BATTLESPACE Updates

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19 Jul 24. The HENSOLDT Group (“HENSOLDT”) is streamlining its organization in order to accelerate growth and make full use of the acquisition and integration of ESG Elektroniksystem- und Logistik-GmbH (“ESG”). The company will divide its operations into four divisions focused on its different types of businesses: Radar, Optronics, Multi Domain Solutions, and Services & Training.

The core product divisions, Radar and Optronics will continue to focus on the development of cutting-edge defence electronics products, optimizing cross-project operations to drive synergies. The Services & Training division will maintain its current structure, fostering stability and growth beyond maintenance, repair, and overhaul (MRO), and expanding further into Training & Simulation services. The newly established Multi Domain Solutions division will serve as the growth engine of the company, combining HENSOLDT’s Spectrum Dominance and Airborne Solutions divisions with ESG’s capabilities. It will provide integrated, multi-domain solutions across Land, Air, Naval, Cyber, and Space domains, acting as a docking point for customers seeking comprehensive manufacturer- and platform-independent solutions.

HENSOLDT CEO Oliver Dörre, says: “Our new structure will strengthen HENSOLDT’s position as a leading platform-independent European provider of seamlessly integrated defence solutions. This evolution of our divisional structure will enable us to focus on scaling our solutions business further, while also strengthening our core product portfolio. Our platform-independence is thereby essential to secure and develop critical capabilities for German and European defence requirements.”

 

18 Jul 24. Amphenol Corporation to Acquire Mobile Networks Businesses From CommScope.

Transaction highlights:

  • To acquire CommScope’s Outdoor Wireless Networks and Distributed Antenna Systems businesses for $2.1bn in cash
  • Adds advanced antenna and associated interconnect products, technologies and capabilities
  • Complements Amphenol’s existing product portfolio for next-generation wireless networks
  • Expected to be accretive to Amphenol’s Diluted EPS in first full year after closing

Amphenol Corporation (NYSE: APH) today announced a definitive agreement to acquire CommScope’s (NASDAQ: COMM) mobile networks businesses for $2.1bn in cash, subject to customary post-closing adjustments. The deal includes the purchase of CommScope’s Outdoor Wireless Networks (OWN) segment as well as the Distributed Antenna Systems (DAS) business which resides in CommScope’s Networking, Intelligent Cellular and Security Solutions (NICS) segment. These combined businesses are currently expected to have full-year 2024 sales and EBITDA margins of approximately $1.2bn and 25%, respectively. Assuming a continuation of current economic conditions, the acquisition is expected to be accretive to Amphenol’s Diluted Earnings Per Share in the first full year after closing, excluding acquisition-related costs. “We are excited by the prospect of adding CommScope’s mobile networks businesses and their approximately 4,000 talented employees to the Amphenol family,” said Amphenol President and Chief Executive Officer, R. Adam Norwitt. “CommScope provides mobile networks solutions, with advanced technologies in the areas of base station antennas and related interconnect solutions, as well as distributed antenna systems. In particular, we are encouraged that the businesses we are acquiring make up the former Andrew Corporation portfolio of products, a company with a rich history of innovation and technology leadership in the wireless industry. We look forward to supporting customers who are developing next-generation wireless networks around the world with these advanced solutions as well as our own existing complementary products. Finally, this acquisition further supports Amphenol’s long-term growth and balanced end market exposure across all areas of the electronics market.”

Amphenol expects to finance the acquisition through a combination of cash on hand and debt. Subject to the receipt of customary regulatory approvals and other closing conditions, the deal is expected to close in the first half of 2025. Amphenol looks forward to discussing the acquisition when the Company reports second quarter 2024 earnings on July 24, 2024. (Source: BUSINESS WIRE)

 

18 Jul 24. Hexcel Reports 2024 Second Quarter Results. Hexcel Corporation (NYSE: HXL) today reported second quarter 2024 results including net sales of $500 m and adjusted diluted EPS of $0.60 per share.

CEO and President Tom Gentile said, “Our Hexcel team delivered a solid financial performance in the second quarter with strong overall revenue growth that drove continued recovery in margins. We are well-positioned and ready to support our customers’ rate increases and remain excited about the medium-term outlook and opportunity. In the near term, aircraft delivery levels and public comments by our customers on production plans warrant a more cautious stance, which we are reflecting in our revised 2024 guidance. We remain strongly positioned for growth with available plant capacity, and we continue employee training and operational optimization for the production ramp ahead. Reflecting our continued confidence in Hexcel’s future, we repurchased another $100 m of Hexcel common stock during the second quarter, bringing the total 2024 share repurchases to $200m.”

Mr. Gentile continued, “Since joining Hexcel earlier this year, I have had the chance to visit more than half of our manufacturing sites, which has accelerated my learning about our products and capabilities. Hexcel’s broad portfolio of lightweight materials is helping current programs reduce carbon emissions and suppress noise, and our R&T team is advancing technologies that will help next generation products drive more efficient and sustainable aviation.”

Markets

Sales in the second quarter of 2024 were $500.4m compared to $454.3m in the second quarter of 2023.

Commercial Aerospace

  • Commercial Aerospace sales of $320.7m for the second quarter of 2024 increased 21.3% (21.6% in constant currency) compared to the second quarter of 2023. Both widebody and narrowbody sales increased by double digit percentages. Other Commercial Aerospace increased 15.4% for the second quarter of 2024 compared to the second quarter of 2023 with growth in business jets and regional jets.

Space & Defense

  • Space & Defense sales of $138.9m in the second quarter of 2024 increased 1.0% (1.4% in constant currency) for the quarter as compared to the second quarter of 2023. Military helicopters were strong globally including the CH-53K and Apache, partially offset by declining V-22 sales as the program winds down.

Industrial

  • Total Industrial sales of $40.8m in the second quarter of 2024 decreased 22.3% (21.8% in constant currency) compared to the second quarter of 2023. Growth in Automotive was more than offset by declines in other sub-markets. The focus will continue to be high end premium industrial segments that utilize carbon fiber.

Consolidated Operations

Gross margin for the second quarter of 2024 was 25.3% compared to 24.4% in the second quarter of 2023 as higher sales drove favorable cost leverage. As a percentage of sales, selling, general and administrative expenses for the second quarter of 2024 were 8.0% compared to 7.9% for the second quarter of 2023. R&T expenses as a percentage of sales were 2.9% in the second quarter of 2024 compared to 2.9% in Q2 2023. Adjusted operating income in the second quarter of 2024 was $72.0m or 14.4% of sales, compared to $61.8 m, or 13.6% of sales in the second quarter of 2023. The impact of exchange rates on operating income as a percent of sales was favorable by approximately 40 basis points in the second quarter of 2024 compared to the second quarter of 2023.

Year-to-Date 2024 Results

Sales for the first six months of 2024 were $972.7m compared to $912.0m, a 6.7% increase from the same period in 2023.

Commercial Aerospace (64% of YTD sales)

  • Commercial Aerospace sales of $620.0 m increased 13.0% (13.1% in constant currency) for the first six months of 2024 compared to the first six months of 2023 led by growth in widebodies. Other Commercial Aerospace increased 4.1% for the first six months of 2024 compared to the same period in 2023 reflecting growth in regional jets and turboprops.

Space & Defense (28% of YTD sales)

  • Space & Defense sales of $278.0m increased 5.4% (5.5% in constant currency) for the first six months of 2024 as compared to the first six months of 2023. Growth was led by F-35 and a number of military helicopter programs, both domestic and international, partially offset by significantly lower V-22 sales.

Industrial (8% of YTD sales)

  • Total Industrial sales of $74.7m in the first six months of 2024 decreased 24.9% (25.0% in constant currency) compared to the first six months of 2023 due to declines in all sub-markets.

Consolidated Operations

Gross margin for the first six months of 2024 was 25.2% compared to 26.2% in the prior year period. The first quarter of 2023 benefited from particularly favorable cost absorption and sales mix. As a percentage of sales, selling, general and administrative expenses for the first six months of 2024 were 9.1% compared to 9.5% for the first six months of 2023. R&T expenses as a percentage of sales were 3.1% in the first six months of 2024 compared to 3.0% in the first half of 2023. Adjusted operating income for the first six months of 2024 was $126.1 m or 13.0% of sales, compared to $124.8m or 13.7% of sales in 2023. Other operating expense for the first six months of 2024 and 2023 included restructuring costs. The impact of exchange rates on operating income as a percent of sales was favorable by approximately 30 basis points in the first six months of 2024 compared to the first six months of 2023.

Cash and other

  • Net cash provided by operating activities in the first six months of 2024 was $37.2m, compared to $30.1m for the first six months of 2023. Working capital was a cash use of $118.3m for the first six months of 2024 and a use of $113.9m for the comparable period in 2023. Capital expenditures on a cash basis were $51.6m for the first six months of 2024. For the first six months of 2023, capital expenditures on a cash basis were $74.8m, including approximately $38m for the purchase of the land and building at the Hexcel Amesbury, Massachusetts facility. Free cash flow was ($14.4) m in the first six months of 2024 compared to ($44.7)m in the first six months of 2023. Free cash flow is defined as cash generated from operating activities less cash paid for capital expenditures. Capital expenditures on an accrual basis were $41.1 m and $70.5m for the first six months of 2024 and 2023, respectively.
  • The Company used $101.1 m to repurchase shares of its common stock during the second quarter of 2024 and $201.8m during the first six months of 2024. The aggregate remaining authorization under the share repurchase program as of June 30, 2024, was $285.3m.
  • As announced today, the Board of Directors declared a quarterly dividend of $0.15 per share payable to stockholders of record as of August 2, 2024, with a payment date of August 9, 2024.

2024 Guidance

  • Sales of $1.90bn to $1.98bn (previously $1.925bn to $2.025bn)
  • Adjusted diluted earnings per share of $2.02 to $2.18 (previously $2.10 – $2.30)
  • Free cash flow of around $200m (previously greater than $200m)
  • Capital expenditures less than $100m (unchanged)
  • Effective tax rate of 22.0%. (unchanged)

Market-Specific Sales Outlook

  • Commercial Aerospace: Up low double-digits to mid-teens (previously up mid-teens)
  • Space & Defense: Up mid-single digits (no change)
  • Industrial: Down low double-digits (previously up low to mid-single digits)(Source: BUSINESS WIRE)

 

18 Jul 24. Textron Reports Second Quarter 2024 Results.

  • EPS of $1.35; adjusted EPS of $1.54, up from $1.46 in prior year
  • Net cash from operating activities of $383m in the second quarter of 2024
  • $358m returned to shareholders through share repurchases in the second quarter

Textron Inc. (NYSE: TXT) today reported second quarter 2024 income from continuing operations of $1.35 per share, as compared to $1.30 per share in the second quarter of 2023. Adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $1.54 per share for the second quarter of 2024, compared to $1.46 per share in the second quarter of 2023.

“In the quarter, our team delivered higher revenue, earnings per share, and cash flow,” said Textron Chairman and CEO Scott C. Donnelly. “At Aviation and Bell, we continued to execute on key programs, including the Citation Ascend and FLRAA.”

Cash Flow

Net cash provided by operating activities of the manufacturing group for the second quarter was $383m, compared to $314m last year. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $320 m for the second quarter, compared to $242m last year.

In the quarter, Textron returned $358m to shareholders through share repurchases. Year to date, Textron has returned $675 m to shareholders through share repurchases.

Second Quarter Segment Results

Textron Aviation

Textron Aviation’s revenues were $1.5bn, up $113m from last year’s second quarter, reflecting higher pricing of $57m and higher volume and mix of $56m.

Textron Aviation delivered 42 jets in the quarter, down from 44 in the second quarter of 2023, and 44 commercial turboprops, up from 37 in last year’s second quarter.

Segment profit was $195m in the second quarter, up $24m from a year ago, reflecting higher volume and mix of $35m, and a favorable impact from pricing, net of inflation, of $22m, partially offset by an unfavorable impact from performance of $33m.

Textron Aviation backlog at the end of the second quarter was $7.5bn.

Bell

Bell revenues were $794m, up $93m from the second quarter of 2023, largely reflecting higher military volume of $104m, primarily related to the FLRAA program, partially offset by lower volume on the V-22 program.

Bell delivered 32 commercial helicopters in the quarter, down from 35 in last year’s second quarter.

Segment profit of $82 m was up $17 m from last year’s second quarter, largely due to a favorable impact from performance of $39m, which included lower research and development costs, partially offset by mix.

Bell backlog at the end of the second quarter was $4.2bn.

Textron Systems

Revenues at Textron Systems were $323m, up $17m from last year’s second quarter, primarily due to higher volume of $14m.

Segment profit of $35 m was down $2m, compared with the second quarter of 2023.

Textron Systems’ backlog at the end of the second quarter was $1.7 bn.

Industrial

Industrial revenues were $914m, down $112m from last year’s second quarter, mainly due to lower volume and mix of $119m.

Segment profit of $42m was down $37m from the second quarter of 2023, primarily due to lower volume and mix.

Textron eAviation

Textron eAviation segment revenues were $9m and segment loss was $18m in the second quarter of 2024, compared with a segment loss of $12m in the second quarter of 2023.

Finance

Finance segment revenues were $12m, and profit was $7m. (Source: BUSINESS WIRE)

 

19 Jul 24. Saab Q2 2024 results: Strong order intake and continuous focus on capacity increases.

Saab presents the results for January-June 2024.

“In the quarter, Saab recorded a strong order intake of SEK 40bn, the second highest quarter in the company’s history. Our portfolio is uniquely positioned and we are strengthening our market presence. We are also continuing our uplift in investments for additional capacity and are fully focused on securing competences and increasing our workforce,” says Micael Johansson, President and CEO, Saab.

Key highlights Q2 2024

  • Order bookings amounted to SEK 39,574m (14,315) with several large contracts signed and booked in the quarter.
  • Sales increased 22% and amounted to SEK 15,170m (12,475), driven by growth in all business areas and Combitech.
  • EBIT increased 25% and amounted to SEK 1,331m (1,065). The EBIT margin increased to 8.8% (8.5), driven by improved profitability across the business areas and Combitech.
  • Net income increased by 27% to SEK 1,012m (798).
  • Earnings per share improved to SEK 1.85 (1.44), where the number of shares has been adjusted according to the 4:1 share split implemented in the quarter.
  • Operational cash flow in the quarter was SEK -2,251m (-1,548) and related to timing of customer payments.
  • Net debt position was SEK 2.4bn (-3.7) at the end of the period.
  • The full year 2024 outlook on organic sales growth, EBIT growth and positive operational cash flow is reiterated.

Saab Q2 2024 results: Strong order intake and continuous focus on capacity increases

Saab presents the results for January-June 2024.

“In the quarter, Saab recorded a strong order intake of SEK 40bn, the second highest quarter in the company’s history. Our portfolio is uniquely positioned and we are strengthening our market presence. We are also continuing our uplift in investments for additional capacity and are fully focused on securing competences and increasing our workforce,” says Micael Johansson, President and CEO, Saab.

Key highlights Q2 2024

  • Order bookings amounted to SEK 39,574m (14,315) with several large contracts signed and booked in the quarter.
  • Sales increased 22% and amounted to SEK 15,170m (12,475), driven by growth in all business areas and Combitech.
  • EBIT increased 25% and amounted to SEK 1,331m (1,065). The EBIT margin increased to 8.8% (8.5), driven by improved profitability across the business areas and Combitech.
  • Net income increased by 27% to SEK 1,012m (798).
  • Earnings per share improved to SEK 1.85 (1.44), where the number of shares has been adjusted according to the 4:1 share split implemented in the quarter.
  • Operational cash flow in the quarter was SEK -2,251m (-1,548) and related to timing of customer payments.
  • Net debt position was SEK 2.4bn (-3.7) at the end of the period.
  • The full year 2024 outlook on organic sales growth, EBIT growth and positive operational cash flow is reiterated.

 

19 Jul 24. Saab profit edges past forecast as defence orders surge.

  • Summary
  • Companies
  • Saab Q2 operating profit rises 25% y/y
  • Q2 profit 1.33bn SEK vs forecast 1.29bn
  • Order intake surges 176% y/y in quarter
  • Order backlog hits new record amid defence boom

Swedish defence equipment maker Saab (SAABb.ST) reported a marginally bigger-than-expected rise in quarterly operating earnings and maintained its outlook for surging sales and earnings this year as countries race to scale up militaries.

Saab repeated on Friday its forecast for sales to grow organically by 15-20% this year with operating earnings to rise even more.

The maker of defence material including missiles, submarines and the Gripen fighter jet said operating profit rose 25% to 1.33bn Swedish crowns ($125m) in the second quarter to come in just ahead of the 1.29bn seen by analysts according to LSEG estimates.

The company, which competes with defence giants such as U.S. Lockheed Martin (LMT.N), France’s Dassault Aviation (AM.PA) and Britain’s BAE Systems (BAES.L), is facing booming demand spurred by global tensions, the war in Ukraine and Sweden’s recent NATO accession.

Saab, which also sells equipment for civilian use to customers such as Airbus (AIR.PA), and Boeing (BA.N) said order bookings shot up 176% in the quarter with its backlog of orders growing to a record 182.7 bn crowns.

“This marks the second-highest quarter in terms of order bookings in the company’s history,” Saab CEO Micael Johansson said in a statement.

“The urgent need to provide Ukraine with more support and a clear uplift of European defence capabilities will remain a driver of growth in the industry for many years.” (Source: Reuters)

 

17 Jul 24. Funding for Battle-Tested Surveillance Technology.

Granta Autonomy has completed its seed funding round, providing its cutting-edge lightweight surveillance and reconnaissance UAVs, micro gimbals, and digital Datalink software.

Granta Autonomy, a specialist in fully autonomous UAVs for intelligence, surveillance, and reconnaissance missions, has successfully completed its €1 m seed funding round.

ScaleWolf VC, the leading Lithuanian dual-use tech VC Fund and Accelerator, led the round, with participation from Brolis Defence and HFL holdings. The new capital will enable Granta Autonomy to accelerate the development and production of its cutting-edge lightweight surveillance and reconnaissance UAVs, micro gimbals, and digital Datalink software, which its team has personally tested in active battlefields.

Granta Autonomy has been developing reconnaissance remote-controlled UAV aircraft, lightweight gimbals, and its unique Datalink software since 2015. The company now provides NATO forces across Europe with its range of hand-launched Hornet UAVs while also providing a range of partners with its proprietary, ultra-reliable, lightweight micro gimbals, which are the lightest direct drive gimbals on the market.

Granta Autonomy’s micro gimbals feature a powerful camera system that allows for clear daytime image capture at distances up to 5km and provides vital thermal vision for nighttime operations, ensuring mission success around the clock.

Granta Autonomy’s latest UAV, the Hornet XR, is a small, hard-to-detect, hand-launched mini reconnaissance UAV with several critical features for covert missions. With a simple throw take-off and a silent flight lasting up to 3 hours, it can cover distances up to 160km undetected.

Pre-programmed missions ensure autonomous operation, even in radio silence or GNSS-denied environments. The ultra-lightweight aircraft lands itself using a deep-stall method, making it easy to retrieve in tight spaces, and its compact, modular design allows for convenient transport in a car trunk.

Granta Autonomy’s powerful but lightweight GS-214X and GS-218X micro gimbal systems enable Hornets and other third-party drones to capture sharp images from long distances during the day and include a thermal camera for missions at night. Granta Autonomy’s Digital Datalink software ensures the gimbal integrates with most Ground Control Station (GCS) software.

Gediminas Guoba, founder and CEO of Granta Autonomy, commented; “The traditional battlefield is evolving, and Western armies require robust, reliable, and flexible solutions. Granta Autonomy is committed to ensuring our systems can be readily manufactured across Europe, reducing reliance on external sources. Today’s funding enables us to ramp up our production capacity to deliver the large-scale deployments Europe needs.

“However, our focus goes beyond just numbers; our team works directly with soldiers on the battlefield, testing our products and software in combat zones and collaborating on solutions that excel in the toughest conditions. This battlefield experience, valued by our Western partners, fuels our mission to revolutionize drone reconnaissance for global militaries.”

He continued; “The Hornet XR exemplifies our design philosophy, which is rooted in the expertise of our military UAV operators and engineers, delivering industry-leading flight time, simple operation, and rugged durability, which brings greater efficiencies, lower costs, and unmatched reliability to complex, multi-disciplinary missions.” (Source: https://www.defenseadvancement.com/)

 

17 Jul 24. Investors spooked as DroneShield experiences share price pain. Australian counter-drone manufacturer DroneShield has made major investment news with investors spooked and a chaotic share price journey.

Shares in the US publicly listed technology company have drastically fallen over the past week following massive market capitalisation reportedly equating to approximately $2 bn.

The company has since entered a trading halt with a price query undertaken by ASX Limited and answered by DroneShield on 16 July.

DroneShield stated it is not aware of any information concerning it that has not been announced to the market that could explain the recent trading in its securities, according to the statement.

However, it was aware of a news article featuring comments from Sublime Funds Management director Rodney Forrest that Forrest had shorted the stock.

“Its valuation is wild,” Forrest reportedly told Capital Brief.

It’s currently unknown what has so severely spooked investors, however, DroneShield had previously experienced a meteoric rise in recent months.

The company listed on the ASX in 2016 at $0.20 cents, trekking to $0.31 cents by December 2023, before rocketing upward to a high of $2.72 on 16 July. Panic-selling began this week with the share price falling to $1.57 on 17 July and slightly rebounding to where it now stands at $1.77 (as of 17 July). (Source: Defence Connect)

 

18 Jul 24. QinetiQ reports a solid start to FY25 with growth and strategic wins. Defence technology business QinetiQ showcases strategic advancements in Q1 FY25. QinetiQ Group plc has reported a strong start to the fiscal year 2025, emphasising increased revenue, successful contract acquisitions, and changes in leadership. Source: QinetiQ

QinetiQ Group plc, a player in defence technology, has unveiled its first quarter trading update for FY25, marking a solid start to the financial year.

The company reported progress across various operational fronts.

The trading update underlines QinetiQ’s growth trajectory. The company is on track to achieve high single-digit organic revenue growth and stable margins, in alignment with its FY25 guidance. Notably, the company’s order intake performance has surged, elevating revenue under contract for the full year to 73%, an increase from the previous quarter.

QinetiQ also reported strong financial results for FY24, with revenue and operating profit rising by 21% and 20%.

Steve Wadey, Group Chief Executive Officer, expressed satisfaction with QinetiQ’s performance, emphasising the company’s commitment to delivering shareholder value amidst a challenging geopolitical landscape. “I am pleased that we have delivered a good start to the year, with performance for the first quarter in line with our expectations and attractive shareholder returns,” Wadey stated.

The EMEA Services division reported growth, driven by long-term contracts such as the Engineering Delivery Partner role in the UK and Major Service Provider engagements in Australia. Additionally, QinetiQ secured a new framework contract to provide test and evaluation services to NATO, reinforcing its footprint in defence solutions.

QinetiQ achieved milestones in global solutions, including a contract win in the US for the Future Long Range Assault Aircraft (FLRAA) programme. The contract solidifies QinetiQ’s role as the sole source provider of survivability solutions, leveraging its light-appliqué armour systems technology. Furthermore, the company expanded its contract value by delivering the Tethered Aerostat Radar System and securing framework agreements with new National Security customers.

Amidst these operational successes, QinetiQ also announced leadership changes. Martin Cooper was appointed as Group CFO effective September 2024, earlier than originally planned.

Looking ahead, QinetiQ remains confident in its ability to deliver organic revenue growth and shareholder returns. It aims towards its FY27 target of approximately £2.4bn in revenue at a 12% margin.

(Source: army-technology.com)

 

18 Jul 24. Shore Capital has published a research note on QintetiQ’s Q1 Trading Update this morning. See a summary of the key points below and the full note attached.

Jamie Murray, Equity Analyst, said: “QinetiQ has published a strong Q1 FY25F trading update, which highlighted “good” operational performance. The outlook is positive, with near term expectations in-tact and the order coverage exceeding the corresponding period last year. We anticipate the market will have a modestly positive reaction to the strong order coverage. BUY.”

Noteworth Areas:

  • Revenue, profit and cash: QinetiQ stated that revenue is in on track to “deliver high single digit organic revenue”, operating margins are “stable”, and cash conversion is “good.” in the Q1. Although only  limited  information  was  provided,  the  update  suggests  that  the key fundamentals remain in line with our expectations; we forecasts c7% revenue growth, flat EBITA margins and 95% operating cash conversion.
  • Order intake: QinetiQ stated the order intake has remained “good” throughout the quarter. Some material contract wins include the NATO customers to utilise its Test & Evaluation services in the UK and the Future Long Range Assault Aircraft programme.
  • Order book: In line with the positive order intake, the order book appears well filled. QinetiQ stated that visibility on revenue under contract for FY25F has increased to 73%, up from 64%at April 2024

Valuation/view: QinetiQ is an ambitious company with strong growth potential. On our current numbers, the stock trades on an FY26F EV/EBITA of 11.1x, whichremains below the peer average. Following today’s update, we would expect the shares to trade marginallyahead of the market given the strong order coverage. Our unchanged analysis of growth, ROCE and risk suggests it can trade on an undemanding FY2F EV/EBITA of 12x driving a FV of 520p, suggesting 12% upside. We reiterate our BUY recommendation

 

17 Jul 24. Cohort today announces its unaudited results for the financial year ended 30 April 2024. Highlights include:

– Record revenue, adjusted operating profit, order intake, closing order book and net funds, exceeding market expectations.

– Adjusted operating profit up 11% on revenue up 11%.

o Sensors and Effectors saw robust growth, with Chess and SEA delivering improved performances on the back of strong product offerings.

o Communications and Intelligence reported a weaker year overall.

– Order book exceeded half a bn pounds for the first time, with deliveries now extending out to 2037.

– Order intake of £392.1m (2023: £220.9m), including the £135m Royal Navy contract awarded to SEA in March 2024.

– Dividend increased by 10%; the dividend has been increased every year since the Group’s IPO in 2006.

– Net funds above market expectations at £23.1m (2023: £15.6m).

Commenting on the results, Nick Prest CBE, Chairman of Cohort plc, said:

“We are reporting another strong performance for Cohort with improved revenue, profit and net funds, and one that has exceeded expectations. Our order book surpassed £500m for the first time and provides a solid foundation for the future.

Our order book not only grew in value, but its longevity further increased, providing visibility out to 2037. We have good prospects to secure further long-term orders for our naval systems and support work.

The order book underpins more than £184m (2023: £140m), representing over 90% of 2024/25 revenue expectations.  Following order wins since the start of the financial year of over £70m, that cover now stands at over 95%. These order wins include over £35m from Portugal.

We continue to expect another year of good growth in trading performance in 2024/25, enhanced by the addition of ITS. Given planned capital expenditure and expansion in working capital to support our record order book, net funds are likely to decrease.

We are optimistic that the Group will make significant further progress in 2025/26 and beyond, based on current orders for long-term delivery, our continued investment in the businesses and our pipeline of opportunities.”

Cohort also announces that its subsidiary Marlborough Communications Ltd (“MCL”) has been awarded two orders with a total value of £21.4m by a UK government customer.

Marlborough Communications Ltd (“MCL”) has been awarded two orders with a total value of £21.4m by a UK government customer. Work will commence immediately and is expected to be complete within one year.

Andy Thomis, Cohort Chief Executive, said:

“This order demonstrates again the effectiveness of MCL’s business model, based on close, trusted relationships with both external technology providers and UK government customers. Its highly skilled and knowledgeable team has a unique capability to provide effective solutions to emerging threats, rapidly, and at competitive prices.

“Together with other recent contract wins across the Group, this further underpins our order book and enhances the visibility of future revenues.”

 

17 Jul 24. Shore Capital has published a research note on Cohort’s Full Year Results this morning. See a summary of the key points below and the full note attached.

Jamie Murray, Equity Analyst, said: “Cohort’s FY24A results were strong with EPS beating our expectations by 21%. The outlook is very positive with a rapidly growing order book underpinning our expectations. As a result, we upgrade our FY25F-FY26F EPS by 7%-9%, introduce FY27F forecasts, and increase our fair value (FV) to 1,050p. Despite the shares rallying 50% ytd, we still see 27% upside potential against today’s price, which could be supplemented by further upgrades, which we believe is likely. We would BUY the shares.”

Performance:

  1. Sales rose by 11% yoy to £203m (Shore Capital expectations: £185m). Growth was driven by excellent performance from Sensors and Effectors (+24%  yoy) as work on naval systems made a major contribution.
  2. EBIT rose by 11% yoy to £21m (Shore Capital expectations: £21m). Margins were unchanged yoy at 10.4%.
  3. EPS rose by 18% yoy to 42.9p (Shore Capital expectations: 35.4p). This 21% beat was driven by a materially lower tax rate on adjusted earnings due to high R&D tax credits and a technical tax allowance.
  4. Net cash (excluding leases) rose by £8m yoy to £23m. This was driven by favourable timing of working capital flows and delayed expenditures on the new facility in Germany due to adverse weather conditions.
  5. DPS rose by 10% yoy to 14.8p (Shore Capital expectations: 14.6p)

Outlook: We believe the outlook is particularly favourable with risks on the upside. The order intake during the period rose by 78% yoy to £392m (although this includes the £135m Royal Navy contract awarded to SEA), which drives a book-to-bill of 1.9x, indicating extremely high demand for Cohort’s products. Adjusting for the Royal Navy contract award, the book-bill is still 1.3x. The order backlog rose by 58% to £519mm, with 90% of FY25F revenues covered at year end. This has risen to 95% since the start of the financial year, which provides excellent visibility. Following these positive results, we upgrade our FY25F-FY26F EPS by 7%-9% and introduce FY27F forecastsValuation/view: Cohort offers a solid and growing order book with a robust book-to-bill ratio, a positive industrial backdrop in defence and security markets, and a strategic supplier position with clients. This all points towards a premium valuation being sustained for Cohort, in our view. In March, we upgraded our fair value to 800p which has pleasingly been reached. Following today’s results, we increase this to 1050p. On our new FY26F expectations, Cohort trades on a PER of 16.7x and EV/EBITDA of 10.0x. We anticipate the shares will trade ahead of the market today.

 

17 Jul 24. Babcock FY24 results update and Type 31 contract update.

Babcock International Group PLC (“Babcock” or “the Group”) provides an update on its year ended 31 March 2024 (FY24) and the Type 31 contract.

FY24 – unaudited financial performance

Based on draft preliminary accounts, subject to finalisation of the year end audit, the Group’s summary results for FY24 are set out below.

Highlights

Strong revenue1 growth, up 11% organically to £4.4bn, contract backlog up 9% to £10.3bn

Underlying operating profit2 up 34% to £238m. This includes a £90m loss on the Type 31 contract and a £17 m profit on disposal of a property

Type 31 loss is fully recognised in FY24. Cash impact of the loss will be recognised over the life of the contract

Underlying free cash flow of £160m is significantly ahead of expectations, despite £35m accelerated pension deficit payment

Balance sheet strengthened: net debt down £129m. Net debt to EBITDA (covenant basis) 0.8x

Long term pension funding plans agreed on two of our three large pension schemes; future annual deficit payments reduced by £25m to c.£40m

Guidance unchanged: we expect a further year of progress in FY25 and reiterate our medium term guidance

Revenue £4.4bn (FY231: £4.4bn) grew 11% on an organic basis, driven by strong growth in Nuclear (up 29%) and Land (up 17%).

Underlying operating profit2 of £237.8m (FY23: £177.9m) reflects strong operating performance, particularly the Nuclear, Land and Aviation sectors.

Underlying operating profit includes a £90m loss on the Type 31 contract (FY23: £100 m loss), discussed below. Excluding the Type 31 loss, underlying operating profit was £328m (FY23: £278m). Also included is a £17 m profit on disposal of a property. Excluding these and Type 31 loss, FY24 underlying operating profit was £311m (see note 2).

Underlying operating margin3 improved to 5.4% (FY23: 4.0%). Excluding the impact of the Type 31 loss and profit on disposal underlying operating margin improved 40 basis points to 7.0%.

Underlying free cash flow of £160m was significantly ahead of expectations (FY23: £75m), despite an accelerated £35 m pension deficit repair contribution. Strong operational performance and the timing benefits of early customer receipts were the key drivers, resulting in an operating cash conversion ratio of 136% (FY23: 173%), or 98% excluding the impact of the Type 31 loss (FY23: 110%).

Strong balance sheet: Net debt at 31 March 2024 was £435m, a reduction of £129m driven by strong cash generation. Net debt excluding leases was £211m (FY23: £346m). On a covenant basis, net debt to EBITDA decreased to 0.8x (FY23: 1.5x).

Pension deficit, on an actuarial technical provision basis, reduced to c.£200m (FY23: c.£400m)

Long-term funding plans have been agreed with two of our three large pension schemes, the Babcock International Group Pension Scheme (BIGPS) and the Devonport Royal Dockyard Pension Scheme (DRDPS).

FY24 included a £35 m accelerated pension deficit repair payment to the BIGPS, which has now reached self-sufficiency.

As a result, we expect the total Group pension deficit repair payments to reduce to around £40m per annum (previously £65m per annum).

Type 31 update

The outturn over the lifetime of the contract has deteriorated by £90m, which has been fully recognised in FY24

The cash impact of this loss is expected to be realised over the remainder of the contract

The programme has been restructured following a detailed operational review to protect the in-service date

Excluded from the loss are the benefits from some planned productivity efficiencies and expected continuation of the Type 31 programme

Signed in 2019, the Type 31 contract for five ships is the last material legacy onerous contract the Group is managing. During FY24, we have made progress on the programme with the superstructure of the first ship almost complete. Work is also progressing on the second ship with the keel laid and the first double bottom blocks in the build cradle. In addition, during the year we have settled the Dispute Resolution Process with the customer, which has enabled the restructuring of the programme to drive efficiency and to protect the in-service date.

Overall estimated programme costs have increased due to the maturing of the design and increase in the forecast cost of labour. The increase in the cost of labour in the market available to Rosyth is forecast to be higher than CPI, the indexation within the Type 31 contract. These cost increases cause the total contract outturn to deteriorate by £90m, which has been fully recognised in FY24. The cash impact of the loss is expected to be realised over the remaining five years of the programme.

During the year we initiated an operational improvement programme to challenge all aspects of the contract, including a significant focus on cost drivers and financial modelling, supported by external consultants. This has been led by a new management team with enhanced capability to restructure the programme, and they are supported by the experienced leaders in the new Group functions. Our operational improvement programme is facilitated by the fact that the design is now more mature. Although this has increased the volume of work, the design maturity has allowed us to target improvements in productivity and ongoing support costs as well as benefitting prospective export sales of our Arrowhead 140 design.

The Audit Committee has reviewed the programme team’s plans to deliver additional programme benefits from improvements in productivity and further work relating to the continuation of the T31 contract. Some of these benefits have not been taken into account in the loss given the evidential bar required to recognise future benefits, although we do expect the benefits to be delivered over the course of the programme.

Preliminary results

The external audit is substantially complete in all areas except the finalisation of Type 31. Subject to completion of the audit process, we expect to announce our FY24 preliminary results on 26 July 2024.

Notes

  1. Revenue

FY23 included £422m from disposals and a £12m one-off credit (revenue and profit)

Excluding these, FY23 revenue was £4,005m

  1. Underlying operating profit

FY24 underlying operating profit included a £90m loss on Type 31 and a profit on property disposal of £17m

Excluding these, FY24 underlying operating profit was £311m

FY23 underlying operating profit included a £100m loss on Type 31, a one-off accounting credit (£12m as above), and £1m operating profit contribution from businesses divested in the year

Excluding these, FY23 underlying operating profit was £265m

  1. Underlying operating margin

Excluding the loss on Type 31 and profit on property disposal, FY24 underlying margin was 7.0%

Excluding disposals and one-off credit, FY23 underlying operating margin, on an ongoing basis, was 6.6%

The FY23 figures were the basis of our medium-term guidance, outlined in the FY23 results.

  1. Full year dividend

The full year dividend reflects the HY24 interim dividend of 1.7 pence (FY23: nil) and a FY24 proposed final dividend of 3.3 pence (FY23: nil)

 

17 Jul 24. UK’s Babcock posts 34% jump in annual profit. British engineering company Babcock (BAB.L)posted a 34% jump in its annual profit on Wednesday, helped by strong operating performance in nuclear, land and aviation sectors.

The company said underlying operating profit for the full year ended March 31 was £237.8m ($308.5m), and reiterated its medium-term guidance.

Babcock said its year-end net debt stood at £435m, a reduction of £129m from the year-ago period, driven by strong cash generation.

16 Jul 24.

 

12 Jul 24. SilencerCo Announces Acquisition of ZEV Technologies.

A big piece of industry news just dropped with the recent acquisition of ZEV Technologies by SilencerCo. The pending transaction brings “certain business operations” of ZEV under the SilencerCo banner.

SilencerCo Acquires ZEV Technologies

“We are very happy to align ourselves with such an innovative company as Zev Technologies,” said Jonathon Shults, SilencerCo CEO. “We look forward to the launch of the FDP-9/FDC-9 in conjunction with Magpul and anticipate that product launch taking place later this year.”

For the uninitiated, ZEV Technologies manufacturers firearms and firearm parts. The company’s Glock-pattern builds comprise some of the finest sport and EDC pistols in the business. ZEV helped pioneer Glock customization with upgraded slides, triggers, barrels and ultimately the OZ9 pistol family. Then ZEV and Magpul collaborated on the wildly popular Folding Defensive Pistol (FDP-9) and Folding Defense Carbine (FDC-9).

Meanwhile, SilencerCo continues its rise into one of the most influential suppressor companies in the industry. It expects the deal to finalize before the end of July. The company plans to continue placing emphasis on the ZEV brand as a manufacturer rather than an OEM supplier of components to other builders. SilencerCo stated it plans to maintain the ZEV headquarters in Centralia, Washington.

“Our team is excited for the future of Zev under this new acquisition,” said Taylor Goode, Zev Technologies President. “We look forward to working closely with SilencerCo to enhance both of our brands and product lines.”

For more info, visit zevtechnologies.com or silencerco.com.

GAT Editor’s Take: If we are reading the tea leaves correctly here, and we think we are, this acquisition is about to blow ZEV up even further in the consciousness of shooters everywhere. Trending away from OEM and shifting to hyper-focused on building the ZEV brand, look for more ZEV firearms and components to drop in the near future. Make no mistake, ZEV knows the Glock pattern, and their Magpul collab keeps us all eagerly waiting for more. This one could lead to some big moves in the competition, EDC and shooting spaces.

(Source: https://gatdaily.com/)

 

16 Jul 24. KBR to Acquire LinQuest, Expanding Technical Capabilities Across Air, Space and Digital Domains.

  • KBR entered into a definitive agreement to acquire LinQuest Corporation, adding digital integration capabilities for national security customers
  • Acquisition expands opportunities for revenue growth, meeting customer and market demands
  • Enhances KBR’s position in high-end, technically differentiated services across space, air dominance and battlespace missions

KBR (NYSE: KBR) announced today it has entered into a definitive agreement to acquire LinQuest Corporation. LinQuest is an engineering, data analytics and digital integration company with a legacy of solving complex technical challenges for national security missions. They develop and integrate advanced technology solutions to meet the most challenging demands across space, air dominance and connected battlespace missions, including advanced AI and machine learning capabilities. LinQuest is a leader in supporting the U.S. Space Force, U.S. Air Force and other U.S. Department of Defense and intelligence agencies.

The acquisition of LinQuest is an important accelerator to KBR’s strategy of furthering the delivery of high-end technology, expertise and mission capabilities. The two companies have highly complementary capabilities creating synergies across the portfolio of solutions that will drive new revenue growth. Additionally, over 74% of LinQuest’s 1,500+ employees hold security clearances, which will strengthen KBR’s support for strategic U.S. government clients to meet the demands of the rapidly changing defense and national security sector.

“LinQuest is an innovator in national security, space and technology solutions. Their talented people deliver high-end, technically and digitally differentiated services that are complementary to KBR,” said Stuart Bradie, KBR President and Chief Executive Officer. “LinQuest is a terrific company, and the revenue synergy opportunities are exciting. Our values are strongly aligned, and we are delighted to welcome this talented team to the KBR family.”

The transaction is expected to be accretive to adjusted EPS, which excludes amortization from purchased intangible assets and non-recurring transaction costs. The transaction has been unanimously approved by the KBR Board of Directors and is subject to certain regulatory approvals prior to closing.

The purchase price is $737m, inclusive of modest expected tax benefits, which represents a 2025 FY Adj. EBITDA multiple of just over 11x. KBR will utilize a combination of cash and existing debt capacity to fund the transaction, which is expected to close in Q3 or Q4 this year.

Arena Strategic Advisors supported financial due diligence and Gibson, Dunn & Crutcher LLP acted as legal advisor to KBR for the transaction.

Baird acted as the exclusive financial advisor to LinQuest in connection with the transaction. Kirkland & Ellis LLP acted as legal advisor to LinQuest.

Supplemental information is available at investors.kbr.com.

About KBR

We deliver science, technology and engineering solutions to governments and companies around the world. KBR employs approximately 35,000 people worldwide with customers in more than 80 countries and operations in over 30 countries.

KBR is proud to work with its customers across the globe to provide technology, value-added services, and long-term operations and maintenance services to ensure consistent delivery with predictable results. At KBR, We Deliver.

Visit www.kbr.com

About LinQuest Corporation

LinQuest is a national security space leader that enables defense and intelligence missions through advanced digital transformation solutions and the development, integration, and operation of mission-critical systems. With a legacy that spans 47 years, LinQuest’s 1,500-plus team members work side-by-side with their customers to solve their most complex technical challenges, drive innovation, and deliver fielded solutions for national security missions. More information can be found on the company’s website at www.linquest.com.

 

15 Jul 24. Shore Capital has published a research note on Cohort’s Contract Award this morning. See a summary of the key points below and the full note attached.

Robin Speakman, Equity Analyst, said: “The defence and security technology specialist has announced this morning that, following a competitive tender, its subsidiary EID (in its Communications and Intelligence Division) has signed a contract with the NATO Communications and Information Agency (NCI Agency) to supply the Portuguese Army with a Tactical Deployable Communication and Information System (TDCIS). The value of the signed contract is €33 m with delivery over a three-year period”.

Strong Order Book: This win further extends Cohort’s growing order book for FY25F. At the FY trading update stage in May (YE April) Cohort confirmed a book to bill ratio of 1.9x for FY24F with a very strong order intake of c.£387m (2023: £218m) through the year, resulting in another record closing order book of c.£518m (30  April  2023:  £329m) including the £135m Royal Navy countermeasures contract awarded to SEA in March 2024. This order book already underpins FY25F revenues of c.£180m (90% of our current forecast revenues for the year).

Valuation/view: We eagerly await the full year results to update our model for the full extent of recent wins and the outlook. Cohort offers a solid and growing order book with a robust book-to-bill ratio (set to continue), a positive industrial backdrop in defence and security markets, and a strategic supplier position with clients, all point positively to a premium valuation being sustained for Cohort, in our view.). In March we set a 30% upgraded interim valuation target of 805p which has pleasingly being reached. On our current FY25F expectations, Cohort trades on a PER of 19.9x (EV/EBITDA 12.0x).We sense much more delivery and value creation to come and feel comfortable in sustaining our BUY case. This report is prepared solely for the use of Shore Capital Press/Media Support Shore Capital Press/Media Support.

 

Jul 24. Rafael Advanced Defense Systems Ltd. has been upgraded to an ‘A’ credit rating by S&P Global Ratings, with a stable outlook. This significant achievement underscores Rafael’s robust operating performance, resilient profitability, and strong competitive position within the aerospace and defense industry.

Key Highlights:

  • Enhanced Competitive Position: S&P Global Ratings has reassessed Rafael’s business risk profile from ‘fair’ to ‘satisfactory,’ reflecting our strengthened market position and the increasing demand for our cutting-edge defense solutions.

“Our view of Rafael’s competitive advantage and improved profitability underpins our reassessment of its business risk profile. Rafael’s improving competitive advantage and high demand for many of its products and services mean it is well placed to capture customer demand, both from the Israeli Ministry of Defense and from overseas governments and militaries.”

– S&P Global Ratings Report

  • Strong Financial Health: Our financial risk profile has been upgraded from ‘modest’ to ‘minimal,’ underpinned by a solid net cash position. Rafael’s cash balances are projected to exceed $4bn through 2024, further cementing our financial stability.
  • Growing Order Backlog: Rafael boasts an impressive order backlog exceeding ILS 50bn (approximately USD 13 bn), representing about three years of revenue. This surge is driven by heightened defense budgets and robust demand for our advanced defense systems.
  • Positive Outlook: The stable outlook from S&P Global Ratings is based on the expectation of continued strong demand for Rafael’s products and services, bolstered by rising government defense budgets. This trend is anticipated to support our order backlog and financial performance over the next two years.

Dr. Yuval Steinitz, Chairman of Rafael: “We are honored to receive the credit rating upgrade by the world-leading rating agency S&P especially during such a challenging time for the country and society as a whole. Here, again, we see that also economically Rafael can achieve the impossible. In the heat of the tireless efforts invested by the company during the “Swords of Iron” war and despite the extensive reserve enlistment from its ranks, Rafael continues to grow consistently with improvements of tens and hundreds of percent compared to previous years in most parameters. Rafael’s employees and senior directors work with determination, around the clock, especially during this wartime, to realize the company’s vision and be a significant pillar in the security of the State of Israel. I am pleased that these accomplishments are reflected in S&P’s upgraded rating, showcasing trust in Rafael’s strength and financial stability.”

Rafael CEO Yoav Tourgeman: “Rafael maintains its growth trajectory, demonstrating excellent financial results and stability. The S&P rating, the highest ever awarded to an Israeli company, is a testament to this. The year 2023 was a record year for Rafael, marked by technological breakthroughs and robust business activity, a trend we continue into 2024. Since the onset of the war, Rafael’s systems have been saving lives daily and making a decisive contribution to the ‘Swords of Iron’ efforts. This success is due to the unwavering dedication of Rafael’s employees and our commitment to staying at the forefront of technology, turning the impossible into possible. In 2023, Rafael seized important opportunities globally, securing significant deals like the historic sale of the David’s Sling to Finland and other major contracts.”

 

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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

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