rise sharply (+3.6 points), benefiting from both a scope effect (transfer of the cellular IoT business to Telit from December 31, 2022), as well as the improvement in the sales margin and the impact of operating leverage on sales growth.
Excluding Naval Group, unallocated EBIT amounted to -€42m, compared with -€41m in H1 2022. As in 2022, this category reflects the reallocation of certain costs following the classification of the Transport business as a discontinued operation. At €44m in the first half of 2023, versus €89 m in 2022, Naval Group’s contribution to EBIT continued to record underlying growth, as last year’s contribution (€89 m) included non-recurring income of around €50m related to the compensation agreement signed between Australia and Naval Group.
Net financial interest (€13m versus -€32m in the first half of 2022) became positive, benefiting from the improvement in the Group’s cash position compared to the first half of 2022 and the rise in interest rates. Other adjusted financial income and expenses13 (-€13m in H1 2023 versus -€10m in H1 2022) remain low. The deterioration of the adjusted financial expense on pensions and other long-term employee benefits13 (-€38 m compared to -€15m in H1 2022) reflects the decrease in net liabilities combined with the sharp increase in discount rates.
At €36 m compared with €30m in H1 2022, the adjusted net income, Group share, from discontinued operations was in line with trends in the Transport business.
Adjusted net income, Group share13 thus amounted to €819m, compared to €726m in H1 2022, after an adjusted income tax charge13 of -€175m, compared to -€141m in H1 2022. The effective tax rate stood at 20.0% at June 30, 2023, compared with 19.7% at June 30, 2022. The corporate tax rate in France was stable at 25.8% in H1 2023.
Adjusted net income, Group share, per share13 amounted to €3.91, up 15% compared to H1 2022 (€3.41).
Consolidated net income, Group share stood at €649m, up 15% as compared to June 30, 2022 (€566m). This evolution was in line with that of adjusted net income, Group share.
Free operating cash flow14 amounted to €99m, compared with €820m in H1 2022. In the first half of 2023, Thales recorded an increase in working capital requirements due to higher inventories. This is due to the significant production increase, the effect of inflation and the building up of inventories of products for which Thales is seeking to increase its resilience.
The net balance of disposals and acquisitions of subsidiaries amounted to -€7m in the first half of 2023, as the Group did not complete any significant acquisitions or disposals over the period. Thales has announced two acquisition projects since the beginning of the year ; the acquisition of Tesserent, a leading cybersecurity player in Australia and New Zealand, whose completion is expected during the second half of 2023, and the acquisition of Cobham Aerospace Communications, which is expected to be completed in the first half of 2024.
Under the share buyback program covering a maximum of 3.5% of the share capital announced in March 2022, 4,378,527 shares, representing 58.4% of the share capital, were repurchased in the first half of 2023 for €210m, for a total of €536m since the start of the program.
At June 30, 2023, net debt amounted to €781m, versus €894m at June 30, 2022, after taking into account new lease liabilities for €49m (€112m at June 30, 2022) and after the payment of €468m in dividends (€416m in the first half of 2022).
Shareholders’ equity, Group share amounted to €7,115m, compared with €7,174m at December 31, 2022, with consolidated net income, Group share (€649m) offsetting the dividend payout (€468m) and share buybacks (€216m).
Medium-term demand prospects remain very solid in the Group’s key markets. For the second half of 2023, the global environment will continue to be marked by tensions affecting supply chains, and by the dollar’s weakening against the euro. In addition, DIS sales growth should continue to decelerate, the second half of 2022 having benefited from a significant price effect (DIS organic growth in H2 2022: +16.5%).
Against this backdrop, Thales continues its short-term efforts on managing the operational factors to support production ramp-up: strengthening the resilience of its supply chains, recruiting talent and investing in engineering and industrial tools.
As a result, in the absence of major new disruptions in the global economy, the public health context, or global supply chains, Thales adjusts its targets for 2023:
• A book-to-bill ratio above 1
• Organic sales growth of between +5% and +7%, corresponding to sales in the range of €17.9bn to €18.2bn;
• An EBIT margin between 11.5% and 11.8%, up 50 to 80 basis points from 2022.
21 Jul 23. Invisio announces Results. CEO comment, “The strong trend continues. The order intake was just over SEK 400m, which is a record for an individual quarter. The current trend with high order intake and an order book of almost SEK 800m, as well as a generally active market, means that we stand by previous statements concerning continued strong sales, order intake and profitability in 2023.”
• Revenue: 298.8m (153.7)
• Gross profit: SEK 163.3m (88.4)
• Gross margin: 60.5 % (57.5)
• EBITDA: SEK 60.5m (3.4)
• EBITDA margin: 22.4 % (2.2)
• Operating profit/loss: SEK 45.4m (-8.3)
• Operating margin: 16.8 % (-5,4)
• Profit/loss for the period: SEK 27.3m (-7.3)
• Earnings per share: SEK 0.60 (-0.16)
• Cash flow from operating activities SEK 85.9 m (8.1)
• Order intake: SEK 402.2m (157.7)
• Order book: SEK 790.3m (481.7)
• Revenue: SEK 581.2m (291.1)
• Gross profit: SEK 357.9m (170.4)
• Gross margin: 61.6 % (58.5)
• EBITDA: SEK 157.1m (11.2)
• EBITDA margin: 27.0 % (3.8)
• Operating profit/loss: SEK 129.3m (-12.1)
• Operating margin: 22.2 % (-4.2)
• Profit/loss for the period: SEK 87m (-11.7)
• Earnings per share: SEK 1.92 (-0.26)
• Cash flow from operating activities SEK 166.2m (11.5)
• Order intake: SEK 717.2m (554.2)
• Order book: SEK 790.4m (481.7)
Important events in the quarter
• For the first time the order intake exceeded SEK 400m in an individual quarter and rolling twelve-month sales SEK 1bn.
• INVISIO received its largest order ever, worth SEK 130m, from the US Department of Defense.
• The company received an order worth SEK 90m from a European NATO country.
• INVISIO launched a new generation of the V60 control unit, which enables data traffic, giving enhanced user functionality and flexibility.
20 Jul 23. Babcock announce Results, David Lockwood, Chief Executive Officer, said: “We’ve made excellent progress this year, with better-than-expected cash generation, margin expansion and double-digit revenue growth. When we started our transformation, my first goal was to stabilise and strengthen the balance sheet and I’m delighted to say that work is complete. Babcock is now a higher-quality, lower-risk and more predictable business, with a clear focus on execution. “In a world of significant instability, national security has never been more important. With defence making up two-thirds of the Group, the combination of capability, availability and affordability we offer, is increasingly relevant. I’m excited by the momentum building across the business, and that confidence is reflected in our expectation of continuing cash-backed profitable growth, and reintroducing a dividend in FY24.” Financial highlights – Contract backlog £9.5bn, up 7% organically – Revenue up 8% to £4,438.6m, up 10% organically, with growth across all sectors – Statutory operating profit of £45.5m, down due to a loss on disposal and related items and the £100.1m Type 31 loss, announced in the April trading update – Excluding the Type 31 loss: – Underlying operating profit up to £278.0m, driven by a strong performance in Land, including a £12m one-off credit – Underlying basic earnings per share (ii)(iii) up 10% to 33.8p – Underlying free cash flow of £75.3m, better than expected due to strong operating cash performance. 110% operating cash conversion, excluding the Type 31 loss – Net debt to EBITDA (covenant basis) 1.5x, within our target range of 1.0x to 2.0x (1.1x excluding the Type 31 loss from EBITDA) 2 Babcock International Group PLC Full year results for the year ended 31 March 2023 Outlook (v) – FY23 baseline: Our FY24 outlook and medium-term guidance is based on FY23 results excluding the impact of disposed businesses the Type 31 loss and the £12m one-off credit in Land. Excluding these items, FY23 revenue was c.£4bn, underlying operating profit was c. £265m, and underlying operating margin was 6.6%. – FY24: Our expectations for FY24 profitability and cash flow are unchanged, although operating cash flow may be weighted to the second half given the FY23 overperformance. With c.£2.8bn of revenue under contract at 1 April 2023 and around £700m of framework orders expected to be delivered in FY24, we are confident of another year of organic revenue growth and further underlying margin expansion. We also expect to reinstate a dividend in FY24, as indicated in the April trading update. – Medium term guidance: We have increased confidence in the growth, profitability and cash generation potential of the business in the medium term. Over the next three-to-five years we believe we can: – Deliver average underlying operating cash conversion of at least 80% – Achieve underlying operating margins of at least 8% – Deliver average annual revenue growth in the mid-single digits – A number of factors could influence the pace of achieving these targets, for example mobilisation of large new programmes and phasing of lower capital intensity work that could accelerate revenue but slow margin expansion. Strategic highlights – Completed portfolio realignment programme, with over two thirds of the Group’s revenue now in defence – Further investment in improving the control environment and project risk management – Progressed delivery of our ESG strategy and commitments. Integrated ESG into our long-term planning process and performance framework – Published capital allocation policy with a commitment to reinstate a dividend in FY24 – Achievements to date and confidence in our future has enabled us to set medium term guidance Operational highlights Marine – Growing naval warship support in the UK and Australia – new contracts, extensions, increased operational tempo – Developing digital defence offering in the UK Skynet programme – Progressing naval shipbuilding programmes – Type 31 in the UK/MIECZNIK frigate programme in Poland – Strong demand for our LGE equipment and developing the aftermarket opportunity Nuclear – Major upgrades to UK submarine infrastructure in preparation for the next 50+ years of submarine support requirements – Launched Submarine Availability Partnership with the UK MOD and Submarine Delivery Agency to improve availability – Concluded the first LIFEX deep maintenance programme of a Vanguard Class submarine – Awarded initial contract for second Vanguard Class submarine refit after the year end on a full cost recovery basis – Developing strategic relationships for global decommissioning opportunities eg Japan Land – Significantly improved operational delivery of the key DSG contract with option years being discussed – Strengthened position in secure communications market: Australian Defence High Frequency Comms – Delivered urgent operational requirements to revalidate/modernise gifted equipment in support of operations in Ukraine – Secured new production contract with the UK MOD for 70 protected mobility vehicles, with potential for requirement to grow – Expanded operational role in France through award to support air transit and aircraft operation equipment across 26 military bases Aviation – Significantly progressed our French defence offering, delivering fixed and rotary wing aircraft for support and training programmes – Increased Canadian Aerial Emergency Services activity with 10-year air ambulance contract for British Columbia – Submitted bid with Leonardo for Canada’s Future Air Crew Training (FAcT) programme for the Canadian Royal Air Force – Partnering with the UK Royal Air Force to progress sustainable aviation technologies to reduce environmental impact.
20 Jul 23. Babcock shores up its own defences.
• Statutory profit sunk by £100mn charge
• Cash from operations increases by £300mn
David Lockwood has now been in the chief executive’s role at Babcock International (BAB) for nearly four years, although he joked as he began the company’s results presentation that “this has actually been the first fun year”.
The company’s turnaround has undoubtedly been a slog. The first two years’ results were full of accounting restatements and contract reassessments that blew a big hole in its balance sheet. Then there’s been the task of reducing the defence contractor’s debt mountain, largely through the sale of non-core assets. And just when investors thought things were looking up, the company reported in April that this year’s results would incorporate a loss of £100mn on an unprofitable contract with the Ministry of Defence (MoD).
This contract to build five Type 31 frigates was awarded in 2019 and will run to 2028 – so far, Babcock has built 40 per cent of the first ship. The £100mn charge was recognised to cover potential losses over the lifespan of the contract, although Babcock remains in a dispute process with the ministry about renegotiating it. Lockwood was keen to point out that the dispute hasn’t affected its relationship with the MoD, citing recent other recent wins, including a £400m, six-year contract to manage the Skynet military satellite communications system.
He also argued that this was the last major contract awarded to Babcock before he and chief financial officer David Mellors were appointed to the company, and that they had strengthened risk management procedures in a bid to prevent similar losses.
Excluding the loss on the frigates contract, underlying operating profit grew by 17 per cent. There was also better news in terms of both cash generation and net debt – cash from operations rose by £300m to £349m. This, and some disposals, helped it to cut net debt by around £400mn to £565mn. Babcock is now a “higher quality, lower risk and more predictable business”, Lockwood said.
Demonstrating this, the company set medium-term guidance of achieving an operating margin of at least 8 per cent (up from 6.6 per cent, excluding the Type 31 loss). It also plans to reintroduce a dividend in its 2024 financial year.
Investors were clearly sold, with the shares climbing by 11 per cent. They are priced at nine times broker Shore Capital’s forecast earnings, and with defence budgets growing there’s an argument to be made that they represent good value. The company is still working through legacy issues, though, and we think there are better opportunities elsewhere in the sector. Hold. Last IC View: Hold, 308p, 22 Nov 2022. (Source: Investors Chronicle)
20 Jul 23. Babcock annual profit hit with UK Ministry of Defence contract dispute. Babcock International Group PLC on Thursday said its annual profit dropped following a dispute over its frigates contract with the UK Ministry of Defence. Meanwhile, shares in Babcock International were up 7.9% at 340.60 pence in London on Thursday morning.
In the financial year that ended March 31, the London-based aerospace, defence and nuclear engineering services company said its pretax profit fell 97% to GBP6.2m from GBP182.3m.
This was caused by a GBP100.1m in costs for the year incurred from the Type 31 frigates dispute, representing a GBP42.6m revenue reversal and a GBP1.6 m impairment and the recognition of a GBP55.9m contract loss caused by the commencement of a dispute resolution process with the Ministry of Defence over the contract costs of Type 31 frigates.
Revenue grew 8.3% to GBP4.44bn from GBP4.10bn, and was up 10% organically with growth across all sectors.
“We’ve made excellent progress this year, with better-than-expected cash generation, margin expansion and double-digit revenue growth. When we started our transformation, my first goal was to stabilise and strengthen the balance sheet and I’m delighted to say that work is complete,” said Chief Executive Officer David Lockwood.
Net debt fell 42% to GBP564.4m from GBP968.7m the prior year.
Babcock declared no dividend for the financial year, unchanged from the prior year, but said it plans to reintroduce a dividend in 2024.
The company said it expects financial 2024 to be a year of organic revenue growth and that its expectations for profitability and cash flow were unchanged.
“In a world of significant instability, national security has never been more important. With defence making up two-thirds of the group, the combination of capability, availability and affordability we offer is increasingly relevant,” said CEO Lockwood.
“I’m excited by the momentum building across the business, and that confidence is reflected in our expectation of continuing cash-backed profitable growth, and reintroducing a dividend in [financial 2024].”
(Source: Google/https://www.marketscreener.com/ Alliance News)
20 Jul 23. Defence group Saab raises sales outlook after Q2 profits jump. Swedish defence equipment maker Saab (SAABb.ST) reported on Thursday a 44% rise in second-quarter operating profit, citing a solid order intake, and raised its organic sales growth guidance for the full year.
Operating profit at Saab, maker of the Gripen fighter jet, was 1.06 bn crowns ($103.5m), up from 738m a year earlier.
The company said it now expected organic sales growth of 16-20% in 2023, against previous guidance for 15%.
Saab, which competes with U.S. defence giant Lockheed Martin (LMT.N), France’s Dassault and Britain’s BAE Systems (BAES.L), has seen strong demand for its products over the past year as the war in Ukraine has lead many nations to increase military spending.
20 Jul 23. Saab Q2 2023 results: Capacity and delivery in focus.
Saab presents the results for January-June 2023
“Our order bookings and sales continued to have a strong momentum in the second quarter. With an ambitious growth path ahead of us, meeting our customer commitments and deliveries is crucial for Saab’s success. We are currently putting relentless effort into project execution, deliveries and capacity, which in turn is driving sales growth,” says Micael Johansson, President and CEO, Saab.
Key highlights Q2 2023
• Solid order intake amounting to SEK 14,315m (17,363) with strong growth in medium-sized orders in the quarter. Q2 last year included a GlobalEye order from Sweden of SEK 7.3bn.
• Sales increased to SEK 12,475m (10,171) with an organic growth of 22%, driven by high pace in project activity across all business areas.
• EBITDA amounted to SEK 1,618m (1,255) with a margin of 13.0% (12.3).
• Operating income (EBIT) increased 44% and amounted to SEK 1,065m (738) with a margin of 8.5% (7.3). Excluding items affecting comparability of SEK 34m, the margin was 8.3%.
• Net income for the period amounted to SEK 798m (433) and earnings per share increased to SEK 5.76 (3.15).
• Operational cash flow in the quarter declined to SEK -1,548m (531) and was due to higher outflow of supplier payments. The operational cash flow for H1 2023 was SEK 1,524m (352).
• Net liquidity position in the quarter was SEK 3.7bn (-0.1).
• Upgraded outlook for organic sales growth 2023: organic sales growth to be between 16-20%, compared to previous outlook of around 15%.
For more information and explanations of the above key ratios, please see www.saab.com/investors/financial-data/key-ratios.
19 Jul 23. IronGate Capital Advisors Announces Dual-Use National Security Technology Fund.
IronGate Capital Advisors, a venture capital investment firm focused on dual-use national security technologies, announced today the final closing and full allocation of its first discretionary fund with $25mm of commitments.
These funds enable IronGate’s mission to invest private capital into early-stage companies and venture capital partnerships to support technologies which are dual-use and dual-benefit. These technologies strengthen the national security of the U.S. and its allies while creating industries, jobs, and innovative civilian applications that are reshaping every facet of society.
“IronGate invests in critical national security technologies with dual-use applications in the commercial economy.”
The fund has been successfully deployed into direct and partnership investments in IronGate’s six target investment segments: (i) robotics, unmanned systems, and hypersonics; (ii) ISR and integrated sensors; (iii) cybersecurity; (iv) artificial intelligence, advanced processing, and human-machine interface; (v) space; and (vi) critical infrastructure and key resources protection.
Hon. Tidal McCoy, Co-Founder and Chairman at IronGate (Washington, DC), said:
“IronGate was conceived and built upon the premise that nations which ignore the competition paradigm for new technologies will be overtaken by adversaries. Such awareness must be achieved through a rigorous process of discovery, then organized, funded, and executed in an agile fashion so as to ensure that the most advanced dual-use technologies will safeguard security and prosperity. IronGate is leading the way in renewing this vital process through our public statements, discovery, and funding of advanced technologies.”
Andrew Magliochetti, Co-Founder and Managing Partner at IronGate (Chicago, IL), said: “The successful closing and deployment of our first discretionary fund further establishes a strong foundation for IronGate’s future. We intend to build upon this foundation to the benefit of our investors, our nation, and our allies. Private investment in cutting-edge, dual-use technologies enhances our intelligence and warfighting capabilities, protects our nation and allies, and strengthens our economic future.”
Ryan Morfin, Co-Founder and Managing Partner at IronGate (Dallas, TX), said: “This important milestone enables us to broaden our mission of ensuring that the United States and its allies can achieve peace through strength, and strength through innovation. The nations that achieve primacy in developing and deploying the most effective and advanced technologies will not only guide the geopolitical future, but also reap economic benefits on a massive scale. It is imperative that we not allow our adversaries to outflank us in the battle for transformational science and technology.”
Hamlet Yousef, Co-Founder and Managing Partner at IronGate (West Palm Beach, FL), said: “Since 2018, we’ve been a leading voice in calling for private capital investment in dual-use technologies that enhance our national security and economic interests. In the face of nation-states that are growing increasingly adversarial and hostile towards the U.S. and its allies, it is essential that we create and support strategic innovation.”
Founded in 2018, IronGate’s mission is to direct capital to the highest-performing ventures in the advanced technology arena, with a specific focus on innovations in aerospace, defense and intelligence, and national security that have dual-use applications in the civilian economy. IronGate is managed by a multidisciplinary team of experts in finance, national security, and technology. IronGate’s investment approach provides investors with a diversified venture capital portfolio while supporting the early-stage companies that are poised to meet the most demanding national security requirements. For more information, visit IronGateVC.com. (Source: PR Newswire)
18 Jul 23. AAR CORP. (NYSE: AIR), a leading provider of aviation services to commercial and government operators, MROs, and OEMs, today reported fourth quarter fiscal year 2023 consolidated sales of $553.3m and income from continuing operations of $23.2m, or $0.66 per diluted share. For the fourth quarter of the prior year, the Company reported sales of $476.1m and income from continuing operations of $23.9m, or $0.66 per diluted share. Our adjusted diluted earnings per share from continuing operations in the fourth quarter of fiscal year 2023 were $0.83, compared to $0.72 in the fourth quarter of the prior year.
Consolidated fourth quarter sales increased 16% over the prior year quarter. Our consolidated sales to commercial customers increased 31% over the prior year quarter, primarily due to further recovery in the commercial market. Our consolidated sales to government customers decreased 7% primarily due to the completion of certain government programs that occurred last fiscal year. Sales to commercial customers were 69% of consolidated sales, compared to 62% in the prior year quarter.
“Across our domestic and international markets, the demand for commercial air travel is increasing and our airline customers expect this trend to continue. In turn, we have seen sustained high demand for our services which drove another strong quarter of growth,” said John M. Holmes, Chairman, President and Chief Executive Officer of AAR CORP.
Gross profit margins were 19.5% in the current quarter, compared to 18.9% in the prior year quarter. Adjusted gross profit margin increased from 18.6% to 19.5%, primarily due to the favorable impact of our previous actions to reduce costs and improve our operating efficiency.
Selling, general, and administrative expenses were $70.8m in the quarter, which included increased investments in digital initiatives as well as $5.1m related to Trax acquisition and amortization expenses. As a percentage of sales, selling, general, and administrative expenses were 12.8% for the quarter, compared to 12.0% last year. Excluding the Trax acquisition and amortization expenses, selling, general, and administrative expenses were 11.9% of sales in the quarter.
Operating margins remained consistent at 6.6% in the current and prior year quarters, while adjusted operating margin increased from 7.0% in the prior year quarter to 7.8%, primarily as a result of the growth in commercial sales. Sequentially, our adjusted operating margin increased from 7.6% to 7.8%, driven by improved profitability in our commercial business. Subsequent to the quarter, we announced an extension and expansion of our United Airlines MRO relationship and a planned facility expansion in Miami, Florida. Under the new arrangement, we will increase our narrow body maintenance capacity to provide United Airlines a minimum of 10 lines of support across our Miami and Rockford, Illinois, MRO facilities. To support the additional lines of maintenance, we will add a new three-bay hangar adjacent to our existing nine-bay facility at Miami International Airport. Miami-Dade County has committed to reimburse the expected construction costs of the hangar.
Net interest expense for the quarter was $4.7m, compared to $0.6m last year. Average diluted share count decreased from 35.7m shares in the prior year quarter to 34.8m shares in the current year quarter. We did not repurchase any shares during the quarter as a result of deploying capital towards the acquisition of Trax and other attractive investment opportunities. We have $57.6m remaining on the program and will continue to evaluate share repurchases along with other opportunities to deploy our capital.
Cash flow provided by operating activities from continuing operations was $45.3m during the current quarter. Excluding our accounts receivable financing program, our cash flow provided by operating activities from continuing operations was $48.8m in the current quarter. As of May 31, 2023 our net debt was $203.6m and our net leverage was 1.07x.
Holmes continued, “The sales growth combined with our actions to improve margins drove record earnings in the fourth quarter. We also delivered solid cash flow, and our balance sheet remains exceptionally strong, which will allow us to continue to make growth investments, as we did with the acquisition of Trax.”
Fiscal year 2023 results
Full fiscal year 2023 consolidated sales were $2.0bn, an increase of 9% from fiscal year 2022. Aviation Services sales increased by 9%, primarily from the continued recovery in the commercial market, while sales to government customers in this segment decreased 13% primarily due to the completion of certain government programs that occurred last fiscal year. Expeditionary Services sales increased 24% in fiscal year 2023 from higher volumes in our Mobility operations.
Full fiscal year 2023 income from continuing operations was $89.8 m, or $2.52 per diluted share. In fiscal year 2022, income from continuing operations was $78.5m, or $2.16 per share. Our adjusted diluted earnings per share from continuing operations was $2.86 in the current year, compared to $2.38 last year, reflecting continued recovery in the commercial market.
Sales to commercial customers were 67% of consolidated sales, compared to 60% in the prior year. Cash flow from operating activities from continuing operations was $23.8m in fiscal year 2023. Excluding our accounts receivable financing program, our cash flow provided by operating activities from continuing operations was $26.0 m in fiscal year 2023.
Holmes concluded, “I am exceptionally proud of our team and the record results we delivered this year. We expect continued growth in our parts business due to increasing demand for used material and the full ramp-up of recent new parts distribution contract awards. Our hangars are expected to remain largely full throughout the year, and we are excited about the opportunities Trax provides to help further strengthen the AAR value proposition. Our new business pipeline across the commercial and government markets remains strong, and we believe we are well-positioned to continue our growth and margin expansion.”
Change in operating segments
Beginning in the first quarter of fiscal 2024, we implemented a new reporting structure which resulted in the separation of our Aviation Services segment into three new operating segments: Parts Supply, Repair & Engineering, and Integrated Solutions. In conjunction with this re-alignment, we have also changed our measure of segment performance from gross profit to operating income. These changes will be initially reflected in our condensed consolidated financial statements for the quarterly period ended August 31, 2023. We expect to file a Form 8-K later today that will provide certain historical summary financial information under our new operating segment structure for fiscal years 2022 and 2023.
19 Jul 23. Patria records strong order stock development driven by vehicle programmes. The first half-year interim report reveals robust net sales growth but below-target profitability for Patria Group.
Patria Group has reported growth in order stock primarily due to the success of its vehicle programmes.
However, delays in key delivery agreements have burdened net sales and profitability in the first half 2023. The company remains optimistic about its future, driven by ongoing strategic initiatives and multinational partnerships.
Patria Group’s strong order stock development driven by vehicle programmes
Patria Group, a defense and aerospace company, has published its interim report for the period spanning January to June 2023.
Patria Group’s net sales for the first half-year reached €321.8m, ($360.4m) showcasing substantial growth compared to €280.6m in the same period of the previous year. However, the operating profit declined to €15.8m from €19.8m, falling short of the targeted profitability.
The equity ratio stood at 39.1%, marginally lower than the 39.8% recorded in the comparative period, and the net gearing ratio increased to 77.8% from 69.3%.
One of the primary factors influencing the net sales was the delay in the orders of new planned 6×6 vehicle programmes during the first half of the year. Additionally, despite the success of Patria’s 6×6 and 8×8 vehicle programmes, profitability remained below the target set for the first half of 2023.
Patria’s involvement in several vehicle program delivery agreements simultaneously has led to resource challenges. Nevertheless, the company’s supply chain is expected to meet its targets, enabling timely deliveries to customers throughout the remainder of the year. As a result, the outlook for net sales and profitability for the rest of 2023 remains robust.
The company’s success in 6×6 and 8×8 vehicle programmes has not only contributed to the development of its other business operations but has also facilitated the Group’s internationalization. Patria made significant progress in the negotiations for the F-35 program, and its NEMO mortar systems found a new market in Sweden.
However, it’s worth noting that while the demand and order stock are particularly high for vehicle programmes, the demand is not uniformly distributed across all of Patria’s services.
Focus on Finland’s F-35 acquisition and employee challenges
In June, Patria and Lockheed Martin signed a Memorandum of Agreement (MoA) for direct work within Finland’s F-35 industrial participation program. The MoA covers the contractual framework for F-35 forward fuselage assemblies in Finland, further solidifying the collaboration between the two companies.
Additionally, Sweden’s decision to strengthen its defense capabilities with eight new mortar vessels, equipped with Patria NEMO Navy turreted 120 mm systems, marks a milestone for Patria. This development showcases the company’s expanding influence in the international defense market.
Furthermore, Patria signed a agreement with the Finnish Defence Forces Logistics Command for 91 Patria 6×6 armored vehicles, with a purchase option for an additional 70 vehicles.
This agreement is part of the multinational Finland-led CAVS (Common Armoured Vehicle Systems) program, which involves Latvia, Sweden, and Germany. The deliveries of these vehicles are scheduled to begin in 2023, contributing to the company’s order stock.
However, Patria faced challenges in certain segments during the second quarter, necessitating change negotiations on fixed-term layoffs in its Helicopters unit, Production Support, New Production, and Diesel Engines unit.
These measures were implemented due to decreased demand in aircraft and helicopter airframe, as well as various types of motor equipment maintenance. As a result, 89 employees were affected by fixed-term full and part-time layoffs.
The ongoing negotiations concerning Finland’s acquisition of F-35 fighter jets are expected to be a focal point for the rest of the year. Patria and Lockheed Martin‘s MoA signed in June lays the groundwork for further collaboration within Finland’s F-35 industrial participation program.
Vehicle programmes propel Patria’s internationalisation
The multinational joint CAVS program for Patria’s 6×6 vehicle is on track, with deliveries of the 91 vehicles to Finland set to commence this year. Additionally, Sweden and Germany’s involvement in the program highlights its growing international significance.
Patria’s demand in the 6×6 and 8×8 vehicle programmes presents challenges in ensuring sufficient resources and efficient supply chain management. Furthermore, despite prevailing uncertainties such as the geopolitical situation, economic fluctuations, inflation, and increasing costs, Patria’s delivery capability is anticipated to remain at a high level.
In the medium and long term, the company, alongside the defense industry in Europe, is expected to witness an increase in demand due to the rising defense spending in various European countries. (Source: army-technology.com)
19 Jul 23. Cohort benefits from increased UK military spend.
• Pipeline timings lead to margin squeeze
• Nine-tenths of this year’s revenue covered by order book
Cohort (CHRT), the Aim-traded defence technology business, has been slower to see the benefit of the uplift in defence spending by European governments than peers such as BAE Systems (BA.) and Qinetiq (QQ.).
Yet the company is now showing signs of progress. Top-line growth of 33 per cent was attributed to a “significant uplift” in orders from the UK’s Ministry of Defence (MoD), particularly for its MCL business, which provides communications and surveillance technology.
The amount of revenue Cohort generated from the MoD increased by 50 per cent last year, to just below £100mn. It now earns 54 per cent of revenue domestically, which it described as “a marked change” to recent years, where the proportion of revenue earned at home has generally been falling.
This top-line growth fed into higher adjusted net profit, which grew by 23 per cent to £19.1m, although margins were weaker across both its communications and intelligence (C&I) and sensors and effectors (S&E) units.
In the C&I arm, where adjusted operating margin fell by 40 basis points to 17.3 per cent, this was due to ongoing delays in the Portuguese Navy’s ship procurement programme, which meant Cohort’s EID business posted a “small” operating loss. It expects orders from this to flow more freely this year.
In S&E, the margin fell by 110 basis points to 9.7 per cent, with its ELAC business not generating as much profit because a contract to provide sonar equipment on new submarines for the Italian Navy is still in the design phase, although again profits should improve once production kicks off. There were also signs of improvement in its previously underperforming Chess surveillance equipment business. Finance director Simon Walther said he expects the S&E margin to recover over the next three to five years to around 14-15 per cent. The C&I margin will remain in the high teens, he added.
Encouragingly, orders grew at a faster pace than revenue, and with a further £60m of orders since its April year-end around 90 per cent of this year’s forecast sales are now covered. Broker Shore Capital expects earnings per share to weaken slightly this year, by around 1.4 per cent to 36p, as the company steps up capex to replace a leased facility in Germany with its own factory. Yet even with a 10 per cent post-results rise, Cohort’s shares trade at 13.6 times earnings, marginally below their five-year average. The company’s encouraging prospects mean we maintain our buy stance. Last IC View: Buy, 443p, 14 Dec 2022. (Source: Investors Chronicle)
19 Jul 23. Cohort plc today announces its unaudited results for the year ended 30 April 2023. Statutory profit before tax.
• Record adjusted operating profit of £19.1m (2022: £15.5m) on record revenue of £182.7m (2022: £137.8m)
• Growth in both reporting divisions:
o Especially strong performance from within the Communications and Intelligence division, driven by significant uplift in UK MOD activity at MCL.
o Improved performance within Sensors and Effectors, with Chess delivering better operational performance.
• Net funds higher than market expectations at £15.6m (2022: £11.0m) with continuing robust cash generation.
• Dividend increased by 10%; the dividend has been increased every year since the Group’s IPO in 2006.
1 Excludes exceptional items, amortisation of other intangible assets, research and development expenditure credits and non-trading exchange differences, including marking forward exchange contracts to market.
2Excludes IFRS 16 lease liabilities.
• Strong order intake of £220.9m (2022: £186.4m) leading to a record closing order book of £329.1m (2022: £291.0m)
• Underpins a record 80% of current market revenue expectations for 2023/24 (78% equivalent figure for 2022/23).
• Encouraging start to the 2023/24 financial year. Expectations for the full year unchanged.
Commenting on the results, Nick Prest CBE, Chairman of Cohort plc said: “This was a record performance for Cohort, which came in slightly above market expectations, with robust cash generation and a record closing order book giving us strong revenue cover for the coming financial year. Our order book is not only growing in value, but its longevity continues to increase and we now have orders across the Group stretching out to 2032. We have good prospects to secure further long-term orders for our naval systems and support work, including from the UK MOD, Portugal and in export markets, as recently exemplified by the £26m order announced 9 May 2023 and a first order for our KDS anti-submarine system of over £7m announced on 30 May 2023. The order book underpins more than £140m (80%) of 2023/24 revenue expectations (2022: £128m). Following order wins since the start of the financial year of over £60m, that cover now stands at just over 90%. We continue to expect that our trading performance for 2023/24 will be ahead of that achieved for the year ended 30 April 2023. As a result of planned capital expenditure and expansion in working capital we expect that our net cash balance will decrease, but that we will maintain positive net funds at the year end. We are optimistic that the Group will make further progress in the medium to longer term, based on current orders for long-term delivery, our continued investment in the businesses and on our pipeline of opportunities.”
“Record performance, slightly above expectations, robust cash, and a record closing order book with strong revenue cover for the coming financial year.”
The Group achieved a record adjusted operating profit of £19.1m (2022: £15.5m) on record revenue of £182.7m (2022: £137.8m), a result that slightly exceeded market expectations. Compared to 2021/22, significant improvements in performance were seen in both reporting divisions.
The Group had another strong year of order intake, winning £220.9m of orders (2022: £186.4m), resulting in a record closing order book of £329.1m (2022: £291.0m). Our order book now stretches out to 2032 and we expect to extend that further in the coming year.
Our Communications and Intelligence division had a strong year, delivering a 21% increase in trading performance on 26% revenue growth and an operating margin of 17.3% (2022: 17.9%). Sales to UK MOD offset a weaker performance at our Portuguese business, EID, which made a marginal trading loss, a result of continuing weak performance in Portugal due to continuing delays to new programmes, particularly with the Portuguese Navy. We now expect these orders to be placed in 2023/24. Most of the improvement in this division arose at MCL from high demand for hearing protection, communication equipment and drones from the UK MOD. We also saw good order intake with MASS securing several order extensions with its UK MOD customers, continuing work it has been undertaking for many years.
The Sensors and Effectors division also saw an improved performance. Adjusted operating profit was up 25% on 39% higher revenue, producing an operating margin of 9.7% (2022: 10.8%). The strong order intake in the last financial year, especially for naval systems and support, was a significant factor in the improvement. This included an improved result at Chess where a much better financial performance was achieved alongside resolving the remaining project issues. ELAC continues to make progress on its project to provide a world-leading sonar solution to the Italian Navy’s new submarines. At present we are trading this contract at a low margin whilst moving through the design phase. We expect to begin production in the coming financial year.
The impact of COVID-19 has now largely dissipated, although we continue to face higher prices in some of our supply chains. Face-to-face meetings, including exhibitions and engagement with customers, have largely returned to pre-pandemic levels.
The Group’s statutory operating profit of £15.3m (2022: £11.1m) is stated after recognising amortisation of intangible assets of £3.7m (2022: £6.9m), no exceptional items (2022: £0.7m income) and research and development expenditure credits of £0.9m (2022: £1.0m). Profit before tax was £13.9m (2022: £10.2m) and profit after tax was £11.3m (2022: £8.7m).
The closing net funds of £15.6m (2022: £11.0m) was better than our expectation, due to an improved operating cash flow, particularly in the Communications and Intelligence division. Within Sensors and Effectors, Chess delivered a welcome improvement in cash performance, unwinding a significant proportion of its opening working capital.
Russia’s invasion of Ukraine has resulted in extraordinary hardship and suffering for the people of that country and has brought war to the plains of Europe for the first time in almost 80 years. One of the consequences of this situation is the impact on public and government perceptions worldwide of the importance of an effective defence capability. At the time of the invasion, last year, many governments across the world had to re-learn that the stability of democracy and maintenance of our freedoms and values requires strong defence to deter, and if necessary repel, an aggressive invader. It is also clearer than ever that strong defence depends on a strong defence industry as well as capable armed forces. That is something Cohort’s leadership and employees understand well, and for many of us it is a large part of our motivation at work. By contributing to the security of the UK and its allies, Cohort generates social value as well as financial returns. Our customers’ response to the situation in Ukraine had a positive business impact in 2021/22 and, as we expected, this increased in 2022/23. At this time, the duration and outcome of this conflict is difficult to predict but, as we stated last year, we believe that the long-term change in defence stance that has been catalysed by these events, especially among NATO countries, will be of benefit to the Group. Study work by McKinsey forecasts an increase in European defence spending of between 53% and 65% from 2021 to 2026. To set against this, we expect to see continuing economic fallout from the war in Ukraine, including higher inflation and rising interest rates as well as sustained higher energy costs.
Further afield, the increasingly assertive approach of China in the South China Sea, Taiwan and beyond, mostly through naval power, is driving a response among nations in that region. One example is Australia’s AUKUS alliance between the UK, Australia and the US. Joint development of future nuclear submarines is a key component of this, and our strong involvement with the UK submarine programme positions us well to participate. But the scope of the alliance is much wider, and we are looking to engage in other areas including electronic warfare and artificial intelligence. Elsewhere Japan has announced an intention to increase annual defence spending by 65% by 2027, as well as move towards a wider international supply base. We already supply Japan through our Sensors and Effectors division and are looking to build relationships and demonstrate our other capabilities.
The prospects for the Group in this region, especially in naval systems supplied mostly through our Sensors and Effectors division, are good.
When we acquired Chess Dynamics in December 2018, we agreed to pay further consideration depending on the performance of the business over the three years ended 30 April 2021. We took control of the whole of Chess on 30 November 2022 for a further consideration of £1.0m.
The Group continues to review acquisition opportunities as they arise, in line with our investment criteria.
Adjusted earnings per share (EPS) were 36.48 pence (2022: 31.08 pence). The adjusted EPS figure was based on profit after tax, excluding amortisation of other intangible assets, net foreign exchange movements and exceptional items. Basic EPS were 27.92 pence (2022: 22.55 pence). The adjusted EPS were 17% higher primarily due to the stronger adjusted operating profit (up 23%), partly offset by a higher interest charge and tax charge of 14.8% (2022: 13.5%).
The Board is recommending a final dividend of 9.15 pence per ordinary share (2022: 8.35 pence), making a total dividend of 13.40 pence per ordinary share (2022: 12.20 pence) for the year, representing a 10% increase. The dividend has been increased every year since the Group’s IPO in 2006. It will be payable on 3 October 2023 to shareholders on the register at 25 August 2023, subject to approval at the Annual General Meeting on 26 September 2023.
Over the medium term, the Group plans to maintain a policy of growing its dividend each year broadly consistent with the growth in adjusted earnings per share growth.
As always, my thanks go to all employees within the Cohort businesses. Their hard work, skill and ability to satisfy our customers’ needs are what continue to drive the performance of our Group.
As already highlighted, the impact of COVID-19 has now largely dissipated, and we have in most instances returned to normal work and travel practices. Where appropriate we continue to offer flexibility to our employees as to their location of work, including hybrid working in some cases.
Andy Thomis, Simon Walther and their senior executive colleagues have continued their dedicated and skilful work which has helped the Group to continue its progress.
19 Jul 23. Houlihan Lokey Advises Emergent Space Technologies. Houlihan Lokey is pleased to announce that Emergent Space Technologies, Inc. (Emergent) has been acquired by York Space Systems (York), a portfolio company of AE Industrial Partners. The transaction details were not disclosed.
Headquartered in Laurel, Maryland (with offices in Austin, Texas), Emergent Space Technologies is a leading aerospace technology company focused on developing and fielding mission software and guidance, navigation, and control (GN&C) solutions for multi-spacecraft missions. Emergent offers a suite of 10 proprietary, IP-backed flight and ground software products and, for more than two decades, has delivered advanced technology to U.S. defense agencies, the Intelligence Community, and NASA. Emergent’s award-winning core competencies include systems engineering; GN&C; positioning, navigation, and timing; modeling and simulation; and software architecture, design, development, and testing.
York is a Denver-based aerospace company dedicated to the rapid deployment of complete space mission solutions. York specializes in rapid production of complete mission-ready spacecraft platforms leveraging commercial development applied to numerous government and commercial missions. Emergent’s 20-year history in software development, integration, and testing further strengthens York’s leadership position in mission software capabilities. Additionally, Emergent’s nationally recognized software engineering processes will enhance York’s mission solution designs for DoD, civil, and intelligence community programs.
AE Industrial Partners is a private equity firm specializing in aerospace; defense and government services; space; power and utility services; and specialty industrial markets. AE Industrial Partners invests in market-leading companies that can benefit from its deep industry knowledge, operating experience, and relationships throughout its target markets. AE Industrial Partners is a signatory to the United Nations Principles for Responsible Investment and the ILPA Diversity in Action initiative.
Houlihan Lokey served as the exclusive financial advisor to Emergent and assisted in initiating, marketing, structuring, and negotiating the transaction on its behalf.
If you would like more information about Houlihan Lokey or if you have any questions regarding this transaction, please contact one of the deal team members listed below.
18 Jul 23. 401(k) Funds Funnel Billions into Nuclear Weapons, Cluster Munitions, and Other Controversial Weapons. A new analysis from As You Sow has found that the largest U.S. mutual fund managers, responsible for funds found across thousands of corporate 401(k) plans, have significant investments in nuclear and other controversial weapons like white phosphorus and cluster bombs.
The UN Secretary-General António Guterres recently stated that the world has entered “a time of nuclear danger not seen since the height of the Cold War,” driven by Russia’s invasion of Ukraine and recent nuclear threats, prompting investors to reevaluate their investments in companies profiting from nuclear weapons and global conflict.
The U.S. recently announced it is planning to deliver cluster munitions to Ukraine, sparking outcry among NGOs and prompting investor concerns about profiting from these controversial weapons. While nations have the right to the legitimate use of weapons for self-defense and national security, having investor-owned arms manufacturers in retirement plans puts people in the position of profiting from this bloodshed.
“Many investors, given a choice, would not want to profit from companies that manufacture weapons of mass destruction,” said Andrew Behar, CEO of As You Sow. “Yet nearly every retirement plan has nuclear and other controversial weapons embedded in their plan. Our new ratings empower investors with the tools to know what they own so they can invest their money in alignment with their values.”
As You Sow’s analysis looks at hundreds of mutual fund managers, with a focus on comparing the top 25 largest firms to the 25 largest sustainable fund managers. Fund managers commonly found in corporate 401(k)s like American Funds, John Hancock Funds, and Franklin Templeton Investments were among the most exposed among the largest fund managers. All of the 25 largest managers earned a “D” grade or lower; all but two of the sustainable fund managers earned a “C” grade or higher, with almost one-third of the sustainable firms earning an “A” grade with no identifiable exposure to military weapons.
Concerns about the social impact, human rights, reputation risk, and regulatory risks are just a few of the reasons weapon-free investing has been a common component of sustainable investing for decades. These risks are amplified when companies are involved with nuclear weapons and controversial weapons like cluster munitions, anti-personnel landmines, incendiary weapons, and depleted uranium. Sustainable investing has traditionally avoided weapon investments not only for moral reasons, but with the goal of avoiding the financial risk inherent in the business models of arms manufacturers. Research shows that sustainable indexes that screen out nuclear weapons largely track or outperform comparable non-sustainable indexes.
The new Fund Manager Military Weapon Ratings are the latest addition to As You Sow’s Weapon Free Funds investment tool, built to help responsible investors prioritize peace and people over war and violence. The ratings use research from non-profits and ethical investment firms to identify investor-owned companies involved with arms manufacturing, nuclear weapons, and cluster munitions, then cross-reference this with the holdings of thousands of mutual funds and exchange-traded funds. The tool includes a toolkit people can use to help shift their investments, including their company 401(k) savings, away from weapon investments.
18 Jul 23. Lockheed Risks $400m Payment Delay Until It Shows New F-35 Software Works (excerpt). The Pentagon will withhold about 10% of the price for new F-35s from Lockheed Martin Corp. until the contractor shows that new software works properly, potentially delaying more than $400m in payments by December on 52 of the advanced fighter jets.
The aircraft needs the delay-plagued software upgrade to function just right with new cockpit hardware before it can carry more precise weapons and gather more information on enemy aircraft and air defenses. The “TR-3” upgrade will increase processing power 37 times and memory 20 times over the F-35’s current capabilities. The Defense Department said Lockheed’s contract calls for it to deliver as many as nine jets a month with the improved software and hardware.
The contractor is paid 90% of each plane’s price tag during the stages of assembly for work completed. The remaining 10% depends on signed paperwork validating that the plane’s requirements have been met.
Investors will be looking for more information on delayed F-35 deliveries and repercussions for Lockheed’s cash flow when the company reports its earnings on Tuesday.
The payment delays are only the latest snag for the TR-3 upgrade, which is meant to replace decade-old processing power for the jet but has been plagued by delays and cost overruns. The original contract for the software, signed in 2018, has almost doubled from $712m, and Lockheed won’t receive any profit from the upgrade work. (end of excerpt) (Source: https://www.defense-aerospace.com/ Bloomberg)
18 Jul 23. Lockheed Martin raises full-year forecast on strong weapons demand. U.S. weapons maker Lockheed Martin (LMT.N) on Tuesday raised its annual profit and sales outlook on strong demand for military equipment stoked by ongoing geopolitical uncertainties.
Shares of the company rose around 1% in premarket trading.
Defense companies in the U.S. have been successful in translating demand for air defense systems, missiles and other weapons into orders, triggered by the war in Ukraine and increasing tension in U.S.-China relations.
Lockheed’s weapons, such the guided multiple launch rocket system and Javelin anti-tank missiles, made in conjunction with aerospace and defense firm RTX (RTX.N), have been used by Ukraine in its fight against Russia’s full-scale invasion.
However, Lockheed’s F-35 jets face delays in delivery to the Pentagon due to software upgrades, according to media reports.
The advanced jet is Lockheed’s largest program, after having generated 27% of total consolidated net sales and 66% of aeronautics’ net sales in 2022.
Quarterly sales at Lockheed’s aeronautics unit, its largest, rose 17.3% from a year earlier to $6.88 bn. Last year’s second quarter was hit by the end of some federal funding and supply chain constraints stemming from the pandemic.
The world’s largest defense contractor now expects profit to be between $27 and $27.20 per share in 2023, compared with the previous guidance of $26.60 to $26.90 per share.
It expects full-year net sales to be between $66.25bn and $66.75bn, up from its earlier forecast of $65bn to $66bn.
Bethesda, Maryland-based Lockheed posted a net income of $6.63 per share for the second quarter, above Wall Street estimates of $6.45 per share, according to Refinitiv data. On an adjusted basis, profit was $6.73 per share. Quarterly net sales rose 8.1% to $16.69bn, beating expectations of $15.92bn. (Source: Reuters)
18 Jul 23. Lockheed Martin Reports Second Quarter 2023 Financial Results.
• Net sales of $16.7bn, an increase of 8% year-over-year
• Net earnings of $1.7 bn, or $6.63 per share
• Cash from operations of $1.1bn and free cash flow of $0.8bn
• $1.5 bn of cash returned to shareholders through dividends and share repurchases
• Record backlog of $158.0bn
• 2023 outlook increased for sales, segment operating profit and earnings per share
Lockheed Martin Corporation [NYSE: LMT] today reported second quarter 2023 net sales of $16.7 bn, compared to $15.4bn in the second quarter of 2022. Net earnings in the second quarter of 2023 were $1.7bn, or $6.63 per share, compared to $309m, or $1.16 per share, in the second quarter of 2022. Cash from operations was $1.1bn in the second quarter of 2023, compared to $1.3bn in the second quarter of 2022. Free cash flow was $771m in the second quarter of 2023, compared to $1.0bn in the second quarter of 2022.
“Lockheed Martin delivered strong financial results in the second quarter, with a record backlog of $158bn and 8% sales growth year-over-year,” said Lockheed Martin Chairman, President and CEO Jim Taiclet. “Orders highlights included F-35 Lot 17 and significant awards to ramp-up PAC-3, GMLRS, and other major programs, positioning us well for the future. We continued our dynamic and disciplined capital allocation in the quarter, with nearly two times free cash flow returned to shareholders.”
“Given the strength of our year-to-date results and ongoing demand for our signature programs and advanced technologies, we are raising our full year sales and earnings per share outlooks for 2023. We are confident in our return to growth and ability to reward our shareholders over the long run with reliable free cash flow per share expansion and cash deployment. Along the way, we will continue developing and investing in our 21st Century Security vision to strengthen the resilience and responsiveness of the U.S. defense production system, elevate deterrence through the acceleration of digital technologies into critical missions with our commercial industry partners, and deepen our industrial relationships with allies and partner nations for production and sustainment operations.”
Adjusted earnings before income taxes, net earnings and diluted EPS
The table below shows the impact to earnings before income taxes, net earnings and diluted earnings per share (EPS) for certain non-operational items:
2023 Financial Outlook
The following table and other sections of this news release contain forward-looking statements, which are based on the company’s current expectations. Actual results may differ materially from those projected. It is the company’s practice not to incorporate adjustments into its financial outlook for proposed acquisitions, divestitures, ventures, pension risk transfer transactions, financing transactions, changes in law, or new accounting standards until such items have been consummated, enacted or adopted.
Cash Flows and Capital Deployment Activities
Cash from operations in the second quarter of 2023 was $1.1bn and capital expenditures were $329m, resulting in free cash flow of $771m. The decrease in operating and free cash flows in the second quarter of 2023 compared to the same period in 2022 was primarily due to the timing of federal tax payments.
The company’s cash activities in the second quarter of 2023, included the following:
• paying cash dividends of $758m;
• paying $750m to repurchase 1.6 m shares (including 0.1 m shares received upon settlement of an accelerated share repurchase agreement (ASR) in the third quarter 2023; and
• receiving net proceeds of $1,975m from a debt issuance of senior unsecured notes, consisting of $500m aggregate principal amount of 4.45% Notes due May 15, 2028, $850m aggregate principal amount of 4.75% Notes due February 15, 2034, and $650m aggregate principal amount of 5.20% Notes due February 15, 2055.
The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space
Net sales and operating profit of our business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation and not included in management’s evaluation of performance of each segment. Business segment operating profit includes our share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of our business segments.
Business segment operating profit excludes the FAS/CAS pension operating adjustment, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, intangible asset amortization expense, and other miscellaneous corporate activities. Excluded items are included in the reconciling item “Unallocated items” between operating profit from our business segments and our consolidated operating profit.
Changes in net sales and operating profit generally are expressed in terms of volume. Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts. Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract. In addition, comparability of the company’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the company’s contracts. Increases in profit booking rates, typically referred to as favorable profit adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract. Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit adjustments. Increases or decreases in profit booking rates are recognized in the current period and reflect the inception-to-date effect of such changes.
The company’s consolidated net favorable profit booking rate adjustments represented approximately 20% and 26% of total segment operating profit in the quarters ended June 25, 2023 and June 26, 2022.
Aeronautics’ net sales in the second quarter of 2023 increased $1.0 bn, or 17%, compared to the same period in 2022. The increase was primarily attributable to higher net sales of $735 m for the F-35 program due to higher volume on production contracts partially driven by lower volume in the second quarter of 2022 due to the impact of the delays in receiving additional contractual authorization and funding under the Lots 15-17 contract and higher volume on sustainment contracts; higher net sales of $100 m on classified programs due to higher volume; and higher net sales of $90 m for the C-130 program due to higher volume on sustainment contracts.
Aeronautics’ operating profit in the second quarter of 2023 increased $105m, or 17%, compared to the same period in 2022. The increase was primarily attributable to higher operating profit of $75m for the F-35 program due to higher volume on production contracts; and higher operating profit of $20 m on classified programs due to lower unfavorable profit adjustments. Total net profit booking rate adjustments in the second quarter of 2023 were comparable to the same period in 2022.
Missiles and Fire Control
MFC’s net sales in the second quarter of 2023 were comparable to the same period in 2022. Higher net sales of $20m for tactical and strike missile programs due to higher volume (Precision Strike Missile (PrSM)) was offset by lower net sales of $20m for integrated air and missile defense programs due to lower volume (Terminal High Altitude Area Defense (THAAD)).
MFC’s operating profit in the second quarter of 2023 decreased $47 m, or 11%, compared to the same period in 2022. The decrease was primarily attributable to lower operating profit of $25 m for sensors and global sustainment programs due to lower net favorable profit adjustments (Sniper Advanced Targeting Pod (SNIPER®) and Infrared Search and Track (IRST21®)); and lower operating profit of $20 m for tactical and strike missile programs due to lower net favorable profit adjustments (High Mobility Artillery Rocket System (HIMARS) and Joint Air-to-Surface Standoff Missile (JASSM)). Total net profit booking rate adjustments were $55m lower in the second quarter of 2023 compared to the same period in 2022.
Rotary and Mission Systems
RMS’ net sales in the second quarter of 2023 decreased $11m, or 3%, compared to the same period in 2022. The decrease was primarily attributable to lower net sales of $145m for Sikorsky helicopter programs due to lower production volume (Black Hawk). This decrease was partially offset by higher net sales of $60m for integrated warfare systems and sensors (IWSS) programs due to higher volume (Aegis, Defense of Guam, and TPY-4 programs).
RMS’ operating profit in the second quarter of 2023 decreased $7m, or 2%, compared to the same period in 2022. The decrease was primarily attributable to lower operating profit of $60m for Sikorsky helicopter programs due to an unfavorable profit adjustment of $100m on the Canadian Maritime Helicopter Program (CMHP) as a result of increased costs and lower than planned revenues and lower production volume (Black Hawk), partially offset by higher equity earnings and higher net favorable profit adjustments (Seahawk). This decrease was partially offset by higher operating profit of $75m for IWSS programs primarily due to a favorable profit adjustment of $65m as a result of a positive resolution of a contractual matter on an international surveillance and control program. Additionally, the decreases in net profit booking rate adjustments and volume as described above were partially offset by contract mix. Total net profit booking rate adjustments were $40m lower in the second quarter of 2023 compared to the same period in 2022.
Space’s net sales in the second quarter of 2023 increased $341m, or 12%, compared to the same period in 2022. The increase was primarily attributable to higher net sales of $150m for strategic and missile defense programs due to higher development volume (Next Generation Interceptor (NGI)); higher net sales of $120m for national security space programs due to higher development volume (classified and Transport Layer programs); and higher net sales of $65m for commercial civil space programs due to higher volume (Orion).
Space’s operating profit in the second quarter of 2023 increased $41m, or 15%, compared to the same period in 2022. The increase was primarily attributable to higher operating profit of $25 m for commercial civil space programs due to higher net favorable profit adjustments and higher volume (Orion); and higher operating profit of $15m for higher equity earnings from the company’s investment in United Launch Alliance (ULA) due to launch mix. Total net profit booking rate adjustments in the second quarter of 2023 were comparable to the same period in 2022.
Total equity earnings (primarily ULA) represented approximately $20m, or 6%, of Space’s operating profit in the second quarter of 2023, compared to approximately $5m, or 2%, in the second quarter of 2022.
The company’s effective income tax rate was 16.2% and 6.4% for the quarters ended June 25, 2023 and June 26, 2022. The rate for the second quarter of 2022 was lower than the second quarter of 2023 primarily due to lower earnings before income taxes resulting from a noncash, non-operating pension settlement charge of $1.5bn, which reduced the tax expense by approximately $314m. The rates for all periods benefited from research and development tax credits, tax deductions for foreign derived intangible income, and dividends paid to our defined contribution plans with an employee stock ownership plan feature.
17 Jul 23. Astronics Corporation Reports Preliminary Orders for Second Quarter 2023 of Approximately $200m.
• Expects revenue for second quarter 2023 to be in range of $170m to $175m; at upper end of previous guidance
• Announces second quarter 2023 financial results conference call and webcast scheduled for aftermarket on Thursday, August 3, 2023
• Astronics Corporation (Nasdaq: ATRO), a leading provider of advanced technologies for global aerospace, defense and other mission critical industries, announced that preliminary orders for the second quarter of 2023 are approximately $200 m to $205 m. Included in orders was a $9.6m production order for the Handheld Radio Test Sets (HHRTS) Program for the U.S. Marine Corps (USMC) related to the $40m IDIQ contract previously announced on April 6, 2023.
The Company also announced that unaudited preliminary results suggest revenue for the second quarter to be in the range of $170m to $175m. This is at the upper end of its previous guidance range of $165m to $175m which was provided on May 9, 2023.
17 Jul 23. IronNet Announces Intention to Voluntarily Delist Securities from New York Stock Exchange. IronNet, Inc. (together with its subsidiaries, “IronNet”, “we”, “us” or the “Company”) (NYSE: IRNT) announced today its intention to voluntarily delist from the New York Stock Exchange (“NYSE”).
This announcement follows the Company’s receipt of notice from the NYSE that the Company is not in compliance with the NYSE’s continued listing standards. The Company has been evaluating its options with respect to its NYSE listing. After discussions and deliberations on these matters, the Company’s board of directors has approved a resolution authorizing the Company to voluntarily delist from the NYSE.
On July 17, 2023, the Company notified NYSE of its intent to voluntarily delist its securities from NYSE. The Company currently anticipates that it will file a Form 25 with the Securities and Exchange Commission (the “SEC”) relating to the delisting on or about July 27, 2023, and anticipates that the delisting of its securities will become effective on or about August 6, 2023. Following delisting, the Company expects that its common stock will be traded on over-the-counter markets.
The Company does not expect that the delisting will have any adverse effects on its business operations, and the Company will remain subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended.
About IronNet, Inc.
Founded in 2014 by GEN (Ret.) Keith Alexander, IronNet, Inc. (NYSE: IRNT) is a global cybersecurity leader that is transforming how organizations secure their networks by delivering the first-ever collective defense platform operating at scale. Employing a number of former NSA cybersecurity operators with offensive and defensive cyber experience, IronNet integrates deep tradecraft knowledge into its industry-leading products to solve the most challenging cyber problems facing the world today. (Source: BUSINESS WIRE)
15 Jul 23. Defence companies face 300pc jump in insurance costs on City’s ethical crusade. Firms complain ESG rules are making it difficult to access financial services. The City’s ethical investment drive has been blamed for surging insurance costs in Britain’s defence industry, with some companies seeing their premiums jump by as much as 300pc.
Dozens of defence companies complained to the Ministry of Defence that environmental, social and governance (ESG) rules are pushing up their costs and leaving them struggling to access financial services in some cases.
As well as surging insurance premiums, businesses have complained of being denied banking services or charged higher rates because of the nature of their work.
Kevin Craven, chief executive of ADS Group, the trade body for aerospace and defence companies in the UK, said his organisation was assisting the Ministry of Defence in investigating the problem.
The investigation is still at an early stage, Mr Craven said. One member had their insurance premium rise by 300pc with no change to their cover requirements.
He said about 15pc of 700 members who responded to a survey by ADS said they had some sort of problem with access to finance or financial services, and ADS estimates about a third of those affected had “concrete, real problems” that could be tied to their defence work.
Bank accounts can be declined for a number of reasons, he conceded, but the figures suggest further investigations are necessary.
“This is not an industry with huge margins, and at a time when you are battling inflation, cost of living increases, and particularly skills and labour shortages it’s an unnecessary concern,” he said in an interview.
Financial costs in the defence sector are soaring as banks, insurers and investment firms face growing pressure to show they are operating in line with ESG rules.
The rules are aimed at avoiding investing in or lending to businesses which prop up human trafficking and other universally reviled practices.
They can also help investors filter out investing in fossil fuels, tobacco or alcohol, should they choose. Defence companies are also excluded under the rules.
The shrinking pool of finance companies willing to work with the defence industry has left them with less choice and facing higher cost.
Last month Paul Livingston, UK boss of huge US defence firm Lockheed Martin, told a Parliamentary committee that small businesses that supply companies like his are being denied banking facilities as a result of their links to the defence sector.
Mr Livingston said: “What we’re seeing is small companies being refused even basic banking abilities, because they do defence.”
Industry chiefs complain that the rules are being misapplied to them as Britain needs to ramp up production of ammunition and other equipment following donations to Ukraine’s war effort. (Source: Google/DailyTelegraph)
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.