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23 Nov 23. Austal enters trading halt pending Department of Defence announcement. Australian shipbuilder and defence prime Austal has entered a voluntary trading halt pending an announcement about future agreements with the Australian Department of Defence.
Securities of Austal Limited will be placed in a trading halt until normal trading resumes on Monday, 27 November or until the announcement is released to the market, according to a public announcement made on 23 November.
“Austal requests a voluntary trading halt in its securities pending an announcement in relation to future agreements with the Commonwealth of Australia (Department of Defence),” according to company secretary Adrian Strang.
“The company requests that the trading halt takes effect immediately and continues until the release of the relevant announcement, or no later than the commencement of trading on Friday, 24 November 2023.”
It’s understood the trading halt could coincide with the possible awarding of the Australian Army’s LAND 8710-1A program. Austal has partnered with Raytheon Australia and BMT to bid for the contract with their Australian Independent Littoral Manoeuvre Vessel design to align with littoral combat focus recommended by the Defence Strategic Review released earlier this year.
Austal has previously entered a trading halt earlier this year with market commentators speculating that the defence contractor could be acquired by US private equity firms Cerberus, Arlington Capital Partners or even Western Australian investments company Tattarang, backed by mining magnate and bnaire Andrew Forrest.
Earlier this month, Austal Australia announced that they had entered a memorandum of understanding with engineering services company Harland & Wolff Group to pursue shipbuilding opportunities in the United Kingdom.
Both organisations signed the agreement at the Indo Pacific 2023 Maritime Exposition in Sydney to promote the transfer of technology, skills, and shipyard capabilities required to build the next generation of patrol vessels for the United Kingdom for maritime security agencies.
(Source: Defence Connect)
23 Nov 23. Mitsubishi aims to double defence revenues. Japan’s biggest defence contractor Mitsubishi Heavy Industries (MHI) has said it expects to more than double defence revenues in the next few years in line with Tokyo’s plan to enhance the capability of the Japan Self-Defense Forces (JSDF).
MHI said in a defence business briefing in Tokyo on 22 November that it forecasts its annual defence sales will expand from the current level of about JPY500 bn (USD3.3 bn) to JPY1 trillion by fiscal year (FY) 2024–26 and to more than JPY1 trillion by FY 2027–29.
MHI said in briefing materials that “for many years [its] defence revenues have trended around just under JPY500 bn”. However, it added that its forecast defence revenues will “more than double due to [the] significant expansion [in the] Japan Defense Buildup Program (DBP)”.
The DBP was announced by the government in December 2022 and outlines investment in JSDF capability of about JPY43.5 trillion through FY 2027.
(Source: Janes)
22 Nov 23. Czech gunmaker Colt CZ makes offer for Vista Outdoor. Czech gunmaker Colt CZ Group (CZG.PR) has made an offer to Vista Outdoor (VSTO.N), valuing the U.S. sporting and outdoor goods group at about $1.7bn, according to Reuters calculations.
Vista said in a statement it had not made any determination about the $30 per share cash and stock proposal, which is at a premium to its last closing price of around $25.75, though below a 2023 high of $33.78 hit in September.
Colt CZ said it proposed keeping the company together, scrapping Vista’s planned sale of its sporting products business to privately held Czechoslovak Group (CSG), announced in October in a $1.91 bn deal.
“The market’s view of the Czechoslovak Group transaction was clear in its reaction to the announcement, which resulted in the rapid fall in (Vista’s) share price on October 16, 2023,” Colt CZ said in a letter to Vista’s board published on its website late on Wednesday.
“We would keep the company together, allowing continued upside for current Vista shareholders with the ‘New Vista’ retaining its listing in the U.S.”
Colt CZ said its offer of “a strategic combination” included a $900 m share buyback programme that it would conduct after the transaction had closed, funded by $600 m of new equity issued at the transaction price and $300 m of debt.
Vista shareholders would hold about 55% in the new company under the deal, Colt CZ said.
Vista said it would review Colt CZ’s proposal but that it had not made any change in its recommendation for the CSG deal.
“Vista Outdoor’s Board of Directors remains committed to acting in the best interests of Vista Outdoor stockholders,” it said. “Vista Outdoor stockholders do not need to take any action at this time.”
CSG declined to comment on the Colt CZ offer.
When announcing the sale of its sporting products business on Oct. 16, Vista also cut its full-year sales forecast. Colt CZ, along with a majority shareholder and its chairman, together acquired more than 5% of Vista shares, they announced in October. The Czech group acquired U.S. gun brand Colt in 2021. Colt CZ said on Thursday its adjusted nine-month earnings before interest, tax, deprecation and amortisation (EBITDA) fell 17.3% year-on-year to 1.9bn crowns ($84.8m), as a recovery in the U.S. commercial market had been slower than expected. Colt CZ shares fell around 3% at the Prague open but had recovered to trade down 0.2% by 0919 GMT. ($1 = 22.4040 Czech crowns) (Source: Janes)
22 Nov 23. Hensoldt (HAGG.DE) sees artificial intelligence (AI) and analytics as an area with investment opportunity, the German defence electronics maker said at its Capital Markets Day.
The producer of radars for the IRIS-T air defence system supplied to Ukraine said on Wednesday that mergers and acquisitions were always important to its growth strategy.
“Investment opportunities arise, for example, in the areas of artificial intelligence and analytics as well as in the services and integration business,” it said in a statement.
According to slides from Hensoldt’s Capital Markets Day presentation, the company plans to invest in AI development “across all business for all relevant products and solutions”.
The company, whose orders have more than doubled since 2019 due to increased geopolitical instability around the world, is eyeing acquisitions in a bid for European consolidation.
“With increasing geopolitical tensions around the world, we are facing a time of great uncertainty and an enormous need for defence and security technologies,” CEO Thomas Mueller said.
Last week, Hensoldt announced plans for a capital increase to finance the acquisition of German military service firm ESG.
The partly state-owned defence electronics specialist also confirmed its annual and mid-term guidance at its Capital Markets Day, adding that around 85% of 2024 revenue is already secured by a 5.5-bn-euro ($6.00-bn) order backlog. ($1 = 0.9168 euros) (Source: Google/Reuters)
22 Nov 23. Babcock International, the defence company, has signed a Memorandum of Understanding (MoU) with Hanwha Aerospace to offer enhanced capabilities across Land, Air and Sea domains by bringing together the companies’ combined skills through a collaborative range of products, services and integrated solutions.
Under the agreement, which was signed during the President of Korea’s recent visit to the UK, the companies will work together to pursue global business development opportunities, with an initial focus on opportunities to cooperate on conventional submarines.
This new partnership will benefit from Babcock’s long-standing experience supporting defence programmes in countries such as Canada and Poland, as well as its expertise in Maintenance, Repair and Overhaul (MRO), alongside Hanwha Aerospace’s extensive expertise in global aerospace and defence equipment.
Babcock CEO, David Lockwood, said: “This announcement builds on our longstanding relationship with Hanwha in both the defence and energy sectors. This is an exciting venture that will see our organisations bring together complementary skills and expertise to forge innovative solutions for our current and future customers across the globe”.
Jae-il Son, President and CEO of Hanwha Aerospace, said: “This Memorandum of Understanding deepens our already strong connection with Babcock, as well as our dedication to Korea-UK defence ties as we work together to address global defence challenges,” said “As we move forward, we are keen to leveraging the synergies of this partnership to strengthen our product offerings and give exceptional value to our customers around the world.”
Babcock is currently working with Hanwha on its Weapon Handling System for the Korean submarine programme and has strong existing relations with Hanwha Ocean through joint work on global opportunities, including the Poland and Philippine submarine projects.
In June 2023 Babcock Canada and Hanwha Ocean Signed a Technical Cooperation Agreement enabling both companies to share their respective capabilities in shipbuilding and submarine sustainment in support of the CPSP and the current Victoria In Service Support Contract (VISSC).
BATTLESPACE Comment: This agreement in the maritime arena builds on the Hanwha Team Thunder bidding team for the K9A1 for the155mm MFP requirement. Could this agreement broaden to bring Babcock’s DSG segment into Team Thunder and broaden the product offering across all types of armoured vehicles including K9A1 and Redback? Watch this space.
22 Nov 23. Advent Technologies Granted 180-Day Extension by NASDAQ to Regain Compliance with Minimum Bid Requirement. Advent Technologies Holdings, Inc. (NASDAQ: ADN) (“Advent”), an innovation-driven leader in the fuel cell and hydrogen technology space, today announced that it has received a notification letter from Nasdaq Stock Market LLC (“Nasdaq”) that the Company has been granted an additional 180-day compliance period, or until May 20, 2024, to regain compliance with Nasdaq’s minimum bid price rule.
Nasdaq’s determination is based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for listing on Nasdaq, with the exception of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period and if necessary, by effecting a reverse stock split.
In a notification letter dated May 24, 2023, Nasdaq previously informed the Company that, based on the previous 30 consecutive business days, the Company’s ordinary shares no longer met the minimum $1.00 bid price per share requirement. Therefore, in accordance with Nasdaq’s Listing Rules, the Company was provided 180 calendar days, or until November 20, 2023, to regain compliance.
If at any time before May 20, 2024, the closing bid price of the Company’s ordinary shares is at least $1.00 per share for a minimum of 10 consecutive business days, the Company will regain compliance with this Nasdaq rule and this matter will be closed.
This current notification from Nasdaq has no immediate effect on the listing or trading of the Company’s ordinary shares, which will continue to trade on Nasdaq under the symbol “ADN”. (Source: BUSINESS WIRE)
22 Nov 23. TT Electronics plc (“TT”, “the Group”), a global provider of engineered electronics for performance critical applications, publishes the following trading update on the Group’s performance in the four-month period ended 28 October 2023 (“the Period”).
Trading update
- The Group continues to show good year over year improvement with year-to-date organic1 revenue growth of 4 per cent (5 per cent excluding the pass-through revenue in GMS). As previously guided, TT is returning to a more normal H1:H2 weighting of revenue2, with sales in the four months to October reducing by 8 per cent organically (5 per cent reduction excluding pass through) against a strong 2022 comparator.
- The performance of our Power & Connectivity division continues to show good year over year improvement, and GMS is sustaining its strong margin performance. Trading in Sensors and Specialist Components has been in line with our expectations other than the one-off impact of the previously highlighted machinery breakdown experienced in one of our facilities, which continued for longer than anticipated, impacting profit in Q3 by circa £2m.
- As anticipated, we have seen order intake normalisation during the second half as lead times have reduced, however, order visibility across the Group remains above historic levels.
Positive financial position
- The Group remains on track to deliver much improved cash generation over last year and a further reduction in leverage.
Outlook
- While the Board still expects good year on year improvement in revenue and profit, as a result of the machinery breakdown in S&SC we now expect to report Group adjusted profit before tax towards the lower end of current market expectations for 20233.
- We are mindful of the wider macroeconomic backdrop, but see continued positive momentum in the business, with a robust order book providing good visibility of revenues for 2024.
Peter France, TT Chief Executive Officer commented:
“Having joined in October, I have now visited the majority of our sites, spent time with colleagues and met a number of our customers and other stakeholders. I have been greatly impressed by the quality of our people, the strength of our culture and the depth of our customer relationships.
“I am excited about the potential for TT and can already see opportunities to unlock further value across the business, driving growth, efficiencies and performance through capitalising on our positions in the structural growth markets in which we operate. I look forward to sharing more detailed thoughts shortly after our FY23 results, as we plan the next phase of our disciplined growth strategy.
“The business continues to show good year over year improvement and I look forward with confidence.”
21 Nov 23. Rheinmetall expects 13-14bn euros in revenue in 2026. German arms company Rheinmetall (RHMG.DE) expects sales of 13 bn to 14 bn euros ($14.18bn to $15.27bn) in revenue in 2026 and operating margins of more than 15%, it said on Tuesday in a presentation for an investor day. Shares in the group, whose sales and profits have risen as a result of Russia’s invasion of Ukraine, rose by 3%. ($1 = 0.9168 euros) (Source: Reuters)
21 Nov 23. SRT – Get on board for a profitable voyage.
A lowly-rated marine specialist has a bumper order book and is primed to deliver strong earnings growth,
- First-half revenue falls 70 per cent to £5.5m.
- Interim pre-tax loss of £4.6m.
- Full-year profit guidance maintained
The absence of any revenue from its maritime systems business explains the hefty pre-tax loss for Aim-traded SRT Marine Systems (SRT: 38.5p). However, the directors expect substantial milestone payments to be earned in the second half from the group’s £160m contracted order book, so are confident of hitting analysts’ full-year expectations.
To put the second-half forecast growth into perspective, house broker Cavendish expects SRT to deliver £55.8m of revenue from its systems business and £9.6m of revenue from its transceiver activities. On this basis, the £74m market capitalisation company could more than double annual revenue from £30.4m to £70.9m and report pre-tax profit of £7.2mn in the 12 months to 31 March 2024.
Of course, there is execution risk in delivering contracts and a hefty second-half weighting, too. That said, chief executive Simon Tucker highlighted to Investors’ Chronicle the specific milestones from key contracts that support full-year revenue expectations.
These include a £1m final payment on a fisheries contract nearing completion in the Philippines; initial payment of £11m on the implementation of the next phase of a £40m Middle East Border Agency contract in the first quarter of 2024; and £41mn of payments when first deliveries of equipment are made on a $180m (£145m) contract with a national coast guard in South East Asia that SRT announced six months ago. Specifically, the group is supplying an integrated maritime surveillance and intelligence system to the client.
In addition, the directors expect a contract to be issued soon for the follow-on phase of a maritime surveillance system with a long-standing Middle Eastern coastguard. Potentially, some of the deliveries on that contract could fall into the second half, too. Shareholders can also expect other announcements on SRT’s £380mn medium-term (one to three years) pipeline that forms part of its £1.4bn validated pipeline of contract opportunities.
Transceiver demand booming
It’s worth noting that demand for the transceiver business, which accounted for all of first-half revenue of £5.5m, is benefiting from increased adoption resulting from regulation. For instance, the Port of Antwerp has recently extended existing regulation for certain classes of commercial vessels to make it mandatory that they have an automatic identification system (AIS), which provides the ship’s position and identification to coastal authorities.
Furthermore, Tucker noted that thousands of fish farms in the EU will require tracking and monitoring using aid to navigation (ATON) systems from 2024. The device is external to a vessel and assists navigators in determining their position or safe course, or to warn them of dangers or obstructions to navigation. SRT has appointed a dedicated salesperson to work on the growing global market opportunity for its high-margin digital ATON systems, which provide specialist navigation devices for buoys and infrastructure. It’s already bearing fruit as Tucker revealed to the IC that SRT has issued quotations to potential clients that have a contract value of £15m.
True, the transceiver business has a seasonal second-half bias. However, factoring in underlying market growth and incremental demand from new product launches, it’s reasonable to expect the unit to deliver 26 per cent growth to achieve Cavendish’s full-year revenue estimate of £15.1mn. Moreover, with shipping of SRT’s new NEXUS VHF/DSC radio system (allows digital information transfer not just voice) slated for autumn 2024, and SRT entering the lucrative US market, Cavendish expects divisional revenue to surge by more than half to £23.2m in the 2024-25 financial year. A soft launch of the new product is already generating solid orders.
Growth opportunity undervalued
Based on Cavendish’s maintained forecasts, SRT’s shares are rated on a price/earnings (PE) ratio of 10 and enterprise valuation to operating profit multiple of nine times for the 12 months to 31 March 2024. Both earnings multiples fall to only six times in the 2024-25 financial year when analysts expect revenue to increase 48 per cent to £105m and pre-tax profit and earnings per share (EPS) to rise by more than 60 per cent to £11.8m and 6.2p, respectively.
Importantly, the business is well funded, having drawn down £7.7m of a £40m loan note facility with LGB Capital Markets solely for working capital purposes. Net debt of £5.7m should reduce to £2.2m at the financial year-end (31 March 2024) with the benefit of the second-half operating cash flow. Cavendish forecasts net cash of £3.6m on 31 March 2025. So, with the contracted order book materially de-risking second-half revenue and earnings forecasts, I feel the share price pullback since SRT raised £5.4m, at 50p, in a placing and released better-than-expected annual results (‘This stock has a very low rating and a growing order book’, 27 July 2023) is worth exploiting. Buy. (Source: Investors Chronicle)
20 Nov 23. Cyberlux Corporation (OTC: CYBL) Releases Third Quarter 2023 Financial and Operational Results; Announces Transformative Actions to Refocus the Company on the Defense Technology Sector.
The Company reports significant UAS results, the acquisition of Datron World Communications, and the disposition of the non-U.S. subsidiaries to make way for all levels of US Department of Defense contracts.
November 20, 2023 11:02 PM Eastern Standard Time
Cyberlux Corporation (OTC: CYBL), a leading provider of innovative defense technology systems, announced that the Company achieved a record Cash Flow quarter for the period ended September 30, 2023, and the Company is poised to achieve a record level of Revenue for the year. The Company also grew its Balance Sheet Assets over the last nine months from $12.3 m for the period ended December 31, 2022, to $46.9 m for the period ended September 30, 2023, an increase of almost 4X.
Cyberlux Corporation CEO Mark Schmidt commented on the results: “Dear Cyberlux Community, our Q3 2023 Report, which includes our financial results as advised and reviewed by the accounting experts at EisnerAmper, includes the following transformative actions: our breakthrough UAS results, our Datron acquisition, and the refocusing of the Company on Defense Technology and the related disposition of the non-U.S. subsidiaries to make way for DoD contracts that require Top-Secret clearances. Our operating period ended September 30, 2023, has set the stage for the Company to capitalize on remarkable opportunities across the global Defense Technology markets.
We are publishing our results in this press release (see the link to the Q3 Report below) as we are currently unable to distribute through the OTC Markets platform. Our work to remove the CE designation continues, but the Company is driving breakthrough results regardless of these temporary obstacles. Cyberlux is taking the steps required to become a fully reporting SEC compliant public company as soon as possible.”
https://cyberlux.com/public-released-documents/Cyberlux-Corporation-Q3-2023-Quarterly-Disclosure-Statement-11.20.2023-FINAL.pdf
During the nine months ended September 30, 2023, the Company has refocused its operations through the following transactions:
- On August 29, 2023, Cyberlux Corporation was awarded a contract of $78.9m to deliver Cyberlux K8 Unmanned Aircraft Systems, as confirmed by the United States Department of Defense (“DoD”) in the February 24, 2023, USAI announcement (https://www.defense.gov/News/Releases/Release/Article/3308633/biden-administration-announces-additional-security-assistance-for-ukraine/). As of September 30, 2023, the Company has received advance payments for the purchase of such systems from the DoD of $38,700,600. The completion of shipment of the systems is expected to occur by March 2024.
- On September 16, 2023, the Company acquired 100% of the outstanding stock of Datron World Communications, Inc. (“Datron”), a provider of communications solutions to government, militaries, and industrial users globally. The purchase price consisted of the payment of $3.0m at closing, issuance of a $2.0m note payable (1st note), the issuance of a $2.0m note payable (2nd note) and the cancellation of a $3.5m advance made to Datron World Communications, Inc. by Datron Holdings, Inc. The Datron acquisition was accounted for as an acquisition of a business, and the purchase price of approximately $10.5 m was allocated to net current assets of $1.3m and the remaining $9.2 m was allocated to technology based intangible assets, which are to be amortized over 5 years. The Company also recognized a deferred tax liability (included in other long-term liabilities on the accompanying balance sheet) of approximately $2.2m representing the basis difference in the intangible assets.
- Cyberlux and Kreatx Shpk, FBD Shpk and Havas SAS entered into Agreements of Business Separation, effective as of June 30, 2023, terminating the business relationship between the parties, in exchange for certain payment and equity terms. The operations of these businesses for the periods ended June 30, 2023, are presented as discontinued operations in the consolidated statement of operations. The Company recognized a loss of $11,027,358 in the disposition of these subsidiaries, as presented in the consolidated statement of operations.
During 2021 and 2022, Cyberlux introduced products and solutions across multiple industries, extending the mission of the Company well beyond the hardened multispectral illuminators Cyberlux had become known for. In the course of 2023, Cyberlux has refocused solely on Defense Technology with four defense technology business units, including:
Unmanned Aircraft Solutions (UAS): Military-Grade Hardware and Software Guidance System Platform with Enhanced Infrared Night Vision; Thermal Sensor technology; Eye-in-the-Sky Monitoring; LiDAR Mapping and Perception; UAS Guidance System Software; UAS Service Support Software; and Telecommunications, Data Analytics Application Solutions with ongoing technology and Strategic IP development.
Military Communications Technology (MCT): Datron Military-Grade mission-critical voice, data, and video connectivity. Datron partners with governments, militaries, public safety organizations, security forces and commercial users worldwide to innovate and rapidly deploy high frequency (HF), very high frequency (VHF), multiband (MB) voice/data solutions. Datron World Communications has customers in over 80 countries who benefit from communications systems that reliably perform in demanding environments. Datron’s military communication technology expands from short range (VHF/MB) to long range communications (HF).
Short Range Communications: Datron’s VHF/MB short-range radios (7-50 km) provide secure voice and data exchanges to troops worldwide for communicating on the battlefield. These radios offer highly encrypted voice and data communications which allow the users to communicate without interception by nonfriends foes.
Long Range Communications: Datron’s long-range HF radios (50-100 km) offer secure communications in a ruggedized form-factor, providing a sophisticated feature-set, and utilizing a simplified user interface for ease of operation. Datron’s HF radios are JITC certified, software defined radio (SDR) offering advanced capabilities to the end user.
Special Activities Solutions (SAS): Global Training and Security capability for UAS and other Special Operations training, soldier support systems, including advanced infrared and white LED lighting systems.
Advanced Defense Solutions (ADS): Advanced Intelligence, Surveillance and Reconnaissance (ISR) solutions, advanced UAS solutions, advanced cyber technology solutions addressing U.S. agencies, with ongoing Strategic IP development with legacy and future Strategic Partner technologies.
For Unmanned Aircraft Solutions, Military Communications Solutions, Special Activities Solutions and Advanced Defense Solutions, we sell as direct commercial sales, foreign military sales, and foreign military financing to global government customers. We fulfill ongoing contract requirements for various Non-U.S. Government and U.S. Government agencies including the U.S. Air Force, Air/Army National Guard, U.S. Special Operations Command (USSOCOM), U.S. Army and the Defense Logistics Agency. For some of our products, we sell and service directly to customers and through related distributors.”
Going forward, Cyberlux Corporation is “Harnessing the Future,” driving operational growth with current and future technologies, through fundamental organic growth and through an accelerated acquisitions and joint ventures strategy, all fueling significant future growth. As the Company develops advanced technology products, we will identify core technology and product companies, and these companies will become the Cyberlux growth catalysts. As the results show, Cyberlux is building a global enterprise and developing into a leading technology growth company.
About Cyberlux Corporation
Cyberlux Corporation (OTC Bulletin Board: CYBL) is “Harnessing the Future” by leading defense technology solution development across global industries, driving operational growth through an accelerated acquisitions and joint ventures strategy, and continuously fueling growth with current and future technology developments, including fundamental organic growth from the Company’s four business units – Unmanned Aircraft Solutions, Military Communications Technology, Special Activity Solutions, and Advanced Defense Solutions, targeting U.S. government agencies, commercial markets and international opportunities. For more information, please visit www.cyberlux.com. For investor information, please contact: (Source: BUSINESS WIRE)
20 Nov 23. Amentum Announces Agreement to Merge with Jacobs’ Critical Mission Solutions and Cyber and Intelligence Businesses. Amentum announced today a definitive agreement to merge with Jacobs’ (NYSE:J) Critical Mission Solutions (CMS) and Cyber and Intelligence (C&I) businesses, creating a new leader in systems integration and technology solutions trusted by the United States and its allies to modernize their most complex missions around the world. The combined organization will be a publicly traded company with $13 bn in revenue and more than 53,000 employees in 83 countries.
“Uniting our great organizations – Amentum, CMS, and Cyber & Intelligence Solutions – creates a leading provider of systems integration and technology solutions with the talent, scope, scale and footprint to deliver excellence and a wider range of solutions for our clients,” commented Amentum CEO John Heller. “Our combined company will deliver extensive expertise in the government’s highest priority areas of energy, space exploration, intelligence and analytics, and digital modernization. We look forward to the union of our strong teams and a bright future ahead.”
The transaction was approved by the Jacobs board of directors and is subject to customary closing conditions, including regulatory approvals. The transaction is expected to close in the second half of fiscal year 2024.
Governance and Management
Upon completion of the deal, John Heller, current CEO of Amentum, will serve as CEO of the combined company and sit on the combined company’s board, and Dr. Steve Arnette, EVP and President of CMS, will serve as COO. Jacobs’ current Executive Chair Steve Demetriou will become Executive Chair of the combined company.
The board of directors of the combined company will be composed of an equal number of directors appointed by Jacobs and Amentum. Members of the combined company’s senior management team will be drawn from both companies and will be announced later as integration planning progresses.
Strategic Rationale of the Combination
- Creates a leading, pure play government technology solutions prime: ~$13 bn in combined revenue1, with more than 80% from prime contracts serving the full program life cycle for government clients, and a combined talent base of more than 53,000 skilled employees – including more than 27,000 cleared employees.
- Stable revenue base with attractive, diversified portfolio mix: Combines stable base of large government contracts with strong capabilities in growing client priority areas. A large majority of future EBITDA of the combined company is expected to come from higher growth, higher margin intelligence, cyber, energy, digital engineering, and science and technology sectors, with a strong foundation of long-term and large-scale DoD contracts.
- Highly complementary strengths: Amentum brings expertise in engineering solutions, complex program management, and solutions integration to modernize customers’ most important missions. Jacobs’ contributed businesses bring world-class engineering and science capabilities, with unique expertise in sectors such as space, cyber & intelligence, and energy.
- Shared vision and aligned values: Each organization brings an intense focus on the mission and delivery of the highest quality service for their clients. The organizations share common values, including a commitment to safety, inclusion and diversity, and creation of enhanced opportunities for the combined employee base.
- High visibility cost synergies: Management has identified approximately $50-70m of estimated net cost synergies. Both organizations have track records of effective synergy realization and will work to target additional synergies during integration.
- Compelling financial profile: Approximately $50bn in combined backlog (3.7x combined revenue), ~$13 bn of combined revenue, and more than $1.1 bn projected 2024 combined adjusted EBITDA2, including estimated net cost synergies, representing approximately 8% projected adjusted EBITDA margin for the combined company. Significant growth opportunities exist through both on-contract growth and new contract wins across the combined portfolio.
- Secure balance sheet with strong FCF and attractive deleveraging pathway: Leverage ratio of the combined company is targeted to be approximately 3.8x at close, inclusive of expected run-rate net cost synergies, with plan to reach less than 3x leverage ratio within 24 months of close. Capital expenditures for the combined company approximate 0.3% of revenue.
Advisors
J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are serving as financial advisors to Amentum and Cravath, Swaine & Moore LLP is serving as legal advisor. Centerview Partners LLC and Perella Weinberg Partners LP are serving as financial advisors to Jacobs and Wachtell Lipton, Rosen & Katz is serving as legal advisor. Goldman Sachs provided financial advice to the Jacobs Board of Directors.
About Amentum
Amentum is a leader in global engineering, project management and solutions integration, trusted to modernize the most critical missions anywhere in the world. Driven to create a safer, smarter, cleaner world, we innovate as a team of inventive doers passionate about making a difference. Underpinned by a strong culture of ethics, safety and inclusivity, Amentum is fiercely committed to operational excellence and successful execution. Visit us at amentum.com to learn how we solve what’s next.
1 Estimated combined revenue of Amentum in FY2023 and Jacobs’ separated business in FY2023 should not be considered indicative of future performance.
2 Reconciliation of projected 2024 adjusted EBITDA for the combined company to the most directly comparable GAAP measure is not available without unreasonable efforts because the Company cannot predict with sufficient certainty all the components required to provide such reconciliation. (Source: BUSINESS WIRE)
20 Nov 23. Investors pump over $600m into defense funds as geopolitical tensions rise. Investors piled into exchange-traded funds tracking defense companies since October in anticipation of increased military budgets in the U.S. and Europe due to rising incidents of geopolitical conflicts. The Invesco Aerospace & Defense ETF has seen net inflows of more than $100m so far this month, according to Lipper data, adding to the nearly $180m it raked in October. Peers like the $5.5bn iShares US Aerospace & Defense ETF and $1.78bn SPDR S&P Aerospace & Defense ETF have posted net inflows of $178.4m and $163.6m, respectively, since October.
“National security threats are growing in magnitude and complexity, driving wider need for the latest defense technologies,” said Ashish Shah, global chief investment officer of public investing at Goldman Sachs Asset Management in a note.
“Companies positioned to benefit as the U.S. and other NATO countries increase their spend on high-tech surveillance and deterrence should do well.”
Since February 2022, the Invesco fund’s total net assets have nearly quadrupled to $2.37bn from $632m as the war in Ukraine boosted military spending and aid.
Assets further climbed 19% since the October 7 attack on Israel by Hamas that killed 1200 people, followed by Israeli military strikes on Gaza that have killed more than 13,000 people.
U.S. President Joe Biden has asked Congress to provide $106bn in supplemental funding, with $61.4bn for Ukraine and $14.3bn for Israel.
Of this, $10.6bn would go to Israeli air and missile defense support, while $30bn will help supply Ukraine with weapons and replenish U.S. stocks. The U.S. Congress has approved $113bn for Ukraine in 21 months since the start of the war. Defense ETFs have also benefited from an increased interest in tech stocks because so much of the defense industry will be influenced by advancements in AI, said Michael Ashley Schulman, chief investment officer at Running Point Capital.
(Source: Reuters)
21 Nov 23. Avon not protected from impairments. Goodwill impairments and restructuring charges at defence equipment supplier Avon Protection (AVON) led to the company declaring a pre-tax loss from continuing operations of $20.2m (£16.1m), compared with a profit of $6m in the prior year. The company recorded a goodwill impairment of $24.6m on the carrying value of its head protection business, $1.4m of restructuring costs and a further $1.5m of transition costs. Revenue was also 7.5 per cent lower at $244m and adjusted operating profit 19 per cent lower on a constant currency basis, but its order book grew and the company said it is making progress with improving profitability. The shares were 3 per cent lower by mid-morning. (Source: Investors Chronicle)
21 Nov 23. Avon turnaround helped by activist intervention.
Ancora Alternatives’ attention avoids complacency setting in
- Statutory operating profit hit by goodwill impairment
- Net debt rises by $17m to $85.4m
Usually, an active investor agitating for a sale in an underperforming business isn’t openly welcomed by management, but in the case of Avon Protection (AVON) the intervention has proved useful.
It is in the midst of a three-year turnaround sparked by a late 2021 share price implosion following the company’s admission that a body armour business it had bought from 3M for $91m (£73m) two years earlier had failed US military ballistic tests.
Avon’s shares have lost more than 80 per cent of their value over the past three years, which led activist Ancora Alternatives’ call in June for a strategic review, saying there would be “multiple potential strategic acquirers” willing to pay more for the business than it is currently worth.
Finance director Rich Cashin said this intervention made the turnaround job being led by him and chief executive Jos Sclater “slightly easier”.
“There was a risk, particularly in 150-year-old businesses, that a little bit of complacency can drift in,” he said. “And what that letter did was to prove to our troops internally that there is still work to do.”
That can clearly be seen in its full-year results. Adjusted operating profit was 9 per cent lower at $21.2m, although a $24.6mn writedown in the carrying value of its head protection business, coupled with nearly $3mn of restructuring and transition costs, contributed to a statutory operating loss of £12.6m.
Cashin said the impairment was the result of it formally splitting the business into two units and apportioning the requisite goodwill to each. The helmets business was still carrying almost $30m of goodwill from the 3M deal, which could no longer be justified given lower revenues and profitability.
Avon has cut central overheads, though, and is embarking on projects to improve margins and cash conversion, such as rationalising sites on both sides of the business.
Cash conversion during the year fell to just 7 per cent, which management blamed on the timing of a one-off order for a Middle Eastern customer fulfilled at year-end, for which it expects to be paid this month. Net debt rose by $17m to $85.4m.
FactSet consensus forecasts are for earnings per share to pick up by nearly a quarter this financial year, but even on such a big gain Avon’s shares trade at around 19 times earnings. More evidence of progress is required for even this rating to be justified. Hold.
Last IC view: Hold, 865p, 23 May 2023. (Source: Investors Chronicle)
22 Nov 23. China approves Broadcom-VMware deal amid lingering cybersecurity concerns, says GlobalData.
Even though China has approved the Broadcom acquisition of VMware, the ensuing delay has caused ripples in the cybersecurity industry, and potentially affected VMware’s standing and share value. Despite VMware’s Q2 fiscal year 2024 revenue growth, the contrast in share value trends between VMware and Broadcom is evident. The cybersecurity market, projected to reach over $282 bn by 2027, adds complexity to the competitive landscape amid the delay in the deal closing and lack of a clear story to date in the cybersecurity segment with the VMware acquisition, says GlobalData, a leading data and analytics company.
Rajesh Muru, Principal Technology Analyst at GlobalData, says: “VMware is an established player with a solid foundation and strategy, and this cuts across its cybersecurity portfolio. Even though China has approved the deal with restrictive conditions, the acquisition post closure will continue to create uncertainty for its cybersecurity customers, particularly on larger cybersecurity deals, in an already aggressively competitive market.”
GlobalData analysis highlights that VMware’s total revenues for Q2 of fiscal year 2024 was $3.41bn, an increase of 2% compared to fiscal 2023. However, the delay in the transaction closing has impacted VMware’s share value. This is the opposite effect to Broadcom shares which a week ago were at a positive $957.52, potentially influenced by Broadcom’s direction on artificial intelligence (AI) in relation to its semiconductor chip business.
GlobalData forecasts the total cybersecurity market to grow at a CAGR of 12.56% and reach over $282bn in 2027. The key sub product areas include network, endpoint, and cloud security, all of which are aligned with both Broadcom and VMware’s cybersecurity portfolio strengths.
Muru observes: “In a cybersecurity market that will be fueled with end-to-end security monitoring for distributed customer cloud environments in zero trust settings, coupled with observability data monitoring, the competition is aggressive with the likes of Cisco, Palo Alto Networks and Zscaler. If Broadcom is not careful, the potential impact on VMware’s brand equity could be high in the short-term due to customer uncertainty, and this could cover portfolio consolidation for its cybersecurity business”
Broadcom announced on 30 October 2023 that the acquisition of VMware will close before the expiration of the merger listed as 26 November 2023. The company also stated that the parties had received legal merger clearance across key countries and foreign investment control clearance in all necessary jurisdictions. Therefore, China’s approval on the eleventh hour will be a relief to shareholders across both organizations.
The US’ tough stance with China on chip controls could have been a catalyst for the deal not going through. But equally, this month’s presidential meetings between Xi Jinping and Joe Biden during the Apec summit, could have played a role in lowering the barriers between the two state powers to do business.
Muru concludes: “It must be a relief for both companies that this deal has gone through. But the by-product of this stand-off has been the possible decremental impact on VMware’s overall business and share value, including its cybersecurity business, as customers are swayed towards competitors with more robust and stable future cybersecurity product lines. (Source: GlobalData Media Centre)
20 Nov 23. Italy has thrown a spanner in the works of French jet engine maker Safran’s planned $1.8bn acquisition of the flights control business of Collins Aerospace over concerns the deal could affect key supply contracts for the Eurofighter programme. Safran said in a statement on Monday it had been informed that the Italian government had exercised its “golden power” to oppose its acquisition of Microtecnica, Collins Aerospace’s Italian subsidiary. Collins is a subsidiary of US-based Raytheon Technologies, now known as RTX. According to the decree issued by Italy, which has been seen by the Financial Times, a government investigation “does not allow to conclusively conclude” that Safran would “give the necessary priority to the industrial production lines of interest for national defence”. Italy also consulted with Germany ahead of the decision, according to the decree. The German government expressed concern that the deal could lead to the interruption of spare parts and services deliveries to the Eurofighter and Tornado jet fighter programmes, which were needed “to guarantee the operational requirements of Nato”. As a result, Italy concluded that the deal “poses an exceptional threat to the essential interests of national defence and security”. The move by Giorgia Meloni’s rightwing government underlines the challenges faced by European defence companies as they seek to bulk up via acquisitions. Given the national interests involved, governments often have more sway to intervene than in other sectors. Safran chief executive Olivier Andriès told the Financial Times in an interview that the group was surprised by the decision and it had not held discussions with the Italian or German governments. He also hit back against the implication that Safran would not be a reliable supplier. “They assume the worst about our intentions that we will not fairly support or prioritise the Eurofighter,” he said. “This is somewhat ironic since we are already suppliers of the Eurofighter and of other Italian defence programmes via various subsidiaries.” Safran is now reviewing its options, but it said it remained committed to the acquisition announced in July, which would have been its largest since 2018. The Microtecnica subsidiary accounts for about 15 per cent of revenues at Collins’s flights control business, and there are three factories in Italy. Italy adopted its golden power rules for foreign mergers and acquisitions of Italian companies deemed of strategic national interest in 2012, and has since expanded the number of sectors to which they can be applied. Until now, these powers have mainly been used to block Chinese companies from acquiring Italian industrial assets, with former prime minister Mario Draghi blocking the Chinese acquisition of a shipmaker, and Meloni’s government limiting the shareholder rights of Chinese petrochemical giant Sinochem over Italian tyremaker Pirelli. However, experts tracking such cases say that Rome’s blocking of an acquisition from a European or Nato ally is relatively rare. Andriès expressed dismay that Italy seemed to have no issue when Microtecnica was owned by a US shareholder, yet opposes the involvement of a French company. “This is a very bad signal sent by Italy and Germany for the future of European defence collaboration,” he said. Italian government officials did not immediately respond to requests for comment. (Source: FT.com)
20 Nov 23. Nvidia’s Q3 earnings: challenges ahead for chipmaker giant. Nvidia’s third quarter earnings when they are revealed on Tuesday will be impressive and the guidance positive, but the company faces challenges ahead, yet almost every investor needs exposure to semiconductors.
This is the prediction from Nigel Green, CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organisations, ahead of the chip maker’s report this week.
All eyes are on the tech giant after a strong second quarter performance that saw revenues soar to $13.5bn.
The deVere CEO says: “Nvidia’s second-quarter, epic, shock-and-awe-esque earnings report still looms large in the minds of investors around the world. Now all eyes are on the semiconductor titan’s revenues on Tuesday.
“While we expect the revenue growth to still be hugely impressive and the company’s stellar rise will undoubtedly continue, its trajectory also faces challenges ahead.”
He continues: “There is growing and intensifying competition in the semiconductor market and this will threaten Nvidia’s market share and, therefore, margins over the longer term.
“In addition, the 170% surge in the second quarter mainly came from data centre revenues and Nvidia is very exposed to China.
“With China tightening regulations and cracking down on various industries, including technology, the company may face headwinds in this critical market. Regulatory uncertainties and geopolitical tensions could impact Nvidia’s ability to sustain its mighty results, especially if there are disruptions to its business operations in China.”
Despite the potential challenges on the horizon, the overarching theme remains—semiconductors are a cornerstone of the contemporary tech-driven world.
“Almost every investor should recognise the strategic importance of semiconductor stocks in their portfolios,” notes Nigel Green.
“As the backbone of the digital era, semiconductors power a vast array of technologies, from consumer electronics to advanced computing systems.”
The semiconductor industry’s continued growth is propelled by the increasing demand for smart devices, the expansion of 5G networks, and the rapid development of artificial intelligence and machine learning.
Including semiconductor stocks in a diversified portfolio offers investors exposure to a sector with long-term growth potential. The sector’s resilience, adaptability, and its role in driving technological innovation make it an attractive choice for those seeking stability amid market uncertainties.
“Nvidia’s upcoming earnings report is a pivotal moment for investors to assess the company’s standing in the dynamic semiconductor landscape.
“Investors, recognising the critical role of semiconductors now and in the future, are likely to find value.
“Your future self will thank you for maintaining or establishing positions in this key sector,” concludes the deVere CEO.
31 Oct 23. LiquidPiston Raises $30m in Reg A+ Crowdfunding Round. This latest round, executed via the DealMaker platform, has brought the company’s total crowdfunded capital to $50m. LiquidPiston, Inc., a leading innovator of efficient rotary engine technology and hybrid power systems, and DealMaker, a leading cloud-based fintech platform used by growing companies to raise capital digitally, today announced the successful close of LiquidPiston’s second Reg A+ equity crowdfunding campaign. The raise, which was oversubscribed, brought in $30m in investments, bringing the total capital raised across three Regulation CF campaigns and two Regulation A campaigns to $50m.
The overwhelming support from over 10,000 investors in this round underscores the strong confidence in LiquidPiston’s technology and its potential to deliver power for a wide spectrum of military and commercial hybrid-electric applications. The funds will be instrumental in accelerating the company’s research and development efforts, expanding its operations, and bringing its groundbreaking engine technology closer to commercialization.
“We are incredibly grateful for the tremendous support from our investors, who have shown unwavering belief in our vision and technology,” said Alec Shkolnik, CEO of LiquidPiston. “This round is a testament to the hard work of our dedicated employees, the expertise and support of the DealMaker team, and the transformative potential of our engine technology. We are excited to use this capital to propel LiquidPiston into the future and create sustainable and more efficient power solutions.”
LiquidPiston’s advanced engine technology promises to deliver significant improvements in fuel efficiency, power density, and versatility. Its applications span across various industries, including automotive, aerospace, and power generation. These capabilities have earned LiquidPiston $6m in U.S. Department of Defense funding, including a recent $35 m contract from the U.S. Air Force.
“LiquidPiston is a perfect example of an aspiring startup that has leveraged the reach of crowdfunding to bypass traditional funding bureaucracies and reach directly into the hearts and minds of individual investors more familiar with their area of innovation,” said Rebecca Kacaba, co-founder and CEO, DealMaker. “As a result, their base of investor support has grown dramatically, and DealMaker is proud to have contributed to their success.”
For more information about LiquidPiston and its innovative engine technology, visit liquidpiston.com.
About LiquidPiston
LiquidPiston, Inc., a technology startup based in Bloomfield, CT, is leading the power systems industry’s development of combustion engines that are scalable (from one horsepower (hp) to over 1,000), compact (delivering 1.5 hp/lb), and capable of utilizing efficient fossil or renewable fuel. The company’s patented High-Efficiency Hybrid Cycle™ (HEHC), aka “The Shkolnik Cycle”, and engine architecture innovation support next-generation fuel-energy conversion solutions for hybrid power systems, including for UAS, mobile power generation, and APU applications. To learn more, visit www.liquidpiston.com.
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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk
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