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14 Mar 24. Kopin Corporation Reports Financial Results for the Fourth Quarter and Full Year 2023.
Kopin Corporation (Nasdaq: KOPN), a leading provider of application-specific optical solutions for defense, enterprise, industrial, and consumer products, today reported financial results for the fourth quarter and full fiscal year ended December 30, 2023.
Company Highlights
- Fifth consecutive quarter of positive book-to-bill with greater than $55m of orders for 2024 as of January 2024
- Paused production in Westborough manufacturing facility in the fourth quarter of 2023 for additional automation and retooling in anticipation of greater 2024 demand, impacting fourth quarter 2023 revenue
- New branding and website unveiled in January 2024
- Expect 2024 revenue growth of at least 20% compared to 2023
- Continued OLED fabrication transition to U.S. DoD approved facilities
- Announced Software Defined, AI enabled NeuralDisplay™ Architecture
“2023 was a transitional year for Kopin, successfully evolving from a leading provider of microdisplay solutions to becoming an application-specific optical solutions provider,” said Michael Murray, Kopin’s Chief Executive Officer. “This shift was underscored in the fourth quarter and into 2024 with additional partnerships and multiple new and follow-on orders, supported by strong new and existing customer engagement and satisfaction. Performance and outlook were supported by our fifth consecutive quarter of positive book to bill, marking a new record for orders.
“We saw continued positive momentum with follow-on orders in the fourth quarter, including a $6.0m follow-on order for a Thermal Weapon Sight Program. This follow-on order is a testament to our responsiveness and reliability in delivering weapon sights and targeting products in this fast-changing global environment, and the improvements in our manufacturing processes and equipment. Combined with a $20.5 m contract for new thermal weapon sight configuration and several other orders in the first quarter of 2024, the increase in demand would potentially triple our thermal weapon sight production volumes in fiscal year 2024, as compared to 2023.
“As a result of our strong order book, we plan for a significant production increase in 2024. As we discussed in our third quarter of 2023 financial results call, to ensure we execute on this anticipated production ramp in 2024, we took additional steps and extended our planned 2023 holiday shut down period to improve production flow for long-term profitability. These preparations included a temporary pause in production to retool, adding new automation, and clean our manufacturing facilities at the end of the fourth quarter, which had an impact on the quarter’s revenues.
Mr. Murray concluded: “We start 2024 with a strong order book, new customer engagements and positive internal morale, strengthening Kopin for significant and sustainable revenue growth needed to achieve profitability. We have increased our 2024 order cover with higher prices on several key programs and believe there are opportunities for additional follow-on orders and several new customer development orders which we expect to receive soon. Our sales funnel is strong and our increased emphasis and resources focused on business development are paying off. As we look forward, our foundation of innovation paired with our core capabilities serve as the bedrock for our progression into application-specific optical solutions and advanced software-defined AI-enabled microdisplays. We believe Kopin is well positioned to deliver these exciting new technologies and deliver long-term growth for our shareholders.”
Fourth Quarter Financial Results
Total revenues for the fourth quarter ended December 30, 2023, were $8.6m, compared to $12.2m for the fourth quarter ended December 31, 2022. Product revenues for the fourth quarter ended December 30, 2023, were $6.8m, compared to $8.7m for the fourth quarter ended December 31, 2022. The decrease in product revenues was a result of lower defense and industrial product revenues, which decreased by $0.9m and $0.6m, respectively, year over year. In the fourth quarter of 2023, funded research and development revenues decreased by $1.6m due to the completion of certain programs.
Cost of Product Revenues for the fourth quarter of 2023 was $7.2m, or 106% of net product revenues, compared with $8.9m, or 103% of net product revenues, for the fourth quarter of 2022.
R&D expenses for the fourth quarter of 2023 were $2.2m compared to $4.7m for the fourth quarter of 2022. The decrease in R&D expense is attributable to a decrease in funded research and development expense as certain programs were completed and lower internal expense related to OLED development.
SG&A expenses were $5.9m for the fourth quarter of 2023, compared to $4.9m for the fourth quarter of 2022. The increase was primarily due to legal fees associated with our litigation.
Net Loss Attributable to Kopin for the fourth quarter of 2023 was ($6.5)m, or ($0.06) per share, compared with Net Loss Attributable to Kopin of ($6.2)m, or ($0.07) per share, for the fourth quarter of 2022.
Full Year 2023 Financial Results
Total revenues for the year ended December 30, 2023, were $40.4m, compared to $47.4m for the year ended December 31, 2022. Product revenues for the year ended December 30, 2023, were $25.9m, compared to $32.4m for the year ended December 31, 2022. The decrease in product revenues was a result of lower defense, industrial and consumer product revenues, which decreased by $2.2m, $3.4m, and $0.9m, respectively, year over year. Revenues from the sale of products for defense declined due to lower revenues from thermal weapon sight applications which were partially offset by higher revenues from avionic applications. Revenues from industrial applications declined to lower revenues for products for 3D automated optical inspection (3DAOI) due to continued weakness in the Chinese 3D automated test market and lower revenues from industrial headset applications. Consumer revenues declined in 2023 as compared to 2022 due to lower sales of OLED displays for consumer applications. In the full year 2023, funded research and development revenues decreased by $0.9m due to decreased funding for new display technology development for U.S. defense programs and OLED display development, which was partially offset by increased funding for armor vehicle targeting system and medical headset development.
Cost of Product Revenues for 2023 was $25.0m, or 96% of net product revenues, compared with $32.6m, or 100% of net product revenues in the prior year. Cost of product revenues decreased as a percentage of revenues in 2023 as compared to 2022 primarily due to increased sales of higher margin products for defense applications in 2023 versus 2022 and decreased sales of lower margin products for defense applications in 2023 versus 2022. The Company also implemented several programs and hired additional employees to improve manufacturing quality and efficiency.
R&D expenses for 2023 were $10.8m compared to $18.7m for 2022, a 42% decrease year over year. The decrease in R&D expense as compared to the prior year was seen in both funded and internal R&D. Funded R&D expenses were $7.2m for 2023 as compared to $10.3m for 2022, a 30% decrease, primarily due to the completion of contracts for defense programs awarded prior to 2023. Internal R&D expenses were $3.6m for 2023 as compared to $8.4m for 2022, a 57% decrease, primarily due to decreased OLED development.
Selling, General and Administration (SG&A) expenses were $21.8m for 2023, compared to $18.0m for 2022. SG&A for 2023 increased as compared to 2022 primarily due to an increase of approximately $5.0m in legal and professional fees and $1.0m in non-cash stock-based compensation, partially offset by a $1.3m decrease in compensation and benefits.
Net Loss Attributable to Kopin Corporation for the year 2023 was $19.7m, or $0.18 per share, compared with Net Loss Attributable to Kopin Corporation of $19.3m, or $0.21 per share, for the year 2022.
Net Cash Used in Operating Activities for 2023 was approximately $15.3m. Kopin’s cash and equivalents and marketable securities were approximately $17.9m at December 30, 2023 as compared to $12.6m at December 31, 2022. In the first quarter of 2024 the Company sold 3.1m shares of its common stock for gross proceeds of $7.5m under its At The Market (ATM) program.
All amounts above are estimates and readers should refer to the Form 10-K for the fiscal year ended December 30, 2023, for final disposition as well as important risk factors. (Source: BUSINESS WIRE)
14 Mar 24. J.F. Lehman & Company Completes Acquisition of Mission Microwave. J.F. Lehman & Company (“JFLCO”), a leading middle-market private equity firm focused exclusively on the aerospace, defense, maritime, government and environmental sectors, is pleased to announce that an investment affiliate has acquired Mission Microwave Technologies, LLC (“Mission” or the “Company”).
Founded in 2014 and headquartered in Cypress, CA, Mission is a leading provider of Solid-State Power Amplifiers (SSPAs) and Block Upconverters (BUCs) to the satellite communications market. The Company’s X, Ku and Ka Band units support critical ground-based, airborne, maritime and space-based applications for government and commercial customers that require high efficiency, reliability and performance. Utilizing advanced gallium nitride (GaN) transistors, unique power combining technology and novel full-system designs, Mission provides the industry’s most efficient, lightweight, and compact high-power devices.
“Since its founding, Mission has rapidly established a market leading position with a product portfolio critical to the performance of satellite communications across a range of applications, from commercial broadband network gateways to mobile tactical terminals deployed in the battlefield. We are excited to partner with the Mission team to build on the Company’s exceptional reputation for innovation and technological leadership, particularly with respect to satisfying high power and/or high frequency requirements in size, weight and power (SWaP) efficient packages,” said Steve Brooks, Partner with JFLCO.
Mike Friedman, a Managing Director with JFLCO added, “Mission represents an excellent fit with our established investment strategy given its strong positioning with blue-chip customers, differentiated technical performance and proprietary product portfolio across a diverse and expanding array of end markets. We are looking forward to supporting the Company’s continued product development and growth initiatives as Mission further positions itself to capitalize on an extremely compelling market opportunity.”
JFLCO is partnering with Mission’s prior majority shareholders (affiliates of GaAs Labs LLC), founders and management, who will remain material shareholders in the business and continue to lead Mission as the Company pursues the next phase of its growth.
Francis Auricchio, Co-Founder, President, and CEO of Mission commented, “JFLCO represents the perfect partner to support the next stage of our Company’s evolution. JFLCO offers a unique combination of deep industry knowledge and relationships, commercial and operational expertise, and substantial capital we will leverage to accelerate our growth, product portfolio expansion and further advance our technological leadership. The entire Mission team is excited to continue to deliver innovative solutions to our customers’ complex and ever-changing challenges under JFLCO’s sponsorship.”
Debt financing in support of the transaction was led by Barings and co-led by PennantPark and SMBC.
Jones Day provided legal counsel to JFLCO. King & Spalding provided government contracts, defense security and international trade advice to JFLCO. KippsDeSanto & Co. served as financial advisor to Mission, and Phillips Lytle provided legal counsel to Mission and its majority equity holders.
11 Mar 24. Magellan Reports Results. A summary of Magellan’s business and significant updates. Magellan is a diversified supplier of components to the aerospace industry. Through its wholly owned subsidiaries, controlled entity and joint venture, Magellan designs, engineers and manufactures aeroengine and aerostructure components for aerospace markets, including advanced products for defence and space markets, and complementary specialty products. The Corporation also supports the aftermarket through supply of spare parts as well as performing repair and overhaul services.
Magellan operates substantially all of its activities in one reportable segment, Aerospace, which is viewed as one segment by the chief operating decision-makers for the purpose of resource allocations, assessing performance and strategic planning. The Aerospace segment includes the design, development, manufacture, repair and overhaul, and sale of systems and components for defence and civil aviation.
Business Update
On December 19, 2023, Magellan announced an agreement with the Canadian government for the provision of LUU-2 illumination flares for the RCAF. The $39m, four-year contract commences in 2024 and involves the manufacture, assembly and delivery of LUU-2 flares from Magellan Aerospace, Winnipeg’s propellant plant in Manitoba, Canada.
For additional information, please refer to the “Management’s Discussion and Analysis” section of the Corporation’s 2023 Annual Report available on www.sedarplus.ca.
- Results of Operations
A discussion of Magellan’s operating results for the fourth quarter ended December 31, 2023
The Corporation reported revenue in the fourth quarter of 2023 of $223.6m, a $30.5m increase from the fourth quarter of 2022 revenue of $193.1 m. Gross profit was $23.8m in the fourth quarter of 2023 compared to a gross loss of $0.9m in the same quarter of the prior year. Net loss for the fourth quarter of 2023 was $0.3m in comparison to a net loss of $20.8m for the fourth quarter of 2022. (Source: Google/https://www.morningstar.com/)
12 Mar 24. Teledyne to Acquire Valeport. Teledyne Technologies Incorporated (NYSE:TDY) (“Teledyne”) announced today that it has entered into an agreement to acquire Valeport Holdings Limited and its affiliates (“Valeport”). Valeport, founded in 1969 and headquartered in Totnes, United Kingdom, designs and manufactures underwater sensors for environmental, energy, construction and defense applications. Terms of the transactions were not disclosed.
Valeport provides complementary underwater sensors including sound velocity probes, current and flow meters, and conductivity, temperature and depth sensors. Valeport also provides multi-parameter profilers which can also measure turbidity or cloudiness, or include fluorometer sensors to detect chlorophyll levels.
“We are delighted that Valeport will join Teledyne Marine and expand our technology offerings,” said George Bobb, President and Chief Operating Officer of Teledyne. “Through more than 20 acquisitions and ongoing collaboration, Teledyne Marine brings imaging, instruments, interconnects, acoustics, and complete subsea vehicle technology together to provide total solutions to our customers.”
“Our family is very proud of where we have brought Valeport so far, but the time is right for the next phase of its journey, and I am so pleased that this will be as a part of Teledyne Marine and excited about the prospect of working with the rest of the Teledyne group to bring our customers an even greater range of excellence,” said Matt Quartley, Managing Director of Valeport. (Source: BUSINESS WIRE)
14 Mar 24. Seraphim Space Investment Trust plc, the world’s first listed SpaceTech investment company, announces its interim results for the six month period ended 31 December 2023.
- £5.7m deployed in the period, across three new investments and three follow-on investments.
- Portfolio valuation up £10.6m to £198.0m, driven by additional investments, unrealised fair value net gains and a small unrealised FX gain.
- Main driver of underlying fair value increase was D-Orbit, reflective of a transaction that reached a conditional completion post period. This has been balanced by reductions in the fair value of other companies.
- 82% of the portfolio by fair value has a robust cash runway, with 60% fully funded based on latest projections from the companies’ management teams and 22% funded for 12 months or more from 31 December 2023.
Mark Boggett, Chief Executive Officer, Seraphim Space Manager LLP, said: “The period has marked continued strong performance for SSIT’s portfolio as well as the wider SpaceTech ecosystem, reflecting the strong fundamentals that are driving ever-growing traction for top-performing SpaceTech companies. Record numbers of SpaceTech VC investments have been closed during recent quarters, with the last six months having seen a notable recovery in levels of growth funding rounds, an encouraging sign for prospects in 2024.
These trends are reflected in SSIT’s portfolio, which has continued the positive cadence of fundraising. Eight companies closed new funding rounds during the period, once again with the majority of these rounds being led by new investors, a healthy indicator given generalist investors are spoilt for choice in terms of investment opportunities given the wider downturn in the VC market.
Although mindful of the difficulties some companies may face in accessing additional capital, overall, we remain positive about the prospects for the portfolio in 2024 and we are satisfied that SSIT continues to have the cash reserves required to meet the near-term funding needs of the portfolio. This has enabled us to deploy a modest amount of capital into a handful of new investments, capitalising on the current favourable investor conditions.”
12 Mar 24. Defense Unicorns Announces $15m U.S. Space Force Strategic Funding Increase. Defense Unicorns, a veteran-owned startup providing open-source software and Artificial Intelligence (AI) capabilities for National Security systems, announced a $15m U.S. Space Force Strategic Funding Increase (STRATFI) in partnership with Program Executive Office Assured Access to Space (AATS). Defense Unicorns’ focus is to accelerate and scale secure software solutions to increase the launch capacity of the Space Launch Deltas and meet the increasing demand for federal and commercial launch operations.
“The launch capacity of the nation continues to skyrocket. To hit this demand, the nation needs to rethink how we manage our secure access to space,” said Jeff McCoy, Co-Founder of Defense Unicorns. “Defense Unicorns is honored to help and support the Space Force as they transform the nation’s space capabilities.”
STRATFI was established to offer qualified small businesses with promising technologies up to $15 m in funding to scale and deliver strategic capabilities to the United States Air and Space Force.
“AATS serves as America’s gateway to space, and we are keen on attracting top-tier talent from the defense industrial base to digitally transform our spaceports. This will enable us to keep pace with the rapid expansion of the US launch industry,“ said Major Jason Lowery, Chief Technology and Innovation Officer for the Assured Access to Space PEO. “The achievements of Defense Unicorns have caught our attention, and this STRATFI demonstrates our commitment to collaborating with outstanding companies. We are not only ready but eager to engage with innovative firms that can contribute to our mission.”
Defense Unicorns’ open-source technologies provide a comprehensive Unicorn Delivery Service (UDS) solution to accelerate software and AI capability delivery to any environment. Software delivery for national security has unique challenges: diverse infrastructures, limited or no access to the Internet, integration at scale, cyber security compliance, and system operators who are trained in mission effects, not IT. Defense Unicorns’ UDS solves these hurdles to make secure software delivery easy, empowering mission operators wherever their mission lives.
Unicorn Delivery Service (UDS) offers:
Artificial Intelligence for National Security: a suite of generative AI capabilities to accelerate understanding complex mission data and enable decision advantage.
Software Factory: a fully portable and pre-configured software development platform that accelerates delivery into any production environment, including cloud-based, on-prem, disconnected, or otherwise egress-limited.
Your App Your Environment: delivers requested cloud-native application, needed by the mission operators for success, into the specific environment.
These capabilities are supported by a suite of open-source projects Defense Unicorns has created. These include:
- Zarf: A tool that enables continuous software delivery on disconnected networks.
- LeapfrogAI: A self-hosted generative AI platform designed for environments that are disconnected or with limited processing and storage.
- Pepr: A tool that manages and modifies resources in a Kubernetes cluster via easy-to-read and write configuration modules.
- Lula: A tool that provides real-time insight into deployed software configuration and compliance to help accelerate and maintain accreditations.
AATS is preparing for the future challenges of space launch operations. Anticipating a significant surge in launch demands and the imperative for robust cyber defense mechanisms, modernizing the software and IT infrastructure becomes paramount. Defense Unicorns will amplify the efficiency and adaptability of space launch operations to ensure operational solutions are not only agile, but are also portable to any environment, from cloud to on-premises. With Defense Unicorns, AATS is poised to achieve seamless operational integrations, rapid deployments, and enhanced mission readiness. (Source: BUSINESS WIRE)
14 Mar 24. ArmorWorks Enterprises Announces Acquisition of Fox Valley Metal-Tech. ArmorWorks Enterprises, LLC (“ArmorWorks”), a portfolio company of Littlejohn Capital, LLC, announced today the acquisition of Fox Valley Metal-Tech, Incorporated (“Fox Valley”), a provider of complex, precision metal fabrications for use on naval ships, submarines, combat vessels, and other critical defense applications.
Founded in 1989 and based in Green Bay, WI, Fox Valley specializes in complex metal fabrications primarily for the U.S. Department of Defense (“DoD”), as well as commercial industries. The company manufactures custom electrical enclosures and consoles, components and fabrications for military trailers, radar systems as well as watertight doors and hatches. Fox Valley actively supports leading defense industry companies, and its precision components and fabrications are incorporated on the latest naval platforms such as the Ford-class aircraft carrier and Columbia-class submarine, amongst others. The company has a state-of-the-art 185,000 square foot facility that enables it to meet the highest of quality standards. For more information, visit www.fvmt.com.
Kevin Dahlin, Chief Executive Officer of ArmorWorks, commented, “Fox Valley’s components meet the Navy’s stringent requirements, and combine unique fabrication, machining, precision welding, and painting/finishing capabilities to provide customers with a vertically-integrated manufacturing solution in compliance with the highest U.S. military standards. Fox Valley’s fabrications are trusted on high priority naval programs amid a historical fleet expansion, and we look forward to supplementing our existing business with the addition of Fox Valley’s superior products.”
Angus Littlejohn III, President of Littlejohn Capital, said, “Fox Valley’s focus on mission-critical Naval systems instantly propels ArmorWorks into a broader segment of the DoD. The acquisition also adds impressive manufacturing capabilities in the Midwest expanding the geographic reach of ArmorWorks. Fox Valley is a trusted partner to the defense industry, and we are proud to add this company as an integral part of ArmorWorks as they continue to protect the military personnel who defend our country.”
Steve Corbeille, Co-Founder and Chief Executive Officer of Fox Valley, added, “Fox Valley has built its business and reputation over the past 25 years by developing products whose standards are designed to withstand the harshest conditions. Fox Valley will continue to thrive and better serve its customers as part of a larger organization within ArmorWorks.”
KAL Capital served as exclusive financial advisor to Fox Valley.
About ArmorWorks
Founded in 2001, ArmorWorks is a leading provider of specialized military survivability products. Its innovative technology is used to develop high performance products for the U.S. military forces and commercial industries, including composite and steel armor systems, blast attenuating seating, maximum-security enclosures and advanced door systems for the military and nuclear industries. A majority of ArmorWorks’ business is with the DoD, including all services, as well as many defense and commercial Original Equipment Manufacturers. For more information, visit www.armorworks.com. (Source: PR Newswire)
13 Mar 24. MBDA held its annual press conference in Paris today, 13 March. The company’s CEO shared the Group results for 2023 together with some insight into tackling future challenges in the face of growing demand in a complex international context.
Eric Béranger, CEO of MBDA, said, “MBDA was created out of a need for greater European cooperation, a fundamental component of its DNA. The company grew to become a worldwide leader in its field. The challenge now is to keep on adapting to an evolving environment, while continuing to foster cooperation, notably at the European level. To be battle-ready when asked to answer the new demands of our customers, their armed forces and their allies. To help ensure their sovereignty in a global environment where force is challenging international rights more and more.”
In 2023, major domestic contracts signed included the order of Aster missiles for France and Italy, Akeron MP and Mistral 3 for France, Enforcer – which entered serial production at the end of 2023 – for Germany, CAMM-ER for Italy, the evolution of Sea Viper for the UK and Mistral 3 for Spain. At export, MBDA booked significant orders in Europe, notably with major contracts for CAMM in Poland and Sweden, and the mid-life refurbishment of SCALP missiles for Greece.
The events unfolding last year on the international scene proved again the need for fully comprehensive defence solutions and a multi-layered Air Defence, for which cooperation successes like Aster or CAMM missiles are revealing instrumental. Current theatres of conflict in the world are also revealing new warfare trends like the use of drones. A trend MBDA identified early on and created Sky Warden, its flagship solution addressing the full range of unmanned aerial systems threats.
With the threats evolving rapidly, innovation and preparation for the future remain priorities at MBDA. To be ready to face new threats and be present in new domains of conflict. The future of deep strike is progressing, with Italy joining France and the UK in the development of FC/ASW. MBDA is leading Hydis², a consortium involving 14 European countries developing Aquila, to face the emergence of hypersonic effectors. Not forgetting AI solutions applied to Collaborative combat, which Orchestrike, MBDA’s Collaborative Combat Effectors demonstration, has shown. The company also took major steps with directed energy weapons. DragonFire in the UK, the Laser Weapon Demonstrator (LWD) in Germany and Cilas in France. Finally, Space, a new domain where there is a need to safeguard strategic assets and have the ability to complete missions from Earth. Hence, MBDA’s recent participation in the AsterX exercise.
To remain a trusted partner of its customers, MBDA continues to anticipate and adapt swiftly. That is why the company is ramping-up its production, with significant increases in the production rates of Akeron MP, Aster, Brimstone, CAMM, Enforcer, Exocet, MICA and Mistral while also investing in the future. MBDA also uses all leverage at its disposal at a European level, having always supported the European Commission and the European agenda for Defence, and now welcoming the European Defence Industrial Strategy and its future implementation.
From 2023 to 2028, MBDA is investing an unprecedented 2.4bn euros at Group level, and planning to hire more than 2,600 new people in 2024.
Figures at a glance:
- Total revenues in 2023 were €4.5bn
- Order intake at a new record total of €9.9bn
- Backlog reaching €28bn
13 Mar 24. MBDA books record orders amid European air-defense rush. Pan-European missile maker MBDA booked record orders in 2023, as countries across the region scrambled to beef up their air defenses in response to Russia’s invasion of Ukraine.
The company’s order intake rose 10% to a record €9.9bn (US$10.8bn) last year, Chief Executive Officer Eric Béranger said at a press conference here on March 13. The order book stood at €28 bn at the end of December, from €22.3bn a year earlier.
“We saw in our orders in 2023 how much air defense is important for countries,” Béranger said. He said air defense will again be important this year. “It’s really a major topic for our governments, and we see that this is the area where we’re asked to accelerate, we’re asked to increase volumes.”
MBDA orders have nearly doubled from 2021, before Russia invaded Ukraine, and 70% of last year’s orders were for air defense. The war in Ukraine has driven home Europe’s need to protect itself against everything from drones to ballistic missiles, with German Chancellor Olaf Scholz setting up the European Sky Shield Initiative and Poland spending bns to modernize its air defenses.
Russia had launched nearly 7,400 missiles and 3,700 Shahed drones against targets in Ukraine as of December, since the start of its invasion in February 2022, according to news reports citing Ukraine’s air force.
In response to the evolving security situation in Europe, France has repeated called on MBDA to speed up its missile production, particularly of the Aster air-defense missiles, used by the French, Italian and British navies, as well as the Franco-Italian SAMP/T air-defense system.
MBDA plans to triple monthly production rate for the CAMM family of missiles between 2022 and 2026, and increase production of Aster by 50% over the period. The company is targeting cutting the time between an Aster order and delivery to 18 months by 2026, from 42 months before 2022.
Aster “was developed in an era where time was not important,” Béranger said. He said the big change after February 2022 “is that suddenly, brutally, time matters.”
MBDA is looking at its entire portfolio to cut delivery times, starting with air-defense products. Legacy issues for Aster production include components that cross the Alps “many times,” something the company would organize differently if it was creating the production line today, the CEO said. MBDA is a joint venture between Airbus, BAE Systems and Leonardo.
MBDA is doubling production capacity at its site in Bolton, U.K., is creating a second final assembly line for CAMM-ER in Italy, and is doubling the site of its final assembly line in France. The company plans to invest at least €2.4bn over the next five years to expand production capabilities.
The company plans to quadruple monthly throughput of the Mistral short-range air-defense missile between 2022 and 2025, and increase production of the Akeron anti-tank missile 2.5 times.
“All of this is work in progress, and I perfectly understand the impatience of our customers,” Béranger said.
MBDA plans to hire more than 2,500 people this year, after hiring around that number in 2023, and integrating the new hires is the main challenge, rather than recruitment, according to the CEO. The company currently employs around 15,000 people.
Last year’s biggest order came from Poland, with a deal worth more than €2bn to supply missiles for the country’s PILICA+ program, and a French-Italian order for Aster in early 2023 worth more than €1bn, according to Béranger. The CEO said 76% of last year’s orders came from European countries other than the five MBDA considers its home market – the U.K., France, Italy, Germany and Spain.
Loitering munitions are a new and growing segment, and MBDA has an ability to integrate explosive charges that can transform dual-use drones into weapon systems, according to Béranger. The CEO said that is not a widespread competence, and the missile maker is working with small and medium-sized drone companies to offer joint products.
“MBDA is not intending to become a drone manufacturer, it is not our job, but creating and offering to our customers weapon systems based on loitering munitions, using drones, this is something where we are very legitimate,” the CEO said.
The company is in talks with Europe-based Organisation for Joint Armament Cooperation about the hypersonic interceptor project Hydis2, and Béranger said he expects to sign a contract with OCCAR within weeks. The CEO said the move will go beyond the matter of providing a demonstrator, and go into “programmatic considerations.”
MBDA is not currently facing any supply-chain shortages, but is stockpiling special grades of iron, as well as titanium and electronic components, something it already started doing in response to the Covid-19 pandemic. Béranger said the company has 80 tons of specific types of iron stocked, compared to requirements of 4 to 5 tons, and has enough titanium for several thousand missiles. (Source: Defense News Early Bird/Defense News)
13 Mar 24. Comtech Appoints John Ratigan as Interim Chief Executive Officer. Comtech (NASDAQ: CMTL) (the “Company”) today announced that its Board of Directors has appointed John Ratigan, Chief Corporate Development Officer (“CCDO”), as interim Chief Executive Officer, effective immediately. Mr. Ratigan succeeds Ken Peterman, who has been terminated as President and CEO and will cease to serve on the Board. Mr. Peterman’s termination was for conduct unrelated to Comtech’s business strategy, financial results or previously filed financial statements.
Mr. Ratigan, a former Chief Executive Officer, is an accomplished executive who brings over three decades of experience and senior leadership expertise across the global satellite technology sector. He has an extensive background in satellite communications, as well as a deep familiarity with Comtech, having spent ten years at EF Data Corp. prior to its acquisition by Comtech in July 2000, driving significant revenue growth over the course of his tenure. As CCDO at Comtech, Mr. Ratigan has proven himself an instrumental member of the executive team, identifying and optimizing market shifts currently underway and executing on the Company’s One Comtech strategy.
In addition, the Board has elected current Board member Mark Quinlan as Chair of the Board.
“The Board is committed to upholding the highest standards of ethical and professional conduct,” said Mark Quinlan, Chair of the Comtech Board. “The Comtech Board remains committed to our strategy and mission of serving the complex and secure connectivity needs of the government and commercial sectors. We are fortunate to have a leader of John’s caliber leading Comtech’s talented organization at this important moment as we continue to deliver mission-critical solutions to our global customer base. With our commitment to innovation and competitive market position, Comtech is well positioned to capitalize on the significant growth opportunities ahead.”
“As a leading global provider of next-generation 911 systems, secure wireless technologies and satellite communications, Comtech is at the forefront of innovative trusted connectivity solutions,” said Mr. Ratigan. “I look forward to working closely with the leadership team and the Board as we continue successfully executing on One Comtech, building on the Company’s recent momentum and creating value for shareholders, customers, partners, employees and other stakeholders.”
The Board will initiate a search for a permanent successor and intends to retain a leading executive search firm to assist in the process.
The Company expects to report its financial results and file its Form 10-Q for the quarter ended January 31, 2024, on March 18, 2024.
About John Ratigan
Before joining Comtech in November 2023 as the Company’s first Chief Corporate Development Officer, Mr. Ratigan served as CEO and President of iDirect Government, LLC and as an Executive Committee Member of ST Engineering iDirect, Inc. During his tenure, he grew iDirect Government to over $100m in annual revenue and spearheaded the acquisition of GlowLink Communications Technologies, Inc. and its unique interference mitigation technology (CSIR), which helped the company become the largest provider of Time Division Multiple Access (TDMA) SATCOM capabilities. Earlier in his career, Mr. Ratigan ran East Coast operations for Fairchild Data Corporation and EF Data Corp., which is now a part of Comtech. During his time at EF Data, he was instrumental in helping the company grow from $20 m to $120 m in revenue in under eight years. Prior to that, Mr. Ratigan held the position of Senior Vice President of North and South American sales for the start-up BroadLogic Network Technologies, Inc. He began his career in the United States Senate working for Senator Bill Armstrong (R-Colorado) and held multiple sales positions with the Xerox Corporation as a member of the legal sales team.
Mr. Ratigan holds a Bachelor of Science in Marketing from the University of Maryland.
14 Mar 24. Rheinmetall expects both sales and profit margins to keep growing this year, as the German defence contractor declared itself a winner amid the “changing threat situation in Europe”. The world’s largest maker of artillery ammunition on Thursday said 2024 sales were expected to reach a record €10bn, compared with €7.2bn the previous year. Operating margins were likely to reach 14 to 15 per cent, the company said, up from 12.8 per cent in 2023. “A new decade in security policy has begun,” said chief executive Armin Papperger. “It is very important to us to do all we can to help Ukraine in its fight for survival,” he added. Papperger has emerged as one of the loudest voices in the European defence industry that — after decades of having been largely shunned by investors because of ethical concerns — is now booming amid growing political fear over Europe’s borders. The Düsseldorf-based company last year completed the takeover of its Spanish rival Expal, cementing its position as the most important provider of 155mm shells, which are in high demand from Ukraine’s military as it fights the Russian invasion. In 2023, Rheinmetall’s sales grew 12 per cent to a record €7.2bn — slightly lower than expected, which the company said was due to some of its deliveries having been postponed into 2024. Operating profits rose by 19 per cent to a record €918mn. Rheinmetall’s strong growth makes it an outlier in the wider German industrial landscape, which has suffered following the energy crisis unleashed by the loss of cheap Russian gas. The group said that its civilian business, which includes car parts and baggage handlers for airports, recorded only “slight” revenue growth last year, adding that sales grew “primarily in business with military customers”. Recommended MBDA Missile Systems UK must play a role in EU’s defence strategy, urges European missile maker’s chief Aside from ammunition — for which Rheinmetall last year signed multiyear contracts with the Bundeswehr worth €4.6bn as well as with Ukraine for €1.7bn — the company also sold combat vehicles, military trucks and drones. The war in Ukraine in 2022 prompted German chancellor Olaf Scholz to announce a Zeitenwende — a turning point in history — that meant Europe’s largest economy would abandon its decades-long pacifist policy in the wake of the second world war and rebuild its military powers. Germany’s defence minister Boris Pistorius has repeatedly called on the country’s once slumbering defence industry to rapidly build capacity — something that Rheinmetall and other mainly private companies such as Krauss-Maffei Wegmann and the maker of the Taurus missile system, MBDA Deutschland, have argued can only be done following concrete orders. In February, Rheinmetall started building a new munitions factory in Lower Saxony. On Thursday, the company said it had a record order backlog worth €38.3bn. Event details and information Future of Retail(Source: FT.com)
14 Mar 24. Rheinmetall is on track for success: another all-time earnings high, new record order backlog.
Fiscal year 2023
- Consolidated sales grow by 12% to €7,176m
- EBIT before purchase price allocation stands at €968m
- Operating result improves by 19% to a new record figure of €918m
- Group’s operating margin increases to 12.8% after 12.0% in the previous year
- Another all-time high in the Rheinmetall backlog of €38.3bn, increase of 44% (previous year: €26.6 bn)
- Dividend proposal of €5.70 per share, after €4.30 in the previous year
Outlook for 2024: Strong sales growth and increasing profitability
- Rheinmetall forecasts strong sales and earnings growth in fiscal 2024
- Consolidated sales expected to increase to a level of around €10 bn
- Operating margin guided between 14% and 15% for the Group
Düsseldorf-based Rheinmetall AG is benefiting from the ongoing upswing in the defence sector and is continuing its growth trajectory. The technology group closed fiscal year 2023 with record earnings and order backlog figures.
In times of a changed threat situation in Europe, the Group is the focus of customer interest as a supplier of state-of-the-art defence technology. Numerous major orders from the German armed forces and other armed forces have been contracted, particularly in the areas of ammunition, combat vehicles and air defence. Rheinmetall has also become an important partner for Ukraine, helping with extensive deliveries from the entire product portfolio, from tactical vehicles and ammunition for Gepard anti-aircraft tanks to mobile field hospitals.
Consolidated sales increased primarily in business with military customers. As a leading supplier to land forces, Rheinmetall is meeting the significant increase in demand from military customers in the short and medium term, particularly in the land domain – for example for combat vehicles, military trucks and ammunition, but also for drones and in the field of digitalization. In the civilian business, however, the Group is recording only slight sales growth.
In view of the security policy environment, Rheinmetall is forecasting continued strong sales and earnings growth for fiscal 2024. For the first time in the Group’s history, the forecasted sales volume is expected to reach the €10bn mark.
Armin Papperger, CEO of Rheinmetall AG: “A new decade of security policy has begun. In this situation, we at Rheinmetall are grateful to be able to make a decisive contribution to restoring our country’s ability to defend itself. We are sparing no effort in order to fulfill this task of national importance. We are investing massively, building new plants and significantly increasing our personnel.”
Armin Papperger: “In the past fiscal year, we achieved record sales and earnings. In terms of EBIT before purchase price allocations, we are close to the threshold of €1bn. We are proud of this achievement, which is based on innovation, technological expertise and, above all, the performance of our employees. The course is set for further growth and increasing profitability.”
“In everything we do, our primary goal is to be a capable partner to the German Bundeswehr and the armed forces of our allies and friends and thus, above all, to serve peace in Europe. It is a matter close to our hearts to do everything we can to support Ukraine in its fight for survival. We are fully committed to this responsibility.”
Group’s profits soar with rising sales – Rheinmetall backlog climbs to around €38bn
In fiscal 2023, the Rheinmetall Group generated consolidated sales of €7,176m. Compared with the previous year’s sales of €6,410 m, this is an increase of €766m or 12%. As there were deadline adjustments for deliveries in individual projects, some sales were postponed to 2024. Consolidated sales for 2023 therefore fell short of the forecast, which had anticipated sales in a range of €7.4 bn to €7.6 bn for the year.
Taking into account exchange rate and M&A effects, sales growth amounted to 11.9%; adjusted for these effects, it was 10.6%. The international share of consolidated sales in the year under review was around 76%, after 71% in the previous year.
Fiscal 2023 was once again characterized by significant sales increases in Vehicle Systems and Weapon and Ammunition. Both benefited in particular from rising demand as a result of the turning point triggered by the war in Ukraine. On August 1, 2023, the operational activities of Expal Systems became part of the Rheinmetall Group. With the significantly expanded production capacities available as a result, particularly in the field of artillery, mortar and medium-caliber ammunition, Rheinmetall has further expanded its position as an important supplier to the NATO armed forces.
Electronic Solutions and Sensors and Actuators were also able to increase their sales levels once again compared with the previous year. Sales in Materials and Trade remained roughly at the previous year’s level.
On December 31, 2023, the Rheinmetall backlog stood at €38.3bn, a new high, after €26.6bn in the previous year. This figure includes binding orders (order backlog) and orders from framework contracts (frame backlog) as well as the nominated backlog of the Group’s civilian business.
The consolidated operating result (EBIT before special items) climbed by 19% to a record level of €918 m and thus increased at an above-average rate compared with the sales growth achieved. This significantly exceeded the previous year’s figure for consolidated operating earnings (EBIT before special items) of €769 m, which was the highest earnings figure in the company’s recent history. The Group’s operating margin reached 12.8%, exceeding the previous year’s figure of 12.0%.
Including special items, reported EBIT was €897m and thus around €160m above the previous year’s figure of €738m. In fiscal 2023, positive special effects totalling €49m and special effects from purchase price allocations amounting to -€70m had to be taken into account.
Earnings after taxes increased to €586m and exceeded the previous year’s figure of €540m by 9%. After deduction of earnings attributable to non-controlling interests of €51m (previous year: €66m), earnings attributable to the shareholders of Rheinmetall AG were €535m, compared with €474m in the previous year. This results in earnings per share from continuing operations before purchase price allocations of €10.96 (2022: €14.65).
On this basis, a dividend payment for fiscal 2023 of €5.70 per share will be proposed to the Annual General Meeting on May 14, 2024, compared with €4.30 in the previous year. This equates to a payout ratio in relation to earnings per share (continuing operations) before purchase price allocation of 38.9% (previous year: 39.2%).
The operating free cash flow generated in the Rheinmetall Group in fiscal 2023 amounted to €356m or 5.0% of sales. It was therefore within the strategic target range of 4% to 6% of sales. After € 151m in the previous year, the operating free cash flow of €356m improved significantly in the reporting period.
Vehicle Systems: Significant increase in sales and operating result
In fiscal 2023, Vehicle Systems generated sales of €2,609m with its military wheeled and tracked vehicles. Compared with the previous year’s sales of €2,270m, this is a significant increase of around 15%.
Considerable sales contributions were particularly made by the delivery of Lynx infantry fighting vehicles to the Hungarian armed forces and ring swaps in the context of the Ukraine war. In addition, swap body trucks and other logistics vehicles from the HX, TGS and TGM series were delivered to customers in the UK, Australia, Norway and Sweden. As in the previous year, a considerable share of sales was generated through deliveries as part of a major Australian order for tactical vehicles, which involves the production of 211 Boxer wheeled armoured vehicles.
The historical turning point or “Zeitenwende”, which was proclaimed by Chancellor Scholz in Germany in February 2022, was reflected particularly clearly in the order situation.
At €7,144m, Vehicle Systems’ share of the Rheinmetall nomination was more than four times that of the previous year 2022, when €1,564 m was booked. The largest individual items here were a joint framework agreement for airborne vehicles for the German and Dutch armed forces worth over €1 bn and an order from the US for the XM30 infantry fighting vehicle program worth around €700 m. Other major new orders included the second lot of Puma infantry fighting vehicles commissioned by the German government and a Leopard 2 upgrade for Norway.
The operating result improved by around €63m to a total of €324m in 2023. The positive development is the result of the sales ramp-up from the aforementioned orders and strict cost management. At 12.4%, the operating margin exceeded the previous year’s figure of 11.5% thanks to a better product mix.
Weapon and Ammunition: High demand leads to record order intake level
Weapon and Ammunition generated sales of €1,756m with its weapon system and ammunition activities in the year under review. Measured against the previous year, this represents an increase in sales of €397m or 29%. In addition to Germany, significant growth impetus came from other NATO states in Eastern Europe and from Ukraine.
Weapon and Ammunition’s share of the Rheinmetall nomination reached a new record level of €8,238m, more than doubling the previous year’s figure of €4,979m. Two multi-year framework agreements for tank ammunition (€3.2bn) and artillery ammunition (€1.4 bn) with the German customer particularly stand out here, as well as direct orders from Ukraine with a volume of around €1.7bn. Outside Europe, another important sales success was achieved with a rapid fog protection system for the Australian navy.
The operating result for Weapon and Ammunition rose by €106 m or around 36% to approximately €403 m in fiscal 2023, mainly due to the higher sales volume (previous year: €297m). The operating margin increased slightly from around 22% (2022) to 23% in the year under review, which is primarily due to cost optimization measures and a more profitable product mix.
Electronic Solutions: Increased sales and operating margin
Electronic Solutions generated sales of €1,318m in the field of defence electronics in fiscal 2023, exceeding the previous year’s figure by 13% (previous year: €1,164m). A significant contribution to this growth in sales came from a major order placed in fiscal 2022 for the delivery of Skynex air defence systems for a European customer. Other relevant sales were generated from the share in the major projects for Lynx infantry fighting vehicles for Hungary, Puma infantry fighting vehicles for the German armed forces, Boxer wheeled armored vehicles for Australia and the delivery of combat helmets for a major order placed by the German armed forces in the previous year.
The Rheinmetall Nomination for Electronic Solutions climbed to a record €2,183 m in fiscal 2023 (previous year: €1,724 m). This represents growth of approximately 27%. The largest individual orders relate to Skynex air defence systems for two customer countries with a total value of around €700 m and to the supply of electronic components for the Puma infantry fighting vehicle of the German armed forces. The follow-up order for a drone system for the German armed forces for medium-range reconnaissance was also reflected in the order book.
At €150m, the operating result was 24% above the previous year’s figure (2022: €121m). The operating margin rose from 10.4% in the previous year to 11.4% in the year under review thanks to successfully completed major orders.
Sensors and Actuators: Slight sales growth
Despite a challenging market environment in civilian business, Sensors and Actuators increased its revenue. In the year under review, sales grew by 3% or €39m to €1.421m.
Particular contributions to this came from components and systems for the electrification of drive systems, including orders for fuel cell drives, and the development of innovative technologies throughout the value chain of the hydrogen economy, which is expected to make a decisive contribution to the energy transition.
The Air Management product area increased its sales significantly by 9% compared with the previous year. Sales of electric gas pumps on the Chinese and North American markets as well as sales of exhaust gas recirculation systems and exhaust flaps for both the light- and heavy-duty segments were the main contributors to this. The Electrification and Digitalization business unit achieved an increase thanks to successful sales of oil and water valves. By contrast, the Thermal Management business unit recorded a slight decline in sales of -2%.
At €2,720 m, booked business in fiscal 2023 was slightly below the previous year’s level of €2,770 m, corresponding to a decline of around 2%. In 2023, orders were acquired for high-voltage water pumps in electric vehicles and several orders for fuel cell applications in the passenger car sector as well as water pumps in the field of Industrial Technology, which will further advance the transformation.
Sensors and Actuators achieved an operating result of €69m in fiscal 2023, falling short of the previous year’s figure by € 26m. The operating margin declined to 4.8% in 2023 (previous year: 6.8%).
Materials and Trade: Sales and operating result at previous year’s level
At €737m, Materials and Trade maintained the previous year’s sales level (previous year: €742m) despite adverse effects in the IT area. The unit, which supplies plain bearings and structural components and operates the global aftermarket business, was affected by an IT attack in the second quarter of 2023, which had a noticeable impact on sites in Germany and abroad.
The Trade business unit once again showed a very good year-on-year sales performance, increasing sales by 4% or €18m. The business unit achieved higher sales in the sales regions of Europe, South America and Asia in particular. In the Bearings business unit, sales declined by 8% or €24m year-on-year. In the Castings unit, the passing on of lower material prices, significantly reduced tonnage and a change in the sales mix had a negative impact and led to a year-on-year decrease in sales. In business with plain bearings, by contrast, there was a slight volume-driven increase in sales compared with the previous year.
Booked business in Materials and Trade came to €760m in the reporting period and with an increase of 1% was slightly above the previous year’s level.
Materials and Trade achieved an operating result of €66m in fiscal 2023, on a par with the previous year. At 8.9%, the operating margin was also at the previous year’s level.
Rheinmetall Group forecast for 2024: Strong sales growth with rising high margins
Based on the current market outlooks, the Rheinmetall Group expects significant growth in sales and anticipates a rising operating margin combined with an improved operating result in fiscal 2024.
The Rheinmetall Group’s annual sales are expected to rise to a level of around €10bn in fiscal 2024 (sales in fiscal 2023: €7.2 bn).
Based on this sales forecast and taking into account holding costs, Rheinmetall is expecting to see an improvement in the Group operating result and a Group operating margin of 14% to 15% (margin in fiscal 2023: 12.8%).
12 Mar 24. What to make of BATM’s strategic review.
The technology group is focusing on its core cyber security, network solutions and diagnostics activities, but investors should wait before getting excited again
- Full-year cash profit up 12 per cent to $9.3m
- Adjusted pre-tax profit up from $2.8mn to $4.8m
- Potential for M&A activity and divestments
Technology group BATM Advanced Communications (BVC:19.25p) is undergoing a corporate reorganisation, restructuring non-core activities and prioritising its core cyber security, network solutions and diagnostics activities.
As part of the new strategy, the directors have engaged investment banks in both Israel and the US to explore corporate activity to add to the group’s capabilities, and to secure attractive terms for disposals.
BATM closed the 2023 financial year with net cash of $31.7m after deducting $4.5mn of lease liabilities and $4.6m of bank debt, so has ample firepower available for acquisitions. It is also scaling up sales and marketing functions.
In the short term, the increased investment will impact profit, hence why analysts at house broker Shore Capital reined in their 2024 cash profit estimate from $13.5mn to $9.4mn. This implies a flat performance year on year. However, analyst Robin Speakman notes that there is scope for “better forecast outcomes and so upgrades are also real and high from this point”.
Bearing this in mind, the group’s cyber division secured $32.4m of new orders in 2023, increased revenue 76 per cent to $10.3m and quadrupled cash profit to $2.4m, or a quarter of the group total. One of the orders from a long-standing defence department customer was for BATM’s latest high-performance encryption platform. The $26mn contract will be delivered over the next five years, and the directors expect to receive further orders for the technology in the current year.
Moreover, BATM is ramping up its high-margin edge computing and network function virtualisation software product suite, Edgility. Having been awarded two five-year orders with a leading provider of emergency connectivity services in North America to support critical public infrastructure, BATM’s management expects to receive further orders from the client as it’s rolled out across other US states and the Asia-Pacific region. The product is also undergoing evaluation and successful proof-of-concept trials with leading network operators and systems integrators. In 2023, the group’s networking division (which includes Edgility) quadrupled cash profit to $1.7m.
Diagnostics division offers growth potential
Admittedly, the group’s diagnostic division reported 9 per cent lower annual cash profit of $3m on flat revenue of $33.3m. However, adjust for Covid-19 product sales, which boosted the 2022 result, and divisional revenue increased by a fifth.
Interestingly, BATM’s directors highlight strong interest in two new molecular diagnostics instruments. The first provides laboratory clients with an integrated, compact, cost-effective nucleic acid detection system based on the real-time polymerase chain reaction (PCR) method. The second helps automate the manual library preparation process for an advanced technology used for DNA and RNA sequencing and variant/mutation detection.
In addition, BATM has been strengthening its distribution operations and conducting a sales and marketing campaign for diagnostic clients who have been awarded government funding. It should lead to tenders, which management is confident of winning orders from.
Of course, firm orders will be needed for investors to warm to the investment case once again, having seen analysts’ 2024 earnings expectations materially lowered since the interim results (‘Contract wins mean this cyber stock is now a buy’, 29 August 2023). Valued on eight times cash profit to enterprise valuation of $75m, and 10 per cent below book value, the rating is about right for now. Hold. (Source: Investors Chronicle)
11 Mar 24. MTI is a smart play on the defence spending boom.
This technology group is rated on a single-digit earnings multiple even though it is delivering double-digit profit growth, and offers a 6.1 per cent dividend yield
- Annual pre-tax profit up 12 per cent to $4.8m
- EPS rises 9 per cent to 4.58¢
- Net cash of $8.1m (9.2¢)
The latest results from Israel-based MTI Wireless Edge (MWE:40p) highlight the benefits of diversification as growth from the technology group’s antennae and water management systems units more than mitigated a weaker performance from its electronics division.
The antennae business sells ‘off the shelf’ flat and parabolic antennas as well as custom-developed antenna solutions to a range of commercial and military customers. Buoyed by a sharp rise in military sales, divisional operating profit surged from $0.3m to $0.8m. Current events around the world suggest that requirements for military equipment will continue to grow in the coming years as western governments increase their defence budgets, too. Moreover, the conflict in the Middle East has triggered an increase in demand that should lead to higher stock levels of all military equipment being maintained by the Israeli government going forward. Defence-related work now accounts for 44 per cent of group sales.
Strength from the military side of the business more than offset a slight dip in revenue from MTI’s 5G backhaul antenna solutions due to slower installation rates in certain markets. However, as soon as 5G is rolled out in India (a key market), the requirement for MTI’s products will be substantial. Also, the group’s automatic beam steering antenna solution that adapts to any small movements caused by different climate conditions is now entering into production after successful testing by key original equipment manufacturers (OEMs).
A climate change winner
MTI offers investors exposure to the themes of climate change and water conservation through wireless water management systems, too. Water scarcity is a real global problem. Last year, the UN Water Conference reported that global fresh water demand will outstrip supply by 40 per cent by 2030. This level of challenge underlines the importance of water conservation and the solutions that MTI offers customers (agriculture, municipal authorities and commercial entities), which can reduce water usage by 30 per cent.
In addition, MTI has been expanding its services beyond efficient water usage across public parkland and green open spaces, having recently completed a project to monitor and partially control 40 urban fountains for a municipality in Israel. It could become a valuable future revenue stream for a division that increased operating profit by 8 per cent to $2mn last year.
Admittedly, contract delays at two loss-making projects led to profits reversing at MTI’s electronics division. However, the directors report that increased defence spending by governments is creating a strong market environment to operate in, partially from the Israeli defence forces and partially from international markets via the Israeli systems houses. To this end, MTI’s electronics division has been completing several design wins for both new and existing customers. It augurs well for future sales. House broker Shore Capital expects divisional operating profit to bounce back 25 per cent to $1.95mn in 2024 and contribute to 9 per cent higher group operating profit of $5.1mn (£4mn).
On this basis, MTI is rated on seven times 2024 operating profit to enterprise valuation of £28.4m. A 6.1 per cent dividend yield and a £0.5mn expansion of the share buy-back programme are also supportive. Trading around the level of my last buy call (‘MTI boosted by defence spending and offers 6% yield’, 15 August 2023), MTI’s shares rate a buy.
(Source: Investors Chronicle)
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