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01 Aug 24. AMETEK, Inc. (NYSE: AME) today announced its financial results for the second quarter ended June 30, 2024.

AMETEK’s second quarter 2024 sales were $1.73bn, a 5% increase over the second quarter of 2023. Operating income increased 7% to a record $447.5m and operating margins were 25.8%, up 40 basis points from the second quarter of 2023. Operating cash flow in the quarter was $381.4m, up 14% versus the prior year.

On a GAAP basis, second quarter earnings per diluted share were $1.45. Adjusted earnings in the quarter were $1.66 per diluted share, up 6% from the second quarter of 2023. Adjusted earnings adds back non-cash, after-tax, acquisition-related intangible amortization of $0.21 per diluted share. A reconciliation of reported GAAP results to adjusted results is included in the financial tables accompanying this release and on the AMETEK website.

“Our operating performance in the second quarter was strong with outstanding core margin expansion, record operating income and EBITDA, and earnings growth ahead of our expectations,” commented David A. Zapico, AMETEK Chairman and Chief Executive Officer. “We also generated excellent cash flows, with free cash flow up 17% and free cash flow conversion of 107% in the quarter. These results reflect the strength and flexibility of our operating model as well as our team’s ability to successfully manage through a slower growth environment.”

Electronic Instruments Group (EIG)

EIG sales in the second quarter were $1.15bn, up 2% from the same quarter in 2023. EIG’s operating income in the quarter increased 14% to $349.9 m with operating income margins of 30.3%, an increase of 320 basis points compared to the second quarter of 2023.

“EIG delivered strong results this quarter with excellent operating performance leading to outstanding profit growth and robust margin expansion,” stated Mr. Zapico. “Our EIG businesses are well positioned across a diverse set of attractive market segments.”

Electromechanical Group (EMG)

EMG sales in the second quarter were a record $581.2m, up 14% from the second quarter of 2023. EMG’s second quarter operating income was $123.1 m, while operating income margins were 21.2% in the quarter.

“EMG continued to experience headwinds in the quarter from the normalization of inventory levels across our OEM customer base,” stated Mr. Zapico. “Despite these headwinds, our teams delivered solid operating performance with sequential margins improving 50 basis points versus the first quarter’s adjusted margins.”

2024 Outlook

“Our operating results through the first half of 2024 have been solid against the backdrop of a slower growth environment. We now expect the impact of inventory normalization within our OEM customer base will continue through the balance of 2024. Additionally, customers are turning more cautious leading to some short-term delays in project spending,” stated Mr. Zapico.

“As a result, we are adjusting our sales and earnings guidance for the year,” continued Mr. Zapico. “We remain confident in our ability to successfully manage through these near-term demand headwinds, deliver strong operating performance and cash flows, and ensure AMETEK is well positioned for strong growth and profitability.”

“For 2024, we now expect overall sales to be up between 5% and 7% compared to 2023. Adjusted earnings per diluted share, including a lower tax rate in the fourth quarter, are now expected to be in the range of $6.70 to $6.80, up 5% to 7% over the comparable basis for 2023,” he added.

“For the third quarter of 2024, overall sales are expected to be up mid-single digits on a percentage basis compared to the same period last year. Adjusted earnings in the quarter are anticipated to be in the range of $1.60 to $1.62, down 1% to 2% compared to the third quarter of 2023,” concluded Mr. Zapico. (Source: PR Newswire)

01 Aug 24. Averna, a leading global test & quality solutions provider, announced the acquisition of Global Equipment Services, Inc. (GES), a division of Kimball Electronics, Inc. (Nasdaq: KE) specialized in automation, test and measurement solutions for industries such as consumer electronics, semiconductor and medical devices.

Averna Expands its Asian and North American Footprint with the Acquisition of Global Equipment Services, Inc. from Kimball Electronics, Inc.

This strategic acquisition combines both companies’ strengths and footprint to create one of the largest independent system integrators in test automation with 1,200 employees across 20 offices within 11 countries. New Averna locations will include Ho Chi Minh, Vietnam; Suzhou, China; Trivandrum, India; Tokyo, Japan and San Jose, United States with technical support in the Philippines, Taiwan, South Korea, Malaysia, and Thailand.

“As our global customers’ operations spread across all continents, it was important for us to join forces with the right team and establish a significant presence in diverse geographies in Asia,” explains François Rainville, President and CEO of Averna. “With this acquisition, Averna now has a solid footprint in the Americas, Europe and Asia where the majority of our customers’ research & development and manufacturing activities are taking place. Combine that with the in-depth automation, vision and test engineering capabilities of the team and their impressive client database, GES was clearly the right fit.”

GES customers include both Original Equipment Manufacturers (OEMs) as well as their Contract Manufacturers (CMs). Core technical capabilities include optical metrology and defect detection, image processing/software, and micro-alignment of components/parts for products. GES offers a wide scope of automation and inspection equipment, including functional testing, cosmetic inspection, and assembly applications across all markets.

“Being part of Kimball Electronics, we have been exposed to many large-scale projects.” said Chris Thyen former Vice President, New Platforms at GES and now Vice-President, Averna APAC. “By joining forces with Averna, not only will we be exposed to a new landscape of test, but we can share our expertise in different areas of quality innovation.”

This acquisition solidifies Averna as a leader in test, measurement, and quality. By adding over 160,000 ft² of new manufacturing space, including class 100K and 10K clean rooms, Averna is solidly prepared to take on large customer challenges, anywhere in the world. (Source: PR Newswire)

01 Aug 24. Behrman Capital, a private equity investment firm based in New York, today announced that it has entered into a definitive agreement to sell its portfolio company kSARIA Holdings (“kSARIA” or “the company”), a leading producer and supplier of mission-critical connectivity solutions for the aerospace and defense end markets, to ITT Inc. (“ITT”, NYSE: ITT) in a transaction valued at approximately $475m.

Founded in 2000, kSARIA brings extensive process technology and engineering expertise to the high-reliability connectivity industry, offering interconnect products and services with superior performance, quality and value to the Mil/Aero end market. The Company’s products support applications for avionics, sensors, communications and networking on coveted platforms with defense prime contractors and commercial aerospace leaders. The majority of the Company’s positions are sole or primary source. kSARIA is also the only provider in its space offering a combination of ruggedized fiber optic and electrical solutions with complementary service offerings. kSARIA’s proprietary engineering and manufacturing capabilities in both fiber and electrical interconnect technologies enable it to deliver mission-critical, engineered products which must survive and function in harsh environments.

“We are incredibly proud of kSARIA’s remarkable growth and achievements during our ownership,” said Grant Behrman, Managing Partner at Behrman Capital. “The four add-on acquisitions consummated by the Company have created a highly differentiated market leader in high-reliability connectivity solutions for Mil/Aero customers. We believe the business is exceptionally well-positioned for further growth under its new ownership and we commend Tony Christopher and the management team for their innovative leadership, wishing them success in the future as part of ITT.”

After partnering with the kSARIA management team in 2018 to acquire the Company, Behrman has pursued a wide range of strategic initiatives. These include four strategic add-on acquisitions, geographic expansion in the US and internationally, and the achievement of supplier positions on high-growth, next-generation defense and aerospace platforms that will have decades of longevity.

“Behrman Capital has been an excellent partner to the kSARIA team,” said Tony Christopher, kSARIA’s Chief Executive Officer. “Their vision for the Company’s growth strategy and approach to due diligence on acquisition candidates added a tremendous amount of strategic value that enabled us to offer an increasingly deep portfolio of highly customized connectivity solutions to our customers, who require the highest quality products to meet their mission-critical needs.”

The transaction is expected to close before the end of the third quarter of 2024.

For kSARIA, Guggenheim Securities, LLC and BMO Capital Markets Corp. served as financial advisors and Goodwin Procter LLP served as legal advisor.

About Behrman Capital

Based in New York City, Behrman Capital was founded in 1991 by Grant G. and Darryl G. Behrman. The firm invests in management buyouts, leveraged buildups and recapitalizations of established growth businesses. The company’s investments are focused in three industries: Defense and Aerospace, Healthcare, and Specialty Industrials. The firm has raised $4.1bn since inception and is currently investing out of its seventh fund. For more information, please visit http://www.behrmancap.com.

About kSARIA

kSARIA, based in Hudson, New Hampshire, offers complete interconnect solutions for mission critical applications with unsurpassed quality and performance. kSARIA offers unmatched advantages for all aspects of Mil/Aero connectivity solutions from cable assembly design, connector products, fabrication, installation, training, and logistics management. Whether it is optical fiber, copper, RF or hybrid cable assemblies, kSARIA has the technology, expertise, and an end-to-end approach to optimize solutions for customers. For more information, please visit www.ksaria.com. (Source: PR Newswire)

01 Aug 24. Electron Energy Corporation (“EEC”) has joined Magnetic Holdings, LLC, the parent company of Dexter Magnetic Technologies (“Dexter”) and Magnetic Component Engineering (“MCE”). Magnetic Holdings is a portfolio company of Tinicum.

The Walmer family, who founded EEC as the world’s first manufacturer of samarium cobalt magnets in 1970, retained a significant minority interest in Magnetic Holdings, and Michael Walmer, its Chairman and CEO, joined the Magnetic Holdings board of directors. Financial terms of the transaction were not disclosed.

The transaction creates a group of leading permanent magnet firms, each with unique and complementary capabilities to solve customers’ most demanding challenges. The businesses of Magnetic Holdings collectively have nearly 500 employees, and over 200,000 square feet of manufacturing space, serving critical applications for aerospace, defense, medical, semiconductor, energy, and industrial customers.

The companies of Magnetic Holdings will collaborate to provide integrated solutions, utilizing the most technically advanced raw materials, world-class magnet fabrication and assembly capabilities, and expertise in designing and developing customized high-performance motors and electromechanical components, all supported by one of the largest technical engineering and commercial teams in the industry. Moreover, Magnetic Holdings now has four highly capable facilities in three distinct locations and a vertically integrated manufacturing process, creating a robust and resilient supply chain.

Magnetic Holdings is backed by Tinicum, which has over $2.4bn of committed capital, providing the financial, operational, and strategic resources to grow and the stability that comes from its long-term ownership philosophy.

Mr. Walmer stated, “In 54 years, EEC has grown from two people with a great vision and little resources to a team of 150 committed and talented individuals serving our specialized markets with strength. EEC will continue to find new opportunities to do what has never been done before in support of space exploration, aviation, defense, medical and energy initiatives. Our growth will be enhanced by this new, dynamic relationship with these strong partners. This growth enables EEC to keep pace with increasing vital customer demand, providing continual purposeful work for our employees.”

He continued, “After exploring partnerships with firms that are also rooted in and appreciate the advantages of our family-run culture, we found one that stands out as extremely well aligned with our values: Tinicum. Both Tinicum and EEC are led by their founding families, ensuring a continuation of vision for the future and legacy for the long term. Moreover, Magnetic Holdings now features three of the strongest, most entrepreneurial magnet companies in the United States. Together, each company will benefit from collaboration within Magnetic Holdings, the strength and scale of the larger enterprise, and the capital resources of Tinicum, while also maintaining agility and vitality in each of our respective markets. Based on our talent and creative spark, we know that EEC will continue to engineer solutions for a healthy, secure nation and for the challenges of a dynamic world for generations to come.”

Joe Stupfel, CEO of Magnetic Holdings, stated, “We are thrilled to join forces with EEC, a firm whose capabilities, employees, and leadership we hold in the highest regard. We are excited to now be able to offer our customers a comprehensive solution—unique in the magnetics industry—with the ability to design and produce custom samarium cobalt formulations, manufacture magnetics with world class speed, precision, and quality, and engineer, design and build assemblies and motors customized to customer applications.”

Stupfel added, “Our employees are our most important asset. Investing in their careers and personal development not only benefits them but increases capabilities of our businesses. The larger size of our business creates opportunities for all the employees of Dexter, EEC, and MCE to grow. We strive to attract and retain the best talent in the magnetics industry and to be the employer of choice in each market in which we operate.”

Rich Dosik, partner at Tinicum, stated, “We are thrilled to partner with the Walmer family and the team at EEC, and we are honored that they have entrusted us with their business. We have the utmost respect and admiration for EEC. As we have done at both Dexter and MCE, we are excited to continue to make significant investments into EEC to help them grow as we build Magnetic Holdings for the long term.”

About EEC

EEC is an expert developer and leading American producer of rare earth magnets serving the global aerospace, defense, energy, medical and semiconductor markets. Founded in 1970 by Marlin Walmer, EEC is headquartered in Pennsylvania and is the only vertically integrated American manufacturer of DFARS- and ITAR-compliant samarium cobalt magnets. EEC’s ability to control material compositions allows for customization and precise control of magnetic properties. Engineers at EEC collaborate with customers to devise solutions and enable applications that were previously not possible. For more information about EEC, visit www.electronenergy.com.

About Dexter

Dexter provides specialized magnetic components and assemblies for use in demanding applications in the medical, aerospace, defense, semiconductor manufacturing, oil and gas, and industrial end markets. Dexter has been solving complex customer challenges since 1951 and manufactures its products at its headquarters in Elk Grove Village, Illinois. Dexter manufactures DFARS- and ITAR-compliant products and holds AS9100D, ISO13485, and ISO9001 certifications. For more information about Dexter, visit www.dextermag.com.

About MCE

MCE manufactures permanent magnets and magnet assemblies for the most demanding applications for aerospace, defense, medical, and industrial technology customers. MCE manufactures DFARS- and ITAR-compliant products and holds AS9100D and ISO9001 certifications. For more information about MCE, visit www.mceproducts.com.

About Tinicum

Tinicum, founded in 1974 as a family investment office, is a private partnership that manages a diversified group of industrial manufacturing, distribution, and technology companies. Based in New York, Tinicum also has offices in San Francisco, Houston, and Frankfurt. For more information about Tinicum, visit www.tinicum.com. (Source: PR Newswire)

01 Aug 24. Reticulate Micro, Inc. (“Reticulate Micro,” “Reticulate” or the “Company”), a commercial and defense technology company dedicated to delivering trusted and resilient communications over any transport and in any environment, has launched its Regulation A stock offering to raise up to $10m (the “Reg A Offering”) to support Reticulate’s product and market launch efforts as a leading provider of video compression and tactical and SATCOM management solutions. Its flagship product, VAST™, is designed to enable ultra-efficient streaming video and situational awareness in bandwidth-challenged environments.

Reticulate’s offering was qualified with the Securities and Exchange Commission (“SEC”) this week and allows anyone to now invest in the Company. The Reg A Offering has an offering price of $3.50 per unit. Each unit includes one share of the Company’s Class A Common Stock and one warrant to purchase one share of the Company’s Class A Common Stock at an exercise price of $5.50 per share. The minimum investment is $700 for 200 units and is open to all investors.

The lead selling agents for the transaction include Boustead Securities, LLC, a leading full-service investment banking firm and licensed FINRA member, and Digital Offering LLC, a next-generation investment bank focused on technology and innovation and helping high-quality private and public growth companies access U.S. capital markets.

“We are delighted to launch our capital raise with such an experienced investment banking team who share our vision to democratize our offering to a broad investment pool,” said Michael Chermak, Executive Chairman of Reticulate Micro.

Reticulate will utilize the DealMaker platform which allows the public to invest directly in Reticulate’s stock: https://invest.reticulate.io

The Company plans to use the proceeds from the Reg A Offering to scale sales and marketing as well as operations, invest in new product development, and expand its IP portfolio.

“We are excited to leverage the funds from our Reg A Offering to accelerate the development and delivery of our cutting-edge VAST™ video compression technology, ensuring we stay at the forefront of innovation in national security, healthcare, and critical infrastructure,” said Joshua Cryer, President and CEO of Reticulate Micro.

Investors can receive additional information on the offering either on Reticulate’s investor page at https://reticulate.io/investors/ or via email at .

About Reticulate Micro, Inc.

Reticulate Micro, Inc., with headquarters in Palm Bay, Florida, is a commercial and defense technology company dedicated to delivering trusted and resilient communications over any transport and in any environment. Reticulate is building one of the world’s first post-quantum-encrypted open-systems platforms for robust video streaming, simplified terminal management and satellite mobile connectivity in austere environments and diverse orbital regimes. Serving the defense, mobility, broadcasting, enterprise infrastructure monitoring and security sectors, Reticulate Micro and its newest business segment Reticulate Space embrace open standards across its software and product offerings. (Source: PR Newswire)

01 Aug 24. MACOM Reports Fiscal Third Quarter 2024 Financial Results. MACOM Technology Solutions Holdings, Inc. (“MACOM”) (Nasdaq: MTSI), a leading supplier of semiconductor products, today announced its financial results for its fiscal third quarter ended June 28, 2024.

Third Quarter Fiscal Year 2024 GAAP Results

Revenue was $190.5m, an increase of 28.3%, compared to $148.5m in the previous year fiscal third quarter and an increase of 5.1% compared to $181.2m in the prior fiscal quarter;
Gross margin was 53.2%, compared to 58.0% in the previous year fiscal third quarter and 52.5% in the prior fiscal quarter;
Income from operations was $19.7m, or 10.4% of revenue, compared to income from operations of $17.3m, or 11.7% of revenue, in the previous year fiscal third quarter and income from operations of $15.4m, or 8.5% of revenue, in the prior fiscal quarter; and
Net income was $19.9m, or $0.27 per diluted share, compared to net income of $11.9m, or $0.17 per diluted share, in the previous year fiscal third quarter and net income of $15.0m, or $0.20 per diluted share, in the prior fiscal quarter.

Third Quarter Fiscal Year 2024 Adjusted Non-GAAP Results

Adjusted gross margin was 57.5%, compared to 60.1% in the previous year fiscal third quarter and 57.1% in the prior fiscal quarter;
Adjusted income from operations was $45.6m, or 24.0% of revenue, compared to adjusted income from operations of $37.0m, or 24.9% of revenue, in the previous year fiscal third quarter and adjusted income from operations of $40.2m, or 22.2% of revenue, in the prior fiscal quarter; and
Adjusted net income was $48.9m, or $0.66 per diluted share, compared to adjusted net income of $38.5m, or $0.54 per diluted share, in the previous year fiscal third quarter and adjusted net income of $43.2m, or $0.59 per diluted share, in the prior fiscal quarter.

Management Commentary

“We remain focused on engineering excellence, financial performance and execution,” said Stephen G. Daly, President and Chief Executive Officer. “Our portfolio expansion strategy continues to create new business opportunities with our Industrial, Defense, Telecom and Data Center customers.”

Business Outlook

For the fiscal fourth quarter ending September 27, 2024, MACOM expects revenue to be in the range of $197m to $203m. Adjusted gross margin is expected to be between 57% and 59%, and adjusted earnings per diluted share is expected to be between $0.70 and $0.76 utilizing an anticipated non-GAAP income tax rate of 3% and 75.0 m fully diluted shares outstanding. (Source: BUSINESS WIRE)

01 Aug 24. nLIGHT, Inc. Announces Second Quarter 2024 Results. nLIGHT, Inc. (Nasdaq: LASR), a leading provider of high-power semiconductor and fiber lasers used in the industrial, microfabrication, and aerospace and defense markets, today reported financial results for the second quarter of 2024.

“Second quarter revenue of $50.5m was at the upper end of our guidance range and increased 13% compared to the first quarter”

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“Second quarter revenue of $50.5m was at the upper end of our guidance range and increased 13% compared to the first quarter,” commented Scott Keeney, nLIGHT’s President & Chief Executive Officer. “Strong execution in directed energy and in existing laser sensing programs resulted in 26% quarter-over-quarter growth in our Aerospace & Defense business. We also announced a strategic partnership with EOS, an industry leader in additive manufacturing. Additive manufacturing remains a key growth area for nLIGHT and we believe our work with EOS positions us even better for long-term growth in this market.”

Mr. Keeney continued, “Higher volumes and a more favorable mix of business during the second quarter enabled us to increase products gross margin to 30%, above the high end of our guidance range. We generated approximately $7m from cash flow from operations during the first six months of the year and we ended the quarter with approximately $115 m of cash and investments with no debt.”

Second Revenues of $50.5m for the second quarter of 2024 were down 5.2% compared to $53.3m for the second quarter of 2023. Gross margin was 23.5% for the second quarter of 2024 compared to 22.7% for the second quarter of 2023. GAAP net loss for the second quarter of 2024 was $11.7m, or $0.25 per diluted share, compared to net loss of $8.8m, or $0.19 per diluted share, for the second quarter of 2023. Non-GAAP net loss for the second quarter of 2024 was $4.6m, or $0.10 per diluted share, compared to non-GAAP net loss of $0.9m, or $0.02 per diluted share, for the second quarter of 2023. Reconciliations of the non-GAAP metrics presented here to the most directly comparable GAAP metric have been provided in the tables included at the end of this release.

Outlook

For the third quarter of 2024, nLIGHT expects revenues to be in the range of $53m to $58m. The midpoint of $55.5m includes Laser Products revenue of approximately $39.5m and Advanced Development revenue of approximately $16m. nLIGHT expects overall gross margin to be in the range of 22% to 26%, with Laser Products gross margin in the range of 28% to 32% and Advanced Development gross margin of approximately 8%. nLIGHT expects Adjusted EBITDA to be in the range of ($2)m to $1m. (Source: BUSINESS WIRE)

01 Aug 24. BigBear.ai Announces Second Quarter 2024 Results

Revenue up 3.4% to $39.8m compared to $38.5m in 2023, up 20% QoQ vs. 1Q24.
Cash balance of $72.3m as of June 30, 2024.
Announced upcoming exercises for ConductorOS distributed platform.
Signed MSA with Heathrow Airport to deliver advanced technologies to Europe’s largest airport.
Adjusting full-year 2024 revenue guidance to $165-$180m.

BigBear.ai Holdings, Inc. (NYSE: BBAI) (“BigBear.ai” or the “Company”), a leader in AI-powered decision intelligence solutions, today announced financial results for the second quarter of 2024 and issued an investor letter that has been posted to the Investor Relations section of the Company’s website.

“BigBear.ai continues to focus on our mission of creating clarity for the world’s most complex decisions by delivering enabling technology and expertise so our customers can take action faster. We are excited to share progress on the trajectory of our business as well as our ConductorOS distributed platform investment.”

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“ConductorOS is built to be lightweight, and works within any existing infrastructure to rapidly and seamlessly orchestrate sensor data and artificial intelligence models across highly diverse and distributed environments. We believe that ConductorOS will play a critical role in unlocking the last mile for artificial intelligence for our customers, and that BigBear.ai is uniquely positioned to deliver this capability,” said Mandy Long, CEO of BigBear.ai.

“I am also proud today as we announce signing a Master Service Agreement with Heathrow Airport – this is exactly the sort of win that demonstrates that the path we are on is the right one.”

“We also faced several challenges this quarter, particularly around the timing of certain customer awards and regulatory approvals. While we’re confident in our ability to achieve these milestones and execute on these opportunities, as a result of the current timing uncertainty we’ve experienced, we are adjusting our full year guidance down to $165 – $180 m,” she continued.

Financial Highlights

Revenue increased 3.4% to $39.8m for the second quarter of 2024, compared to $38.5m for the second quarter of 2023. The year-over-year increase was impacted by the planned wind-down of the Air Force EPASS program in mid-2023 offset by a full quarter of Pangiam revenue in the second quarter of 2024.
Gross margin increased to 27.8% in the second quarter of 2024 as compared to 23.3% in the second quarter of 2023, partially driven by higher margin solutions in the second quarter of 2024 compared to the second quarter of 2023.
Net loss of $11.7m for the second quarter of 2024, compared to $16.9m for the second quarter of 2023. The decrease in net loss was primarily driven by the change in fair value of warrants issued in 2024 of $11.0m, which was partially offset by higher non-recurring integration and strategic initiatives of $2.1m and higher equity-based compensation of $1.8m.
Non-GAAP Adjusted EBITDA* of $(3.7)m for the second quarter of 2024 compared to $(3.2)m for the second quarter of 2023, primarily driven by increased Recurring SG&A* of $2.7m, increased research and development expense of $0.6m net of capitalized software development costs, partially offset by higher gross margin driven by higher mix of higher margin solutions in the second quarter of 2024 compared to the second quarter of 2023.
SG&A of $23.4m for the second quarter of 2024 compared to $16.9 m for the second quarter of 2023, partially due to higher costs related to non-recurring integration and strategic initiatives.
Recurring SG&A* increased $2.7m from $13.1m in the second quarter of 2023, to $15.8m for the second quarter of 2024, which includes a full quarter of Pangiam’s operating results.
Ending backlog was $266m as of June 30, 2024.
The consolidated year-to-date results include results from Pangiam from the acquisition date of February 29th, 2024 to the end of June 2024.

*Refer to the “Non-GAAP Financial Measures” section in this press release.

Momentum

BigBear.ai to Showcase AI Orchestration at the Edge during DoD Technology Readiness Experimentation 2024 — BigBear.ai is slated to battle-test its ConductorOS distributed platform at the Department of Defense’s (DoD) RDER Technology Readiness Experimentation 2024 event in August. An exclusive live-fire, full-scale event, DoD’s T-REX-24-2 is an essential demonstration and evaluation event for advanced military technologies. BigBear.ai’s ConductorOS is a lightweight, distributed platform built to support the rapid adoption and integration of AI-powered solutions at the edge. Read the PR: https://rb.gy/h9d0sg
MSA with Heathrow Airport — Bigbear.ai entered into a Master Service Agreement with Heathrow to deliver advanced technologies at Europe’s largest airport. The partnership between BigBear.ai and Heathrow aims to improve security and operational effectiveness, while enhancing the overall experience for travelers through the UK’s hub airport.
BigBear.ai’s Troy workflow engine newest ‘Awardable’ product on DoD’s Tradewinds procurement platform — Troy, the company’s intelligent workflow engine designed to automate and accelerate the process of binary reverse engineering, has achieved “Awardable” status and is now available for procurement on the Chief Digital and Artificial Intelligence Office’s (CDAO) Tradewinds Solutions Marketplace. Troy is the latest of six BigBear.ai products now available on the Marketplace. Read the PR: https://rb.gy/shzjoi
EPP in Vancouver: Canada Place cruise terminal implements cutting-edge facial recognition technology for passenger processing — Vancouver Fraser Port Authority (VFPA), the federal agency mandated to enable Canada’s trade through the Port of Vancouver, selected BigBear.ai to enable deployment of the US Customs and Border Protection’s (CBP) new Enhanced Primary Processing (EPP) initiative. BigBear.ai’s technology provides passengers the EPP option, which fully automates the existing manual documentation identity verification checks for passengers boarding a cruise requiring admission into the United States. This is BigBear.ai’s first deployment of facial recognition technology for cruises in Canada.
Dallas Fort Worth International Airport (DFW) – BigBear.ai continues to expand its strategic partnership with DFW; most recently, working with DFW’s Terminal Experience team to deploy Enhanced Passenger Processing for use by US CBP. BigBear.ai’s VeriScan enables the expedited screening of returning US citizens, significantly reducing passenger processing times. (Source: BUSINESS WIRE)

01 Aug 24. Astronics Corporation Reports 14% Growth in Sales in 2024 Second Quarter

Sales grew 14% to $198.1m in the quarter
Operating income increased to $7.6m in the quarter, or 3.8% of sales
Achieved net income for the quarter of $1.5m, or $0.04 per diluted share
Adjusted EBITDA1 grew 28% to $20.2m, or 10.2% of sales, an increase of $4.4m over the second quarter of the prior year
Bookings in the quarter were $219.0 m, driving a record backlog of $633.4m with book to bill ratio of 1.11x
Aerospace achieved its tenth consecutive record backlog of $554.6m
Raising 2024 revenue guidance to $780m to $800m

Astronics Corporation (Nasdaq: ATRO) (“Astronics” or the “Company”), a leading supplier of advanced technologies and products to the global aerospace, defense, and other mission-critical industries, today reported financial results for the three and six months ended June 29, 2024.

Peter J. Gundermann, Chairman, President and Chief Executive Officer, commented, “Our second quarter confirmed success with increased demand, new program wins, and our ability to deliver product to our customers more efficiently and predictably. We exceeded our guidance with 14% growth in sales and improved profitability. Bookings were at a post-pandemic high, resulting in yet another record backlog. Our strong performance supports raising our expectations for the year. Looking beyond 2024, our market leadership positions, the significant programs that we have won recently, and our high level of innovation point to a long runway for delivering value and improved earnings power.”

Consolidated sales were up $23.7m, or 13.6%. Aerospace sales increased $18.6m and Test Systems sales increased $5.1m.

Consolidated operating income increased to $7.6m, compared with operating income of $2.4m in the prior-year period. Improved operating income reflects the operating leverage gained on higher sales volume, partially offset by $4.0m in bonus expense as the Company’s incentive programs resumed in 2024.

Consolidated sales and operating profit were negatively impacted by $3.5 m due to a revision of estimated costs to complete certain long-term mass transit contracts in the Test Systems segment.

Consolidated net income was $1.5m, or $0.04 per diluted share, measurably improved compared with the net loss of $12.0m, or $0.37 per diluted share, in the prior year. Tax benefit in the quarter was $0.3m, compared with tax expense of $8.1m in the prior year.

Consolidated adjusted EBITDA increased to $20.2m, or 10.2% of consolidated sales, compared with adjusted EBITDA of $15.8m, or 9.1% of consolidated sales, in the prior-year period primarily as a result of higher sales.

Bookings were $219.0m in the quarter resulting in a book-to-bill ratio of 1.11:1. For the trailing twelve months, bookings totaled $783.6m and the book-to-bill ratio was 1.06:1.

Aerospace Segment Review (refer to sales by market and segment data in accompanying tables)

Aerospace Second Quarter 2024 Results (compared with the prior-year period, unless noted otherwise)

Aerospace segment sales increased $18.6m, or 11.7%, to $176.9m. The improvement was driven by a 14.6% increase, or $16.3m, in Commercial Transport sales. Sales to this market were $128.4m, or 64.8% of consolidated sales in the quarter, compared with $112.1m, or 64.3% of consolidated sales in the second quarter of 2023. Higher airline spending drove increased demand.

Military Aircraft sales increased $11.2m, or 82.4%, to $24.8m, driven by progress on the FLRAA program as well as higher sales of lighting, safety and avionics products for military aircraft. General Aviation sales decreased $6.0m, or 24.0%, to $19.0m due to lower antenna and VVIP sales.

Aerospace segment operating profit of $19.3m grew 41% compared with operating profit of $13.7m in the same period last year. As a percent of sales, operating margin expanded to 10.9%, or 220 basis points over the prior-year period. Operating margin expansion reflects the leverage gained on higher volume and improving production efficiencies. Operating profit in the second quarter of 2024 was impacted by a $3.0m increase in litigation-related legal expenses and reserve adjustments related to an ongoing patent dispute and $2.9m related to the resumption of the Company’s incentive programs.

Aerospace bookings were $192.7m for a book-to-bill ratio of 1.09:1. Backlog for the Aerospace segment was a record $554.6m at quarter end.

Mr. Gundermann commented, “The strong demand for our Aerospace products and technologies continues to gain momentum as the aerospace industry recovers. Encouragingly, we are seeing strength across all of our Aerospace product lines. While our significant position in inflight entertainment and connectivity continues to grow, we are also seeing strong growth in our flight critical power and aircraft lighting thrusts. At the same time, we are continuing to become more efficient at delivering product reliably and predictably and the higher throughput is beginning to show the operating leverage that is inherent in our business.”

Test Systems Segment Review

Test Systems Second Quarter 2024 Results (compared with the prior-year period, unless noted otherwise)

Test Systems segment sales were $21.2m, up $5.1m. The improvement was driven by radio test sales following the award of the U.S. Army TS-4549/T contract, which contributed $7.2m in sales during the quarter. However, segment sales were negatively impacted by $3.5m due to a revision of estimated costs to complete certain long-term mass transit Test contracts. The revision resulted in reduced revenue recognized in the period due to lower estimates of the percentage of work completed on the programs.

Test Systems segment operating loss was $5.3m, compared with operating loss of $6.1m in the second quarter of 2023. The positive margin realized on the Army contract was offset by $3.5m related to the revision of estimated costs noted above. Additionally, Test Systems continues to be negatively affected by mix and under absorption of fixed costs due to current volume.

In April 2024, the Test Systems segment implemented restructuring initiatives to align the workforce and management structure with near-term revenue expectations and operational needs resulting in $0.7m in severance expense recognized during the second quarter. As part of the restructuring the Test business closed an operation in Kilgore, TX, simplifying its operations. We expect to realize annual savings of approximately $4m from these activities, beginning in the third quarter.

Bookings for the Test Systems segment in the quarter were $26.4m, including a $15.5m initial booking for the U.S. Army TS-4549/T radio test set program. The book-to-bill ratio was 1.25:1 for the quarter. Backlog was $78.8m at the end of the second quarter of 2024 compared with a backlog of $73.6m at the end of the previous quarter.

Mr. Gundermann commented, “The second quarter was an important reset for our Test business. We finally were awarded the U.S. Army’s radio test program known as 4549/T, which we expect will bring revenue of $215m or so over the next few years. We also completed a major restructuring of the business including the elimination of a peripheral manufacturing facility, our second of three such consolidations planned for the business. Finally, we performed our quarterly review of certain long-term mass transit contracts which resulted in an increase in the estimated costs to complete as the programs are not progressing as efficiently as expected. This was certainly a painful adjustment but, combined with the restructuring and the 4549/T award, we believe the business is set for a considerably brighter future.”

Liquidity and Financing

Capital expenditures in the quarter were $1.8m and $3.4m year-to-date. Net debt was $174.0m, up from $161.2m at December 31, 2023.

Cash used for operations in the second quarter of 2024 was primarily the result of a $16.7m increase in accounts receivable which was related to increased sales and the timing of shipments.

On July 11, 2024, the Company announced it had amended and expanded its revolving line of credit and refinanced its term loan. The refinancing provides improved liquidity, lower cash costs, and greater financial flexibility for the Company. The refinancing is comprised of an expanded asset-based line of credit and a reduced, lower-cost term loan.

The revolving line of credit was expanded from $115m to a $200m maximum subject to the borrowing base, with an interest rate of SOFR plus 2.5% to 3.0% varying based on the Company’s consolidated leverage ratio. At closing, Astronics had $128 m drawn on the facility.

The new $55 m term loan has an interest rate of SOFR plus 5.5% to 6.75% varying based on the Company’s consolidated leverage ratio. Cash amortization of the new term loan will be approximately $550,000 annually, down from the previous rate of approximately $9.0m.

The lower combined interest rate is expected to reduce interest expense by $2.0m annually. The new debt structure afforded the Company approximately $50m of available liquidity at closing, which was up from approximately $15m prior.

Third quarter 2024 expenses will include refinancing-related fees, the call premium on the previous term loan and the write-off of deferred financing costs related to the previous financing. These expenses in total are estimated to be $7.5m.

2024 Outlook

The Company is increasing its 2024 revenue guidance to $780m to $800m. The midpoint of this range would be a 15% increase over 2023 sales. Astronics considered the broad range of tailwinds affecting the business balanced against certain risks, including those associated with OEM production rates, in issuing its guidance.

The Company expects third quarter revenue to be in the range of $195m to $205m.

Backlog at the end of the second quarter was a record $633.4m, of which approximately $402.3m is expected to ship in 2024. Planned capital expenditures in 2024 are expected to be in the range of $17m to $22m.

Peter Gundermann commented, “We are making excellent progress as an organization, with first half 2024 sales up 15.8% and strong margin improvement. We believe the table is set for current trends to continue, and that 2024 will finish as a very strong year. Our innovative products are valued by our customers, we are executing on key wins after significant investments of time and money over the last few years, and we are regaining our operational stride which allows continued expansion of our margin profile and earnings.”

(Source: BUSINESS WIRE)

01 Aug 24. US navy shipbuilder Huntington Ingalls beats second-quarter estimates.

Huntington Ingalls on Thursday reported better-than-expected second-quarter results, as heightened global tensions drove up demand for aircraft carriers, amphibious assault ships and submarines.

The Virginia-based company reported a profit of $4.38 per share for the quarter ended June 30, ahead of analysts’ estimates of $3.62. Demand for submarines and aircraft carriers is surging, fueled by China’s expanding naval footprint and high global tensions.

Huntington Ingalls, the largest U.S. military shipbuilding company, saw a 6% rise in revenue to $2.98bn, compared with estimates of $2.84bn, according to LSEG data.

The company reaffirmed its annual outlook but raised its revenue forecast for the Mission Technologies segment, now seeing it at up to $2.8bn, compared with the previous range of $2.7bn to $2.75bn. (Source: Reuters)

01 Aug 24. Filtronic soars: revenue up 55% as profits explode.

Filtronic LON:FTC the AIM-listed electronic components business, published its full year results to end-March earlier this week, and the Durham-based company has had an excellent year.

Tipped as ‘One to Watch’ by The Armchair Trader back in February, Filtronic reported an increase in year-on-year revenue of 55.8% to GBP25.4m and the period saw earnings increase by 277% and operating profit up 1,700% to GBP3.6m.

Filtronic is a designer and manufacturer of products for the aerospace, defence, space and telecommunications infrastructure markets. Although Filtronic has been around since the 1980s as a defence contractor, before diversifying into telecommunications in the 1990s, the company has historically had quite a narrow and focussed client list, mainly government entities, especially in its defence portfolio.

Filtronic investing in growth

The electronic components business saw basic earnings per share increase from 0.22p/share to 1.45p/share, however Filtronic’s management decided that for reasons of long-term sustainability that any excess cash be retained in the business for investment in research and development to fund growth and therefore did not declare a dividend this year.

Filtronic has hoovered up a number of significant contracts in the past years, with the most significant a five-year partnership with Elon Musk’s SpaceX, where Filtronic will supply its Cerus solid state power amplifier. Jonathan Neale, Filtronic’s chairman notes: “Given the customer’s preference for vertical integration, this is a significant testament to our ability to design and deliver best in class technology.”

The company also won a GBP3.2m contract from the European Space Agency. Filtronic will develop a series of mmWave products for the next generation of the ESA’s lower earth orbit constellations and payload applications. Other big wins included radar contracts with BAE LON:BA. and QinetiQ LON:QQ. for a combined contract value of GBP6.5m.

Filtronic’s telecom business remains strong

In terms of telecoms, new orders came in from derivative products from OEMs (Original Equipment Manufacturers) and network providers, and on the design side Filtronic secured further work from the UK’s Defence Science and Technology Labs (DSTL) to design new radar products.

At the start of last month (1st July) Filtronic issued 113,880 new 1p shares as part of an exercise of options under the company’s share save plan. Filtronic opened trading today (1st August) at 66p. The company’s shares were up to 67.5p within the first few hours of trading. Over one-year Filtronic’s shares are up 295% and over the year-to-date up 210% with the AIM-listed company’s shares ranging between 14p and 80p over a 52-week period. The company has a market cap of GBP142m.

(Source: https://www.thearmchairtrader.com/)

31 Jul 24. L3Harris expands footprint with milestones in propulsion and EW. L3Harris Technologies is celebrating a year of achievements and growth, marked by advances in propulsion systems and a new Centre of Excellence for electronic warfare in Australia.

The launch of L3Harris’s Centre of Excellence for Electronic Warfare, the facility will enable the delivery of T4 and T7 robots to the ADF. Source: L3Harris

In a year of evolution, L3Harris Technologies has made steps, notably in its propulsion systems through Aerojet Rocketdyne and the recent inauguration of a Centre of Excellence (COE) for electronic warfare in Australia.

Aerojet Rocketdyne was the second largest proponent of the missile defence market at the time of the acquisition due to its dominant position within the rocket motors segment of the missile systems supply chain. GlobalData’s Thematic Intelligence on Missile Defence highlights how focusing on a niche, but an indispensable family of products in the broader missile defence market can prove profitable.

Christopher E. Kubasik, Chair and CEO of L3Harris, emphasised the importance of these advancements: “The high demand for missiles and the solid rocket motors that propel them makes our investment in Aerojet Rocketdyne even more crucial to our national security. We remain focused on helping meet that demand while strengthening the US defence industrial base.” The integration of solid rocket motors and propulsion systems has supported missile defence tests and space launches, including the missions of Vulcan and Starliner.

On the other side of the globe, L3Harris is investing in Australia by launching its COE for Electronic Warfare in Brisbane. This facility marks a step in L3Harris’s commitment to the Australian defence industry and the Indo-Pacific region. The COE will focus on electronic warfare technology to bolster local manufacturing capabilities.

Australian officials, including Jennifer Howard MP and Graham Perrett MP, highlighted the importance of this investment for Australia’s defence sector.” L3Harris’ new operations in Queensland will contribute to a vibrant and growing defence supply chain, with their investment helping them better support the needs of the Australian Defence Force and the Australian defence industry,” said Howard. The COE will support the design and integration of technologies, provide new job opportunities, and strengthen the sovereign industrial base.

L3Harris’s expansion into Australia aligns with its strategy to bring support and delivery centres closer to key defence partners, reducing turnaround times and enhancing local capabilities. Introducing T4 and T7 robots as part of the Land-154 programme further exemplifies this commitment, offering solutions for explosive device neutralisation.

L3Harris Technologies is advancing its propulsion systems in the US and expanding its global presence with new facilities and capabilities in Australia. These efforts reflect a strategy to enhance defence technology and support international defence needs. (Source: army-technology.com)

31 Jul 24. Luminar buys G&H’s laser module unit to expand chip business- CEO. Luminar Technologies, a maker of lidar sensors for self-driving cars, has purchased the optoelectronic components and laser modules business of Britain’s Gooch & Housego (G&H) to expand its semiconductor operation, its CEO said.

The Nasdaq-listed firm launched its semiconductor arm Luminar Semi last year based on the prior acquisition of three companies: laser manufacturer Freedom Photonics, custom chip design house Black Forest Engineering and photodetector firm Optogration.

Luminar Semi is breaking even and will further expand into aerospace and defence following the acquisition of the G&H unit, EM4, Luminar chief executive Austin Russell told Reuters.

“We have now over 100 active customers and programs across the board for Luminar Semiconductor,” the 29-year founder said in his first interview on Luminar’s chip business.

“Companies are leveraging the same IP and technology that we had first developed for our Lidar systems for the broader sensing industry,” he said.

Lidar, which stands for light detection and ranging, shoots out light pulses that are reflected off objects, allowing self-driving systems and driver-assistance software to gain a three-dimensional map of the road. Many self-driving companies and experts regard it as a crucial component, especially during low-light situations.

Russell declined to comment on the size of the deal, which was agreed in March, but G&H said that month that it had sold EM4 to a U.S. tech company in a deal worth up to $12 m without naming the buyer.

Clients for Luminar’s chip business range from the U.S Department of Defence and the National Aeronautics and Space Administration (NASA) to technology companies, Russell said. (Source: Google/https://wtaq.com/)

01 Aug 24. HARLAND & WOLFF: The struggling Aim-quoted Belfast-based shipbuilder agreed a new $25m loan to shore up its finances, parted ways with its chief executive, John Wood, scrapped plans for a fast ferry service between Penzance and the Isles of Scilly, and formally engaged Rothschild & Co to assess its strategic options.

The loss-making company acted after hopes of securing a £200 m bailout from taxpayers were dashed last week when the government rejected a request for UK Export Finance to underwrite fresh funding from a US hedge fund.

Harland & Wolff said it would focus on its core business in Belfast, Appledore, Methil and Arnish and wind down non-core businesses, such as the Scilly Isles ferry. The shares are suspended after the company failed to file audited accounts on time. (Source: The Times)

The GMB Union has welcomed a finance injection for Harland and Wolff, which was confirmed today

Matt Roberts, GMB National Officer, said: “GMB is pleased Harland and Wolff’s financing has been confirmed and received. Now the company can focus on its core business and what we know GMB members can deliver. Harland and Wolff’s four core sites across the UK remain crucial to our domestic sovereign capabilities in shipbuilding and renewables fabrication,”

01 Aug 24. BAE Systems plc Half-yearly Report 2024.

Charles Woodburn, Chief Executive, said: “Thanks to the outstanding efforts of our employees around the world, we delivered a strong operational and financial performance in the first half of the year, giving us confidence to increase our year-end guidance across all our key metrics. Working closely with our customers, we have maintained momentum on key strategic activities, including AUKUS and the Global Combat Air Programme. We also continued evolving our technology portfolio through strategic acquisitions and the ongoing integration of our new Space & Mission Systems business.

“Our order intake shows that demand for our products and services remains high and we are well positioned for sustained growth in the coming years. We will keep investing in new technologies, facilities and our people so that we can deliver on our record order backlog and help our government customers stay ahead in an uncertain world.”

As defined by Group

The 13%2 growth in sales reflects the ongoing strong programme performance across the portfolio and the acquisition of the Space & Mission Systems (SMS) business in February.
Underlying earnings before interest and tax (EBIT) has grown 13%2, reflecting the increase in sales combined with strong programme execution and the ongoing efforts of our internal efficiency initiatives.
Growth of 7%2 in underlying earnings per share (EPS) is after the increase in underlying net finance costs, incurred primarily as a result of the $4.8bn (£3.8bn) debt finance raised in March, and the increased tax rate.
Free cash flow was £219m, with the comparative period of £1,070m reflecting a high level of customer advances.

As derived from IFRS

The growth in revenue of 13% reflects the same strong operational performance across the portfolio.
Operating profit is up 5% as the growth in underlying EBIT is offset by the additional amortisation of intangible assets acquired with SMS.
The reduction in basic earnings per share on the prior period reflects the increased interest cost and the amortisation of intangibles acquired with SMS.

We monitor the underlying financial performance of the Group using alternative performance measures. These measures are not defined in International Financial Reporting Standards (IFRS) and therefore are considered to be non-GAAP (Generally Accepted Accounting Principles) measures. The relevant IFRS measures are presented where appropriate. The purposes and definitions of non-GAAP measures are provided in the Alternative performance measures section on page 46 in the full report.
Growth rates for sales, underlying EBIT and underlying EPS are on a constant currency basis (i.e. calculated by translating the results from entities in functional currencies other than pounds sterling for the period ended 30 June 2023 to pounds sterling at the average exchange rate of such currencies for the period ended 30 June 2024). The comparatives have not been restated. All other growth rates and year-on-year movements are on a reported currency basis.
Order backlog includes £2.2bn acquired with the SMS business in February.

Strategic progress

Alongside strong operational delivery, we continued to invest in our people, research & development (R&D) and capital expenditure, which underpins our growth outlook. During the first half of the year, key areas of progress included the following:

Under the AUKUS agreement, we were selected to build Australia’s new fleet of nuclear-powered submarines, alongside ASC Pty Ltd.
We signed a contract, worth £4.6bn, for the delivery of the first three Hunter Class frigates (Batch 1) in Australia, following which, we entered the construction phase and officially cut steel on the first ship at a ceremony at the Osborne Naval Shipyard in Adelaide, South Australia.
We made progress against our 2024 target to recruit 2,700 graduates and apprentices in the UK.
In February, we completed the acquisition of the US-based Ball Aerospace business from Ball Corporation and formed our new SMS business, which is reported within our Electronic Systems sector. Since the acquisition, the SMS business has secured orders of £0.7bn and we are progressing with the integration activities.
In February, Air Astana completed an initial public offering (IPO) with a joint listing in London and Kazakhstan. Following the IPO, our shareholding reduced from 49% to 17% – with cash proceeds on disposal of £166m and a profit on disposal of £75m.
We completed two further acquisitions in the uncrewed air systems (UAS) technology market, both of which form part of FalconWorks® in our Air sector.

Operational highlights

The sixth Astute class submarine, Agamemnon, was officially named at our submarines site in Barrow-in-Furness, Cumbria.
We delivered two further Typhoon aircraft to Qatar – a total of 20 are now in service with the Qatar Emiri Air Force.
A new concept model of the next-generation combat aircraft, being developed by the Global Combat Air Programme (GCAP), was unveiled at the Farnborough International Airshow in July. This will be known as Tempest in the UK.
We marked the launch of satellites that will bridge critical gaps in current space-based environmental monitoring capabilities for the US Space Force.
Following the move to full-rate production, we are now delivering five variants of Armored Multi-Purpose Vehicles (AMPV) and, during the period, the US Marine Corps’ fleet of Amphibious Combat Vehicles (ACV) completed its first successful operational deployment.
Within our Hägglunds business, based in Sweden, we are expanding our production and delivery capabilities by investing more than £160m in advanced manufacturing capabilities and a new customer test and acceptance centre in the period.

Capital deployment

We successfully raised $4.8bn (£3.8bn) of debt finance, of which $4.0bn (£3.2bn) was used to refinance the bridge loan facility associated with the Ball Aerospace acquisition.
We completed the third and final tranche of the up to £1.5bn share buyback programme, announced in July 2022 (2022 share buyback programme) on 24 July 2024. In the six months ending 30 June 2024, we repurchased 19,403,928 ordinary shares under the 2022 share buyback programme at a total cost (including transaction fees) of £250m. The up to £1.5bn share buyback programme, which we announced in August 2023 (2023 share buyback programme), commenced on 25 July 2024.
The directors have declared an interim dividend of 12.4p per share in respect of the half year ended 30 June 2024. This represents an increase of 8% compared to the interim dividend declared in respect of the half year ended 30 June 2023. This will be paid on 2 December 2024, in line with our usual dividend timetable.

2024 Upgraded Group guidance1

Sales guidance is increased by 200 bps to 12% to 14% reflecting continued strong operational performance across all sectors.

Underlying EBIT guidance is increased by 100 bps to 12% to 14% reflecting the sales profile and strong operational performance.

Underlying earnings per share guidance is increased by 100 bps to 7% to 9% aligned to underlying EBIT. In addition, we have refined our guidance on underlying net finance costs and the effective tax rate.

We have increased our in-year free cash guide by £200m to >£1.5bn and we expect to deliver over £6.0bn of free cash flow for the three year period ending 2024.

The Group guidance for 2024 incorporates the acquisition of Ball Aerospace2 and the reduction in the Group’s shareholding in Air Astana following its initial public offering, both of which completed in February 2024.

Guidance is provided on a constant currency basis using an exchange rate of $1.24:£1, which is in line with the actual 2023 exchange rate. Sensitivity to foreign exchange rates: the Group operates in a number of currencies, the most significant of which is the US dollar. As a guide, a 5 cent movement in the £/$ exchange rate will impact sales by c.£500m, underlying EBIT by c.£70m and underlying earnings per share by c.1.3p.

01 Aug 24. BAE Systems gains ground with air and sea wins.

Backlog hits a record £74.1bn

Underlying profit rises by 11 per cent
Full-year earnings guidance upgraded

BAE Systems (BA.) reported a healthy set of first-half numbers, with underlying operating profit growing by 11 per cent.

Just as encouraging was the momentum in orders. The company took in £15.1bn of orders during the first half, including a £4.6bn deal for the first of three Hunter Class frigates in Australia. When combined with the £2.2bn of orders brought in following the $5.5bn (£4.3bn) acquisition of Ball Aerospace in February, BAE Systems’ backlog increased to a record £74.1bn.

And although free cash flow was much lower than last year, a stronger performance is expected in the second half, with the company lifting full-year guidance by £200mn to at least £1.5bn. It also increased guidance for sales growth by two percentage points and for underlying earnings per share growth by one percentage point.

Despite this, trading in the company’s shares was largely flat. This is understandable, given the 18 per cent gain recorded so far this year. There are also potential geopolitical headwinds to consider, with the new UK government embarking on a strategic defence review (the second in four years, not counting the ‘refresh’ following Russia’s invasion of Ukraine) and rumours swirling about its commitment to the Global Combat Air Programme (GCAP) in which BAE Systems is a partner.

Chief executive Charles Woodburn said it was foolish to speculate about the outcome of the review given it has just been announced, but added there was “a very strong case for GCAP from a capability perspective”. He also argued in a presentation to investors that the company’s £74bn backlog doesn’t fully reflect the opportunities that are available to the company.

“Our funded plus incumbent backlog is actually several times higher”, he said, citing the ongoing Dreadnought submarine and Typhoon air fighter programmes as significant revenue drivers, and pointed to the fact that little of its backlog is attributable to a US business where budgets are subject to annualised reviews.

It’s a compelling argument. And with brokers upgrading forecasts alongside the results we think we may have been too hasty in moving the shares to hold in February, when its valuation started to look stretched. The upgrades mean the shares trade at 15 times forecast earnings (compared with 19 times in February), and on next year’s numbers are in line with their five-year average in what is likely to remain a strong market. Back to buy.

Last IC View: Hold, 1,217p, 23 Feb 2024. (Source: Investors Chronicle)

01 Aug 24. Serco on track despite tough first half.

The FTSE 100 outsourcer is making good progress on margins

Win rate under pressure
Double-digit dividend hike

The first half of 2024 was challenging for Serco (SRP). Sales dipped by 5 per cent to £2.4bn and underlying operating profit declined by 4 per cent to £142mn. The reasons for this were well flagged: the outsourcer has ditched some low-margin work and is dealing with changes to one of its largest US contracts.

Across the full year, revenue is set to remain slightly depressed. However, widening margins are expected to boost adjusted operating profit by 9 per cent to £270mn.

All of this is very much as expected. However, shares dropped by 7 per cent in the aftermath of Serco’s interim results, suggesting something has spooked investors.

It could be the state of the order book. Serco’s book-to-bill ratio – which compares orders received with work billed for – was 82 per cent in the first half of 2024. While North America and the Middle East put in very strong performances, the UK and Europe book-to-bill ratio sat at just 70 per cent. Management blamed this on unsuccessful bids and existing contracts being extended (therefore delaying the procurement process).

Across the group, the win rate for new work was approximately 25 per cent – at the lower end of what Serco has delivered in recent years.

Rebids also limit visibility. Serco must rebid for contracts worth a total of £1.5bn by the end of 2026. Representing about 30 per cent of the group’s 2024 revenue guidance, this is actually at the low end of what investors have experienced in recent years. However, all eyes are on a lucrative, long-running Australian immigration contract that is due to expire this December.

Investing in outsourcers is not for the faint-hearted, and the market is unlikely to react well if Serco loses the Australian contract. However, the group looks significantly more reliable and robust than it did a few years ago and the progress on margins is encouraging. Buy.

Last IC View: Buy, 189p, 29 Feb 2024. (Source: Investors Chronicle)

01 Aug 24. Avon finds new calling. Defence group Avon Protection (AVON) is changing its name for the second time in three years, to Avon Technologies. The company changed its name from Avon Rubber in 2021 following the disposal of its milkrite business to DeLaval Holding.

(Source: Investors Chronicle)

01 Aug 24. GKN Aerospace owner Melrose cuts 2025 revenue on supply chain issues, shares drop. Melrose the owner of aerospace parts maker GKN Aerospace, cut its 2025 revenue outlook on Thursday due to supply chain challenges, sending its shares down 6%.

The company cut its 2025 revenue estimate to £3.8bn, from £4bn previously, implying a year-over-year growth of 1%-5%.

However, it maintained its profit guidance.

Melrose has recovered strongly from the pandemic, with a revenue growth of 17% last year. But the recent crisis at Boeing and production troubles at Airbus has tempered industry expectations of a faster growth rate.

Melrose, which spun off its auto and other businesses last year to become a pure-play aerospace supplier, reported an adjusted pre-tax profit of £204m for the first six months of 2024, higher than the £134m reported last year. (Source: Google/Reuters)

01 Aug 24. Melrose Industries PLC (“Melrose”, the “Company” or the “Group”), the aerospace focused Group, today announces its interim results for the six months ended 30 June 2024 (the “Period”).

Key messages

Results ahead of our expectations with adjusted1 operating profit up 62%2 versus prior year
Adjusted operating margin at Aerospace level at 14.9%, up 420bps versus prior year with Engines outperformance at 29.4% and good Structures progress at 4.7%
On track for 2024 guidance and 2025 profit targets, despite ongoing industry-wide supply chain challenges
2025 revenue guidance adjusted to £3.8 bn to reflect supply chain challenges and disposals; operating margin guidance increased to >18%
Clear long-term growth strategy driving double-digit EPS growth over the long term with improving cash flows post major restructuring
Further £250m 18 month share buyback announced today, while investing more in organic growth and keeping leverage between 1.5-2x

Net debt and leverage comparative information as at 31 December 2023

Financial highlights

Revenue of £1,742m, 12% growth on the prior year (9% including businesses exited)
Statutory operating loss of £62m (2023: £18m)
Adjusted1 diluted EPS of 11.9p compared to 7.5p in 2023. Statutory diluted EPS of (6.1)p (2023: (3.0)p)
Net debt of £976m, representing leverage1 of 1.7x, after £246 m of share buybacks in 2024 (£339 m in total since current £500 m buyback programme commenced)
Continuation of growing dividend, with an interim dividend of 2.0 pence per share declared, an increase of 33% on the prior year

Strategic highlights2

Engines adjusted operating margin outperforming recent guidance for 2024, and target for 2025, due to aftermarket growth; on track to >30% margin post 2025
Structures delivered 89% growth in adjusted1 operating profit as a result of business improvement actions and portfolio changes
Strong Group operational progress with further improvements in safety, customer quality, and productivity
Increasing interest in proprietary additive fabrication technology from all major engine customers, with ongoing investment in industrialisation and certification
New Engines repair centre in California and £50m additive fabrication capacity in Sweden progressing to plan
Successful disposal of our non-core Structures businesses at St. Louis, Orangeburg and Fuel Systems; disposal plan substantially complete

Divisional highlights

Engines

Engines revenue growth of 21% to £720m with adjusted1 operating profit up 46% to £212m and adjusted1 operating margin up to 29.4%
Engines performance driven by the strength of growth initiatives and the lucrative aftermarket including repairs and defence
Good progress being made on Pratt & Whitney GTF fleet management programme with growing partner confidence on long-term position and performance of programme

Structures

As expected, Structures revenue growth of 6% to £1,022m (1% including businesses exited) reflecting planned civil destocking offset by defence growth
Adjusted1 operating profit of £48m with margins increasing to 4.7% from 2.5% in 2023
Defence improvements are on track with good progress in portfolio repricing and rationalisation
Good progress with ongoing restructuring programme; further work focused on the Netherlands integration and productivity enhancements

Guidance maintained for 2024 full year

Revenue between £3.6bn and £3.75bn, growth tempered by ongoing sector-wide supply chain issues. Revenue guidance includes the effect of non-core disposals
Adjusted1 operating profit (pre-PLC costs3) guidance maintained between £550m and £570m despite recent OE build rate changes and continued supply chain challenges
Adjusted1 EBITDA of between £710m and £730m
Central costs at £30m
As previously guided, cash generation limited by ongoing restructuring in 2024 and announced GTF issues; increasing free cash flow is expected in 2025 and beyond, driven by RRSPs and wider Group

Governance

New Chair designate, Chris Grigg, appointed to the Board, with effect from 1 October 2024
Following a planned transition period, Justin Dowley will step down from the Melrose Board on 31 March 2025; Chris to succeed Justin as the Company’s Non-Executive Chairman

Peter Dilnot, Chief Executive Officer of Melrose Industries PLC, today said: “We have made strong progress in the first half, driven by Engines aftermarket performance and business improvement actions, despite industry-wide supply chain challenges. We remain confident of delivering on our 2024 and 2025 guidance. Our positive outlook and disciplined capital allocation enables us to invest more in attractive organic growth opportunities, as well as continue shareholder returns through our growing dividend and the further share buyback programme announced today. We have positive momentum, a clear strategy and excellent growth opportunities ahead.”

01 Aug 24. MTU Aero Engines expects higher profit as turbofan program progresses. German engine manufacturer MTU Aero Engines (MTXGn.DE) now expects an adjusted core profit margin of 13% for the financial year, from an earlier forecast of over 12%, the company said on Thursday.

The Airbus (AIR.PA) and Boeing (BA.N) supplier cited progress in its geared turbofan fleet management program and a sustained positive market.

Last year, MTU had to recall up to 3,000 geared turbofan engines from its partner Pratt & Whitney (RTX.N) due to a potentially defective turbine disc, costing the company about 1bn euros ($1.08bn). The company is said to be in talks with Pratt about a potential compensation.

MTU also reported second-quarter adjusted core profit at 252m euros ($508.8m), up 16% compared to 19m euros last year and above the 223m euros expected by analysts in a company-provided consensus.

($1 = 0.9237 euros) (Source: Reuters)

01 Aug 24. Rolls-Royce raises profit guidance, to resume dividend. Aerospace engineer Rolls-Royce said it would restart dividend payments when it reports 2024 results next year after it raised its guidance for operating profit and free cash flow by as much as £300m on Thursday after a strong first half.

The British company increased its forecast for 2024 underlying operating profit to between £2.1bn and £2.3bn ($2.70-2.95 bn) and free cash flow to between £2.1bn and £2.2bn.

Chief Executive Tufan Erginbilgic said his transformation of the company was proceeding with “pace and intensity”.

“We are expanding the earnings and cash potential of the business in a challenging supply chain environment, which we are proactively managing,” he said.

“These results and our increased financial resilience give us the confidence to raise our 2024 guidance and reinstate shareholder distributions in respect of the full year 2024 results.”

The company had axed its dividend in 2020 during the pandemic when most commercial flying stopped, cutting off a large chunk of its income.

Rolls reported underlying operating profit of £1.15bn for the first half, up from £673m a year earlier, as it improved its margin by 4.3 percentage points to 14.0%. ($1 = 0.7788 pounds) (Source: Reuters)

31 Jul 24. Houlihan Lokey Advises Ghost Robotics. Houlihan Lokey is pleased to announce that Ghost Robotics Corporation has sold a majority stake to LIG Nex1 Co. and Korea Investment Private Equity (KIPE) at an enterprise value of $400m. The transaction closed on July 26, 2024.

Ghost Robotics is a leading provider of technology-enabled robotic solutions for defense, security, and industrial technology applications worldwide. The company’s quadruped (four-legged) robots, including its flagship Vision 60 platform, operate with agility and autonomy, offering automated persistent and ad hoc remote sensing and manipulation capabilities. These robots are operationally proven and capable of navigating in urban and natural environments, traversing all types of terrain, including sand, snow, rocks, hills, and stairs. The company supports multiple branches of the U.S. DoD, international governments, law enforcement agencies, and Fortune 500 companies, among others.

LIG Nex1 is a Korea-based defense technology company engaged in the research, development, and production of cutting-edge defense systems. LIG Nex1 specializes in precision-guided munitions, surveillance and reconnaissance, communications, avionics, electronic warfare, unmanned systems, and other related fields of technology that support the warfighter on the battlefield.

KIPE is an independent private equity firm wholly owned by Korea Investment Holdings. Since its establishment in 2010, KIPE has achieved rapid growth by focusing its investments on the industrials market. KIPE’s investment approach encompasses growth capital, mezzanine financing, special situations, and secondary markets. The firm has more than $2.5bn under management and 33 active investments.

Houlihan Lokey served as the exclusive financial advisor to Ghost Robotics and assisted in structuring and negotiating the transaction on its behalf. This transaction underscores the firm’s continued global leadership and experience in the unmanned systems market.

Since 2020, Houlihan Lokey’s Aerospace, Defense & Government practice has closed more than 70 transactions worth over $12 bn in enterprise value. With a staff of approximately 20 financial professionals, Houlihan Lokey’s Aerospace, Defense & Government practice is among the largest dedicated industry banking teams worldwide.

31 Jul 24. Babcock warns defence budget growth does not match military demand. In their annual financial report, Babcock touch on the gap between defence budgets and military demand, and the need to shorten the gap.

Babcock, a leading defence engineering company, released their fiscal year financials for 2024 in which they accounted an 11% increase in organic growth.

Each year the company selects a theme for their annual report and 2024 honed in on ‘purpose’, or as Babcock put it more meaningfully, “What we do matters.” This focus demonstrates how Babcock is responding to the recent growth in military demand in a more uncertain world, from the war in Ukraine to adversarial postures in the Indo Pacific.

However, this newfound demand far exceeds what governments appear to be willing to spend on defence, agreed the company Chair, Ruth Cairnie, and CEO, David Lockwood.

“The growth in defence budgets is still not matched by the growth in military demand, making Babcock’s ability to affordably add increased value, essential,” Lockwood maintained in his review.

“Additionally, the threats that governments face are here today, while typically new product development programmes take years to deliver. Increasing availability and capability with existing assets have become ever more important.”

UK Defence struggles to reach 2.5% target

Pending a thorough Defence Strategic Review, the third of its kind in the last five years, the new Labour government will lay to bare its “root and branch” assessment of policy and capability before the end of the first half of next year.

This much-anticipated document will determine the government’s priorities going into a contentious period in world affairs.

Ahead of that though, the Minister for the Armed Forces, Luke Pollard, revealed that a roadmap for the government’s plan to spend 2.5% of the country’s gross domestic product (GDP) on defence will be revealed in a Treasury speech due to be given by the Chancellor, Rachel Reeves, in the autumn period.

While the government nears its target, some commentators have urged allocating a larger portion than that, perhaps 3%, bringing UK Defence up to the leading spending standard of fellow Nato members, Poland and the US.

However, as necessary as the suggestion may be, this seems unlikely given Reeves’ account of the public finances in a speech to Parliament this week (29 July 2024). Citing an audit that began when the Labour Party came to government, the Chancellor claimed that the former Conservative administration accrued a projected overspend of £22bn, which she added included unfunded military aid to Ukraine.

“Threats are here today”

Nonetheless, Babcock was able to report organic revenue growth of £4.3bn driven, largely, by its Nuclear (+29%) and Land (+17%) services, which the company says offset an expected revenue decline in Aviation (-17%).

Furthermore, within the underlying operating profit there was a £90m loss on the Type 31 contract (FY23: £100m loss), as set out in an update on 17 July.

Despite the growth this year, Lockwood added that Babcock must also think about delivering orders going forward.

“The threats that governments face are here today, while typically new product development programmes take years to deliver. Increasing availability and capability with existing assets have become ever more important.”

One well-regarded airpower academic, Justin Bronk, with the Royal United Services Institute, painted a sobering picture of Britain’s warpath in the coming years:

“We need to be ready by 2028 to war fight against the Russians because we may not have a choice about it.”

This examination of the Russian threat perception as an imminent crisis has led to a corollary that services do not have the time to buy new platforms; that only so much can be prepared in such a short amount of time.

(Source: Google/army-technology.com)

31 Jul 24. VSE Corporation Announces Second Quarter 2024 Results.

Record Revenue and Record Profitability for Aviation Segment. VSE Corporation (NASDAQ: VSEC, “VSE”, or the “Company”), a leading provider of aftermarket distribution and repair services, announced today results for the second quarter 2024.

“In the second quarter, we made significant progress in strengthening our balance sheet and reducing our net leverage”

Post this

SECOND QUARTER 2024 RESULTS(1)

(As compared to the Second Quarter 2023)

Total Revenues of $266.0m increased 29.6%
GAAP Net Loss of $(2.8)m decreased 127.5%
GAAP EPS (Diluted) of $(0.16) decreased 120.5%
Adjusted EBITDA(2) of $31.3m increased 18.4%
Adjusted Net Income(2) of $11.0m increased 4.5%
Adjusted EPS (Diluted)(2) of $0.64 decreased 22.0%

1 From continuing operations

2 Non-GAAP measure. See additional information at the end of this release regarding non-GAAP financial measures

MANAGEMENT COMMENTARY

“The VSE team delivered another milestone quarter marked by record revenue and profitability for our Aviation segment coupled with solid execution against our 2024 strategic transformation priorities,” said John Cuomo, President and CEO of VSE Corporation. “Within our Aviation segment, we reported 55% revenue growth and a 70-basis point improvement in Adjusted EBITDA margins as compared to the prior year, driven by a very balanced quarter of execution supported by strong performance of existing distribution programs, the scaling of new distribution awards, an expanded portfolio of maintenance, repair and overhaul (“MRO”) capabilities, and contributions from recent acquisitions. Although our Fleet segment results were temporarily impacted by the United States Postal Service’s (“USPS”) transition to a new Fleet Management Information System (“FMIS”), the decline in USPS revenue was partially offset by 22% growth in our e-commerce fulfillment and commercial fleet businesses.”

“We enter the second half of the year with significant momentum within our Aviation business and a continued focus on executing our strategic and operating plans,” Mr. Cuomo continued. “This includes scaling our new European distribution center of excellence, supporting our Pratt & Whitney Canada Europe, Middle East and Africa (“EMEA”) agreement, launching our new OEM licensed manufacturing program, integrating the Desser Aerospace acquisition, and executing on our growth and integration plans for the Turbine Controls, LLC (“TCI”) acquisition. Within our Fleet business, we remain committed to supporting the USPS through this period of transition, while continuing to scale our e-commerce fulfillment and commercial fleet businesses. We remain confident in the long-term market trends in both businesses and believe we are strategically well positioned to capitalize on the opportunities that lie ahead.”

“In the second quarter, we made significant progress in strengthening our balance sheet and reducing our net leverage,” stated Tarang Sharma, Chief Accounting Officer and Interim Chief Financial Officer of VSE Corporation. “Following the acquisition of TCI in April 2024, we reduced debt and net leverage through a successful equity offering in May 2024. Pro forma net leverage ratio is currently 3.2 times, within our target range of 3.0 to 3.5 times. We are in position to further improve net leverage by year-end, driven by stronger free cash flow generation in the second half of the year, supported by the optimization of working capital following our strategic inventory investments in the first half of the year.”

STRATEGIC UPDATE

AVIATION NEW PROGRAM EXECUTION AND ACQUISITION UPDATE:

The Aviation segment continues to scale the new European Distribution Center of Excellence in Hamburg, Germany. The facility, launched earlier this year, supports the Pratt & Whitney Canada EMEA program which is performing in line with expectations and is expected to be at a full year run-rate by the fourth quarter of 2024. In late 2024, the facility is expected to support additional distribution products, including tires, tubes and batteries.
The launch of the new OEM licensed manufacturing fuel control program continues to outpace early expectations and contribute to the segment’s profitability. The Kansas facility expansion supporting the fuel control program remains on track to be operational by the end of this year.
The integration of Desser Aerospace is in process with plans to be completed over the next twelve-months.
VSE Aviation’s new e-commerce site supporting both VSE Aviation and legacy Desser customers is on schedule to launch in the third quarter of 2024.
On April 24, 2024, VSE completed the acquisition of TCI, a leading provider of aftermarket MRO support services for complex engine components, as well as engine and airframe accessories. The initial performance of TCI has exceeded expectations, and VSE’s initial focus is on expanding capacity and increasing its scope with existing OEM partners.

FLEET UPDATE:

Fleet remains committed to supporting the USPS through their transition to a new FMIS platform.
The Memphis distribution center of excellence continues to scale and support above-market growth and additional market share opportunities.
The Fleet segment strategic review is in process and the Company expects to provide additional updates after the USPS system transition is complete and the revenue recovery is realized, both of which are anticipated to be in late 2024.

CORPORATE UPDATE:

Completed Follow-on Equity Offering

In May 2024, VSE completed a follow-on equity offering of 2,429,577 shares of common stock at $71.00 per share, resulting in net cash proceeds of approximately $162.0m.
The net proceeds from the offering were used to repay outstanding borrowings under its revolving loan facility, including borrowings that were used to fund its acquisition of TCI and to support future strategic acquisitions.

Corporate Restructuring

As previously disclosed, the Company expected to recognize approximately $15 to $18m in additional restructuring charges related to the relocation of the Company’s headquarters and other corporate restructuring initiatives supporting the finalization of the Federal and Defense segment divestiture. In connection with these activities, the Company recorded a charge of $17m in the second quarter and expects no subsequent material charges related to the aforementioned activities.
VSE plans to relocate its corporate headquarters to one of its Aviation segment’s operating facilities later in 2024.

SECOND QUARTER SEGMENT RESULTS

Aviation segment revenue increased 55% year-over-year to a record $192.8 m in the second quarter of 2024. The year-over-year revenue improvement was attributable to strong program execution of new and existing distribution awards, an expanded portfolio of MRO capabilities, and contributions from recent acquisitions. On an organic basis, revenue increased approximately 14%, as compared to the prior-year period. Aviation distribution and MRO revenue increased 32% and 112%, respectively, in the second quarter of 2024, versus the prior-year period. The Aviation segment reported operating income of $24.5m in the second quarter, compared to $15.8 m in the same period of 2023. Segment Adjusted EBITDA increased by 61% in the second quarter to $31.0m, versus $19.2m in the prior-year period. Adjusted EBITDA margin was 16.1%, an increase of approximately 70 basis points versus the prior-year period, driven primarily by favorable price and product mix, along with strong MRO revenue growth slightly offset by lower margins from recent acquisitions.

Fleet segment revenue decreased 9% year-over-year to $73.1 m in the second quarter of 2024. Revenue from the USPS declined approximately 37% on a year-over-year basis. This revenue decline was primarily driven by USPS’ transition to a new FMIS platform, which is expected to be completed in the third quarter of 2024. Revenue from commercial customers increased 22% on a year-over-year basis, driven by growth in e-commerce fulfillment and commercial fleet sales. Commercial, or non-USPS, revenue represented 64% of total Fleet segment revenue in the period. The Fleet segment reported operating income of $2.2 m in the second quarter, compared to $7.9 m in the same period of 2023. Segment Adjusted EBITDA decreased 65.7% year-over-year to $3.3 m, and Adjusted EBITDA margin declined approximately 740 basis points to 4.5%, primarily driven by the decline in USPS revenue.

FINANCIAL RESOURCES AND LIQUIDITY

As of June 30, 2024, the Company had $194m in cash and unused commitment availability under its $350m revolving credit facility maturing in 2026. As of June 30, 2024, VSE had a total net debt outstanding of $445 m. Pro forma net leverage was approximately 3.2 times Adjusted EBITDA as of the end of the second quarter.

GUIDANCE

VSE is reaffirming its full-year 2024 revenue growth and Adjusted EBITDA margin guidance for its Aviation segment. The guidance is as follows:

Aviation segment full-year 2024 revenue guidance range of 34% to 38% growth, as compared to the prior year.
Aviation segment full-year 2024 Adjusted EBITDA margin guidance range of 15.5% to 16.5%.

VSE is reaffirming its full-year 2024 revenue growth and Adjusted EBITDA margin guidance for its Fleet segment. The guidance is as follows:

Fleet segment full-year 2024 revenue guidance range is 0% to 5%, as compared to the prior year.
Fleet segment full-year 2024 Adjusted EBITDA margin guidance is 6% to 8%. (Source: BUSINESS WIRE)

31 Jul 24. Oshkosh Corporation Reports 2024 Second Quarter Results.

Reports Sales of $2.85bn, up 18 Percent

Reports Earnings per Share of $2.56; Adjusted1 Earnings per Share of $3.34

Updates 2024 Earnings Expectations

Declares Quarterly Cash Dividend of $0.46 Per Share

Oshkosh Corporation (NYSE: OSK), a leading innovator of purpose-built vehicles and equipment, today reported 2024 second quarter net income of $168.6m, or $2.56 per diluted share, compared to net income of $175.0 m, or $2.67 per diluted share, for the second quarter of 2023. Adjusted1 net income was $219.8m, or $3.34 per diluted share, for the second quarter of 2024 compared to $179.6m, or $2.74 per diluted share, for the second quarter of 2023. Comparisons in this news release are to the second quarter of 2023, unless otherwise noted.

“We reached a significant milestone in our partnership with the US Postal Service (USPS) during the quarter as we began low volume production of our Next Generation Delivery Vehicles (NGDV). We look forward to continuing to support the USPS on its journey to modernize and decarbonize its fleet.”

Post this

Consolidated sales in the second quarter of 2024 increased $433.8m, or 18.0 percent, to $2.85bn primarily due to improved organic sales volume in all three segments, sales related to the AeroTech acquisition of $192.0m and improved pricing.

Consolidated operating income in the second quarter of 2024 increased 11.1 percent to $260.9m, or 9.2 percent of sales, compared to $234.9m, or 9.7 percent of sales, in the second quarter of 2023. The increase in operating income was primarily due to favorable price/cost dynamics and higher organic sales volume, offset in part by intangible asset impairments in the Defense segment of $51.6m, higher new product development spending and higher operating costs to support the higher sales levels. Adjusted1 operating income in the second quarter of 2024 increased 36.1 percent to $328.2m, or 11.5 percent of sales, compared to $241.1m, or 10.0 percent of sales, in the second quarter of 2023.

“We are pleased to report another quarter of strong performance highlighted by growth in revenue, adjusted operating income and adjusted earnings per share,” said John Pfeifer, president and chief executive officer of Oshkosh Corporation. “In the second quarter, we grew revenues by 18 percent and adjusted operating income by 36 percent, leading to an adjusted operating margin of 11.5 percent and adjusted earnings per share of $3.34. Our exceptional performance is a testament to the outstanding execution of our 18,000 Oshkosh team members who share a passion for our mission.

“Given our strong performance in the first half of the year and continued confidence in our outlook, we are updating our full-year guidance for earnings per share to be in the range of $10.45 and raising our full-year guidance for adjusted earnings per share to be in the range of $11.75.

“As we look forward, we have a positive outlook for 2025. Based on discussions with customers and our expectations for ongoing infrastructure investments, mega projects, industrial onshoring and current fleet age, we expect Access segment sales in 2025 to be in the range of 2024 sales. In our Defense segment, we expect that revenues from the ramp up of NGDVs in 2025 will more than offset the decline of Joint Light Tactical Vehicle (JLTV) revenues from 2024 to 2025. Additionally, our Vocational segment has excellent visibility with a large backlog and strong pricing, which supports continued revenue and margin growth.

“This is an exciting time for Oshkosh. Our investments in innovation and capacity underpin our Innovate. Serve. Advance. strategy, enabling us to support our customers and remain at the forefront of our industries,” said Pfeifer.

Factors affecting second quarter results for the Company’s business segments included:

Access – Access segment sales for the second quarter of 2024 increased 5.9 percent to $1.41bn primarily as a result of higher sales volume in North America.

Access segment operating income in the second quarter of 2024 increased 16.4 percent to $246.5m, or 17.5 percent of sales, compared to $211.7m, or 15.9 percent of sales, in the second quarter of 2023. The increase was primarily due to higher sales volume, favorable price/cost dynamics and improved sales mix, offset in part by increased selling, general and administrative costs.

Adjusted1 operating income in the second quarter of 2024 was $248.8m, or 17.7 percent of sales, compared to $214.0m, or 16.1 percent of sales, in the second quarter of 2023.

Defense – Defense segment sales for the second quarter of 2024 increased 20.2 percent to $598.7m due to higher Family of Medium Tactical Vehicle sales volume, the commencement of NGDV production for the USPS and higher aftermarket parts volume.

The Defense segment had an operating loss in the second quarter of 2024 of $39.9m, or 6.7 percent of sales, compared to operating income of $6.3m, or 1.3 percent of sales, in the second quarter of 2023. The operating loss was the result of intangible asset impairments at Pratt Miller of $51.6m as market conditions led to a decline in expectations of future performance.

Adjusted1 operating income in the second quarter of 2024 was $13.1m, or 2.2 percent of sales, compared to $7.5m, or 1.5 percent of sales, in the second quarter of 2023. Adjusted1 operating income increased as a result of higher sales volume, offset in part by start-up costs on the NGDV program and adverse production variances.

Vocational – Vocational segment sales for the second quarter of 2024 increased $255.6m, or 43.5 percent to $843.1m due to the inclusion of sales related to the AeroTech acquisition, improved pricing and improved organic sales volume. AeroTech had sales of $192.0m during the second quarter of 2024.

Vocational segment operating income in the second quarter of 2024 increased 76.0 percent to $106.5 m, or 12.6 percent of sales, compared to $60.5 m, or 10.3 percent of sales, in the second quarter of 2023. The increase was primarily due to improved price/cost dynamics and higher organic sales volume.

Adjusted1 operating income in the second quarter of 2024 was $118.5m, or 14.1 percent of sales, compared to $63.2m, or 10.8 percent of sales, in the second quarter of 2023.

Corporate – Corporate costs in the second quarter of 2024 increased $8.6m to $52.2m due to higher new product development investments and higher compensation costs.

Interest Expense Net of Interest Income – Interest expense net of interest income in the second quarter of 2024 increased $22.2m to $30.3m due to increased borrowings on the Company’s revolving credit facility following the acquisition of AeroTech.

Miscellaneous, net – Miscellaneous expense, net in the second quarter of 2024 was $1.5m compared to miscellaneous income, net of $4.8m in the second quarter of 2023.

Provision for Income Taxes – The Company recorded income tax expense in the second quarter of 2024 of $53.5m, or 23.4 percent of pre-tax income, compared to $56.3m, or 24.3 percent of pre-tax income, in the second quarter of 2023.

Losses of unconsolidated affiliates – Losses of unconsolidated affiliates in the second quarter of 2024 increased $6.7m to $7.0m due to an impairment of an equity method investment of $6.7m.

Repurchases of common stock – The Company repurchased 334,699 shares of common stock in the second quarter of 2024 for $39.5m, compared to 92,626 shares for $7.4m in the second quarter of 2023.

Six-month Results

The Company reported net sales for the first six months of 2024 of $5.39bn and net income of $348.0m, or $5.27 per diluted share. This compares with net sales of $4.68bn and net income of $263.5m, or $4.01 per diluted share, for the six months ended June 30, 2023. The increase in net income for the first six months of 2024 compared to the six months ended June 30, 2023 was primarily due to improved price/cost dynamics, higher organic sales volume and favorable mix, offset in part by the intangible asset impairments, higher interest expense net of interest income and higher new product development investments.

Adjusted1 net income for the first six months of 2024 was $410.9m, or $6.23 per diluted share compared to $287.2m, or $4.37 per diluted share, for the six months ended June 30, 2023.

2024 Expectations

The Company expects its 2024 diluted earnings per share to be in the range of $10.45 and its adjusted1 earnings per share to be in the range of $11.75, compared to its previous estimates of $10.55 and $11.25, respectively. The Company continues to expect net sales of approximately $10.7bn in 2024.

Dividend Announcement

The Company’s Board of Directors today declared a quarterly cash dividend of $0.46 per share of Common Stock. The dividend will be payable on August 30, 2024 to shareholders of record as of August 16, 2024. (Source: BUSINESS WIRE)

31 Jul 24. Boeing posts bigger loss as defense business struggles to turn around. Boeing (BA.N) posted a bigger quarterly loss, as its troubled defense and space business exacerbated the financial strain on the U.S. planemaker that has already scaled back commercial aircraft production to tackle a quality crisis.

Its second-quarter net loss stood at $1.44bn, the company said on Wednesday, compared with $149m a year ago.

Boeing’s Defense, Space and Security unit, one of its three main businesses, has lost bns of dollars in 2023 and 2022, which executives attributed to cost overruns on fixed-price contracts.

Such contracts have high margins but leave defense contractors vulnerable to inflationary pressures that have dented U.S. corporate earnings in the last few years.

The planemaker used to bid aggressively for fixed-price contracts before the pandemic, but has now said it would pivot away from such contracts to stem losses at the business, which amounted to $1.76bn last year.

Ahead of last week’s Farnborough Air Show, the unit’s head had said it was “significantly challenged” during the quarter.

Boeing CFO Brian West said in May the planemaker will burn rather than generate cash in 2024, hamstrung by lower jet deliveries compared to last year.

The company is mired in crisis after a cabin panel on a 737 MAX 9 jets blew off midair in January, which led to a slowdown in production of its top-selling plane and a management shakeup, even as it came under intense regulatory and legal scrutiny.

The U.S. aviation regulator has capped production of 737 MAX jets at 38 per month, though Reuters has reported that Boeing has been producing jets during some weeks at a much lower level.

Lufthansa sees earnings descend in third quarter as costs rise

That has led to lower deliveries, frustrating customers. During the second quarter, Boeing delivered a total of 92 aircraft, down 32% from last year. (Source: Google/Reuters)

31 Jul 24. Boeing Reports Second Quarter Results.

Second Quarter 2024

Submitted comprehensive safety and quality plan to the Federal Aviation Administration
Announced agreement to acquire Spirit AeroSystems in July; transaction expected to close mid-2025
Revenue of $16.9bn, GAAP loss per share of ($2.33) and core (non-GAAP)* loss per share of ($2.90)
Operating cash flow of ($3.9)bn and free cash flow of ($4.3)bn (non-GAAP)*
Total company backlog of $516bn, including over 5,400 commercial airplanes

The Boeing Company [NYSE: BA] recorded second quarter revenue of $16.9bn, GAAP loss per share of ($2.33) and core loss per share (non-GAAP)* of ($2.90)

. Boeing reported operating cash flow of ($3.9)bn and free cash flow of ($4.3)bn (non-GAAP)*

. Results primarily reflect lower commercial delivery volume and losses on fixed-price defense development programs.

“Despite a challenging quarter, we are making substantial progress strengthening our quality management system and positioning our company for the future,” said Dave Calhoun, Boeing president and chief executive officer. “We are executing on our comprehensive safety and quality plan and have reached an agreement to acquire Spirit AeroSystems. While we have more work ahead, the steps we’re taking will help stabilize our operations and ensure Boeing is the company the world needs it to be. We are making important progress in our recovery and will continue to build trust through action and transparency.”

Cash and investments in marketable securities totaled $12.6bn, compared to $7.5bn at the beginning of the quarter driven by the $10.0bn issuance of new debt partially offset by the usage of free cash flow in the quarter. Debt was $57.9 bn, up from $47.9bn at the beginning of the quarter due to the issuance of new debt. The company has access to credit facilities of $10.0 bn, which remain undrawn.

Total company backlog at quarter end was $516bn.

Commercial Airplanes second quarter revenue of $6.0bn and operating margin of (11.9) percent primarily reflect lower deliveries and planned higher period costs, including research and development.

During the quarter, the company submitted its comprehensive safety and quality plan to the Federal Aviation Administration (FAA). The 737 program gradually increased production during the quarter and still plans to increase production to 38 per month by year end. The 787 program maintains plans to return to 5 per month by year end. In July, the company announced an agreement to acquire Spirit AeroSystems, and the 777X program began FAA certification flight testing after obtaining type inspection authorization.

Commercial Airplanes delivered 92 airplanes during the quarter and backlog included over 5,400 airplanes valued at $437bn.

Defense, Space & Security

Defense, Space & Security second quarter revenue was $6.0bn. Second quarter operating margin of (15.2) percent primarily reflects $1.0bn of losses on certain fixed-price development programs, including a $391m loss on the KC-46A program largely driven by a slowdown of commercial production and supply chain constraints. Losses recorded on the T-7A, VC-25B, and Commercial Crew programs reflect higher estimated engineering and manufacturing costs, as well as technical challenges.

During the quarter, Defense, Space & Security captured an award for seven MH-139A helicopters from the U.S. Air Force and delivered the first CH-47F Block II Chinook to the U.S. Army. Backlog at Defense, Space & Security was $59 bn, of which 31 percent represents orders from customers outside the U.S.

Global Services

Global Services second quarter revenue of $4.9bn and operating margin of 17.8 percent reflect higher commercial volume and mix.

During the quarter, Global Services secured an Apache performance-based logistics contract from the U.S. Army and captured FliteDeck Pro service contracts with Hainan Airlines and Ryanair.

Additional Financial Information

Other unallocated items and eliminations include an earnings charge of $244 m that reflects a fine that would be paid to the U.S. Department of Justice pursuant to an agreement that was recently filed in federal district court, if the agreement is approved.

30 Jul 24. Airbus faces UK criminal probe over potential export control breach. Airbus (AIR.PA) is facing a criminal investigation in Britain into potential violations of export control rules involving several of its British entities, the aerospace group said on Tuesday.

The investigation emerged in footnotes to the company’s half-yearly earnings, which said Airbus was fully cooperating with the probe by Britain’s Revenue and Customs agency (HMRC).

“Airbus is working with all relevant authorities to ensure full remediation of all identified deficiencies,” a spokesperson said in response to a Reuters query about the filing, adding that it was not expected to have a material financial impact.

A spokesperson for HMRC declined comment, citing a policy of never discussing ongoing or specific investigations.

Airbus said the decision to launch the probe followed an audit carried out by British export control authorities in 2022.

The British probe comes around nine months after the U.S. State Department formally lifted the threat of charges over alleged violations of export rules in the United States.

In January 2020, Airbus reached a trio of deferred prosecution agreements and agreed to pay record fines totalling 3.6bn euros following broad investigations in Britain, France and the United States into allegations of corruption.

As part of the settlements, Airbus agreed to pay 9m euros and set up a three-year monitoring plan to resolve findings by the State Department that Airbus had violated U.S. International Traffic in Arms Regulations (ITAR).

The AI divide: chipmakers boom, but costs a worry for Microsoft

Airbus also agreed to appoint an export control compliance officer.

‘NO LINK’ TO RECENT U.S. CASE

ITAR is the official name for a 40-year-old set of rules governing the export of defence goods and data perceived to have implications for U.S. national security.

In 2017, Airbus said it had discovered and reported to U.S. authorities inaccuracies in past declarations to the State Department over the sale of goods and services under ITAR.

The ending of the three-year monitoring period was delayed to October last year after Airbus asked for more time to complete the process after diverting internal resources to ensuring it complied with Western sanctions against Russia.

Airbus also warned last year that the factual disclosures in the State Dept probe could spawn other international investigations, though a person familiar with the latest British investigation told Reuters the two cases were not related.

The British criminal probe puts Airbus back in the judicial spotlight, albeit on what so far appears to be a relatively limited scale, just as Boeing wrestles with the fallout from criminal probes into its handling of the safety of the 737 MAX.

The U.S. planemaker initially won a prosecutor settlement over allegations that it misled U.S. regulators over development of a software feature linked implicated in two fatal crashes.

But the U.S. Justice Department said in May that Boeing had breached its obligations in the agreement, and the U.S. planemaker last week finalised a guilty plea to a criminal fraud conspiracy charge and agreed to pay at least $243.6 m. (Source: Reuters)

30 Jul 24. SRT Marine Systems battles headwinds but charting a course to recovery.

SRT Marine Systems LON:SRT, the AIM-listed engineering firm that builds maritime surveillance, security, management and safety products, and integrated systems, has been charting choppy waters since we last wrote about the marine defence and security firm.

Since November 2022 the company’s shares are down 16.4%, opening the week at 30.5p. However, in the intervening period, SRT experienced a high tide of 68p in June 2023 and low watermark of 17p in June this year. The market reacted savagely to press reports in April from the Philippines, where questions were raised about the transparency of an international tender to supply surveillance equipment to the country’s IMEMS fisheries project. After investigations by the Ombudsman, SRT and its CFO Richard Hurd were cleared of any malfeasance. However, the Ombudsman recommended further investigations into CEO, Simon Tucker and other agents outside of SRT.

SRT’s problems were compounded in June when management announced that two project revenue milestones in its systems business had slipped and would move from this year to the start of the next financial year. The customers in question were a Middle Eastern coastguard and a South East Asian coastguard.

Tucker said at the time: “[…] I take full responsibility for the ups and downs of the share price [and] we’ve seen some reactions recently to some short-term events, for which I apologise and wish it was different. But I believe it’s one of those times, often the case, where the share price is not reflective of actually where the business is…”

As previously reported, SRT Marine Systems is a global leader in maritime domain awareness technologies, products and systems, with two divisions: Systems and Transceivers. The company develops and provides integrated maritime surveillance, monitoring, management and safety systems which are used by coastguards and fishery authorities for the purposes of managing and controlling their maritime domain. The SRT Vessel Monitoring Systems (VMS) system enables governments and national authorities to be able to reliably track, monitor and manage fishing vessels of any size and type in real time without range limitation at optimal cost.

Tucker explained: “[…]We are seeking to be the dominant player in a new market that is forming – the digital maritime domain awareness market – and to do that we have had to develop some pretty complex technologies, and from that sophisticated products [and …] we have the advantage of nearly a decade of accumulated experience, products and technologies which gets us to the place we are today, where we can talk about USD180m and USD200m contracts […] that’s not something that happens overnight, it takes a lot of time.”

SRT Marine Systems CEO prefers to keep shareholders informed

He said that the company is starting to take off, “although some of you might not think that.” The CEO said that SRT is prepared to talk about forward contracts that are yet to be fulfilled, but then it goes over to the governments SRT is negotiating with, and Tucker said it is hard to predict what a government will do and how long it will take, but: “[sometimes] we get that wrong, either it’s too late or too soon, but I would rather communicate about what is coming and [that] we have [secured], for example, a substantial new Middle East contract sometime this year, but the government may decide to do that in two months or twelve months and they decide that independently of us. But I’d prefer to speak about forward business rather than give [investors] a black hole of information until everything is fully done.”

The delays, however, put a GBP14m black hole in SRT’s revenues for this year. The money isn’t lost, it’s just been held up by the customers’ bureaucratic and administrative processes, so will lead to a loss in this financial year, but will be bumped into next year’s accounts. In March, SRT moved its year-end from 31st March to 30th June.

The Middle Eastern contract that has been delayed is worth GBP40m, and SRT has finished GBP16m of the work by completing Phase One. Phase Two is worth another GBP12.5m and Phase Three is worth GBP11.5m and SRT hopes that Phase Two will kick off in the second half of the year. The client amended the scope of the project a number of times, and this slowed progress meaning GBP9m of revenue will not be secured this year due to the logistics of physical delivery and customer acceptance. Phase Three will commence in 2025.

The South East Asian contract is worth GBP140m and is dependent on an inter-government loan between UK Export Finance and the country. Usually export credit agreements take six to nine months to complete, but this one has taken more time than anticipated. Tucker said that the bankers involved are confident of completion, but all parties will have to wait for the slow wheels of government to turn. On completing, SRT is expecting GBP45m from the loan, but this is likely to arrive early on in the new financial year.

Shareholders have had their patience tested by the slowness of SRT fulfilment, something Tucker says is out of the company’s hands. He also regarded the accusations against him regarding the Philippine contract as baseless, and was confident of the Ombudsman ruling in his favour.

Confidence on uptick in deal flow

Some shareholders may have called time on SRT in the past few months, but on a longer-term basis, the company seems to be in fine fettle. It is still ‘one to watch’ at The Armchair Trader. Tucker is confident on an uptick in deal flow in the short- to medium-term. He said: “In the Middle East region there are two contracts we see coming up, one [a USD9m contract] is with an old existing customer that is very dear to us; the second is for a couple of hundred m dollars in another country and there have been some recent changes there and they really want to crack on with their maritime surveillance system. We have a team in country doing site surveys to finalise the proposal and that suddenly seems to have leaped forward and will probably start to crystallise at the end of this year.”

The company also said that maritime security contracts in South East Asia worth USD50m are in the offing from next year. There is also a potential African client with sea and lake control issues looking for a maritime surveillance system with a potential contract value in the region of USD200m

SRT’s transceivers business is also expanding its market penetration. The company explained that the late start to the boating season due to the adverse conditions means that sales are lower than last year, but gross margin contribution the same as the company’s cost of production has normalised. SRT expects sales to pick up as the season progresses, as well as see the effect of some new regulations for vessels to install AIS.

The engineering company successfully completed a fundraising exercise this year, issuing GBP10.5m in an equity placement and retains GBP16.7m of headroom on its secured loan note programme.

Despite recent setbacks, in our view SRT remains a company with significant potential. With a strong order book on the horizon and a proven track record in maritime surveillance technology, the company is still well-positioned to capitalise on the growing demand for secure and efficient maritime operations. While shareholders have endured a period of volatility, in our view the long-term prospects for SRT still appear promising. (Source: https://www.thearmchairtrader.com/)

31 Jul 24. France’s Safran posts higher first-half profit. Jet engine and equipment maker Safran (SAF.PA) reaffirmed financial targets as it posted higher first-half profit on Wednesday, led by growth in the demand for spares and maintenance for existing aircraft and an end to losses in aircraft interiors.

The French aerospace company said recurring operating income rose 41% in the first half to 1.974bn euros ($2.14bn) as sales rose 19% to 13.047bn euros.

Safran expressed confidence in its ability to reach 2024 financial targets, especially at the operating level, but joined U.S. partner GE Aerospace (GE.N) in trimming the outlook for growth in LEAP jet engine deliveries to between zero and 5% from a previous target of 10%-15% amid supply chain problems.

Safran and GE Aerospace jointly own CFM International, the world’s largest jet engine maker by volume, whose engines power all Boeing (BA.N) 737s and about half of the competing Airbus (AIR.PA) A320 family. (Source: Reuters)

30 Jul 24. Howmet lifts financial forecasts, says Boeing trimming parts orders. Aircraft parts maker Howmet Aerospace (HWM.N) on Tuesday said customer Boeing Co (BA.N) was trimming orders for its best-selling programs, as the planemaker grapples with a safety crisis that has hit its production.

But parts orders continue to be above actual 737 and 787 production rates, Howmet CEO John Plant said on an analyst call.

Boeing, which is set to report second-quarter results on Wednesday, has been producing jets at a lower rate than its stated goal of 38 737 aircraft per month to plug quality holes, Reuters has reported. But the planemaker has been buying parts from its suppliers higher than its production rate.

Parts procurement has been in focus as some aerospace suppliers have been struggling to report consistent positive cash flows in the last two years.

However, Howmet, one of the industry’s biggest suppliers, has produced strong results in recent quarters. On Tuesday, it lifted its annual forecasts, driven by strong demand for engine products and fastening systems.

The company also raised its buyback authorization by $2 bn and quarterly dividend by 60% to 8 cents per share.

Shares of the company, which also supplies parts to Airbus (AIR.PA) jumped nearly 13% to close at $93.81 after its second-quarter results also topped estimates.

Pennsylvania-based Howmet now expects 2024 revenue between $7.40 bn and $7.48 bn, up from its prior forecast of $7.23bn to $7.38bn.

Howmet, one of the main suppliers of aerospace castings, expects annual adjusted earnings between $2.53 and $2.57 per share, compared with previous forecast of $2.31 to $2.39.

The AI divide: chipmakers boom, but costs a worry for Microsoft

“The portion of the supply chain where Howmet sits, particularly in advanced metal components for engines, continues to see strong demand; price and execution are supportive as well,” said Seth Seifman, an analyst at J.P. Morgan.

On an adjusted basis, the company earned 67 cents per share for the quarter ended June 30. (Source: Reuters)

30 Jul 24. Filtronic poised for stratospheric growth. Having already landed multiple contracts with Space X, the electronic equipment group’s pipeline of contract opportunities has now doubled year-on-year

Annual revenue up 55 per cent to £25.4m
Cash profit rises from £1.3m to £4.9m
Pre-tax profit up 34-fold to £3.4m
Net cash more than trebles to £5.2m

Communications equipment designer and manufacturer Filtronic (FTC:72p) upgraded earnings guidance multiple times during its 2023-24 financial year, so the eye-catching results had been well flagged.

The company’s key strategic markets are the low earth orbit (LEO) space communication market and aerospace, defence and security sectors. Filtronic’s main customer is Starlink, the LEO operation of Space X and the world leader in LEO constellation operations. Specifically, the company supplies amplified modules for the ground stations which link the LEO constellation network into terrestrial telecom networks and provide high speed, low latency and ubiquitous connectivity.

Having landed its first LEO contract in January 2023, Filtonic has won multiple follow-on orders that culminated in the announcement of a £15.8m order and a five-year strategic partnership with Space X in April this year (‘Space offers a new frontier for Filtronic’, 10 May 2024). Earlier this month, the company announced a £7.1m order pursuant to the five-year Starlink partnership.

The Space X orders and others from the European Space Agency (£3.2m), Qinetiq (£2m) and BAE Systems (£4.5m) not only provide material coverage for current year revenue estimates of £36m, but highlight the company’s focus on end markets that are delivering structural growth. In the aerospace and defence markets, there is an increasing requirement for high bandwidth, fast and secure data telemetry and infrastructure.

In the 2023-24 financial year, Filtronics’ top three clients accounted for 84 per cent of revenue of which Space X accounted for almost half the total, so there is a high degree of customer concentration risk. However, this also reflects the company’s reputation for pushing the boundaries of what is possible in radio frequency (RF) design for customers in its strategic markets.

Moreover, Filtronic’s ability to undertake rapid cutting-edge RF design and scale the manufacturing of mmWave products enables its customers to drive performance improvement and accelerate time to market for demanding applications. This is a competitive advantage that blue-chip clients value, so expect the customer base to broaden in due course as the company converts its pipeline of contract opportunities, which has doubled year-on-year.

Operational gearing underpins robust earnings growth

Reflecting the ongoing ramp up in business, which could see revenue rise to £36m in the 2024-25 financial year and £40mn the year after, the company is investing in engineering, manufacturing and design capabilities to deliver the ramp up in its programmes. Staff costs accounted for two-thirds of Filtronic’s operating costs of £12.5m in the 2023-24 financial year and the research & development (R&D) budget will be maintained at 13 per cent of revenue. At the same time, the board are looking to expand manufacturing space at the Sedgefield facility to cater for the higher workload.

However, the business still has a relatively fixed cost base, so benefits from high operational gearing in a positive sales cycle whereby an increasing proportion of incremental gross profit earned drops through to cash profit and operating profit. This explains why house broker Cavendish expects cash profit to surge 63 per cent from £4.9m to £8m on 41 per cent higher revenue of £36m in the 12 months to 31 May 2025, rising to a cash profit of £9mn on revenue of £9mn in 2025-26. On this basis, expect current year pre-tax profit to increase 88 per cent to £6.4m and earnings per share (EPS) to almost double to 2.7p, rising to £7.6m and 2.9p, respectively, in 2025-26.

Closing net cash of £5.2mn (excluding plant and equipment lease liabilities) is forecast to rise to £6.6m (31 May 2025) and £10.5m (31 May 2026). The company has a favourable working capital cycle with average debtor days around 30 days below average creditor days, and client pre-payments on orders enhancing the cash flow position.

Admittedly, the shares are hardly a bargain after rising more than 40 per cent since my colleague Michael Fahy highlighted the investment opportunity. They now trade on forward price/earnings (PE) ratios of 27 and 25 across the two-year forecast period. However, the growth in satellite launches – the US Government Accountability Office forecasts more than 50,000 new satellites by 2030 – suggests that demand for LEO technologies is on a sharp upward trajectory and that 2025-26 forecasts could prove too conservative. Hold. (Source: Investors Chronicle)

31 Jul 24. Airbus quarterly profit falls on industrial costs and space charge. Europe’s Airbus (AIR.PA) unveiled sharply lower second-quarter profits on Tuesday as the cost of investing in higher jetliner production, coupled with largely pre-announced charges in its Space Systems business, outweighed higher revenue.

The world’s largest planemaker said adjusted operating profit fell by more than half to 814m euros ($879.7m) in the quarter as revenue edged up to 15.995bn euros.

It also took a charge of 989m euros on forward losses in its space business, exceeding the estimate of about 900 m euros it gave with a profit warning last month.

Profits still exceeded analysts estimates, who according to a survey complied by the company were on average expecting second-quarter adjusted operating income of 699m euros on revenue of 15.822bn euros.

The charges bring to just under 1.6bn euros the amount written off Airbus’s balance sheet in just over five months to reflect a new audit of potential losses on key communications and navigation satellite in its troubled Space Systems business.

“I won’t take my eyes off the case before it is fixed,” Airbus CEO Guillaume Faury told analysts.

Industry sources say much of the newly identified risk is accumulated in the OneSat satellite project and EGNOS, a system designed to improve accuracy of existing navigation signals.

Airbus is working on a review of space activities as it discusses potential alliances with France’s Thales (TCFP.PA) and Italy’s Leonardo (LDOF.MI) and will detail a turnaround plan for Space Systems in September, Reuters reported on Monday.

It has also launched an expanded cost-containment plan for the wider Defence and Space division, accelerating and deepening existing cost measures, industry sources said. That comes on top of a new efficiency and costs plan at the commercial division.

Faury confirmed the space restructuring as well as the new

cost reduction plans in space and commercial aircraft.

The company has not provided specific cost reduction targets. Industry sources said the immediate cost containment plan at the Defence & Space division would start with 2% being chopped off budgeted spending plans for 2024.

Announcing its own mid-year results on Tuesday, Leonardo confirmed talks with its existing partner Thales and with Airbus over possible alliances in the space sector.

Europe needs a stronger structure to compete with the United States and China, Leonardo CEO Roberto Cingolani told analysts.

Airbus reaffirmed recently softened goals for 2024 including a target of 770 airplane deliveries this year, down from 800.

Faury said Airbus had been “blind-sided” by a shortfall in deliveries of LEAP engines made by CFM, a joint venture of GE Aerospace and Safran, which come on top of recent supply problems with competing Pratt & Whitney (RTX.N) engines.

GE Aerospace said last week it had made progress with a number of suppliers but that new engine output, which fell 20% from the previous quarter, had not recovered in May as hoped. It reiterated that the supply of materials was a key constraint. (Source: Reuters)

30 Jul 24. Airbus reports Half-Year (H1) 2024 results.

323 commercial aircraft delivered
Revenues € 28.8 bn; EBIT Adjusted € 1.4bn
EBIT (reported) € 1.5 bn; EPS (reported) € 1.04
Free cash flow before customer financing € -0.5bn
2024 guidance as per June update

Airbus SE (stock exchange symbol: AIR) reported consolidated financial results for the Half-Year (H1) ended 30 June 2024.

“The half-year financial performance mainly reflects significant charges in our space business. We are addressing the root causes of these issues,” said Guillaume Faury, Airbus Chief Executive Officer. “In commercial aircraft, we are focused on deliveries and preparing the next steps of the ramp-up, while addressing specific supply chain challenges and protecting the sourcing of key work packages.”

Gross commercial aircraft orders totalled 327 (H1 2023: 1,080 aircraft) with net orders of 310 aircraft after cancellations (H1 2023: 1,044 aircraft). The order backlog amounted to 8,585 commercial aircraft at the end of June 2024. Airbus Helicopters registered 233 net orders (H1 2023: 131 units), including 38 H225s for the German Federal Police in the second quarter. Airbus Defence and Space’s order intake by value was €6.1bn (H1 2023: €6.0bn).

Consolidated revenues increased 4 percent year-on-year to € 28.8bn (H1 2023: € 27.7bn), mainly reflecting the number of commercial aircraft deliveries and a higher volume in the Air Power business of Airbus Defence and Space. A total of 323 commercial aircraft were delivered (H1 2023: 316 aircraft), comprising 28 A220s, 261 A320 Family, 13 A330s and 21 A350s. Revenues generated by Airbus’ commercial aircraft activities increased 4 percent, mainly reflecting the higher number of deliveries. Airbus Helicopters’ deliveries totalled 124 units (H1 2023: 145 units) with revenues broadly stable year-on-year, reflecting a solid performance, notably in services. Revenues at Airbus Defence and Space increased 7 percent, mainly driven by the Air Power business, partly offset by the recent update of Estimates at Completion assumptions in Space Systems. Four A400M military airlifters were delivered in H1 2024 (H1 2023: 3 aircraft).

Consolidated EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – was € 1,391 m (H1 2023: € 2,618 m). This decrease primarily reflects the charges recorded in the Space Systems business of € 989 m.

EBIT Adjusted related to Airbus’ commercial aircraft activities decreased to € 1,954 m (H1 2023: € 2,256 m), with the increase in deliveries reduced by investments for preparing the future.

The A220 ramp-up continues towards a monthly production rate of 14 aircraft in 2026, with a focus on the programme’s industrial maturity and financial performance. In addition, on 24 June 2024, in line with agreements in place and as planned, the Company and Investissement Québec agreed to provide shareholder financing for the Airbus Canada Limited Partnership. As announced in June 2024, the A320 Family ramp-up trajectory has been adjusted to reflect specific supply chain challenges. The production rate of 75 A320 Family aircraft per month is now expected in 2027. The A321XLR powered by CFM engines received its Type Certification from the European Union Aviation Safety Agency (EASA) earlier in July. Entry-into-service is expected at the end of the summer 2024. On widebody aircraft, the Company continues to target a monthly production rate of 4 A330s in 2024 and rate 12 for the A350 in 2028.

Airbus Helicopters’ EBIT Adjusted decreased to €230m (H1 2023: €274m), reflecting the lower deliveries and programme mix.

EBIT Adjusted at Airbus Defence and Space totalled €-807m (H1 2023: €78m), reflecting the €989m of charges mainly linked to the updated Estimates at Completion in Space Systems.

On the A400M programme, development activities continue towards achieving the revised capability roadmap. Retrofit activities are progressing in close alignment with the customer. No net material impact was recognised in the first half of 2024. Risks remain on the qualification of technical capabilities and associated costs, on aircraft operational reliability, on cost reductions and on securing overall volume as per the revised baseline.

Consolidated self-financed R&D expenses totalled €1,593m (H1 2023: €1,431m).

Consolidated EBIT (reported) amounted to €1,456m (H1 2023: €1,887m), including net Adjustments of €+65m.

These Adjustments comprised:

€+19m related to the dollar working capital mismatch and balance sheet revaluation, of which €+32m were in Q2. This mainly reflects the phasing impact arising from the difference between transaction date and delivery date;
€+51m related to the gain on Airbus OneWeb Satellites, linked to the acquisition of the remaining 50% of the joint venture in Q1;
€-5m of other costs including compliance costs, of which €+1m were in Q2.

The financial result was €-108m (H1 2023: €102m), mainly reflecting the negative impact from the revaluation of certain equity investments. Consolidated net income(1) was €825m (H1 2023: €1,526m) with consolidated reported earnings per share of €1.04 (H1 2023: €1.94).

Consolidated free cash flow before customer financing was €-529m (H1 2023: €1,635m), mainly driven by the change in working capital which includes the planned inventory build-up to support the ramp-up plan. Consolidated free cash flow was €-559m (H1 2023: €1,593m). The gross cash position stood at €21.9bn at the end of June 2024 (year-end 2023: €25.3bn), with a consolidated net cash position of €7.9bn (year-end 2023: €10.7bn) after the payments of the 2023 dividend and special dividend.

Outlook

As the basis for its 2024 guidance, the Company assumes no additional disruptions to the world economy, air traffic, the supply chain, the Company’s internal operations, and its ability to deliver products and services.

The Company’s 2024 guidance is before M&A.

On that basis, the Company targets to achieve in 2024:

Around 770 commercial aircraft deliveries;
EBIT Adjusted of around €5.5bn;
Free Cash Flow before Customer Financing of around € 3.5bn.

30 Jul 24. Leonardo DRS Announces Financial Results for Second Quarter 2024.

Revenue: $753m, up 20% year-over-year
Net Earnings: $38m, up 9% year-over-year
Adjusted EBITDA: $82m, up 32% year-over-year
Diluted EPS: $0.14, up 8% year-over-year
Adjusted Diluted EPS: $0.18, up 20% year-over-year
Bookings: $941m (book-to-bill ratio of 1.2x)
Backlog: $7.9bn, up 82% year-over-year
Increases 2024 guidance across metrics

Leonardo DRS, Inc. (Nasdaq: DRS), a leading provider of advanced defense technologies, today reported financial results for the second quarter 2024, which ended June 30, 2024.

CEO Commentary: “Our strong second quarter 2024 results reflect the solid momentum evident across the business. Healthy customer demand continues to propel our bookings and backlog growth. This demand along with an improving supply chain is unlocking revenue growth above our expectations. Overall, I am pleased with our year-to-date performance, however, we are maintaining a clear focus on execution to deliver on our commitments to customers and shareholders,” said Bill Lynn, Chairman and CEO of Leonardo DRS.

Leonardo DRS continued to deliver remarkable year-over-year revenue growth, which stood at 20% for the second quarter. Our programs related to advanced infrared sensing, electric power and propulsion and tactical radars were key drivers behind the robust revenue growth in the quarter.

Higher volume spurred the significant year-over-year adjusted EBITDA growth and margin expansion in the quarter. Quarterly net earnings, adjusted net earnings, diluted EPS and adjusted diluted EPS were all higher as a result of strong operational performance, which outweighed a higher tax rate and expense compared to the prior year.

Cash Flow and Balance Sheet

Net cash flow provided by operating activities was $34m for the second quarter. The company’s free cash flow generation was $1m in the quarter. The operating and free cash flow trends were largely consistent with the historical patterns of the business but showed year-over-year improvement on both metrics due to increased profitability and better working capital efficiency.

At quarter end, the balance sheet had $149m of cash and $208m of outstanding borrowings under the company’s credit facility, which provides the company with sufficient financial capacity to deploy capital for growth, while maintaining a healthy balance sheet.

ASC bookings continued to exceed expectations with solid demand for our advanced infrared sensing as well as our naval and ground network computing technologies. Revenue growth on advanced infrared sensing and tactical radar programs were the major contributors for the year-over-year increase in the segment. Favorable program mix, improved program execution and higher volume drove the adjusted EBITDA growth and margin expansion for the quarter.

Integrated Mission Systems (“IMS”) Segment

Strong IMS bookings were driven by healthy demand for our electric power and propulsion capabilities. Drivers for quarterly revenue growth were broad-based and came from increases in our electric power and propulsion, force protection and ground systems integration programs. While adjusted EBITDA increased as a result of higher volume, unfavorable program mix and less efficient execution related to a ground surveillance integration program led to margin contraction in Q2. Our Columbia Class program continued to trend positively with significantly improved year-over-year profitability.

2024 Guidance

The company does not provide a reconciliation of forward-looking adjusted EBITDA and adjusted diluted EPS, due to the inherent difficulty in forecasting and quantifying the adjustments that are necessary to calculate such non-GAAP measures without unreasonable effort. Material changes to any one of these items could have a significant effect on future GAAP results. (Source: BUSINESS WIRE)

29 Jul 24. Airbus to restructure Space Systems as consolidation talks continue. Airbus (AIR.PA) is drawing up a turnaround plan for its struggling Space Systems business, industry sources said, without waiting for the outcome of European consolidation talks that include Italy’s Leonardo as well as France’s Thales. Airbus also hopes to complete a separate Space Systems strategy review in the fourth quarter as it reels from 1.5bn euros ($1.6bn) of recent charges, they said.

But even beforehand, it aims to announce a restructuring of Space Systems activities in September and has launched an urgent cash containment plan across the wider Defence and Space unit, where managers have declared the cost situation “critical”.

Airbus declined to comment.

CEO Guillaume Faury told reporters last week that Airbus was looking at opportunities to create scale in defence, space and particularly satellites markets where traditional players have been heavily disrupted by the success of new constellations.

La Tribune and Reuters reported earlier this month that Airbus and France’s Thales (TCFP.PA), were exploring a tie-up of space activities as new competition disrupts the sector.

On Monday, industry sources said those talks also include Leonardo (LDOF.MI), partner to Thales in a pair of ventures focusing on satellite manufacturing and the services business.

None of the companies involved had any comment.

Airbus is one of the two largest satellite makers in Europe alongside Thales Alenia Space (TAS), two-thirds owned by Thales and one-third by Leonardo. Telespazio, in which Leonardo owns two thirds and Thales the rest, provides satellite services.

Europe’s biggest satellite firms have traditionally been geared towards one-off satellites parked in geostationary orbit, deploying ambitious but costly technology. They face increasing competition from small satellites in low Earth orbit built at a fraction of the cost by new rivals led by Elon Musk’s Starlink. (Source: Reuters)

30 Jul 24. Spain’s Indra lifts 2024 guidance on defence boost. Spanish defence and technology firm Indra (IDR.MC) lifted its guidance for 2024 after reporting a strong second quarter, helped by its fast growing defence unit.

The war in Ukraine and tensions with China are prompting Western nations to boost military spending and Indra is focused on building a position as one of the leading defence companies in Europe.

The group said it now expects its overall revenue in 2024 to exceed 4.80bn euros ($5.19bn) after defence revenue jumped 16% in the April to June quarter. In February it had forecast full-year revenue of 4.65bn euros.

Chairman Marc Murtra pointed to “higher investments in transnational programmes” and the “growing importance in the command and control systems that are Indra’s core”, when asked by investors about the defence outlook for the next few years.

The company’s shares, which have risen 37% in the year to date, were down 1% at 0958 GMT after falling as much as 3%.

Indra’s second-quarter net profit rose 15% from a year earlier to 53m euros, below the 62m euros forecast by analysts polled by LSEG.

“Indra is used to outperform every quarter and this one it has underperformed, except in revenues. It may be profit taking,” Renta 4 analysts said of the share price reaction.

More than half of Indra’s revenue is generated by its tech unit Minsait, which posted quarterly revenue growth of 5.8% lagging the performance of Indra’s defence and air traffic business, which grew 7.5% in the period.

“We are relatively confident with potential additional growth in the future,” Minsait director Luis Abril told a conference call. (Source: Reuters)

30 Jul 24. Fitch finds “uncertainties” continue at Denel. The latest Fitch rating for South African State-owned defence conglomerate Denel reflects what the United States (US) credit rating agency says are “continuing operational, strategic and liquidity uncertainties despite recent cash equity injections and financial debt repayment”.

Its July rating of CC(zaf) in the national long-term category shows, according to the credit rating agency, weaknesses exacerbated by regular changes in executive management, which limit effective implementation of the group’s turnaround strategy. “Further, the lack of clear, consistent financial reporting provides additional uncertainty to Denel’s financial position and its ability to monitor the progress of its operational and financial initiatives.”

Denel was rated C(zaf) in the Fitch national short-term category. The ratings are unchanged from 2023.

The Fitch credit rating scale uses categories ‘AAA’ to ‘BBB’ (investment grade) and ‘BB’ to ‘D’ (speculative grade) with an additional +/- for AA through CCC levels indicating relative differences of probability of default or recovery from issues. The terms “investment grade” and “speculative grade” are market conventions and do not imply recommendation or endorsement of a specific security for investment purposes. Investment grade categories indicate relatively low to moderate credit risk, while ratings in the speculative categories signal either a higher level of credit risk or that a default has already occurred.

In commentary on its July rating of the South African State-owned enterprise (SOE), Fitch notes the lack of clarity on contracts, coupled with the absence of a long-term funding structure and requirements for repeated equity contributions, highlights the high liquidity risk Denel continues to face.

A lack of financial transparency is cited by Fitch as a key driver of the latest Denel rating. In this regard it notes Denel has an increasing lack of financial transparency as it has not produced independently audited information since the financial year ended 2020.

“Our conservative rating case is based on Denel’s management accounts and related notes and we continue to assume that it has only a limited ability to improve operational capacity and thereby generate sufficient profitability to support liquidity.”

As far as liquidity is concerned Fitch has it that while Denel’s liquidity position has improved as a result of the government’s equity contributions, uncertainty remains over its operating profitability and free cash flow (FCF) generation. The equity contributions have significantly reduced Denel’s debt burden, interest costs and liquidity risk.

“Nevertheless, we expect that the longer Denel takes to generate operating profitability the higher the risk to liquidity arising from claims either from suppliers for non-payment or from claims under guarantees provided by the group (be that either advance payment or performance guarantees),” Fitch stated.

Other negatives influencing its latest rating are what Fitch terms “continued management volatility” and “uncertain operational turnaround”.

“Denel has agreed a turnaround plan with its key stakeholders and is in the process of implementation. While the group maintains that it has simplified its operating structure and has re-established a focus on core projects and capabilities, we are as yet unable to ascertain this and expect poor performance in the near term,” Fitch cautioned.

It added that the government has continued to provide significant additional liquidity support to Denel through direct equity contributions during 2021-2023. In the 2023 financial year, management indicated they had received a further R3.5bn, enabling some debt repayment, payments to employees and creditors and providing working-capital support to enable resumption of operations for key projects.

“Denel continues to benefit from various forms of government support, which had previously allowed the rating to be notched up from its Standalone Credit Profile (SCP). However, under our Government-Related Entities (GRE) Rating Criteria, where near-term default is a real possibility, notching up from the SCP becomes irrelevant and might not adequately reflect near-term default risk. Given continuing operational and liquidity risks, we do not employ any upward notching for state support and Denel remains rated on a standalone basis,” the credit agency stated in its July commentary.

Due to its weak operating and financial profiles, Denel is rated significantly below entities like Rand Water, Fitch stated, with the CC national rating denoting a high level of default risk. The ratings agency added that Denel’s links to the state no longer benefit the company.

However, Denel could improve its ratings by successfully implementing its turnaround plan, leading to normalised operations and production under existing contracts with a sustainable capital structure. Other factors that could lead to improvement would be operational profitability and further demonstration of government support and stronger links.

If Denel does not improve liquidity, or it begins to start to default or launch insolvency proceedings, that would negatively affect future ratings. (Source: https://www.defenceweb.co.za/)

26 Jul 24. EnerSys Completes Acquisition Of Bren-Tronics To Expand Presence In Critical Defense Applications. EnerSys (NYSE: ENS), the global leader in stored energy solutions for industrial applications, announced today that it has completed its acquisition of Bren-Tronics. The acquisition of Bren-Tronics marks a significant milestone in EnerSys’ strategic growth and expansion initiatives.

“We are very pleased to have closed this important transaction and can officially welcome Bren-Tronics to the EnerSys family,” said EnerSys President & CEO David M. Shaffer. “EnerSys’ combination with Bren-Tronics will strengthen our position as a critical enabler of the energy transition and supports our growth in the attractive and growing military and defense end markets.”

Shaffer added, “Our acquisition will accelerate EnerSys’ transformation in expanding our lithium product offerings, growing revenue and profitability and advancing toward our fiscal year 2027 targets.”

Bren-Tronics, headquartered in Commack, N.Y., was previously a privately held company and has developed a legacy of innovation since 1973. Bren-Tronics is a leading manufacturer of highly reliable portable power solutions, including small and large format lithium batteries and charging solutions, for military and defense applications. It has approximately 280 employees across the U.S., France, and the U.K., with 2023 sales of approximately $100m. Bren-Tronics will be integrated within EnerSys’ Specialty line of business.

EnerSys purchased Bren-Tronics for an all-cash transaction of $208 m. The purchase price represents approximately 8.7x Bren-Tronics’ adjusted EBITDA for the twelve months ending December 31, 2023. The transaction will be immediately accretive to EnerSys.

Reed Smith LLP served as legal advisor to EnerSys in connection with the transaction.

Stout, a global advisory firm, served as financial, tax, and IT advisor to EnerSys in connection with the transaction. (Source: BUSINESS WIRE)

17 Jul 24. Momentum builds at Cohort. A huge naval order has swollen the pipeline by 60 per cent. Shares in Cohort (CHRT) had been one of the laggards in the UK defence market following the outbreak of the war in Ukraine, but that has changed meaningfully over the past 12 months. The mini-defence conglomerate’s shares have almost doubled during the last year, with the steepest climb beginning in March after the company announced a bumper £135m order from the Royal Navy.

The navy put in an order for a decoy launcher system used on warships known as Ancilia, which uses lasers as a countermeasure to direct guided missiles away from vessels. It has been developed by Cohort’s Systems Engineering and Assessment subsidiary, and provides a steady stream of work that will continue for more than a decade.

It also helped to increase the size of the company’s order book by nearly 60 per cent in the year to March, to £519mn. A further £70m of deals secured since means that 95 per cent of this year’s expected revenue is in the bag, plus at least £100m of next year’s. On top of this, the company pointed to a greater spread of orders in future years, which chief executive Andy Thomis said offers the company some “long-term stability” from which it can continue to grow the business.

In divisional terms, all of the companies under its umbrella performed well except for EID, the Portuguese company making communications equipment for naval vessels. Continued delays to expected orders meant it incurred another (albeit smaller) loss, although orders received from the Portuguese navy since the year-end means that Thomis also expects a turnaround in this division in the current financial year. Cash from operating activities improved by around £7mn and it finished the year with net funds (excluding leases) of just over £23m, although planned investment in a new site in will eat into this over the next 12 months.

Overall, the strong results and decent order momentum led to several broker upgrades to forecasts. Shore Capital lifted its earnings per share estimate for 2025 by 7 per cent and 2026 by 9 per cent. Based off the former, Cohort’s shares trade at a price/earnings ratio of just under 20 times, which is well above its five-year average of 15 times as well sector giants like BAE Systems (BA.) and Lockheed Martin (US:LMT).

As Shore Capital’s Jamie Murray points out, though, further upgrades seem likely given recent order momentum. Maintain buy. Last IC View: Buy, 532p, 13 Dec 2023. (Source: Investors Chronicle)

29 Jul 24. Ghost Robotics, a leading innovator in legged robotics, and LIG Nex1, a premier South Korean defense technology company, are pleased to announce the close of a strategic partnership through LIG Nex1’s control-stake acquisition of Ghost Robotics. LIG Nex1 has acquired a 60% control-stake in Ghost Robotics for $240m USD, valuing the company at $400m USD.

This partnership marks a significant milestone for both companies as they combine their expertise and resources to advance the field of autonomous robotic solutions. The acquisition will enable Ghost Robotics to leverage LIG Nex1’s extensive experience and capabilities in defense technology and manufacturing to further accelerate scaling.

“We are thrilled to partner with LIG Nex1 and embark on this exciting new chapter for Ghost Robotics,” said Gavin Kenneally, PhD, Co-founder & CEO of Ghost Robotics. “Their investment and strategic guidance will accelerate our growth and enhance our ability to deliver groundbreaking robotic solutions to a wider range of industries and applications.”

LIG Nex1’s CEO, Shin IckHyun, echoed the enthusiasm, stating, “Our acquisition of a majority stake in Ghost Robotics aligns perfectly with our vision to lead the future of defense and security technology.” He added, “We expect this acquisition will serve as momentum for both companies to grow together based on our leading-edge technological capabilities and close cooperation.”

This partial acquisition will foster innovation and drive the development of next-generation robotic systems for both industrial and defense markets. By combining their strengths, Ghost Robotics and LIG Nex1 are well-positioned to lead the industry in delivering robust, versatile, and reliable robotic solutions.

About Ghost Robotics

Founded in 2015, Philadelphia-based Ghost Robotics develops Quadrupedal Unmanned Ground Vehicles, or Q-UGV® for short. Ghost’s Q-UGVs not only manage unstructured terrain well but are built for demanding customers in demanding environments. Their robots have a place in a broad range of government and enterprise applications where mobile robots with four legs have inherent advantages over wheels, tracks and even bipedal systems. To learn more about Ghost Robotics, visit www.ghostrobotics.io.

About LIG Nex1

LIG Nex1 is a leading defense technology company based in South Korea, specializing in advanced weapon systems, electronics, and communication solutions. With a commitment to innovation and excellence, LIG Nex1 is dedicated to providing world-class defense and security technologies. (Source: PR Newswire)

26 Jul 24. Battling Babcock withstands frigate loss.

Defence company takes another £90m hit on the Type 31 contract

Adjusted operating profit up by a third
Strong cash flows accelerate pension payments

The inclusion of a further £90mn loss on a contract to build five frigates for the Ministry of Defence – a year after recording a £100mn loss on the same deal – was the only real fly in the ointment of Babcock International’s (BAB) results.

The company entered into largely fixed-price deals to deliver the Type 31 frigates in 2019 but was then hit with a wave of additional costs as labour, raw materials and other overheads soared. Designs put together when teams were working remotely meant construction of the first ship (for which the superstructure is now complete) has been difficult, chief executive David Lockwood admitted to investors. Operational improvements have allowed the second ship to be built more efficiently and, although future losses can’t be ruled out, “we have dramatically reduced the possible range of outcomes”, Lockwood said.

Even accounting for the loss, this was a strong set of results, with like-for-like revenue up 11 per cent and adjusted operating profit increasing by a third to £238m on improved margins.

Underlying free cash flow more than doubled to £160mn, and the company used some of this to accelerate pension payments. Over the past four years, the actuarial deficit has been cut by £500m to £200m, and annual pension deficit payments are expected to fall by £25m to £40m. Net debt over the four years has been cut from £1.6bn to £435m.

The deleveraged balance sheet and strong end markets offering the prospects of enhanced returns to shareholders were the main reasons for highlighting Babcock in our Ideas of the Year issue. The company’s shares have risen by a third since but at 12 times FactSet consensus earnings they still look like good value. Buy.

Last IC View: Buy, 389p 4 Jan 2024. (Source: Investors Chronicle)

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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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