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22 Feb 24. Profits at Britain’s Rolls-Royce more than doubled in 2023. Britain’s Rolls-Royce (RR.L), opens new tab said annual profit more than doubled last year, beating consensus, and it forecast a further jump in 2024 as aircrafts powered by its engines fly more, its power business improves and defence orders continue to flow.
Group underlying operating profit for 2023 came in at 1.6bn pounds, well ahead of an analyst forecast of 1.4bn pounds and its own guidance of 1.2-1.4 bn pounds, and compared to the 652m pounds it made in 2022.
For this year, Rolls forecast underlying operating profit would rise by at least 6%, predicting a range of between 1.7 bn pounds and 2 bn pounds, compared to the current consensus forecast of 1.7 bn pounds.
Rolls, which powers ships and submarines and makes power generation systems as well as engines for big commercial aircraft, has delivered strong growth under Tufan Erginbilgic, the former BP executive who took the helm a year ago.
“We are unlocking our full potential as a high-performing, competitive, resilient, and growing Rolls-Royce,” he said in a statement on Thursday.
(Source: Reuters)
22 Feb 24. Rolls-Royce shares take off as profit more than doubles.
Jump in profit and cash flows allows engine maker to cut debt
- £150mn of efficiency savings
- Substantial cut in net debt
Rolls-Royce (RR.) chief executive Tufan Erginbilgic said that 2023 was “a big year” for the aerospace group. The company saw its fortunes transformed, with operating profit more than doubling to £1.6bn. A £1bn increase in statutory free cash flow to £2.5bn also helped to cut net debt from £3.3bn to £2bn, and the FTSE 100 constituent made its first double-digit return on capital since 2017.
The thousands of job cuts and other efforts to take out costs at the height of the pandemic meant that there were always going to be operational leverage benefits as revenue improved, and a big uplift in engine flying hours to 88 per cent of 2019 levels – from 65 per cent in 2022 – was a major contributor to the civil aerospace arm’s improvement. It recorded a 29 per cent hike in organic revenue and a sixfold increase in operating profit.
Yet Erginbilgic argued that the “significant step-up in performance was driven by our actions”, rather than just the recovery in aerospace. He pointed to two big increases in guidance last year, and the fact that it beat these numbers meant the numbers delivered were “double what was in Rolls-Royce’s plans less than 18 months ago”.
Rolls-Royce has already achieved £150m of the £400mn-£500m of efficiency savings identified last year, and delivered price increases that contributed to double-digit organic revenue and profit growth across the board.
In defence, its operating margin hit 13.8 per cent, which is only just below the 14-16 per cent medium-term range set at its capital markets day in November. The power systems arm also lifted its operating margin by 2 percentage points to 10.4 per cent.
Indeed, the company is set to achieve 50 per cent of the improvements needed to meet medium-term targets this year. Guidance for 2024 is for underlying operating profit to reach £1.7bn-£2bn, and free cash flow to reach £1.7bn-£1.9bn.
The 240 per cent share price gain over the past 12 months means that Rolls-Royce’s shares trade at a chunky 28 times consensus forecast earnings, although this falls to 19 times by 2026, and further broker upgrades are likely. A further rally in the shares therefore cannot be ruled out. But the Nvidia-style gains made over the past 12 months suggest that the full benefits of Rolls-Royce’s improvement plans have been priced in before they’re even delivered, and severance costs related to its efficiency drive will be a headwind this year. For long-term holders, it may be worth banking some gains. Move to hold.
Last IC view: Buy, 179p, 3 Aug 2023 (Source: Investors Chronicle)
22 Feb 24. Kaman Reports Fourth Quarter and Full Year 2023 Results.
Fourth Quarter 2023 Highlights:
- Net sales: $203.1m
- Operating income: $12.0m
- Net earnings: $2.0m
- Adjusted EBITDA*: $25.6m; Adjusted EBITDA margin*: 12.6%
- Diluted earnings per share: $0.07 per share, $0.12 per share adjusted*
Full Year 2023 Highlights:
- Net sales: $775.9m
- Operating income: $49.1m
- Net earnings: $7.9m
- Adjusted EBITDA*: $106.7m; Adjusted EBITDA margin*: 13.7%
- Diluted earnings per share: $0.28 per share, $0.49 per share adjusted*
Kaman Corp. (NYSE:KAMN) (“Kaman” or “the Company”) today reported financial results for the fourth fiscal quarter and full year ended December 31, 2023.
(1) Information for the period ended December 31, 2022 has been revised from amounts reported in the prior year to correct errors related to the accounting for certain labor costs at one business in the Precision Products segment and the net realizable value on certain portions of the Company’s inventory at another business in the Structures segment. These errors resulted in an understatement of cost of sales, net of tax, of $1.0 m and $2.3 m, in the three-month and twelve-month fiscal periods ended December 31, 2022, respectively. Refer to the Company’s Form 10-K for the year ended December 31, 2023 for further information.
“Our Engineered Products segment achieved another strong quarter and we delivered full year results in line with our revised outlook,” said Ian K. Walsh, Chairman, President and Chief Executive Officer. “Our results reflect our continued execution in reshaping our portfolio, optimizing cost structure and eliminating major sources of variation in performance as we remained disciplined in our approach to capital allocation and realized additional opportunities to reduce expense across the organization.”
MERGER
As announced on January 19, 2024, we have entered into a merger agreement wherein Arcline Investment Management, L.P. (“Arcline”) will acquire Kaman. Under the terms of the agreement, Arcline will purchase Kaman in an all-cash transaction for $46.00 per share, equating to an enterprise value of approximately $1.8 bn. The transaction is subject to customary closing conditions, including approval by Kaman shareholders and receipt of required regulatory approvals. The transaction is currently expected to close in the first half of 2024.
KAMAN BUSINESS RESULTS DISCUSSION BY REPORTING SEGMENT
Kaman manages its portfolio through three segments: (1) Engineered Products; (2) Precision Products; and (3) Structures.
Engineered Products – Our Engineered Products segment serves the aerospace and defense, industrial and medical markets providing sophisticated, proprietary aircraft bearings and components; super precision, miniature ball bearings; proprietary spring energized seals, springs and contacts; and wheels, brakes and related hydraulic components for helicopters, fixed-wing and UAV aircraft.
Three months ended December 31, 2023 versus three months ended September 29, 2023 – Operating income and Adjusted EBITDA remained relatively flat and margin decreased 2.2 percentage points versus the third quarter of 2023. Results remained strong in the fourth quarter driven by higher sales and gross margin on our commercial bearings and aircraft wheels and brakes, partially offset by lower sales volume on our springs, seals and contacts used in medical applications.
Three months ended December 31, 2023 versus three months ended December 31, 2022 – Operating income increased $11.8m, Adjusted EBITDA increased $7.6 m and margin increased 2.0 percentage points versus the fourth quarter of 2022. Results improved compared to the prior period driven by higher sales and gross margin on our commercial bearings, PMA aftermarket parts and aircraft wheels and brakes and the absence of the inventory step-up of $2.3m recorded in the prior year associated with the Aircraft Wheel and Brake acquisition.
Precision Products – Our Precision Products segment serves the aerospace and defense markets providing precision safe and arming solutions for missile and bomb systems for the U.S. and allied militaries; subcontract helicopter work; restoration, modification and support of our SH-2G Super Seasprite maritime helicopters; support of our heavy lift K-MAX® manned helicopter, and development of the KARGO UAV unmanned aerial system, a purpose built autonomous medium lift logistics vehicle.
Three months ended December 31, 2023 versus three months ended September 29, 2023 – Operating loss decreased $2.7m, Adjusted EBITDA increased $2.8m and margin increased 10.1 percentage points versus the third quarter of 2023. Results improved compared to the third quarter, driven by higher JPF direct commercial sales and related margin, partially offset by cost growth on a legacy fuzing program and higher R&D spend on the KARGO UAV unmanned aerial system.
Three months ended December 31, 2023 versus three months ended December 31, 2022 – Operating income decreased $6.2m, Adjusted EBITDA decreased $6.1m and margin decreased 11.8 percentage points versus the fourth quarter of 2022. Results declined compared to the prior period, driven by cost growth on legacy fuzing and measuring programs and lower sales and related margin of JPF and K-MAX® exchanges.
Structures – Our Structures segment serves the aerospace and defense and medical end markets providing sophisticated complex metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft, and medical imaging solutions.
reported in the prior year to correct errors related to the net realizable value on certain portions of the Company’s inventory at a business in the Structures segment. Refer to the Company’s Form 10-K for the year ended December 31, 2023 for further information.
Three months ended December 31, 2023 versus three months ended September 29, 2023 – Operating income and Adjusted EBITDA decreased by $2.4 m, and margin decreased 6.5 percentage points versus the third quarter of 2023. Results were impacted by lower gross profit due to changes in profit estimates for long term contracts and lower sales volumes on our programs with Rolls Royce.
Three months ended December 31, 2023 versus three months ended December 31, 2022 – Operating loss increased by $2.9 m, Adjusted EBITDA decreased by $3.0 m, and margin decreased 8.4 percentage points versus the fourth quarter of 2022. Results were impacted by lower gross profit due to changes in profit estimates for long term contracts and lower margin on our programs with Rolls Royce.
Please see the MD&A section of the Company’s Form 10-K filed with the Securities and Exchange Commission concurrently with the issuance of this release for greater detail on our results and various company programs.
(Source: BUSINESS WIRE)
23 Feb 24. Chemring, an international manufacturing and technology company supplying high-reliability products and innovative services into growing areas of Defence, Security, and Space markets, issues the following update ahead of its Annual General Meeting taking place later today.
Current trading and outlook
The Board’s expectations for FY24 performance are unchanged.
In an environment of heightened geopolitical uncertainty the Group’s niche products and services position it well for continued growth. Both business sectors are aligned to areas of increased activity and budgets as customers revise their operational usage and stockpile assumptions, whilst also investing in digital and electronic capabilities such as active-cyber-defence, electronic warfare, and open-source intelligence.
The outlook for global defence markets is increasingly robust, with continued growth expected over the next decade. This growing visibility together with the flexibility provided by the Group’s strong balance sheet gives the Board confidence to continue to invest for the future, balancing near-term performance with longer-term growth and value creation.
Orders
The order book at 30 January 2024 was £991m (30 January 2023: £654m). Having started the financial year with order cover of 79%, Group expected FY24 revenue is now 87% (30 January 2023: 87%) covered by revenue generated in the period to date and the current order book.
In our Sensors & Information sector Roke has continued its positive momentum with strong order intake, a notable highlight being further wins in the area of electronic warfare with awards received from customers in Sweden and Japan. The order for ten Resolve electronic warfare systems to Japan is Roke’s first into the East-Asia region, securing a high quality reference customer.
Roke also received a £10m increase to the Project ZODIAC award received in September 2023. ZODIAC is the backbone of the British Army’s Land Intelligence, Surveillance, Target Acquisition, and Reconnaissance (“ISTAR”) Programme which will deliver an integrated ISTAR system to transform how the Army undertakes data-led decision-making to gain operational advantage. In total Roke’s ZODIAC programme contract awards now stand at £50m which will be delivered over the next two years.
Having started the year with 61% cover the Sensors & Information sector now has cover of 74% of expected FY24 revenue (30 January 2023: 70%).
In our Countermeasures & Energetics sector we continue to see increasing levels of demand for propellants and energetic materials. Our Norwegian-based subsidiary, Chemring Nobel, secured a contract from Diehl valued at £42m. Deliveries under this contract will be made between 2025 and2030.
Our Chicago business continues to make good progress in winning new orders with commercial space launch providers, furthering our position as a leading supplier of mission critical components into the strategically important space launch and payload deployment markets. Recent wins include a $9m from United Launch Alliance (“ULA”) for the ULA Standard Initiator which complements our existing position as the sole provider to NASA for the NASA Standard Initiator.
In Countermeasures, Chemring Australia secured a US$31m contract for the supply of MJU-68/B infrared countermeasures. The customer is the US Navy, which is also procuring on behalf of the US AirForce, and the governments of Italy, Belgium, Great Britain, Japan, Germany, Denmark, and Poland. This order, which was expected to have been received earlier in the financial year, will see deliveries being made from H2 FY24 through to February 2025.
Severe winter weather conditions have been experienced across a number of our northern hemisphere Countermeasures & Energetics sites giving rise to interruptions of manufacturing operations and resulting in delays to some deliveries scheduled in the first quarter; delivery impacts are expected to be recovered in the second half of the year.
Having started the year with 90% cover, the Countermeasures & Energetics sector now has cover of 94%of expected FY24 revenue (30 January 2023: 99%).
Interim results date
The Group will report its interim results for the six months ended 30 April 2024 on 4 June 2024.
Michael Ord, Group Chief Executive, commented: “The current financial year continues broadly to plan despite severe weather impacting operations at some of our manufacturing sites which has increased our H2 weighting. Our order book momentum has been maintained with the receipt of several significant orders, demonstrating continued customer confidence in Chemring’s market leading products and services. The strong order intake across both sectors has further increased our order cover for FY24 to 87% and continues to build our order cover in the outer years, positioning the Group well for the future.”
23 Feb 24. Eurofighter, radars boosted Hensoldt’s orders in 2023. German defence electronics maker Hensoldt (HAGG.DE), opens new tab reported a 5% increase in annual orders on Friday, with TRML-4D and Eurofighter radars driving revenue in 2023.
Hensoldt’s TRML-4D radars are an integral part of the German Iris-T air defence system supplied to Ukraine while the Eurofighter is the flagship European fighter jet.
The defence electronics specialist posted a preliminary order intake of 2.09bn euros ($2.26bn) in 2023 and revenue of 1.85 bn euros, broadly in line with a company-provided consensus.
European arms manufacturers have reported accelerating profits and soaring order intakes as geopolitical tensions drive the largest increase in defence investments in decades.
Swedish defence contractor Saab (SAABb.ST), opens new tab earlier in February reported an 8% rise in fourth-quarter operating profit and lifted growth targets based on increased military spending.
Hensoldt CEO Thomas Mueller said in a statement that the firm, which makes the lion’s share of its sales in Europe, has proven to be a “reliable partner” for governments and international alliances like NATO “in times of geopolitical tensions and uncertainty”.
The partly state-owned company forecast revenue of around 2 bn euros for 2024, while analysts polled by LSEG are expecting 2.2 bn, and significantly faster growth in order intake. ($1 = 0.9247 euros) (Source: Reuters)
23 Feb 24. HENSOLDT achieves strong growth in 2023 financial year with high order intake and increased profitability.
- Revenue grows to EUR 1,847m, particularly due to significant increase in core business (previous year: EUR 1,707m)
- Order intake remains at a very high level at EUR 2,087m (previous year: EUR 1.993m)
- Adjusted EBITDA increases to EUR 329m (previous year: EUR 292m)
- Adjusted EBITDA margin excluding pass-through business in line with expectations at 19.9% (guidance: >19%)
- Adjusted pre-tax unlevered free cash flow of EUR 259m exceeds previous year’s high level by EUR 40m (previous year: EUR 219m)
- Complementary expansion of integrated sensor solutions portfolio expected through the planned acquisition of ESG Elektronik- und Logistik-GmbH (“ESG GmbH”)
- Management Board proposes dividend of EUR 0.40 per share (previous year: EUR 0.30)
23 Feb 24. The HENSOLDT Group (“HENSOLDT“) continued its profitable growth trajectory in the 2023 financial year and thus met its recently raised forecast. The company increased its revenues to EUR 1,847m (previous year: EUR 1,707m). A key driver here was a significant 16% increase in core business volume. The company is thus consolidating its position as one of the leading companies in the European defence electronics market. With order intake at EUR 2,087m, the high order intake of the previous year was even exceeded (previous year: EUR 1,993m). Driven by the positive business development, adjusted EBITDA increased by 12.8% to EUR 329m (previous year: EUR 292m). The adjusted EBITDA margin excluding pass-through business was in line with expectations at 19.9% (guidance for the 2023 financial year: >19%). At EUR 259 m, adjusted pre-tax unlevered free cash flow was again at a very high level and exceeded the successful previous year by EUR 40m (previous year: EUR 219m).
Investments in defence and security as a result of the ongoing geopolitical tensions worldwide were reflected in increased demand at HENSOLDT, particularly for situational awareness and self-protection systems. In addition to the major projects PEGASUS and the Eurofighter radars, the main revenue drivers in the 2023 financial year were the TRML-4D radars, the Praetorian self-protection system and the C3 service contract for the Eurofighter.
Thomas Müller, CEO of the HENSOLDT Group, says: “In times of geopolitical tensions and uncertainty, governments and international alliances like NATO need a reliable partner for innovative defence and security technologies. HENSOLDT has proven to be precisely that partner, as once again demonstrated in the 2023 financial year. Despite facing economic and political challenges, we managed to significantly increase core business revenues and to exceed the previous year’s outstanding order intake. The demand for integrated defence and security solutions from HENSOLDT remains high worldwide and is expected to increase further due to ongoing global conflicts and crises. In view of the global situation and the company’s strong economic foundation, HENSOLDT is poised to continue expanding its position as a specialised provider of military and civilian sensor solutions under the new leadership of Oliver Dörre, who will assume the role of CEO in April.”
Christian Ladurner, CFO of the HENSOLDT Group, says: “A strong order intake and increased profitability round off a successful 2023 financial year for HENSOLDT. Not only the high business volume, but also the consistent implementation of measures to increase efficiency were important drivers of this success and contributed to us achieving our ambitious targets. We made important progress in the reporting year by further revamping our operational project management and continuing our profitable growth. We have also taken an important step in the consolidation of the European defence industry with the acquisition of ESG. With this expansion of our integrated sensor solutions portfolio, we will be able to offer our customers even greater security in the future.”
Significant increase in core revenue in a dynamic market environment
Despite the dynamic economic and political market environment in the 2023 financial year, the company’s revenue climbed to EUR 1,847m (previous year: EUR 1,707m). Significant growth was recorded in the core business, while pass-through revenues were well below the previous year’s figure. In addition to the two major projects PEGASUS and the Eurofighter radars, the main revenue drivers in the 2023 financial year were the TRML-4D radars, the Praetorian self-protection system and the C3 service contract for the Eurofighter. The significant increase in adjusted EBITDA to EUR 329m) was mainly due to higher core revenues and efficient cost management (previous year: EUR 292m).
Outstanding order intake in core business
At EUR 2,087m, incoming orders in the 2023 financial year were once again up on the previous year’s strong figure (previous year: EUR 1,993m). In the Sensors segment, order intake was characterised by orders for TRML-4D radars to support Ukraine as well as orders as part of the “European Sky Shield Initiative” for the Bundeswehr and the Estonian armed forces. Orders were also won as part of the contract extension for Eurofighter Mk1 radars. In addition, an order for the “Multifunction Self Protection System” (MUSS) for the Bundeswehr’s PUMA infantry fighting vehicle and an order for the national research study as part of the “Future Combat Air System” (FCAS) programme were booked. In the Optronics segment, order intake increased significantly compared to the same period of the previous year. The 2023 financial year was here characterised by incoming orders for the PUMA and Leopard 2 platforms as well as an order for the Norwegian Ula-class submarines. Orders were also won in connection with “Final Focus Metrology” (FFM). The book-to-bill ratio was expectedly lower compared to the previous year’s figure due to its excellent order intake but remained at a high level of 1.1x (previous year: 1,2x).
News
Between October 2023 and January 2024 alone, HENSOLDT recorded an order intake of around EUR 1.1bn, to which all business units contributed. Major orders such as the German air defence system for close- and short-range protection (LVS NNbS) booked in January 2024 with an order value of almost EUR 300 m played a major role here.
Strong profitability and free cash flow above expectations
The EBITDA margin excluding pass-through business at 19.9% was in line with expectations (guidance for the 2023 financial year: >19%). At EUR 259 m, adjusted pre-tax unlevered free cash flow was again at a very high level and exceeded the successful previous year by EUR 40m (previous year: EUR 219m). Special effects in 2023 were mainly due to OneSAPnow-related expenses associated with the business transformation for SAP S/4HANA and payments as part of the strategic transformation program HENSOLDT GO!
Complementary expansion of integrated sensor solutions portfolio through the acquisition of ESG GmbH
With the agreement to acquire the platform- and manufacturer-independent system integrator ESG GmbH, HENSOLDT strengthens its position as a provider of comprehensive solutions and at the same time takes an important step in the consolidation of the European defence industry. The integration of ESG GmbH’s software development and system integration capabilities will enable HENSOLDT sensor systems to be even better integrated across different areas. The merger will also result in significant cost and revenue synergies as well as a much higher innovation capacity for battlefield digitalisation and multi-domain operations. HENSOLDT is thus optimally positioned to contribute to and be part of future defence programs. The transaction is still expected to close at the end of the first quarter 2024.
Dividend proposal and outlook for the 2024 financial year
In view of the successful business performance, the Management Board of HENSOLDT intends to propose a dividend distribution of EUR 0.40 per share to the Supervisory Board and the Annual General Meeting. This corresponds to an increase of EUR 0.10 compared to the previous year.
HENSOLDT expects business to continue to develop positively in the 2024 financial year. Specifically, the company expects revenues of ca. EUR 2 bn with a significantly faster growth in order intake. The adjusted EBITDA margin before pass-through revenue is expected around 19%-20%.
21 Feb 24. BAE Systems earnings beat guidance, sees further growth.
- Summary
- Companies
- EPS up 14% to 63.2 pence
- Guidance was for 10-12% growth
- Raises annual dividend by 11%
- Sees EPS up 6-8% in 2024
Britain’s BAE Systems (BAES.L), opens new tab posted a 14% jump in annual earnings, beating guidance, and said it expected further growth in 2024 as government orders for defence equipment surge due to rising geopolitical tensions.
Underlying earnings per share at the country’s biggest defence contractor came in at 63.2 pence, compared with a consensus forecast of 62.5 pence, and its guidance of a 10-12% rise.
The company, whose biggest customers are the United States, Britain, Saudi Arabia and Australia, recorded sales of 25.3bn pounds ($31.9bn) last year, up 9% on 2022, as the Ukraine war continues to drive demand for military kit.
Chief Executive Charles Woodburn said the performance, combined with record order intake, positioned BAE for sustained growth in the coming years.
“Instability in Europe, the Middle East and other parts of the world brings into sharp focus the vital role that we play in protecting national security,” he told reporters on Wednesday.
“While most of our order volume was driven by existing programme positions that predate the Ukraine conflict, orders to restock and upgrade heavy armour and munitions are starting to come through,” he said.
BAE, which makes submarines and Typhoon fighter jets, said it expected earnings per share to grow by 6% to 8% this year on sales which are forecast to rise 10% to 12%.
Weapons, ammunition and equipment have been in strong demand since 2022 as BAE’s government customers provide support to Ukraine and replenish their own stocks. BAE’s shares have more than doubled since the start of the war.
BAE said its forecasts for 2024 included the $5.55bn acquisition of Ball Aerospace, which completed earlier this month. The deal will boost its exposure to the U.S. market and the satellite and space sector.
BAE increased its annual dividend by 11%. ($1 = 0.7923 pounds) (Source: Reuters)
21 Feb 24. BAE SYSTEMS Announces Full Year Results.
Preliminary Results Announcement 2023
Charles Woodburn, Chief Executive, said: “We’ve delivered a strong operational and financial performance in 2023 and I’m extremely proud of the way our people have delivered cutting-edge equipment and services to our customers, working together with partners across our supply chain. Our performance, combined with our global footprint and record order intake, means we’re well-positioned for sustained growth in the coming years. We’ll keep driving the business forward, investing in new technologies, facilities and our people. This will help us deliver on our order backlog and help ensure our government customers stay ahead in an uncertain world, whilst delivering increased value to our shareholders and the communities where we operate.”
- The growth in sales and revenue was driven by strong programme performance across all sectors.
- The increased profitability of the Group reflects strong programme execution and internal efficiency efforts.
- Earnings per share increased reflecting the profitability of the Group and further benefitting from the on-going share buyback programme.
- After generating free cash flow of £2.6bn, including net cash flow from operating activities of £3.8bn, the Group closed 2023 with cash of £4.1bn and net debt (excluding lease liabilities) of £1.0bn. This places the business in a strong position to manage the financing associated with the Ball Aerospace acquisition which completed in February 2024.
- Our order backlog has reached a record level of £69.8bn, driven by order intake of £37.7bn following a number of significant awards in the year including SSN-AUKUS, Dreadnought and multiple combat vehicles orders in our Hägglunds business.
- The Board has recommended a final dividend of 18.5p, taking the total dividend for 2023 to 30.0p – an increase of 11.1% on last year. Subject to shareholder approval at the 2024 Annual General Meeting, the dividend will be paid on 3 June 2024 to shareholders on the share register on 19 April 2024.
- We monitor the underlying financial performance of the Group using alternative performance measures. These measures are not defined in International Financial Reporting Standards (IFRS) and therefore are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. Accordingly, the relevant IFRS measures are also presented where appropriate. The purposes and definitions of non-GAAP measures are provided in the Alternative performance measures section on page 47.
- Growth rates for sales, underlying EBIT and underlying EPS are on a constant currency basis (i.e. current year compared with prior year translated at current year exchange rates). The comparatives have not been restated. All other growth rates and year-on-year movements are on a reported currency basis.
- Reflects 2023 interim dividend of 11.5p (2022 interim dividend 10.4p) and 2023 proposed final dividend of 18.5p (2022 final dividend 16.6p).
Capital deployment
- In February 2024, we completed the acquisition of the US-based Ball Aerospace business from Ball Corporation for $5.5bn (£4.4bn). Upon completion, the Group drew down $4.0bn (£3.2bn) under a bridge finance facility, and paid $1.5bn (£1.2bn) in cash from the Group’s existing cash resources in settlement of the transaction.
- During the year, the Company repurchased 59m shares under the 2022 share buyback programme, at a cost of £561m. In total, 142m shares have been repurchased under the 2022 share buyback programme at a cost of £1.2bn, representing 4.4% of the called up share capital (excluding treasury shares) when the programme commenced.
- In August, the directors approved a further buyback programme of up to £1.5bn. The further programme is expected to commence after completion of the current buyback programme and complete within three years of its commencement.
- In February 2024, Air Astana completed an initial public offering (IPO) with a joint listing in London and Kazakhstan. Following the IPO, our shareholding has reduced from 49% to c.16% with proceeds on disposal of c.$0.2bn.
Strategic progress
During the year, three significant events have positively enhanced the business portfolio relevance for the long term:
- In March 2023, further announcements were made as part of the AUKUS trilateral agreement between Australia, the UK and the US, with funding of £3.95bn secured from the UK Ministry of Defence for the next phase of the UK’s next-generation nuclear-powered attack submarine programme.
- In December 2023, Ministers from Italy, Japan and the UK signed an international treaty to develop an innovative next generation stealth fighter under the Global Combat Air Programme (GCAP) and confirmed that the joint GCAP government headquarters will be based in the UK. Following the industry collaboration agreement announced in September, as the UK’s industry lead, we will continue to work closely with our partners Mitsubishi Heavy Industries in Japan and Leonardo in Italy to determine the future joint business construct, which will also be headquartered in the UK.
- We announced the acquisition of Ball Aerospace, a leading provider of spacecraft, mission payloads, and optical and antenna systems. The business is headquartered in Colorado, with more than 5,200 employees, adding additional capabilities to design, build and operate satellites and satellite systems to our multi-domain portfolio and increase our exposure to high priority areas of the US Department of Defense budget.
Other operational highlights
- We received a contract award from the Czech Republic for 246 CV90 MkIV infantry fighting vehicles.
- The AMPV combat vehicle moved into full rate production following contract awards.
- We secured a ten-year contract to continue operating the US Army Ammunition Plant in Holston, Tennessee.
- F-35 aft fuselage manufacturing continued at full-rate production through 2023, with 162 aft fuselages completed during the year.
- Ten Typhoons were delivered to Qatar Emiri Air Force, with 18 now in service.
- We reached an agreement with the Kingdom of Saudi Arabia for a further five years of Salam Typhoon support.
- MBDA secured significant orders, including Poland’s PILICA+ Air Defence upgrade defence programme.
- We continued work on developing the UK future flying combat air demonstrator to fly within four years.
- We secured £2.4bn of order intake for Dreadnought, with three boats now in construction.
- Construction of new ship assembly hall and Applied Shipbuilding Academy in Glasgow is well underway.
- We secured additional UK munitions orders, worth over £400m, to increase production of vital defence stocks.
- In Cyber & Intelligence, we continued investing in new products for space, multi-domain capabilities and synthetic training.
Brad Greve, Chief Financial Officer said: “Our 2023 financial results further confirmed our value-compounding model, with strong top line growth, increased profits, strong cash flow generation and earnings progression. Combined with disciplined capital deployment in the form of a growing dividend, continued share repurchases and strategic M&A, this resulted in excellent returns for our shareholders. We also see our model continuing to advance in 2024, with the Ball Aerospace acquisition enhancing our growth and consolidating our presence at scale in the fast growing space and tactical solutions domains.”
Group guidance1 for 2024
The Group guidance for 2024 incorporates the acquisition of Ball Aerospace2 and the reduction in the Group’s shareholding in Air Astana following its initial public offering, both of which completed in February 2024.
Guidance is provided on the basis of an exchange rate of $1.24:£1, which is in line with the actual 2023 exchange rate.
- Underlying net finance costs £350m to £375m
- Effective tax rate c.21%
- Non-controlling interests c.£80m
Sensitivity to foreign exchange rates: the Group operates in a number of currencies, the most significant of which is the US dollar. As a guide, a 5 cent movement in the £/$ exchange rate will impact sales by
c.£500m, underlying EBIT by c.£70m and underlying earnings per share by c.1.3p.
- While the Group is subject to geopolitical and other uncertainties, the Group guidance is provided on current expected operational performance. The guidance is based on the measures used to monitor the underlying financial performance of the Group. Reconciliations from these measures to the financial performance measures defined in IFRS are provided in the Alternative performance measures section on page 47.
- Guidance incorporates the acquisition of Ball Aerospace from 16 February 2024.
In addition to the free cash flow above, the Group received proceeds of c.£0.2bn from the reduction in the Group’s shareholding in Air Astana. The cash flow impact of business acquisitions and disposals is excluded from the Group’s definition of free cash flow.
20 Feb 24. Leonid Capital Partners Fuels PE Acquisition of 55 Industries with $7m Private Credit Financing. Leonid Capital Partners, a leading private credit firm focused on the US Government sector, today announced a strategic $7m financing to support private equity firm, Teedup, in their acquisition of 55 Industries, an inspections services company serving the Aerospace and Defense industries as a Prime contractor. This customized loan agreement, structured around 55 Industries’ robust government contract pipeline and backlog, exemplifies Leonid’s innovative approach to empowering strategic acquisitions within underserved and nationally critical sectors.
55 Industries: Revolutionizing Material Support Services
55 Industries delivers material support to the US Armed Forces and 100+ countries, sourcing from small business partners, purchasing specialists, and direct DLA sources. They specialize in revitalizing obsolescent parts and provide quick-response solutions for mission-critical needs. 55’s ex-warfighter team ensures a deep understanding of personnel requirements and delivers a proactive and successful infrastructure, as opposed to more antiquated supply chain methods. Their innovative approach has positioned 55 Industries as a sought-after partner, securing a strong backlog of government contracts, making them a highly desirable target for Teedup’s strategic acquisition.
Teedup’s Vision: Building a Defense Industry Powerhouse
Teedup, recognized for its focus on acquiring profitable, established, high-growth companies within the Defense and commercial sectors, identified 55 Industries as a unique, off-market acquisition for their portfolio. This strategic move expands Teedup’s reach within the National Security market, further leveraging 55 Industries’ established government contract network and expertise.
Leonid’s Unique Financing: Built for Strategic Growth
Understanding the critical role of 55 Industries’ contract pipeline in securing the acquisition’s success, Leonid Capital Partners crafted a customized financing solution critical to deal close. This innovative loan is specifically structured around the projected revenue generated by 55 Industries’ existing and future government contracts, minimizing upfront costs and providing Teedup with the financial agility needed to seamlessly integrate the new acquisition.
“55 Industries’ innovative model and strong contract pipeline perfectly serves the kind of cash-flowing opportunity we strive to provide our investors,” said Adam Wood, Partner at Teedup. “Leonid Capital Partners’ deep understanding of our industry and their willingness to structure a financing solution tailored to our needs were instrumental in closing this strategic acquisition. This partnership allows us to focus on integrating 55 Industries and accelerating their growth within the defense sector. The Leonid team is a special group of A-players.”
“We are proud to support Teedup’s vision and empower their acquisition of 55 Industries,” said James Parker, Founding Partner of Leonid Capital Partners. “This customized financing showcases our commitment to fostering strategic growth within critical National Security sectors. By leveraging the strength of 55 Industries’ contract pipeline, we are confident this partnership will lead to a stronger, more resilient supply chain for our Country.”
About Leonid Capital Partners
Leonid Capital Partners is private credit firm focused on the US Government sector. The firm offers a variety of flexible financing options, including term loans, lines of credit, venture debt, and acquisition financing all tailored to the unique needs of government contractors. https://leonidfinance.io (Source: BUSINESS WIRE)
20 Feb 24. KBR Announces Fourth Quarter and Fiscal 2023 Financial Results;
Issues Fiscal 2024 Guidance.
February 20, 2024
Delivered Strong Fiscal 2023 Results
Settled Convertible Notes & Warrants without Dilution
Annual Dividend Increase of 11%
KBR, Inc. (NYSE: KBR) today announced its fourth quarter and fiscal 2023 financial results and issued its fiscal 2024 financial guidance.
“The KBR team has shown their unwaverig commitment and exceptional skills, leading to a remarkable performance this fiscal year,” said Stuart Bradie, KBR president and CEO. “We achieved an industry leading safety record, met or exceeded our key financial metrics and delivered a 10% increase in backlog and options in 2023, a testament to our Team of Teams’ ability to deliver results while ensuring the well-being of all involved.”
“Furthermore, we successfully settled the remaining convertible notes and related warrants in cash, avoiding dilution. We more recently extended the maturity of our term loans and revolving credit facility, fortifying our balance sheet and fueling capital deployment optionality for 2024 and beyond.”
“Lastly, we have a more defined path forward on HomeSafe and together with our customer remain unwavering in our commitment to harness our collective expertise and focus on innovation, with the aim of providing an unparalleled and more sustainable moving experience for military personnel and their families.”
New Business Awards
Backlog and options as of December 29, 2023 totaled $21.7bn. Delivered 1.1x trailing-twelve-months (TTM) book-to-bill1 as of December 29, 2023. Awarded $1.7bn of bookings and options in the quarter, bringing fiscal 2023 bookings and options to $10.5bn.
Sustainable Technology Solutions (STS) delivered 1.1x TTM book-to-bill1 as of December 29, 2023, including awards and achievements in the quarter as follows:
- Awarded a Front-End Engineering Design contract by Fidelis New Energy for Project Fyrkat, one of the first onshore liquid carbon dioxide sequestration facilities, located at a receiving terminal at the Port of Aalborg, Denmark.
- KBR’s Purifier™ ammonia technology selected by PT Pupuk Sriwidjaja Palembang, a subsidiary of PT Pupuk Indonesia, for a planned ammonia plant to be built in South Sumatera Province, Indonesia. This will be KBR’s 12th ammonia plant licensed to Pupuk Indonesia.
- KBR’s K-GreeN® technology selected by a consortium consisting of Lotte Chemical, Korea National Oil Corp and Samsung Engineering for Lotte Chemical’s H2biscus green ammonia project that will produce 800 KTA of green ammonia from hydropower in Sarawak, Malaysia.
- KBR’s market-leading low-carbon blue ammonia technology selected by Tokyo-based INPEX Corporation and Oklahoma City-based LSB Industries for a 1.1m tonnes per annum ammonia production and export project in the US Gulf Coast.
- Extended collaboration with ISU Chemical through a memorandum of understanding. Under the terms, KBR will provide licensing, proprietary engineering design, proprietary equipment and catalyst for the planned 10 MTPD hydrogen production unit, employing KBR’s innovative technology, H2ACT℠, which has rapidly emerged as the industry’s leading ammonia cracking technology.
Government Solutions (GS) delivered 1.2x TTM book-to-bill1 as of December 29, 2023, including awards and achievements in the quarter as follows:
- Awarded two additional DEM-Shorad vehicle prototypes, on top of the four delivered to the Army earlier this year, underscoring the growing significance of directed energy capabilities.
- Awarded additional scope to support the development of new energy technologies, systems, and processes as part of the UK government’s drive to net zero carbon emissions by 2050. Frazer-Nash Consultancy, a KBR company, supports the Department for Energy Security and Net Zero to develop its programs and to assess and monitor the projects being delivered within its net zero innovation portfolio.
- Awarded all three one-year options on the Preservation of the Force and Family (POTFF) program for the continued support of the physical, mental, social and spiritual readiness of the Special Operations Forces and their families.
- Awarded a two-year contract extension with the Australian Defence Force to help modernize, integrate and optimize Australia’s military capability. KBR supports the modernization, integration and optimization of Australia’s military capability through its unique expertise, particularly in Command and Control and bespoke information and communication technology systems.
- Awarded 2023 Large Business Prime Contractor of the Year at both NASA Johnson Space Center and NASA Goddard Space Flight Center, marking a two-year winning streak at Goddard.
- Joined forces with The Henry M. Jackson Foundation for the Advancement of Military Medicine on an important contract to support neuroscience research for service members. This new award focuses on those affected by traumatic brain injuries, and research will be done in collaboration with the Uniformed Services University (nation’s only federal health sciences university) and the University of California San Francisco.
Financial Highlights for the Three Months Ended December 29, 2023
- Revenue of $1.7bn, up 8% (organic) on a year-over-year-basis
- Net income attributable to KBR of $21 m; Adjusted EBITDA2 of $188m (10.9% Adjusted EBITDA2 margin)
- Diluted EPS of $0.15; Adjusted EPS2 of $0.69
- Operating cash flows of $83m
- Bookings and options of $1.7bn during the quarter with 1.1x TTM book-to-bill1
Financial Highlights for the Year Ended December 29, 2023
- Revenue of $7.0bn, up 6% (organic) on a year-over-year basis and 11% on an (organic) ex-OAW2 year-over-year-basis
- Net income attributable to KBR of $(265)m; Adjusted EBITDA2 of $747m (10.7% Adjusted EBITDA2 margin)
- Diluted EPS of $(1.96); Adjusted EPS2 of $2.91
- Operating cash flows of $331m; Adjusted operating cash flows2 of $463m
- Bookings and options of $10.5bn during the year to date period with 1.1x TTM book-to-bill1
Commentary on the Three Months Ended December 29, 2023
Revenues were $1.7bn, up 8% (organic) compared to 4Q’22, primarily due to new and on-contract growth across Defense & Intel, Science & Space, and International within Government Solutions and growing demand broadly across Sustainable Technology Solutions.
Net income attributable to KBR was $21m, down $72m compared to 4Q’22, primarily due to a non-cash charge of $40m recorded in connection with the convertible notes settlement method election made in 2Q’23 and a charge of $26m recorded in connection with the settlement of warrants (discussed below).
Net income attributable to KBR ex-Nonrecurring Charges2 was $87m, down $6m compared to 4Q’22, primarily due to increases in gross profit offset by higher interest expense, foreign exchange gains that did not recur in 2023, and higher provision for income taxes due to credits that did not recur in 2023.
Adjusted EBITDA2 was $188m, up 20% compared to 4Q’22, with Adjusted EBITDA2 margins of 10.9%, up 110 bps over 4Q’22.
Diluted earnings per share were in line with the decrease in Net income attributable to KBR. Adjusted earnings per share2 remained flat primarily because the decrease in Net income attributable to KBR ex-Nonrecurring Charges2 was offset by the reduction in Adjusted weighted average common shares outstanding due to repurchases and the cash settlement of warrants.
Operating cash flows were $83m, up 38% compared to 4Q’22. Adjusted operating cash flows were $83m, down 6% compared to 4Q’22.
Commentary on the Year Ended December 29, 2023
Revenues were $7.0bn, up 6% (organic) compared to FY22. Revenue ex-OAW2 (organic) increased $705m, or 11%, due to new and on-contract growth across all Government Solutions business units and growing demand across Sustainable Technology Solutions.
Net income attributable to KBR was $(265)m, down $455m compared to FY22, primarily due to a current year charge of $494m recorded in connection with the convertible notes settlement method election made in 2Q’23 and repurchase and termination of the convertible notes, note hedge and warrants (discussed below) and after-tax cash charge of $132m in connection with the settlement of a legacy legal matter, partially offset by non-cash charge of $137m in equity in earnings related to the resolution of a subcontractor dispute that did not recur in FY23.
Net income attributable to KBR ex-Nonrecurring Charges2 was $361m, up $34 m compared to FY22, primarily due to increases in gross profit and equity in earnings from unconsolidated affiliates partially offset by increases in selling, general and administrative expenses, interest expense, higher provision for income taxes due to credits that did not recur in FY23, as well as prior year gains on sale of non-core assets and unrealized gain on other investment that did not recur in FY23.
Adjusted EBITDA2 was $747m, up 12% compared to FY22, with Adjusted EBITDA2 margins of 10.7%, up 56 bps.
Diluted earnings per share were in line with the decrease in Net income attributable to KBR and the reduction in Diluted weighted average common shares outstanding. Adjusted earnings per share2 increased in line with Net income attributable to KBR ex-Nonrecurring Charges2 and the reduction in Adjusted weighted average common shares outstanding due to repurchases and the cash settlement of warrants.
Operating cash flows were $331m, down 16% compared to FY22 due to the after-tax cash charge of $132m in connection with the settlement of a legacy legal matter. Adjusted operating cash flows2 were $463m, up 9% compared to FY22, primarily due to increased Net income attributable to KBR ex-Nonrecurring Charges2.
Capital returned to shareholders totaled $210 m during the year to date period, consisting of $138m in share repurchases, inclusive of $125m of open market repurchases and $13m of repurchases to satisfy requirements of equity compensation plans, and $72m in regular dividends.
On February 19, 2024, the Board of Directors approved an increase of our quarterly regular dividend from $0.135 per share to $0.15 per share effective for the record date and payment date of the next scheduled distribution on March 15, 2024 and April 15, 2024, respectively. This represents the fifth successive year of dividend increases, representing an 11% increase from the previous regular dividend amount.
Additionally, on February 19, 2024, the Board of Directors authorized replenishment of our share repurchase authorization to $500 m.
Cash Settlement Method Election and Repurchase of Convertible Notes
During 4Q’23, KBR settled the remaining convertible notes in cash, settled the corresponding note hedge and also entered into agreements with the option counterparties to settle the remaining warrants in cash. These agreements resulted in the warrants no longer qualifying for the equity scope exception under ASC 815 Derivatives and Hedging, and as a result, the warrants required fair value measurement between the initial recognition date (agreement date) and settlement date for each counterparty.
Due to the cash settlement method election, the repurchase and settlement of the convertible notes, and the termination of the corresponding portions of the note hedge and warrants in FY23, we recorded a loss of $494m, of which $40m was recorded in the current quarter, in relation to the accretion of convertible notes debt discount and $26m was recorded in the current quarter in connection with the cash settlement of warrants. These amounts are not tax deductible and have been added back to Adjusted EBITDA2 and Adjusted EPS2. No warrants were outstanding as of December 29, 2023.
Refer to Note 22 “Cash Election and Repurchase of Convertible Notes and Warrant Unwind Agreements” in our Form 10-K for the year ended December 29, 2023 for further details.
Subsequent Event
In connection with the cash settlement of warrants in 4Q’23, the company remitted $33m to the final option counterparty in January 2024. In total, the company paid $600m (net) to retire the $350m principal value of convertible notes, note hedge and corresponding warrants.
The company does not provide a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure on a forward-looking basis because the company is unable to predict with reasonable certainty the ultimate outcome of legal proceedings, unusual gains and losses, and acquisition-related expenses without unreasonable effort, which could be material to the company’s results computed in accordance with GAAP.
19 Feb 24. Gilmour Space Technologies has raised a further $55m ahead of the imminent first launch of its Eris orbital rocket.
The Gold Coast-based company said the additional capital would help fund four blast-offs of its three-stage launch vehicle, which has been in development for eight years.
Organisations to tip in included Australian superannuation fund HostPlus, venture capital fund Blackbird and the Queensland Investment Corporation (QIC), owned by the state government.
Gilmour aims to fill a gap in the global market by blasting off small satellites using both its own launch vehicle and spaceport in Bowen, north Queensland. The business already employs more than 100 people and hopes to increase its total headcount to more than 300 by mid-2027.
“When we first invested in Gilmour, the team had just produced a ten-centimetre diameter hybrid rocket engine,” Blackbird co-founding partner Rick Baker said.
“It was a cute little thing that produced a fierce little flame, but the ambition of Adam and the team to build a full-scale rocket was clear.
“The achievements of the team in taking that technology through years of testing and iteration are coming to a head now.
“This funding round will allow Gilmour to attempt multiple launches and to become the first Australian-built rocket to get to orbit. We’re so excited to be on the journey with the Gilmour team.”
Gilmour’s Eris launch vehicle is unique because its propulsion system – developed entirely by the business in Australia – uses a combination of solid and liquid propellants to produce a record 115 kilonewtons of efficient combustion.
It was assembled for the first time earlier this month and will soon try to secure its launch licence from the Australian Space Agency prior to blast-off.
“As long as we get off the pad and start heading towards space then we will get valuable data that we can use for second, third and fourth launches to make them more reliable,” founder Adam Gilmour told the AFR.
“We’ll have validated a heck of a lot of technology with a 10 or 20-second burn.”
The investment comes after Space Connect reported last year how Prime Minister Anthony Albanese hailed Gilmour as a “great Australian success story” during a visit to its factory on the Gold Coast.
“When this rocket goes into space, it will carry 300 companies with it. Australia will become the 12th country in the world to be able to have access to this technology – designed, manufactured, and built right here (on the Gold Coast) and creating high-quality jobs,” PM Albanese said.
“This is one of the companies that we’re looking at when we have our National Reconstruction Fund and that whole agenda about a future here made in Australia – making use of an Australian procurement policy to buy Australian and making sure we back Australian science and innovation.
“Australia can compete with the rest of the world. What we need to do is to back our businesses that are doing it. This is truly an Australian manufacturing success story, and we want more of them.”
Other new investors in the business, now valued at $605m, include superannuation fund HESTA and venture capital firm Main Sequence.
Patrick Christiansen, QIC’s private equity investment director, hailed Gilmour’s ability to compete as a full service launch provider.
“Growing sovereign capabilities in Australian aerospace is often talked about, but it’s Adam and his team knuckling down and making it happen,” Christiansen said.
“Never has an Australian-made, Australian-owned rocket launched into orbit, and we join the nation in eager anticipation as all eyes turn to Bowen for history to be written.” (Source: Space Connect)
19 Feb 24. How to vote at Kromek’s EGM.
It is asking shareholders to sanction a loan note conversion on revised terms, a positive for the investment case
- Convertible loan holders agree to new conversion terms
- Only £34,000 of CLN outstanding
- Estimated net debt of £3.3m at financial year-end
Sedgefield-based Kromek (KMK:6.65p), a radiation detection technology company, is strengthening its balance sheet by converting almost all its outstanding convertible loan notes (CLNs) into new shares.
Holders of £1.5m of debt that accrued an interest rate of 8 per cent have converted their loan notes into 23.6m new shares at an effective conversion price of 6.3p and 7.1p, respectively. The new shares were admitted to trading on 9 February 2024. Two other loan note holders holding £1.2m of convertible debt have agreed to cancel their loan notes and convert them into 16.5mn new shares at an effective price of 7.5p, subject to shareholders’ approval at a general meeting on 4 March 2024.
Although the conversion price is half the level in the August 2022 CLN agreement, it’s still acceptable given that the alternative is that Kromek would need to place a similar number of shares with other investors to fund the CLN redemption. It also means that only £34,000 of CLNs remain outstanding, thus reducing finance charges.
Moreover, Kromek now has a cleaner balance sheet. Group borrowings are largely made up of a £5.5m term-loan facility with a major shareholder, which matures in March 2025 and has the option of a 12-month extension, and £0.5m of low-cost US Covid loans maturing in 2050. Analysts at Equity Development forecast closing net debt of £3.3m on 30 April 2024, or 7 per cent of Kromek’s net asset value of £47.3m.
Importantly, investors are starting to warm to the investment case, as highlighted by the 15 per cent share price appreciation since I covered the interim results (‘Contract momentum builds at Kromek’, 20 January 2024). Tidying up the CLN position should be positive for sentiment, so I would grant the directors authority to issue new shares to the CLN holders at the general meeting. Buy. (Source: Investors Chronicle)
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