Sponsored by SPX Communication Technologies (TCI & ECS)
www.tcibr.com
www.enterprisecontrol.co.uk
———————————————————————————————————————————————————————————————————————————————————————————————————————————————
26 Sept 24. Dassault Aviation forms company to support IAF Mirage 2000 fleet. Established under the ‘Made in India’ policy, the new company will contribute to the self-reliance of India’s growing defence industry.
Dassault Aviation, a French aircraft manufacturer, will create a new company for the Maintenance, Repair and Overhaul (MRO) of the group’s military activities.
Based in Noida (Uttar Pradesh), the new company – Dassault Aviation MRO India (DAMROI) – is particularly committed to supporting Mirage 2000 fighter jets in the Indian Air Force (IAF).
Established under the “Atmanirbhar Bharat” (“Made in India”) policy to contribute to the country’s self-reliance and promote indigenous value-added services.
DAMROI will benefit from Dassault Aviation’s technological expertise and offer new opportunities for cooperation and collaboration with the aim of becoming a key player in participating to a full-fledged aerospace and defence ecosystem in India.
IAF fleet
Currently, the IAF operate a range of multi-role aircraft. The largest type of fighter they operate is the Su-30 MKI – with 222 aircraft made domestically by Hindustan Aeronautics and 72 Russian made units.
The Russian units were acquired between 1997 and 2008, though India signed an memorandum of understanding with Russia in October 2000 to start the licence production at Hindustan’s plant.
Since 2020, the service has begun acquiring Rafale fighters, of which Dassault have delivered 36 jets.
Meanwhile, the Mirage 2000 has become a longstanding staple of the IAF from as early as 1985. Two Mirage 2000TH units were inducted in 1985, 35 Mirage 2000H units between 1985 and 2005, and two more Mirage 2000Csbetween 2021-22.
Mirage 2000
The Mirage 2000 is a multi-role combat fighter that has been oeprational in the French Air Force since 1984.
It has also been selected by Abu Dhabi, Egypt, Greece, India, Peru, Qatar, Taiwan and the United Arab Emirates. Ukraine will become the latest operator, with France announcing their intention to donate five fighters in June 2024.
The platform has nine hard points for carrying weapon system payloads: five on the fuselage and two on each wing. The single-seat version is armed with two internally mounted, high-firing-rate 30mm guns.
Mirage 2000 is also equipped to carry a range of air-to-surface missiles and weapons, including laser-guided bombs.
(Source: Google/airforce-technology.com)
27 Sept 24. Invisible prime steps from the shadows: Raytheon Australia announces new collaborative, communicative strategy. Raytheon Australia is launching a re-energised collaborative and communicative corporate strategy as it seeks to shake off the unwanted title of the invisible prime, according to the company’s new managing director, Ohad Katz.
The senior leader, who previously served as the interim managing director, spoke exclusively with Defence Connect during the recent Land Forces 2024 expo held in Melbourne earlier this month.
During a 23-year tenure in the business, Ohad Katz contributed to cornerstone defence programs run by Raytheon Australia, including those involved with the Australian Defence Force’s Collins Class submarines and Hobart Class destroyers.
Katz recently served as the chief of contracts and supply chain and has been a long-serving board director in Australia.
“I want to spend a lot of time making sure that the organisation, as a whole, is the right structure that we have. I want to make sure that the people we have feel that we’re invested in them as a leadership team,” he said.
“Making sure that we openly communicate with our own people about where the company is going, what our focus is. That’s one [immediate priority].
“Two. It’s really re-establishing a lot of the relationships with the customer – more re-energising. I think we tend to focus on the programs that we’ve got, and we’ve got good relationships at working levels. We’ve got multiple relationships across the top level; my focus is to make sure that we’ve got really good connectivity across all of the defence leadership, that we’ve got really good connectivity as you go down that leadership structure.
“I think people say previously were an ’invisible prime’. But you know, we tend to downplay ourselves. We are the quiet achievers … we don’t advertise our success as much as we should have. We don’t celebrate our successes as much as we should have. So I think I want to do that.
“It’s making people aware of the good news stories like the LAND 19 program (short-range air defence missile system program). We’ve just delivered a significant capability to Defence that is cutting edge technology. It’s the best National Advanced Surface-to-Air Missile System that’s available. We did that locally, partners from the US, partners from Norway. But fundamentally, we did a lot of integration and other activities and Australians designed really our product. So we need to advertise that.
“Between us and ASC working collaboratively, we’ve kept the boats in the water; I want people to be aware of that, because it not only gives us publicity but it also gives the people who work for us visibility, because the teams who are working on those programs aren’t getting enough credit. It’s not just the internal, it’s not just me saying, ’Congratulations, well done’. There’s nothing better than seeing your program highlighted [publicly] as a success story, it makes you feel proud about what you do every day.”
Earlier this year, Defence Connect reported on an internal email that confirmed the exit of four of Raytheon Australia’s then nine-person strong executive leadership team, including long-term managing director Michael Ward.
The internal email on 30 May, confirmed the departure of Gerard Foley, chief of growth; Des McNicholas, chief of people & culture; Sarah Valentine, chief of corporate services; and Carly Habils, head of corporate services.
When asked about the circumstances that required Raytheon Australia to make such significant changes this year, Katz said the company had been laying low in the defence industry ecosystem for too long.
“I think we were being too quiet; I think that’s what necessitated the change. We were too understated,” Katz said.
“It’s just about presenting our face better … To our customers, to the industry; I think we need to communicate more effectively.
“It’s not a criticism that we did something wrong previously and it’s not suggesting that we were in the wrong place. It’s just suggesting that the new mindset is: ’Let’s get out there a little bit more. Let’s be more strategic.’
“I’ve been in the company for a while, so I’ve been there since we started as 100 people to now 1,500 and I’ve seen a lot of change. I’ve seen a lot of different approaches. I personally am trying to bring the best of what I’ve seen over the last 25 years and mold it into something that we can project forward for the next 25 years.
“We could do better … so let’s go do that, because that would be a benefit to us and our customers.”
Katz confirmed that he will be bringing some new objectives to the revamped corporate strategy, including a lift in industry collaboration and constant communication.
“One of my key themes is; ’If you don’t communicate, you’re not going to achieve the objectives that you want to achieve’. You’re probably setting yourself up to fail or to have issues,” he said.
“As long as you’re communicating good news, bad news, and you’re constantly communicating, then you’ve got a relationship that allows you to work through the issues that you need to because you’ve got a good relationship with the customer.
“They want to talk to you because they want your input. They want to talk to you because they’re interested in hearing your views. So I’m doing that, I’m reaching out to industry, to my peers, small and medium-sized enterprises, we’ve got a Capability Plus program where we promote SME capability development.
“Constant rhythm of open communications with our peers so that we can look at how we can collaboratively work together on programs, how we can share information that might be a benefit to all of us … we’re not doing that at the moment. Collectively, as an industry, it’s an opportunity for us to be more collaborative, more inclusive and look at how do we work collaboratively to give the government a better outcome without necessarily having to go head-to-head on everything.
“If you go head-to-head on everything, then one’s a winner, one’s a loser. You look at a more collaborative environment, maybe you’ve got multiple winners and government will definitely get a better outcome. If you collaborate, you can look at how to combine the best and a number of different capabilities to get the optimal outcome.” (Source: Defence Connect)
10 Sep 24. THEON Announces the Acquisition of Harder Digital. THEON INTERNATIONAL PLC (THEON), is pleased to announce the acquisition of a 60% controlling stake in Harder Digital group (Harder Digital), a specialised manufacturer of Image Intensifier Tubes (IIT) mainly operative in Germany, through a cash injection of €34m. This is the first step in THEON’s efforts to secure its supply chain with THEON also working on longer-term commercial agreements with its key suppliers.
This acquisition, in line with the strategic priorities communicated during the IPO process, comes at a critical time as global geopolitical conflicts and emerging threats have put the supply and demand for Night Vision technology in a delicate balance, and will bring multiple benefits to THEON, including:
- Enabling THEON to vertically integrate by insourcing a critical component of the Night Vision value chain, enhancing operational security and flexibility.
- Giving THEON access to niche technologies, supporting the development of new products through additional in-house R&D capabilities.
Notably, this expansion is not expected to compete with IIT produced and procured by THEON’s existing suppliers, ensuring continued strong partnerships. THEON will also continue and expand its cooperation with the other European and US IIT manufacturers.
The acquisition will be performed through a cash injection of €34m, implying a mid-single digit multiple of the expected EBITDA for 2026. The majority of the funds will be deployed to upgrade Harder Digital production facilities and increase the capacity of 3rd generation IIT manufacturing lines in Germany mainly and Latvia. The remaining funds will be used to financially restructure the company.
Harder Digital, which is currently operating well below its full capacity, is targeting €17m sales with 10% EBITDA margin in 2024. In the medium term, it is expected to approximately triple sales by 2028, reaching a mid-twenties EBITDA margin at the time, after restoring capacity and achieving economies of scale. This is also in line with the anticipated increase in global demand which necessitates that THEON will be continuing its long-term cooperation with the other tube manufacturers. THEON currently purchases almost 50% of Harder Digital’s output, and this is envisaged to continue. The remaining production will continue to be sold to third parties.
The transaction is subject to customary approvals from relevant regulatory authorities and expected to close during the fourth quarter of 2024. The transaction is foreseen to be fully financed with available cash that will be deployed over a two-year period.
Christian Hadjiminas, founder and CEO of THEON commented on the acquisition: “We are delighted to announce the signing of our first sizeable M&A transaction which first and foremost is a financially attractive acquisition. We have been partnering with Harder Digital and its current management team for many years and we are pleased to welcome them to the THEON family. This is the first step in implementing our inorganic growth strategy communicated during the IPO process earlier this year. This acquisition would allow us to achieve partial vertical integration in our core Night Vision business segment and strengthen THEON’s presence in Germany and the Baltic region, some of our key markets. The realization of our global expansion is expected to continue with a good pipeline of other potential acquisition targets already identified, including a number of companies in Germany.”
Harder Digital was established in 1999, having its HQ in Woltersdorf, Germany and operating subsidiaries in Germany, Serbia and Latvia. Harder Digital has become one of the few companies in the field of Image Intensification, covering a range of Gen I, Gen II and Gen III as well as custom made IIT and components. Harder Digital exports its products to over 30 countries globally. (Source: ASD Network)
25 Sept 24. Leonardo raises its share in naval systems supplier, GEM Elettronica.
The European defence prime has raised its stake in the company, a manufacturer of navigation and sensor systems, from 30% to 65%.
GEM acted as a supplier to Leonardo for several years on numerous projects. Credit: GEM Elettronica.
One of Italy’s leading defence primes, Leonardo, has raised its stake in GEM Elettronica, a manufacturer of critical maritime systems, from 30% to 65%.
This decision was announced in Rome on 23 September 2024, when Leonardo finalised the acquisition of control in the company for €16m ($17.8m).
With revenue exceeding €30m in 2023, GEM develops and produces navigation systems, situational awareness, radar sensors, optronic and inertial sensors used in naval domain and coastal surveillance settings.
Brief history between the companies
Leonardo had initially placed a 30% stake in the supplier, based on the Eastern coast of Italy along the Adriatic Sea, in April 2021. The move was made to strengthen Leonardo’s position in the naval sector, particularly in the field of short and medium-range sensors.
As part of the original agreement, Leonardo was able to increase its stake in GEM’s capital share and acquire control of the company via a purchase option to be exercised in 2024.
Prior to this deal, GEM acted as a supplier to Leonardo for years on numerous projects, including collaborations on the FREMM programme and the Italian Navy fleet modernisation programme.
Europe’s defence industry ambitions
Leonardo introduced a four-year ‘Industrial Plan’ in March this year that aims to increase organic growth through digitalisation, improve efficiency through changes to product and portfolio for group-wide savings and, finally, cultivating international alliances and inorganic growth.
The decision to acquire control of GEM fits into the latter driver, as the company says it will “play a proactive role in the evolution of the European Defence industry.”
Europe also reoriented a month after Leonardo’s new Industrial Plan when the European Commission and the European Defence Agency unveiled their inaugural defence industrial strategy. This is a new legislative initiative that will bridge the short-term emergency measures, adopted in 2023 and ending in 2025, to a more structural and longer-term approach to achieve defence industrial readiness.
This EU strategy will ensure that ensure that, by 2030, the value of intra-EU defence trade represents at least 35% of the value of the EU defence market.
Leonardo’s consolidation of GEM will support this new European industrial footing by enhancing its supply chain resilience as it leverages the company’s 40 years of experience in the naval sector.
(Source: naval-technology.com)
25 Sept 24. No deal! Hanwha withdraws from billion-dollar Austal acquisition plan. South Korean conglomerate Hanwha has reportedly withdrawn its bn-dollar bid for Western Australian shipbuilder Austal in a surprise move.
Defence Connect can tonight confirm that the South Korean-based industry conglomerate has withdrawn its bn-dollar bid for ASX-listed naval and commercial shipbuilder Austal.
This decision comes following Hanwha’s approach to Austal in September 2023 and a series of three subsequent non-binding (NBIO) approaches and preliminary approvals were provided by both the United States and Australia.
In a formal piece of correspondence from Hanwha chief executive Kwon Hyek-woong, the company said, “Since submitting its first NBIO on 15 September 2023, Hanwha has sought to constructively engage with the Austal Board. We have submitted three revised NBIOs, agreed to a 12-month standstill, and conducted preliminary US and Australian regulatory approval reviews, which have clearly conveyed to you has only increased our confidence.”
Kwon’s letter went further, saying, “More recently, the Austal Board has indicated openness to granting us commercial due diligence, on the condition that Hanwha pays a termination fee if either the US or Australian regulatory authorities reject Hanwha’s acquisition of Austal.”
This allegedly comes following a series of failed attempts by the South Korean company to access Austal’s operations following over 12 months of engagement, which were then subsequently cancelled by the Australian shipbuilder.
Kwon’s letter added, “Discussions have stalled due to Austal’s insistence on Hanwha paying the US$5m ($7.3m) fee at any time in the transaction process if Austal forms the opinion that regulatory approval will not be obtained.
“This is unprecedented in the context of a public markets transaction, and is a wholly unreasonable condition on due diligence access,” Kwon’s letter stated.
“It is hard to arrive at any other conclusion than that the Austal Board has no desire to determine whether an offer that is capable of being recommended to shareholders could be concluded,” the letter stated.
This parting collapse in South Korea’s bid for Austal comes despite a seeming vote of confidence by Deputy Prime Minister and Defence Minister Richard Marles during his meeting with South Korean Defence Minister Shin Won-sik at the 2+2 meetings on 1 May 2024, where he said, “They [Hanwha] are a private company. From the government’s perspective, we don’t have any concern about Hanwha moving in this direction. We have identified Austal as a strategic shipbuilder for Australia in WA.”
The Deputy Prime Minister’s comments were reinforced by US Navy Secretary Carlos Del Toro, who, in March this year, reinforced the high level of comfort within the US for South Korean defence industry like Hanwha to play a greater role in helping to strengthen the industrial bases of the US and its Indo-Pacific allies more broadly.
Secretary Del Toro said at the time, “As I saw firsthand during my shipyard visits in Korea this week, Hanwha and Hyundai set the global industry standard. I could not be more excited at the prospect of these companies bringing their expertise, their technology, and their cutting-edge best practices to American shores.
“As world-class leaders in the global shipbuilding business, they are poised to energise the US shipbuilding marketplace with fresh competition, renowned innovation, and unrivalled industrial capacity,” Secretary Del Toro said of the South Korean shipbuilders.
This approach has its foundations in Secretary Del Toro’s calls for a novel approach to maritime statecraft set out in a speech to the Harvard Kennedy School in September 2023, where he laid the foundation for this approach, saying, “[the US maritime industry] is ripe with opportunity to partner with a greater number of shipbuilders here in the US and with our closest allies overseas, including Japan and South Korea”.
An Austal spokesperson said, “When Austal informed its shareholders in April that it had received an indicative, conditional, non-binding offer from Hanwha, the Company was very clear that the Austal board and advisers were not satisfied that mandatory approvals for the transaction to proceed could be secured by Hanwha. Hanwha’s letter effectively confirms this evaluation.” (Source: Defence Connect)
24 Sept 24. HavocAI Ushers in a New Era of Unmanned Naval Warfare: Trousdale and Scout Ventures Lead $11m Investment Round to Combat Global Maritime Threats. In a move that exemplifies a significant shift in maritime defense, Trousdale Ventures and Scout Ventures have co-led a $11m investment round in HavocAI, a trailblazing developer of low-cost, collaborative, autonomous surface vessels. HavocAI’s fleet of uncrewed boats represents a game-changing solution, with cutting-edge capabilities delivered at incredibly low costs in an era where threats to global shipping and security intensify daily.
HavocAI’s vessels are the first line of defense against increasingly sophisticated maritime threats, such as those posed to commercial shipping in the Red Sea. These revolutionary boats are the ultimate maritime security system—an advanced, coordinated fleet optionally armed with explosive and electronic warfare warheads and with proven capability to launch both subsurface and airborne drones. Electronic warheads disable enemy drones, allowing them to be captured or destroyed with surgical precision.
“HavocAI is at the forefront of what will define the next generation of warfare—massive, low-cost autonomous fleets that can be deployed rapidly and operated with minimal manpower,” said Michael Potiker, Partner at Trousdale Ventures. “The company’s technology has the potential to not only protect vital shipping lanes but also to reshape how global navies defend themselves in an increasingly volatile world.
The Silent Swarm: A Defining Moment for HavocAI
The future of naval dominance is already unfolding. HavocAI demonstrated its visionary technology at the US Navy’s Silent Swarm exercise, where one sailor successfully controlled numerous autonomous vessels in a coordinated attack-and-defend scenario. Havoc’s solutions don’t aim to replace sailors or existing ships but to create an entirely new kind of naval warfare where human operators can unleash fleets of autonomous assets, responding to threats in real-time at a scale never before possible.
As global conflicts escalate and commercial shipping becomes a bigger target for hostile actors, HavocAI’s technology is primed to fill a critical gap. Its naval drones can neutralize enemy combatants and surface threats, operate in denied-communication zones, and work with air and sub-surface autonomous systems, creating a holistic defense web.
“At HavocAI, we’re not just building boats—we’re building an autonomous fleet that can outthink, outmaneuver, and outlast any adversary while empowering individual sailors to defend against a wide array of threats,” said Paul Lwin, CEO of HavocAI. “Our goal is simple: to make the oceans a no-go zone for any hostile entity.”
A Rapidly Growing Threat, A Powerful Response
With rebel groups threatening the safety of shipping lanes and the specter of near-peer conflicts looming large, the demand for unmanned maritime solutions has never been more urgent. HavocAI’s ability to launch aerial vehicles equipped with electronic warfare warheads that neutralize enemy drones gives it a unique edge in the fight to protect global commerce.
And it’s not just the defense industry that’s taking notice. HavocAI’s powerful software platform is gaining attention from commercial sectors, including shipping, port security, and offshore logistics, opening up multi-bn-dollar markets worldwide.
“Investing in dual-use frontier tech like HavocAI allows us to make a tangible difference. They are solving today’s toughest defense challenges while creating opportunities for commercial expansion—exactly the kind of innovation that transforms industries,” said Brad Harrison, Founder, Scout VC.
“HavocAI’s fleet is adaptable, resilient, and can be deployed on a scale that most operators could only dream of,” added Potiker. “This investment is just the beginning. We’re backing a future where one sailor can safely command an entire fleet of autonomous vessels. By efficiently deploying technology, we can create the most effective deterrent to the asymmetric threats we face today, thereby ensuring regional stability.”
A Game-Changing Investment
With this round of funding, HavocAI is positioned to ramp up production and deploy its game-changing fleet across global waters. Trousdale Ventures and Scout Ventures are backing HavocAI’s ability to solve today’s maritime challenges and anticipate the demands of future conflicts. www.havocai.com
23 Sept. 24. Italy approves BlackRock holding more than 3% in Leonardo. Italy has approved BlackRock the world’s biggest asset manager, holding a stake of more than 3% in Italian defence and aerospace group Leonardo a document seen by Reuters showed on Monday.
The document, sent by Italian Prime Minister Giorgia Meloni’s office to parliament, deals with so-called “golden power” decisions.
Rome has “golden powers” to block or set conditions on foreign and domestic investments, as well as governance changes, involving companies that operate in strategic sectors such as energy, telecoms, defence and banking.
“I am happy for the interest of BlackRock. It is an important recognition,” Leonardo chief executive Roberto Cingolani told Reuters.
The cabinet granted the authorisation to BlackRock on Sept. 18 while also imposing some unspecified conditions, according to the document.
Under Italian legislation, Meloni’s office must approve share ownership in any strategic firm which is also listed on the Milan stock exchange when the stake crosses thresholds set at 3%, 5%, 10%, and various other intervals up to 50%.
However, a source familiar with the matter told Reuters BlackRock was expected to trim its stake in a short time, as Leonardo’s bylaws stipulate that no investor outside the public administration can own more than 3% of capital.
Italy’s economy ministry owns 30.2% of Leonardo, the country’s leading defence group as well as a manufacturer of satellites and orbiting infrastructure.
BlackRock is also a leading investor in Italy’s financial sector, holding 7% of UniCredit (CRDI.MI) and 5% of Intesa Sanpaolo (ISP.MI) the country’s top two banks. (Source: Google/Reuters)
23 Sept. 24. Pennant trades at 50% discount as it repositions as a software business. A provider of software plans to increase recurring revenue from high-margin software sales and reduce the volatility in profit
- First-half revenue up 4 per cent to £7.4m
- Flat underlying operating profit of £0.6m
- Net debt (ex lease liabilities) falls a fifth to £1.6m
Pennant International (PEN:23.5p) has announced a major restructuring alongside its interim results that will see the business pivot to a pure-play software and services company.
Pennant provides software and integrated product support solutions to a blue-chip client list of original equipment manufacturers and governments. The company also supplies complex training products to a global client base, the majority of which work in the world’s defence ecosystem.
Although global defence spending increased by 9 per cent to a record $2.2tn in 2023, and the market is forecast to grow to $2.8tn by 2028, the business is exposed to lengthy procurement timeframes in its home market. In particular, the recently announced Strategic Defence Review in the UK has led to contract awards being deferred pending the outcome of the review (expected mid-2025). It includes prospective programmes for which Pennant is a potential supplier.
In light of the protracted timelines and imminent conclusion of the company’s work on the UK Apache programme, Pennant’s management has undertaken a comprehensive review of its UK training systems business. It will now be restructured to reflect the much-reduced workflow while retaining the skills, intellectual property and expertise to deliver future programmes, training software and associated services contracts both in the UK and overseas.
Staff redundancies are expected to generate annualised cost savings of £1.2m and freehold properties in Cheltenham will be sold given the reduced focus on space-intensive equipment programmes. The £0.4m cash cost of implementing this plan will be funded through a short-term debt facility with the company’s bankers.
Pennant pivots to a software pure-play and services company
At the same time, Pennant is accelerating the development of its new Auxilium software suite. It will redeploy software engineers from other parts of the business to support the roll-out and deployment of the suite to customers. In addition, management plans to release the company’s fully integrated suite of data-driven enterprise software solutions in the first quarter of 2025. Specifically, the software will provide its customers in defence and other sectors with a toolset to manage, model and utilise vast amounts of complex equipment data.
The benefit of the restructuring is that it will materially lower the business’s fixed overheads, increase the proportion of recurring revenue generated from software sales and reduce the volatility in profitability. At the same time, Pennant has beefed up its board by appointing a highly experienced chair and two non-executive directors. It’s reassuring that the directors backed a £1.3mn placing and subscription offer at 25p a share earlier this year to fund investment in the software offering.
In the short term, profits will take a hit. This explains why analysts at Zeus Capital expect full-year underlying operating profit to fall by 11 per cent to £1.6m and placed their 2025 forecasts under review until there is greater clarity. Having dipped slightly below the 25p placing price post results, Pennant is rated on a 50 per cent-plus discount to software peers on an enterprise valuation to cash profit multiple. That’s about right for now as the business transitions, so we maintain our hold recommendation (‘Pennant disappoints – but there are reasons to stick around’, 14 May 2024). Hold. (Source: Investors Chronicle)
24 Sept. 24. Cohort (CHRT.L) Company Research. Momentum continues The AGM update flags strong progress in H1, following record FY24 results. YTD, the order book has risen 11% to £575m and provides >90% FY25 revenue cover. FY guidance is ‘a little ahead’ of previous expectations. We upgrade FY25E adj. EPS by 3% to 45p. Moreover, our FY net cash estimate improves by £5m to £20m on better w/c assumptions. The shares are now on a CY25E P/E of 17.2x and EV/EBITDA of 9.4x. Buy, TP 980p reiterated. Strong progress in H1: Following strong activity last year, momentum has continued. The start to FY25 has been encouraging with contract wins of over £120m, including a recent £25m contract award for air defence tracking systems. FY25 cover stands at >90% of revenue. The order book on 20 September stood at >£575m, driven by Sensors and Effectors. This compares to £519m at y/e and stretches out to 2037. H1 performance is expected to be significantly ahead y-o-y, albeit with a continued H2 bias. FY25 outlook: Management now guide revenue and profit will be a little ahead of prior expectations and are optimistic about prospects from both domestic and export customers. With net funds, the Group is well positioned to grow organically and via carefully targeted acquisitions. r Estimates: We upgrade FY25E adj. EPS by 3% to 45p, driven by higher Communications and Intelligence revenue as we understand MCL has been busier than expected. This mix drives a slightly lower margin. Given a strong H1, we estimate a c.66% H2 EBIT bias vs. 72% last year. We upgrade FY25E net cash from £15m to £20m, driven by better working capital assumptions in SEA and EID. Our outer year estimates are unchanged at this stage. 0 Our view: Momentum continues and the potential for further progress remains strong. We believe the Group is capable of mid-teen margins by FY27, implying >25% upside to existing assumptions, largely driven by EID orders positively inflecting and export orders for SEA naval systems, MCL counter drone systems and CHESS ground-based air defence. The shares are on a CY25E EV/EBITDA of 9.4x, which compares to the NTM 5-year average of 10.1x, and looks attractive for improved prospects. h Next scheduled event: Interim results in December. Source: Company accounts, Investec Equities estimates Financials and valuation Y
23 Sept. 24. Rolls-Royce to sell naval propulsion business to FMD.
The sale comprises the naval propulsion units in Pascagoula, Mississippi and Walpole, Massachusetts, in the US, and the naval handling systems unit in Ontario, Canada. Rolls-Royce has entered an agreement to sell its Naval propulsors and Handling business to Fairbanks Morse Defense (FMD), according to an update from 19 September 2024.
The deal will comprise several units across North America, including a marine propeller and waterjet manufacturing base in Pascagoula, Mississippi; a critical ship propulsor systems hub in Massachusetts; as well as a centre for excellence in naval handling in Peterborough, Ontario.
Notably, Rolls-Royce will retain its Naval Gas Turbines and Generator Sets operations, which provide power dense solutions for naval propulsion and onboard power needs.
Both naval suppliers offer their services to the rapidly expanding US Navy. Though, the potential purchase, which is currently undisclosed, will mark one of those “distinctive moments that completely transform this company,” commented George Whittier, chief executive, FMD.
“The way that our products and services complement each other is unmatched in the defence industrial base.”
Complementary portfolios
Rolls-Royce supports more than 70 navies around the world. The company provides propulsion equipment – including controllable-pitch propellers, fixed-pitch propellers and waterjets – for a range of US Navy platforms, including frigates, destroyers, combatants, submarines, aircraft carriers, amphibious ships, fleet support and auxiliary ships as well as US Coast Guard cutters.
Likewise, the fast-growing US naval supplier, FMD, has built and maintained naval power and propulsion systems for more than a century. It has developed a diverse portfolio that now includes engines, electrical hardware, motors, valves, cranes, davit systems, fans, fittings, and water treatment solutions.
Naval handling systems
Rolls-Royce is a global leader in specialised naval handling systems though its Canadian centre of excellence in Ontario. Their systems have provided solutions for more than 35 years.
Particularly, the Mission Bay Handling System (MBHS) – the company’s latest handling system – offers an integrated solution for handling and stowing cargo, munitions, crewed and uncrewed offboard craft. The most recent customer is the UK Royal Navy, a service whose eight Type-26 City-class frigates will benefit from the new handling system well into the 2060s.
FMD strategic acquisitions
FMD is expanding its presence more widely in the US naval industry in response to global supply chain disruptures – overcoming the enduring effects of the COVID-19 pandemic and the more prescient geopolitical tensions to come.
Though FMD is known primarily as an engine manufacturer, the company has acquired 11 companies since the end of 2020, adding domestically produced motors, valves, water filtration equipment, fans, blowers, electrical system hardware and more to its product portfolio.
The US and its allies are forming unprecedented defence industrial ties. At the start of September, Hanwha Ocean, a ballooning Korean shipbuilder, was trusted to maintain a US Navy ship for the first time; an “historic moment,” the supplier remarked.
Despite the positive interchange, these efforts are prompted by an increasingly divided world in which the military aggression of China in the Pacific, and the layered crises in the Middle East, call for industrial unity and strength. This, of course, has negative effects on the global supply chain that Western industry had come to rely on during more than 20 years of globalisation. (Source: naval-technology.com)
15 Sept. 24. Telesat completes billions in funding agreements for their Lightspeed satellite constellation. Telesat (NASDAQ and TSX: TSAT) has completed funding agreements with the Government of Canada and the Government of Quebec for their highly advanced Telesat Lightspeed LEO broadband satellite constellation.
With this milestone completed, Telesat now has all financing sources in place to fund the global Telesat Lightspeed network, including the satellites, launch vehicles to deploy them, an integrated terrestrial network of landing stations and points of presence throughout the world, and the business and operational support systems for the network. All amounts are in Canadian dollars unless otherwise noted.
As previously disclosed, the Government of Canada loan is for $2.14bn and will carry a floating interest rate that is 4.75% above the Canadian Overnight Repo Rate Average (CORRA) with a 15-year maturity. Interest is payable in-kind during the Telesat Lightspeed construction period, followed by a 10-year sculpted amortization. Furthermore, the Government of Canada is receiving warrants for 10% of the common shares of Telesat LEO based upon an equity valuation for Telesat LEO of US$3bn. The Government of Quebec loan is for $400m and has terms that largely mirror the Government of Canada loan but with warrants for 1.87%, in proportion to the smaller loan amount. The borrower under each loan, Telesat LEO Inc. (Telesat LEO), is a subsidiary of Telesat.
The Telesat Lightspeed network is expected to play a critical role in bridging the digital divide by expanding the reach of internet and 5G networks in unserved and underserved communities in Canada and throughout the world, with affordable, high-speed broadband connectivity. In addition, the Telesat Lightspeed network is expected to help governments – including the Government of Canada – modernize their satellite communications technology and make meaningful contributions to North Atlantic Treaty Organization (NATO) and North American Aerospace Defense Command (NORAD) modernization to bolster defence for Canada and its allies.
Telesat has increased its Canadian workforce by approximately 33% in the last 12 months and expects 2024 capital expenditures for the program to be in the range of $1bn to $1.4bn. Telesat plans to launch the first Telesat Lightspeed satellites in mid-2026. Since Telesat’s announcement of MDA Space as its prime satellite manufacturer in August 2023, MDA has selected and onboarded over 90 percent of the suppliers for the Telesat Lightspeed program.
“We are pleased to conclude these funding arrangements with the governments of Canada and Quebec as we make strong progress on the build-out of the revolutionary Telesat Lightspeed constellation, the largest space program in Canada’s history,” said Dan Goldberg, President and CEO of Telesat. “Telesat Lightspeed will help bridge the digital divide in Canada and throughout the world, create and sustain thousands of high-quality jobs in Canada, deliver billions of dollars of investment in the Canadian economy, spur domestic innovation and exports, and ensure that Canada and Quebec are at the forefront of the rapidly growing New Space Economy.
“Our government is focused on Canadians and today’s announcement with Telesat and MDA is our commitment in action. Designed, manufactured, and operated in Canada – the Telesat Lightspeed satellite network will be the largest in Canadian history – creating thousands of jobs, growing our economy, and getting high-speed internet to Canadians. We’re putting Canada at the forefront of opportunity, with a fair chance for everyone to succeed,” said the Rt. Hon. Justin Trudeau, the Prime Minister of Canada. (Source: Satnews)
————————————————————————————————————————————————————————————————————————————————————————————————————————————–
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
—————————————————————————————————————————————————————————————————————————————————————————————————————————————