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19 Sept 24. Babcock International Group PLC (“Babcock” or “the Group”) provides a trading update for the first five months of the financial year ahead of its Annual General Meeting to be held at 10.30 am today.
Trading update
Trading for the five-month period to 31 August 2024 has been encouraging and in line with the Board’s expectations.
Positive momentum has continued into H1, and the Group has delivered good organic revenue growth, particularly in civil and naval Nuclear, and in the Land Sector. Group underlying operating profit also increased compared to the same period last year, despite last year including the license fees from the Polish MIECZNIK programme.
Our expectations for the full year are unchanged and we continue to progress toward our medium-term guidance.
Business developments
Demand in our core defence market remains positive and we continue to make good strategic progress. We have:
Launched H&B Defence, a joint venture with HII (NYSE: HII) to accelerate the development of critical sovereign capability for Australia’s AUKUS nuclear-powered submarine programme, including workforce, nuclear infrastructure design and build, submarine defueling and decommissioning, nuclear waste and future sustainment.
Reopened 9 Dock in Devonport on 12 September, following the completion of an extensive regeneration project. The dry dock will deliver the £560 m maintenance programme to extend the operational life of HMS Victorious, currently underway, and is critical for the future support of the UK’s Continuous At Sea Deterrent.
Inaugurated the Babcock Engineering & Nuclear Skills building at City College Plymouth. Opened by the Minister of State for Defence Procurement and Industry, the new facility will enhance our growing workforce’s capabilities in the UK’s nuclear programmes.
Signed a contract extension with PGZ SA, the Polish Armaments Group, to continue our support to Poland’s Miecznik frigate programme until the delivery of ship three in 2031.
The Group’s HY25 results will be published on 13 November 2024.
16 Sept 24. Intel Awarded up to $3bn by the Biden-Harris Administration for Secure Enclave.
Secure Enclave award builds on Intel’s programmatic engagement across strategic U.S. government defense programs, including SHIP and RAMP-C.
The Biden-Harris Administration announced today that Intel Corporation has been awarded up to $3bn in direct funding under the CHIPS and Science Act for the Secure Enclave program. The program is designed to expand the trusted manufacturing of leading-edge semiconductors for the U.S. government.
The Secure Enclave program builds on previous projects between Intel and the Department of Defense (DoD) such as Rapid Assured Microelectronics Prototypes – Commercial (RAMP-C) and State-of-the-Art Heterogeneous Integration Prototype (SHIP). As the only American company that both designs and manufactures leading-edge logic chips, Intel will help secure the domestic chip supply chain and collaborate with the DoD to help enhance the resilience of U.S. technological systems by advancing secure, cutting-edge solutions.
The Secure Enclave award is separate from the proposed funding agreement that Intel reached with the Biden-Harris Administration in March of this year to support the construction and modernization of semiconductor commercial fabrication facilities under the CHIPS and Science Act.
“Intel is proud of our ongoing collaboration with the U.S. Department of Defense to help strengthen America’s defense and national security systems,” said Chris George, president and general manager of Intel Federal. “Today’s announcement highlights our joint commitment with the U.S. government to fortify the domestic semiconductor supply chain and to ensure the United States maintains its leadership in advanced manufacturing, microelectronics systems, and process technology.”
Today’s announcement reflects the continued progress of Intel Foundry, which brings together all the components customers need to design and manufacture chips at the leading edge. Intel Foundry is nearing completion of a historic pace of design and process technology innovation with its most advanced technology – Intel 18A – on track for production in 2025. The company, which develops and produces many of the world’s most advanced chips and semiconductor packaging technologies, is advancing critical semiconductor manufacturing and research and development projects at its sites in Arizona, New Mexico, Ohio and Oregon.
Intel has a long-standing history of working closely with the Department of Defense. In 2020, Intel was awarded the second phase of the SHIP program, allowing the U.S. government to access Intel’s advanced semiconductor packaging capabilities in Arizona and Oregon and leverage Intel’s substantial annual R&D and manufacturing investments. In 2023, Intel successfully delivered the first multi-chip package prototypes under the SHIP program, a major achievement in ensuring access to cutting-edge microelectronics packaging and paving the way for modernization for the DoD.
In 2021, Intel was awarded an agreement to provide commercial foundry services for multiple phases of the DoD’s RAMP-C program, which aims to leverage U.S.-based commercial semiconductor foundries to produce custom and integrated circuits for critical DoD systems. Since then, Intel has successfully onboarded several defense industrial base (DIB) customers, including Boeing, Northrop Grumman, Microsoft, IBM, Nvidia and others, and has made progress in developing early DIB product prototypes. This progress showcases the readiness of Intel’s 18A process technology, intellectual property and ecosystem solutions for high-volume manufacturing. (Source: BUSINESS WIRE)
16 Sept 24. Sheffield-based Synectics (SNX:233p), a leader in advanced security and surveillance systems, has upgraded profit guidance following a raft of contract wins.
- Ongoing strong earnings momentum
- 11 per cent earnings upgrade
- PE ratio of 12.5 (2024) and 9.7 (2025)
- Forecast dividend yield of 2.7 per cent (2025)
Synectics specialises in delivering tailored security and surveillance solutions to a high-profile, global customer base, operating in environments that are often both technically and logistically demanding. The technology solutions are specially designed for markets with high barriers to entry, so presenting lucrative opportunities in sectors that are often challenging to penetrate. Its proprietary security and surveillance software, Synergy, manages and records over 250,000 channels across 270 locations worldwide, including high-security environments such as casinos (a fifth of annual revenue), town and city centres, stadiums, tourist attractions and critical infrastructure sites.
For instance, Synectics has deployed more than 10,000 specialist COEX camera stations to safeguard oil and gas refineries, pipelines, offshore vessels, and platforms for industry giants including Saudi Aramco and Shell. The global oil and gas market accounts for a quarter of annual revenue. In the transport sector, Synectics delivers market-leading solutions to major national and international transport providers – including leading providers such as Deutsche Bahn, Stagecoach and Irish Rail – to safeguard over five bn passenger journeys each year.
In the third quarter, order intake includes a $1.2m (£1mn) contract for the installation of a new security and surveillance system at a casino resort in the Philippines, further contract wins with oil and gas giant Saudi Aramco, and a strategically important $10mn order for the installation of a new security and surveillance system for a casino resort in Singapore. The Southeast Asian casino customer has been using the company’s Synergy proprietary software platform for the past decade and is now expanding and upgrading its existing system to the latest version. Moreover, the same customer awarded Synectics an additional $3.2m contract last week.
Earnings on the upgrade – again
Analysts at house broker Shore Capital have taken note, upgrading their full-year pre-tax profit and earnings per share (EPS) estimates by 11 per cent to £3.9m and 18.6p, respectively, on 13 per cent higher revenue of £55.4m, implying 30 per cent year-on-year earnings growth. The company is developing a habit of outperforming, having delivered an eye-catching performance in the 2023 financial year when underlying pre-tax profit trebled to £3mn. Key drivers were a leaner cost base following a restructuring programme, the operational leverage of the business and a tailwind from the recovering oil and gas market.
It’s well worth noting that Synectics is a highly cash-generative business. Net cash increased 60 per cent to £6.4m (36p) year-on-year at the latest half-year end and analysts estimate the business will deliver free cash flow (FCF) of £4.8m in the 2024-25 financial year, implying shares in the £41.5m market capitalisation company offer a bumper FCF yield of 11.7 per cent. The robust FCF generation is supportive of a forecast 50 per cent hike in the dividend per share to 4.5p in the 12 months to 30 November 2024, and a further 44 per cent increase to 6.5p in 2025. Ongoing earnings momentum underpins the step-change in the pay-out, too, as Shore Capital predict 29 per cent growth in pre-tax profit and EPS to £5m and 23.9p, respectively, in 2025. On this basis, the shares are rated on a modest forward price/earnings (PE) ratio of 9.7 (only 8.2 times cash-adjusted) and offer a prospective dividend yield of 2.8 per cent. Synectics’ share price has risen 24 per cent since I suggested buying the shares, at 188p (Alpha Research: ‘Spying a small-cap profit opportunity’, 12 July 2024), and I maintain my 280p fair valuation. Buy. (Source: Investors Chronicle)
17 Sept 24. Summary of MilDef’s Capital Markets Day 17/9. At the Capital Markets Day, held at At Six in Stockholm today, MilDef presents the strength of its business model and how the markets are expected to develop going forward, with a focus on the ongoing defense and security rearmament. The updated financial profitability target of EBITA over time of at least 15% per year is reiterated as well as strategies for continued high growth.
The program will be opened by President and CEO Daniel Ljunggren, who will present MilDef’s growth journey, from a pure reseller of tactical IT in 1997 to today’s international and leading player in hardware, software and services for defense and security.
“The Capital Markets Day deepens and broadens investors’ knowledge of our development and strategies for continued growth, under market conditions that have never before been as strong. In addition to presenting MilDef’s upgraded profitability targets, we focus in particular on explaining our customer offering and marketing and sales strategy,” says Daniel Ljunggren, President and CEO of MilDef Group.
Furthermore, the following comment is made on MilDef’s future prospects.
“For the coming years, we expect an accelerated growth, as we predict that the increased defense spendings will have full impact on MilDef from 2025 onwards,” says Daniel Ljunggren, President and CEO MilDef Group.
Fredrik Persson, CTO and Deputy CEO, presents the offering, which covers all components of an IT system, from servers and computers to network equipment and screens, as well as software and services. In addition, products for soldier-borne digitization are presented.
Fredrik Jacobsson, VP Europe and North America, presents marketing and sales strategy, how the sales organization is structured, different paths to the end customer, customer promises and he gives examples of national and international customer collaborations.
Karin Svalander, CLCO, presents strategies for responsible relationships with customers, suppliers and partners. Furthermore, she describes MilDef’s ethical council, framework for customer knowledge (KYC) and MilDef’s Green List regarding nations MilDef chooses to do business with.
Robert Limmergård, Secretary General of the Swedish Security and Defense Industry Association (SOFF), presents the industry organization’s view of the market’s increased needs and trends in defense procurement.
Viveca Johnsson, CFO, presents MilDef’s financial situation and growth journey after the IPO in 2021. She also presents MilDef’s new financial profitability targets.
Martina Karlsson, CPO, presents how MilDef works with competence enhancement in growth, leadership and employeeship as well as a corporate culture that attracts and inspires committed employees.
16 Sept 24. GMB Union has responded to Harland and Wolff’s administration announcement. Matt Roberts, GMB National Officer, said: “Workers, their families and whole communities now face their lives being thrown into chaos due to chronic failures in industrial strategy and corporate mismanagement.
“All the four Harland & Wolff yards are needed for our future sovereign capabilities in sectors like renewables and shipbuilding.
“The Government must now act to ensure no private company is allowed to cherry pick what parts are retained, in terms of which yards or contracts they wish to save.
“Leaving these vital yards – and the crucial FSS contract with all its promises for UK shipbuilding – to the mercy of the market is not good enough. The Government must provide support and oversight to get the market to the solution we need.”
16 Sept 24. TT Electronics profit warning sends shares down a third.
Turnaround stories don’t happen overnight. TT Electronics (TTG), which makes components for the aerospace and defence industries, said on Monday a poor operational performance and weaker orders would mean its operating profit for the full year would be down around £15mn from the consensus forecast of £55mn.
The shares fell 32 per cent in response, to 97p, a 10-year-low for the company.
“Trading results in August have been weak as a result of operational efficiency issues in two North American sites which are impacting both revenue and profitability,” the company said. TT operates in Europe, Asia and North America, with an even split in sales between regions. Management had reiterated guidance as recently as last month. AH (Source: Investors Chronicle)
16 Sept 24. Harland & Wolff to meet with shareholders as administration risk looms
Harland and Wolff’s Aim-listed shares have been suspended since July after accounting issues forced it to delay publishing its annual report.
Troubled shipbuilder Harland & Wolff is planning to meet with shareholders this Thursday following reports that the firm could fall into administration as soon as this week, City A.M. understands.
Interim chairman Russell Downs intends to inform investors of the group’s financial position at the meeting following weeks of turmoil and uncertainty.
Shareholders have repeatedly had requests for an extraordinary general meeting (EGM) shunned in recent months, and it is understood no vote will be held on Thursday.
They are particularly concerned over the prospect of a pre-pack administration, a move that would allow operations to continue but see their investments wiped out. One source familiar with the company told City A.M. that as many as 400 employees in the business are shareholders.
News that the firm could potentially fall into administration comes after a string of revelations at the embattled shipbuilder.
Chief finance officer Arun Raman departed on Wednesday, and the company has since confirmed the launch of an investigation into the “misapplication” of some £25m in corporate funds.
Sky News reported on Saturday the FTSE 250 defence contractor Babcock is weighing a possible bid for the firm, with a host of other suitors also lining up.
Harland & Wolff, the Aim-listed company best known for building the Titanic, was plunged into crisis in in July after the Labour government refused to guarantee a £200m UKEF loan seen as critical to its continued operation.
The troubles have seen the departure of a host of top-level executives, including CEO John Wood, chairman Malcolm Groat and two non-executive directors.
It has also placed the future of a £1.6bn Ministry of Defence contract to build warships for the Royal Navy, and more than 1,000 jobs, in doubt.
Harland & Wolff was approached for comment. (Source: City AM)
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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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