BUSINESS NEWS

Sponsored by SPX Communication Technologies (TCI & ECS)

www.tcibr.com

www.enterprisecontrol.co.uk

——————————————————————————————————————————————————————————————————————————————————————————————————————————————-

31 Oct 24. Reaction Engines, a UK-based aerospace company and developer of high-speed propulsion and cooling technologies, has collapsed after failing to secure a financial rescue deal. The company’s downfall poses a significant challenge to the UK’s efforts to develop reusable Mach 5 aircraft under the Hypersonic Air Vehicle Experimental (HVX) program. In response, the UK Ministry of Defence (MoD) has stated it will “closely monitor all our supply chains” to mitigate any impact on national defense projects.

The aerospace firm was integral to the £1bn ($1.3bn) Hypersonic Technologies & Capability Development Framework (HTCDF), which aims to deliver the UK’s first hypersonic missile. Reaction Engines’ cutting-edge Synergetic Air Breathing Rocket Engine (SABRE) and patented cooling technologies were critical components in these initiatives.

After weeks of negotiations with potential investors—including an unsuccessful bid for £20 million from the United Arab Emirates’ Strategic Development Fund—the company entered administration. Accountancy firm PricewaterhouseCoopers (PwC) has taken over its administration duties. Analysts are concerned about how the absence of Reaction Engines will affect ongoing hypersonic projects, as few companies possess the specialized expertise to replace its role.

A Timeline of 3D Printing Innovations and Troubles

In 2018, Reaction Engines secured a significant financial boost when aerospace giants Boeing and Rolls-Royce invested £26.5 million, reflecting substantial industry confidence in SABRE’s potential. This funding allowed the company to enhance core components, including its pioneering precooler technology capable of rapidly cooling incoming air from over 1,000°C to ambient temperatures—an essential feature for hypersonic flight without overheating.

By early 2023, the company had raised an additional £40 million, bringing total funding to around £150 million. These funds supported the refinement of SABRE’s dual-mode operation, enabling it to function both within the atmosphere and in space, positioning Reaction Engines at the forefront of hypersonic propulsion technology. The propellant injector system, a critical component produced using 3D printing, was instrumental in preventing ice formation during flight and enhancing overall engine performance.

Despite these advancements, financial pressures began to mount. In August 2024, major investors like Artemis and Schroders significantly reduced the valuations of their stakes in the company, citing slower-than-anticipated revenue growth and prolonged development timelines. Artemis cut its valuation by 75%, while Schroders reduced its stake value from £10.6 million to £1.4m, signaling waning confidence in Reaction Engines’ financial stability.

An attempted £20m rescue deal with the United Arab Emirates’ Strategic Development Fund in September 2024 offered a glimmer of hope. The deal required approval from the UK government under the National Security and Investment Act, introducing regulatory delays that the cash-strapped company could ill afford. When negotiations ultimately stalled, Reaction Engines was left without the necessary funds to continue operations. On entering administration, 173 of the company’s 208 employees were laid off, marking a significant setback for the UK’s hypersonic and space sectors. (Source: News Now/https://3dprintingindustry.com/)

31 Oct 24. Huge debts at Titanic shipbuilder Harland & Wolff revealed. Titanic shipbuilder Harland & Wolff owed more than £160m when it collapsed into administration last month, it has been revealed.

Teneo was appointed to oversee the process at the 162-year-old holding company in September while its subsidiary firms, including its prized Belfast shipyard, will continue to trade under the control of the directors.

Now a newly-filed document with Companies House has set out how the business fell into administration and how much it owed its creditors.

Teneo said that when it was appointed, no long-term funding was available from the group or its lender to support the company’s ongoing costs.

It added: “The [Harland & Wolff] sites were largely acquired by the group from insolvency processes and their success was predicted on securing significant revenue growth t support a large overhead base.

“Whilst the group delivered revenue growth, it was slower than required and a recent large contract win was not expected to become profitable in the near term.

“As a result, during 2024 the group had an increasing short-term liquidity requirement alongside a significant level of creditor arrears.”

Why did Harland & Wolff enter administration?

Harland & Wolff sought funding from the Department of Business and Trade and UK Export Finance as well as from its secured creditor.

The funding was required by 1 July, 2024, to tackle its liquidity shortfall and allow statutory accounts to be signed off and filed on time.

However, the government declined the application for funding support and the accounts remained outstanding as its shares were suspended from AIM.

Harland & Wolff then appointed Rothchild & Co to lead a sales process.

Teneo said: “Liquidity pressure in the company was increasing with an imminent threat of a winding up petition being presented by a creditor.

“Furthermore, the company’s cost base was considered to be unsustainable.

“Given the absence of any new funding, the directors of the company concluded that they had no alternative but to appoint Gavin Park and Matthew Cowlishaw as joint administrators of the company.”

(Source: City AM)

30 Oct 24. Rohde & Schwarz technology group closes fiscal year successfully in dynamic market environment.

Rohde & Schwarz has closed the 2023/2024 fiscal year successfully in a market environment that remains highly dynamic. The company again achieved year-on-year increases in both revenue and incoming orders. With its three divisions Test & Measurement, Technology Systems and Networks & Cybersecurity, the group addressed the current challenges. The extensive product portfolio supports customers in maintaining their technological and digital sovereignty.

The 2023/2024 fiscal year (July to June) was characterized by divergent and dynamic market developments. With its focus on connectivity and security, the technology group proved to be well positioned in relevant growth markets. Revenue increased by 5.3 percent to EUR 2.93 bn, while incoming orders exceeded expectations with a 22.77 percent increase to EUR 3.87 bn. The operating result was positive. Thanks to a healthy sales pipeline, Rohde & Schwarz has started the new fiscal year with optimism.

Major investments ensure that the group maintains its leading market position. It invests between 15 and 20 percent of its revenue in research and development every year, emphasizing its innovation leadership in the technology sector. The number of employees worldwide increased to over 14,400 as of June 30, 2024. Further investments in the group’s own centers of competence and production plants ensure customer proximity, flexibility and reliable supply capability. Especially given the challenging economic and geopolitical situation, investments in the group’s vertical integration ensure the necessary resilience against external influences.

Technical expertise in test and measurement for customers in diverse markets

In a challenging market environment, the test and measurement business was generally stable thanks to its diversified product portfolio. In the wireless communications segment, demand was down compared to the preceding years. However, research and development customers demonstrated their continued reliance on the group’s test and measurement equipment to drive forward trending future technologies. These include the next mobile communications generations Beyond 5G and 6G, artificial intelligence and the integration of sensor technology and communications. Increased demand for test and measurement equipment for research into quantum technologies also had a positive impact on incoming orders.

Broad portfolio supports automotive customers in technology transition

As a leading global supplier of test and measurement equipment, Rohde & Schwarz provides well-engineered test and measurement solutions for the automotive industry and its technological transition. This includes radar sensors for environmental sensing, which play an important role in the ongoing development of driver assistance systems. Rohde & Schwarz test systems for radar sensors cover test and measurement requirements from development and production to functional testing during maintenance. Within the vehicle, connectivity ensures the smooth interaction of all devices and services. Although sluggish investment activity on the part of OEMs and their suppliers affected business over the past fiscal year, the group is well positioned for the future with its broad product portfolio.

Innovative solutions for future-proof critical infrastructures

Rohde & Schwarz is playing a key role in shaping the future of aviation safety. As air traffic recovers to pre-pandemic levels, investments in communications technology are also increasing. The group has benefitted substantially from this positive trend. In the past fiscal year, for example, Rohde & Schwarz successfully put three nationwide communications systems into operation in Australia, New Zealand and the UK.

In the security scanner segment, Rohde & Schwarz built considerably on its status as an innovation leader and demand increased in markets around the world. The group sees further market potential – especially in the European and North American markets, where its scanners are already well established.

Rohde & Schwarz successfully maintained its position in the broadcast & media segment. The group reinforced its leading position in the supply of equipment for transmitter networks with the market launch of highly energy-efficient TV transmitters. This also makes it possible to use such new technologies as Next Gen TV and 5G Broadcast today. Leading radio broadcasters worldwide rely on broadcast & media solutions from Rohde & Schwarz.

Aerospace & defense market demands advanced solutions

In the aerospace & defense market, demand was strong for test solutions for radar and satellite applications. For the increasing interlinking of the traditional satellite business with terrestrial mobile communications, Rohde & Schwarz offers a broad portfolio owing to its expertise in both areas. With strong demand in Europe and North America, incoming orders exceeded expectations.

Trust in Rohde & Schwarz as a reliable security partner drives growth

The Technology Systems Division closed the fiscal year with above-average growth. Against the backdrop of geopolitical tensions and armed conflicts, security is a major concern in politics and society. Another major factor behind the extraordinary performance of the division is the German procurement program Digitalization of Land Based Operations (D-LBO), in which the supply of the German armed forces with state-of-the-art radiocommunications plays a central role.

In the avionics field, Rohde & Schwarz has established itself as one of several industry partners of the European defense project Future Combat Air System. The group is participating in the project with its communications solutions and is a development partner of the AI based software platform.

Complete solutions for the navy

The navy plays a decisive role in protecting maritime routes for passenger travel as well as international seaborne trade. The increasing challenges in the maritime sector in recent years have led to growing demand for Rohde & Schwarz solutions in this area. The group successfully won a number of strategically important projects. This included supplying German, Australian and Polish naval forces with radiocommunications and reconnaissance systems. In this context, the group has invested in the establishment of a new naval center of competence in Hamburg and Kiel (Germany) for proximity to customers when implementing major national and international projects.

Ensuring data security and the availability of communications systems

The Networks and Cybersecurity Division achieved a significant year-on-year increase in incoming orders. Steady advances in digitalization are leading to a heightened public awareness of the need for digital sovereignty. Individuals, companies and the public sector want autonomy and security when operating in the digital world. As a key supplier in Germany, the group subsidiary LANCOM Systems met the growing demand with its products and solutions for site networking, network security and network management. An outstanding example was the provision of the group’s high-performance WLAN solutions for the 2024 Biathlon World Cup in Oberhof, Germany.

In addition, the persistently high cyberattack threat level continues to fuel demand for secure encryption. A specially developed communications platform for the encrypted transmission of information such as telephony, video and messaging services offers the highest possible confidentiality levels. Authorities and the military can rely on interruption-free end-to-end encryption of their data.

All three divisions are set for growth in the 2024/2025 fiscal year. Rohde & Schwarz is confident that it can further expand its position as a leading technology group despite the geopolitical and economic conditions, which are expected to remain challenging. (Source: PR Newswire)

30 Oct 24. Leonardo DRS Announces Financial Results for Third Quarter 2024

Revenue: $812m, up 16% year-over-year
Net Earnings: $57m, up 21% year-over-year
Adjusted EBITDA: $100m, up 22% year-over-year
Diluted EPS: $0.21, up 17% year-over-year
Adjusted Diluted EPS: $0.24, up 20% year-over-year
Bookings: $1.1bn (book-to-bill ratio of 1.3x)
Backlog: $8.3bn, up 75% year-over-year
Raises 2024 guidance across all metrics
Initiates preliminary 2025 guidance framework

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

“We delivered strong third quarter results, highlighted by robust bookings, mid-teens organic revenue growth, increases to all of our key profit metrics and healthy free cash flow generation. Our strategy, execution focus and steadfast commitment to our customers are driving outcomes that continue to exceed our expectations” Chairman and CEO of Leonardo DRS.

Year-over-year revenue growth reflected strong continued momentum and was 16% for the third quarter 2024. In the quarter, our programs related to advanced infrared sensing, force protection and tactical radars were the primary catalysts for the solid revenue growth.

Higher volume was the primary driver for the year-over-year adjusted EBITDA growth and margin expansion in the quarter. Our volume expansion coupled with crisp operational performance translated to increases in our bottom-line metrics with quarterly net earnings, adjusted net earnings, diluted EPS and adjusted diluted EPS all higher compared to the prior year, despite a higher tax rate and expense.

Cash Flow and Balance Sheet

Net cash flow provided by operating activities was $59m for the third quarter. The company’s free cash flow generation was $48m in the quarter. Operating and free cash flow were both up significantly compared to last year primarily as a result of increased profitability and better working capital efficiency, which was aided by favorable timing of cash receipts from customers. At quarter end, the balance sheet had $198 m of cash and $205m 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.

Bookings and Backlog

The company recorded $1.1bn in new funded bookings in the quarter. Steady customer demand for our naval network computing, electric power and propulsion, force protection and advanced infrared sensing technologies drove our quarterly bookings. Total backlog at quarter end reached a new company record of $8.3bn, which represents a 75% increase year-over-year and was also up sequentially.

Segment Results

Advanced Sensing and Computing (“ASC”) Segment

While ASC bookings for the third quarter were lower than the prior year, Q3 bookings continued to reflect solid customer demand for our naval network computing, advanced infrared sensing and tactical communications technologies. Revenue growth on advanced infrared sensing and tactical radar programs remained as 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

Demand for our capabilities in electric power and propulsion and force protection drove quarterly bookings in the segment. The modest revenue growth in the segment reflects increases from our force protection programs. Adjusted EBITDA increased as a result of higher volume and slightly improved net program execution in Q3. (Source: BUSINESS WIRE)

30 Oct 24. Curtiss-Wright Corporation (NYSE: CW) reports financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Highlights:

Reported sales of $799m, up 10%;
Reported operating income of $145m, operating margin of 18.1%, and diluted earnings per share (EPS) of $2.89;
Adjusted operating income of $149m, up 11%;
Adjusted operating margin of 18.7%, up 20 basis points;
Adjusted diluted EPS of $2.97, up 17%;
New orders of $860m, up 2%, reflected a book-to-bill of 1.1x driven by solid demand within our Aerospace & Defense (A&D) markets;
Backlog of $3.3bn, up 16% year-to-date; and
Free cash flow (FCF) of $163m, generating 142% Adjusted FCF conversion.

Raised Full-Year 2024 Adjusted Financial Guidance:

Sales increased to new range of 7% to 9% growth (previously 6% to 8%), principally driven by strong growth in our A&D markets;
Operating income increased to new range of 7% to 10% growth (previously 6% to 9%);
Maintained operating margin range of 17.4% to 17.6%, flat to up 20 basis points compared with the prior year;
Diluted EPS increased to new range of $10.55 to $10.75, up 12% to 15% (previously $10.40 to $10.65, up 11% to 14%); and
Free cash flow increased to new range of $430 to $450 m, up 4% to 9% (previously $425 to $445 m, up 3% to 8%), and continues to reflect greater than 105% FCF conversion.

“Curtiss-Wright achieved strong third quarter results, highlighted by mid-teens revenue growth in our A&D end markets, a better-than-expected operational performance in our Defense Electronics segment and a 17% year-over-year increase in Adjusted diluted EPS,” said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation. “We continue to demonstrate solid order activity, yielding an overall book-to-bill of 1.1x in the quarter, highlighted by record quarterly orders within our Defense Electronics segment. We also delivered solid cash generation, resulting in an exceptional free cash flow conversion of 142%. Based on the strong year-to-date performance and our continued momentum in executing on our Pivot to Growth strategy, we once again raised our full-year 2024 outlook for sales, diluted EPS and free cash flow.”

“We continue to leverage our strong balance sheet in support of our disciplined capital allocation strategy. This includes delivering on our commitment to drive solid returns to our shareholders as we completed the recently announced $100 m expansion of our 2024 share repurchase program during the quarter. Additionally, we remain focused on supplementing our organic growth with high quality, strategic acquisitions that meet our stringent financial criteria to drive long-term shareholder value.”

Third Quarter 2024 Operating Results

Sales of $799 m increased 10% compared with the prior year;
Total A&D market sales increased 15%, as we experienced strong growth in the defense markets principally driven by increased demand for our defense electronics products and higher submarine and aircraft carrier revenues in naval defense, as well as higher OEM sales in the commercial aerospace market;
Total Commercial market sales were flat, reflecting solid growth in the power & process market, principally driven by higher sales of our commercial nuclear products, which was offset by lower sales in the general industrial market; and
Adjusted operating income of $149m increased 11%, while Adjusted operating margin increased 20 basis points to 18.7%, principally driven by favorable overhead absorption on higher revenues in all three segments and partially offset by an unfavorable mix of products.

Third Quarter 2024 Segment Performance

Aerospace & Industrial

Sales of $229m, up $8m, or 4%;
Commercial aerospace market revenue increases reflected strong demand and higher OEM sales of sensors products and surface treatment services on narrowbody and widebody platforms;
Higher revenue in the aerospace defense market reflected the timing of sales for our actuation equipment on various fighter jet programs;
Lower general industrial market revenue was principally driven by reduced sales of industrial vehicle products to off-highway vehicle platforms and lower sales of industrial automation and services; and
Adjusted operating income was $39m, up 1% from the prior year, while Adjusted operating margin decreased 50 basis points to 17.2%, as favorable absorption on higher sales as well as the benefits of our restructuring initiatives were offset by unfavorable mix of products.

Defense Electronics

Sales of $243m, up $27m, or 12%;
Higher revenue in the aerospace defense market was principally driven by increased sales of our embedded computing equipment on various domestic and international helicopter programs, partially offset by the timing of flight test equipment sales;
Strong revenue growth in the ground defense market primarily reflected higher sales of tactical battlefield communications equipment;
Higher commercial aerospace market revenue principally reflected increased OEM sales of avionics and electronics on various platforms; and
Adjusted operating income was $64m, up 15% from the prior year, while Adjusted operating margin increased 50 basis points to 26.5%, primarily due to favorable absorption on higher A&D revenues.

Naval & Power

Sales of $327m, up $39m, or 14%;
Strong revenue growth in the naval defense market principally reflected higher demand on the Virginia-class submarine, Columbia-class submarine and CVN-81 aircraft carrier programs, as well as higher growth on various next-generation submarine development programs;
Higher power & process market revenues mainly reflected increased commercial nuclear aftermarket sales supporting the maintenance of U.S. operating reactors; and
Adjusted operating income was $54 m, up 10% from the prior year, while Adjusted operating margin decreased 60 basis points to 16.4%, as favorable absorption on higher revenues was partially offset by an unfavorable mix of products and the timing of development programs.

Free Cash Flow

Reported free cash flow of $163 m increased $26 m year over year, primarily driven by higher cash earnings and lower working capital;
Adjusted free cash flow of $163 m; and
Capital expenditures increased $5 m compared with the prior year period, due to growth investments within the Aerospace & Industrial and Defense Electronics segments.

New Orders and Backlog

New orders of $860 m increased 2% compared with the prior year and generated an overall book-to-bill of approximately 1.1x, principally driven by continued strong demand for defense electronics products within our A&D markets; and
Backlog of $3.3bn, up 16% from December 31, 2023, reflecting higher demand in both our A&D and Commercial markets.

Share Repurchase and Dividends

During the third quarter, the Company repurchased 355,578 shares of its common stock for approximately $113m and remains on track to repurchase a total of $150 m in shares in 2024; and
The Company declared a quarterly dividend of $0.21 a share.

31 Oct 24. Europe’s small arms companies struggle for cash despite military spending boom.

Summary
Cash crunch hampers smaller European defence companies
Firms face estimated 1 to 2bn-euro debt financing gap
Funding gap crimps innovation, EU report finds

Europe’s small and medium-sized defence companies are struggling to access finance needed to drive innovation and grow production lines even as demand soars due to the war in Ukraine and other conflicts, government officials, firms and experts say.

A lack of access to public funding, red tape and banks’ reluctance to lend on fears of falling foul of environmental, social and governance regulations (ESG) are all hindering growth for smaller players in Europe’s defence sector, they say.

This as global military expenditure hit an all time high of $2.44 trillion in 2023, up 6.8% from the prior year and the most since 2009, according to the Stockholm International Peace Research Institute.

“Most of the problems that have existed in recent times for the defence and security industry have continued or deepened,” Defence and Security Industry Association of the Czech Republic Managing Director Jiri Hynek told Reuters. (Source: Reuters)

30 Oct 24. Airbus reports Nine-Month (9m) 2024 results.

497 commercial aircraft delivered
Revenues €44.5bn; EBIT Adjusted €2.8bn
EBIT (reported) €2.7bn; EPS (reported) €2.29
Free cash flow before customer financing €-0.8bn
Guidance maintained

Airbus SE (stock exchange symbol: AIR) reported consolidated financial results for the nine months ended 30 September 2024.

“We saw strong demand across our product range in the first nine months of the year. The nine-month earnings reflect the level of commercial aircraft deliveries, a solid performance in helicopters and the charges in our space business recorded in the first half,” said Guillaume Faury, Airbus Chief Executive Officer. “We are constantly adapting to a complex and fast-changing operating environment marked by geopolitical uncertainties and specific supply chain challenges that have materialised in the course of 2024. We remain focused on our priorities, including ramping up commercial aircraft deliveries and transforming our Defence and Space division.”

Gross commercial aircraft orders totalled 667 (9m 2023: 1,280 aircraft) with net orders of 648 aircraft after cancellations (9m 2023: 1,241 aircraft). The order backlog amounted to 8,749 commercial aircraft at the end of September 2024. Airbus Helicopters registered 308 net orders (9m 2023: 191 units), including 43 heavy helicopters from the Super Puma Family. Airbus Defence and Space’s order intake by value increased to €11.0bn (9m 2023: €8.5bn), reflecting good momentum across the division.

Consolidated revenues increased 5 percent year-on-year to €44.5bn (9m 2023: €42.6bn). A total of 497 commercial aircraft were delivered (9m 2023: 488 aircraft), comprising 45 A220s, 396 A320 Family, 20 A330s and 36 A350s. Revenues generated by Airbus’ commercial aircraft activities increased 4 percent, mainly reflecting the higher number of deliveries. Airbus Helicopters’ deliveries totalled 190 units (9m 2023: 197 units) with revenues rising 5 percent, reflecting a more favourable mix in programmes and a solid performance in services. Revenues at Airbus Defence and Space increased 7 percent year-on-year, mainly driven by the Air Power business, partly offset by the previous Estimate at Completion updates in Space Systems. Five A400M military airlifters were delivered (9m 2023: 4 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 – totalled €2,798m (9m 2023: €3,631m).

EBIT Adjusted related to Airbus’ commercial aircraft activities decreased to €3,028m (9m 2023: €3,216m), with the increase in deliveries being reduced by investments for preparing the future.

The A220 programme continues towards a monthly production rate of 14 aircraft in 2026, with a focus on financial performance. The A320 Family programme continues to ramp up towards a rate of 75 aircraft per month in 2027. In late October, the first A321XLR was delivered. On widebody aircraft, the Company is now stabilising monthly A330 production at around rate 4. On the A350, the Company continues to target rate 12 in 2028 and is actively managing specific supply chain challenges that may have an impact on the programme’s ramp-up trajectory, in particular in 2025.

Airbus Helicopters’ EBIT Adjusted totalled €420m (9m 2023: €417m), reflecting services and the programmes mix despite lower deliveries.

EBIT Adjusted at Airbus Defence and Space was €-661m (9m 2023: €-1 m), reflecting the charges of €989m in Space Systems, as announced in the H1 2024 financial results. 9m 2023 included €0.4bn of charges recorded on certain satellite development programmes.

On the A400M programme, development activities continue towards achieving the revised capability roadmap. Retrofit activities are progressing in close alignment with the customer. No further net material impact was recognised in the first nine months 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 €2,351m (9m 2023: €2,167m).

Consolidated EBIT (reported) amounted to €2,690m (9m 2023: € 2,712 m), including net Adjustments of €-108m.

These Adjustments comprised:

€-146m related to the dollar working capital mismatch and balance sheet revaluation, of which €-165m were in Q3. 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;
€-13m of other costs including compliance costs, of which €-8m were in Q3

The financial result was €-92m (9m 2023: €231m), mainly reflecting negative impacts from the interest result and revaluation of financial instruments, partially offset by the positive impact from the revaluation of certain equity investments. Consolidated net income(1) was €1,808m (9m 2023: €2,332m) with consolidated reported earnings per share of € 2.29 (9m 2023: €2.96).

Consolidated free cash flow before customer financing was €-845m (9m 2023: €1,10 m), mainly reflecting the change in working capital, notably the inventory build-up that supports fourth quarter deliveries and the ramp-up across programmes. Consolidated free cash flow was € -877m (9m 2023: €843m). The gross cash position stood at €21.1bn at the end of September 2024 (year-end 2023: €25.3bn), with a consolidated net cash position of €7.2bn (year-end 2023: €10.7bn).

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 Oct 24. Indra Acquires a Majority Stake in TESS Defence and Becomes the Spanish Flagship Firm for Land Defence Programmes

Indra’s Board of Directors has approved the increase in its stake in TESS Defence to secure a majority position (51.001%) by means of an agreement to acquire an additional 26.33% of the company from the other partners (GDELS-Santa Barbara Sistemas, SAPA and Escribano)
The current configuration of TESS will shift towards an entrepreneurial model with a balance sheet, program management capability and responsibility, engineering, industrial property, manufacturing and delivery responsibility. TESS will have a new governance model and a Board made up of seven members, four of whom will be from Indra and the others from each of the other three shareholder companies
This change will convert TESS Defence into the benchmark for the Ministry of Defence’s armoured land vehicle programs, including the 8×8 WCV and TSV programmes. It will also have natural responsibility for European armoured vehicle programmes such as the future Main Ground Combat System
With this operation Indra will substantially reinforce its operations in the land defence industry, a market worth over 120bn euros per year worldwide. Indra will thus continue to implement the lines defined in its Leading the Future Strategic Plan

On 30 September, Indra’s Board of Directors approved the acquisition of a 51.001% majority stake in TESS Defence (TESS). This operation and the signing, in a single act, of a new shareholders’ agreement with a new governance model will enable Indra to exert majority control over the company and consolidate its financial results.

The deal is a strategic acquisition for Indra that will position TESS as the prime contractor for the Army’s current and future armoured vehicle programmes, including the 8×8 WCV (Wheeled Combat Vehicle), the TSV (Tracked Support Vehicle) and their derivatives and subsequent phases. This opportunity will be reflected in access to a potential portfolio in Spain amounting to over 10 bn euros in armoured land vehicles over the next 15 years, with more than 700 vehicles with firm orders and additional opportunities for over a thousand vehicles. It also includes modernizations and new platforms, as well as maintenance and sustainment throughout the life cycle. In total, in global terms, taking into account exports and including recurrent maintenance, the potential portfolio that TESS is seeking will exceed 30 bn euros over the next twenty years.

Moreover, the assumption of a majority stake in TESS will reinforce Indra’s presence in the land defence industry, which has been limited to the field of mission systems until now. The operation will reinforce Indra’s capacity to lead and manage large domestic and international programmes, boost its export potential and allow it to act as the national coordinator in major European terrestrial programmes. This responsibility will contribute to the creation and integration of Spanish technological capabilities into the development of advanced European solutions. (Source: ASD Network)

30 Oct 24. Lockheed Martin Advances Space Capabilities through Strategic Terran Orbital Acquisition. Lockheed Martin (NYSE: LMT) has completed its previously announced acquisition of Terran Orbital, a leading manufacturer of innovative modular spacecraft serving the global aerospace and defense industries, and its subsidiary, Tyvak International. Lockheed Martin has worked with Terran Orbital on projects including Space Development Agency programs and Lockheed Martin’s technology demonstrations.

“The addition of Terran Orbital’s spirit of entrepreneurship to the scale of Lockheed Martin means there is a great deal of opportunity to keep pushing the boundaries of technology and space solutions together,” said Robert Lightfoot, President, Lockheed Martin Space. “We welcome their ingenuity and dedication to ensuring mission success and we’ve always valued those aspects of our working relationship. Together, we can deliver our combined innovation and services with a greater sense of urgency to support our customers’ commercial, civil and national security needs.”

Terran Orbital offers a unique lineup of customizable spacecraft platforms, which include interchangeable components, and mission services. When these are combined with Lockheed Martin’s mission system integration and payload expertise, the result includes more robust space capabilities. This is in addition to bolstered manufacturing practices, driven by automation and robotics for increased capacity and speed, and advanced testing techniques.

Reporting through Lockheed Martin’s Space business area, the company will be recognized as Terran Orbital, a Lockheed Martin Company. It will remain a merchant supplier to the industry and bring holistic solutions by coalescing satellite design, production, launch planning, mission operations, and in-orbit support to meet the needs of the most demanding military, civil, and commercial customers’ missions.

Terran Orbital, a Lockheed Martin Company, maintains locations in Boca Raton and Melbourne, Florida, Irvine and Santa Maria, California, Atlanta, Georgia, Tysons Corner, Virginia, and Torino, Italy.

The acquisition was first announced August 15, 2024. More information on Terran Orbital can be found at www.terranorbital.com.

30 Oct 24. DELAIR Acquires SQUADRONE SYSTEM. DELAIR has announced the acquisition of Grenoble-based drone manufacturer SQUADRONE SYSTEM, a specialist in drone swarms and industrial inspection. The Toulouse drone manufacturer confirms its dual development strategy (civil & defense) and accelerates the deployment of its technological roadmap.

Founded in 2014 in Grenoble, SQUADRONE SYSTEM., with a workforce of 22 and estimated turnover of €2m in 2024, specializes in the design of multi-copter drones for complex use cases:

UAV swarming: through the TAMOS (Tactical Multi-Objectives Swarming UAVs) project of the Agence Innovation Défense (AID – Defense Innovation Agency) and the Direction Générale de l’Armement (DGA – French Armament General Directorate).
Anti-drone combat: RapidEagle project
Automated industrial inspections: in the civil sector, with UAVs for warehouse inventories, radio spectrum monitoring or aircraft inspection on the ground.

SQUADRONE SYSTEM has also proved its ability to mass-produce UAVs in significant volumes with the HEXO+ drone, which was produced in France at a rate of 600 UAVs/week, and to form partnerships for the dissemination of its key technologies (swarms, anti-drone systems) with major defense players such as Thalès and Safran Electronics & Defense.

With this acquisition, aerial and underwater drone manufacturer DELAIR positions itself as a player in the strengthening of the drone sector in France, and reaches a new milestone in its growth, with a workforce of 150 and a projected turnover of over 30m euros by 2024.

DELAIR Confirms its Dual Development Strategy

“While DELAIR’s Security/Defense business has been particularly dynamic over the past 2 years, our positioning is resolutely dual, with the aim of balancing our civil and military activities at mid-term. The acquisition of SQUADRONE SYSTEM enables us not only to acquire directly the technological backbone of drone swarms, but also to develop our civil industrial inspection activity”, explains Bastien MANCINI, CEO of DELAIR.

Technological Differentiation

“The acquisition of SQUADRONE SYSTEM is perfectly aligned with our technological roadmap, which is built around 5 major technological building blocks (energy, image processing, electronic warfare, swarms and certification). The synergies generated will enable us to gain precious time in an increasingly intense European and global competitive field” adds Bastien MANCINI.

A New Site in a World-Class Technological Hub: Grenoble

After Toulouse, the world’s leading aeronautics center, and Marseille, home to its marine and submarine activities, Delair confirms its local presence by opening a third site in Grenoble, the historic hub of microelectronics in France. At the heart of a world-beating micro and nanotechnology innovation ecosystem.

“This industrial and territorial vision of our development will enable us, step by step, to create a European leader in robotics, based on the technological, academic and industrial specialties specific to each territory and necessary for our complex systems. This will enable us to confront global competition with great ambition,” concludes Bastien MANCINI. (Source: UAS VISION/Delair)

29 Oct 24. SKF is committed to creating a more focused and resilient company to serve its customers even better and accelerate profitable growth. As part of the decision from the Group’s strategic review of its aerospace business, communicated on 27 October 2023, to focus on core aerospace business and to exit areas that are non-strategic, SKF has signed an agreement to divest its ring and seal operation in Hanover, Pennsylvania, USA.

The Hanover ring and seal operation is divested to Carco PRP Group, through its US aerospace subsidiary, PCTI, for a total enterprise value of USD 220m, corresponding to approximately SEK 2.3bn. The Hanover facility manufactures mechanical seals and rings, representing 2023 annual sales of approximately SEK 700m.

“I’m pleased that we have been able to deliver on our prior promises and successfully reached an agreement to divest this successful but non-core business at accretive multiples. With a new owner, I’m confident that Hanover will continue to provide customers with top quality solutions. Aerospace will remain one of our largest customer industries and we will continue to invest and strengthen our position in core Aerospace segments”, says Rickard Gustafson, President and CEO.

SKF will continue to focus its aerospace business around high growth core areas related to aeroengine and aerostructure bearing offers, representing annual sales of approximately SEK 6 bn. The customer offering in these core areas will be further strengthened through investments in product development, customer service and state of the art manufacturing.

As previously announced, SKF is exploring options to exit the precision elastomeric device (PED) aerospace operation in Elgin, Illinois, USA. The PED business is also non-strategic but smaller than Hanover and the exit process is proceeding according to plan.

The Hanover divestment is expected to close during the first quarter of 2025, subject to authorities’ approval

(Source: PR Newswire)

29 Oct 24. ATI Announces Third Quarter 2024 Results.

Ninth consecutive quarter with sales in excess of $1bn

Q3 2024 sales of $1.05bn
Q3 2024 net income attributable to ATI of $82.7m, or $0.57 per share
Aerospace & defense represent 62% of Q3 2024 sales
Full year 2024 guidance updated
Non-GAAP Information*
Q3 adjusted net income attributable to ATI of $85.9m, or $0.60 per share
Q3 2024 ATI adjusted EBITDA of $185.7m, or 17.7% of sales, up 100 basis points sequentially

ATI Inc. (NYSE: ATI) reported third quarter 2024 results, with sales of $1.05 bn and net income attributable to ATI of $82.7m, or $0.57 per share.

Adjusted earnings per share* for Q3 2024 were $0.60, and ATI adjusted EBITDA* was $185.7m, or 17.7% of sales. Q3 2024 adjusted results exclude pre-tax charges of $4.3m consisting primarily of $2.5m of start-up costs and $1.7m for transaction related costs. Q2 2024 adjusted results exclude pre-tax charges of $5.4m consisting of $5.5m of inventory write-downs related to our ongoing European restructuring and $1.8m of start-up costs. These pre-tax charges were partially offset by credits of $1.9m due to lower severance reserves primarily for our ongoing European restructuring. Q3 2023 adjusted results exclude $4.2 m in pre-tax charges related to start-up costs and costs for an unplanned outage, partially offset by restructuring credits.

“Our third quarter results reflected year-over-year growth in sales and EBITDA, yet this rate of growth fell short of our expectations,” said Kimberly A. Fields, President and CEO. “We remain confident in both long-term demand and our ability to deliver for our customers and shareholders. We’re actively addressing uncertainty across our aerospace customer base due to an industry-wide slowing of the aircraft production ramp, exacerbated by a work stoppage in the supply chain. These impacts, along with unplanned outages and transportation issues related to Hurricane Helene, delayed certain shipments during the third quarter,” she said.

“As we proactively address these challenges in demand and production, we are focusing on those areas within our control, targeting improved performance for the remainder of 2024 and beyond,” said Fields. “In terms of operating efficiency, we were pleased to see consolidated adjusted EBITDA margin, as a percentage of sales, increase 100 basis points over the second quarter. We also announced the early redemption of our 2025 Convertible Notes and a new $700m share repurchase authorization, delivering on our commitment to deleverage our balance sheet and return cash to shareholders,” she said.

Operating Results by Segment

HPMC’s third quarter 2024 sales decreased $10m, or 2%, compared to the second quarter 2024, primarily due to lower sales to medical and general industrial markets. Further, lower sales for commercial airframe products were offset by increased demand for next generation commercial jet engine products. Overall aerospace & defense sales represented 86% of total HPMC sales in the third quarter 2024, an increase from 85% in the second quarter of 2024. Third quarter 2024 sales improved 2% compared to third quarter 2023, with total aerospace & defense related sales increasing 4% compared to the prior year period, primarily due to next generation commercial jet engine demand, which offset a decline in sales of commercial airframe products.
HPMC third quarter 2024 segment EBITDA was $123.2 m, or 22.3% of sales. Continued growth in sales for next generation commercial jet engines drove sequential margin growth.
Third quarter 2024 and second quarter 2024 results included benefits of $2.9m and $3.5m, respectively, from the recognition of previously deferred employee retention credits.
AA&S third quarter 2024 sales decreased $35m, or 7%, compared to the second quarter 2024, due to lower aerospace & defense, primarily for commercial airframe products, and specialty energy sales. These decreases were partially offset by higher sales to the electronics end market. Overall aerospace & defense sales were 36% of total AA&S sales in the third quarter 2024. Third quarter 2024 sales increased 3% compared to the third quarter 2023. Higher year-over-year sales to aerospace & defense, medical, and electronics end markets were partially offset by lower conventional energy and general industrial markets sales.
AA&S third quarter 2024 segment EBITDA was $73.6m, or 14.8% of sales. The sequential decline in margins was primarily due to lower deliveries of titanium and exotic alloys.
Third quarter 2024 and second quarter 2024 results included benefits of $1.9 m and $5.1 m, respectively, from the recognition of previously deferred employee retention credits.

Corporate Items and Cash

Restructuring and other charges:
Third quarter 2024: $4.3m includes pre-tax charges consisting primarily of $2.5m of start-up costs and $1.7m of transaction related costs.
Second quarter 2024: $5.4m includes pre-tax charges of $5.5m of inventory write-downs related to our ongoing European restructuring and $1.8m of start-up costs. These pre-tax charges were partially offset by credits of $1.9m due to lower severance reserves primarily for our ongoing European restructuring.
Third quarter 2023: $4.2m includes pre-tax charges of $2.8m of start-up costs and $1.9m of costs associated with an unplanned outage at our Lockport, NY melt facility, partially offset by $0.5m pre-tax credit for restructuring charges, primarily related to lowered severance-related reserves based on changes in planned operating rates and revised workforce reduction estimates.
Corporate expenses in the third quarter 2024 were $13.4m, compared to $19.4m in the second quarter 2024, and $12.5m in the prior year quarter. The decrease in corporate expenses in third quarter 2024 compared to second quarter 2024, was primarily due to lower incentive compensation costs.
Closed operations and other income/expense was income of $2.3m in the third quarter 2024, compared to income of $0.7m in the second quarter 2024, and expense of $3.6m in the prior year quarter. The third quarter 2024 included a $3.7m gain from the sale of oil & gas rights. The second quarter 2024 included a $2.3m gain from the sale of our previously idled Houston, PA facility.
Third quarter 2024 results include a $28.3m income tax provision, or an effective tax rate of 24.6%. Second quarter 2024 results include a $25.3m income tax provision, or an effective tax rate of 22.8%. Third quarter 2023 results include a tax provision of $4.9m, or an effective tax rate of 4.9%. The effective tax rate for the third quarter 2024 increased compared to the second quarter 2024 primarily due to lower discrete tax benefits. The Company’s effective tax rate for third quarter 2023 was lower than the third quarter 2024 due to the net valuation allowance position in the U.S.
Cash provided by operating activities was $24m and $26m for the third quarter and year-to-date 2024, respectively. Third quarter 2024 managed working capital as a percent of sales was 40.0%, which increased from 35.5% in the second quarter 2024. Capital expenditures for the third quarter 2024 were $66m.
During the third quarter of 2024, the Company redeemed for shares of its common stock the $291.4m outstanding principal of ATI’s 3.5% Convertible Senior Notes due 2025 by issuing 18.8m shares of ATI stock. In addition, the Company received cash proceeds of $76m to settle the capped call associated with these notes.
Cash on hand at September 29, 2024 was $407m, and available additional liquidity under the asset-based lending (ABL) credit facility was approximately $551m. As of September 29, 2024, we had no outstanding borrowings on the ABL credit facility. ATI has no significant debt maturities until the fourth quarter 2025.
During the third quarter 2024, ATI’s Board of Directors authorized the repurchase of $700m of ATI common stock. In the third quarter 2024, the company repurchased $40m of common stock at an average price of $59.37, retiring approximately 0.7m shares. As of September 29, 2024, total share repurchase authorization remaining was $660m.

Outlook

“The third quarter presented challenges and we expect to continue to see uncertainty with our most critical customers through the remainder of 2024 and first part of 2025. That said, the demand in our end markets remains very strong and our strategy of leading in aerospace & defense and ‘aero-like’ markets will deliver growth and continued margin expansion,” said Fields. “We remain committed to creating lasting shareholder value.”

The company is updating its full year 2024 guidance. The table below includes the current and prior guidance. (Source: PR Newswire)

29 Oct 24. Oceaneering Acquires Global Design Innovation Ltd. Oceaneering International, Inc. (NYSE: OII) announced today that it has acquired Global Design Innovation Ltd. (GDi), a UK-based provider of digital and software services. This acquisition is a key step in Oceaneering’s strategy to advance its digital capabilities and broaden the solutions available to its global clients.

As the only provider certified by the United Kingdom Accreditation Service (UKAS) to perform remote visual inspection using point cloud data and photographic images, GDi brings advanced algorithms and data solutions that, when combined with Oceaneering’s engineering expertise, will strengthen Oceaneering’s ability to optimize asset management for clients in industries including oil and gas, utilities, and power generation. GDi’s suite of solutions, including its Vision software, complements Oceaneering’s portfolio by supporting enhanced safety, data quality and integrity, and cost efficiency for customers worldwide.

Roderick A. Larson, President and Chief Executive Officer of Oceaneering, stated, “We look forward to deepening our partnership with GDi through this acquisition, which aligns with our strategic plan to expand our digital and software solutions.”

Karl Green, director of GDi, stated: “We are excited to join the Oceaneering team, which will allow GDi to leverage Oceaneering’s global network and resources, while continuing to deliver the high-quality digital services that our customers expect.”

GDi will continue to operate under its existing brand identity. Oceaneering intends to report GDi’s future financial results through its Integrity Management and Digital Solutions (IMDS) segment. (Source: BUSINESS WIRE)

30 Oct 24. L3Harris unit making rocket motors used in Ukraine says business has surged. L3Harris Technologies’ (LHX.N) business unit Aerojet Rocketdyne has doubled its monthly production of motors for GMLRS rockets that are heavily used in Ukraine, a company executive said on Tuesday, as global demand surges to supply Kyiv and to rebuild shrinking U.S. stockpiles.

Demand for rocket motors is soaring worldwide because of wars in Ukraine and the Middle East. Other militaries are also realizing that future conflicts will likely require many more rockets and missiles – as a part of a new warfighting doctrine dubbed “affordable mass” to describe the sheer volume of firepower involved.

This is good news for L3Harris. In December 2022 the U.S. defense contractor offered to purchase Aerojet, which produces about half of all the rocket motors propelling U.S. military missiles, rockets and other projectiles. But at that time no one knew how long the Ukraine war would last and the Pentagon had signed few contracts to restock its shelves.

Guided Multiple Launch Rocket System rockets, also known as GMLRS, travel about 45 miles (72 km). Their widespread use and success in Ukraine has driven demand from new customers.

“GMLRS was a program that we have kind of unbounded demand for. In the most recent quarter, we’ve doubled the production that we averaged per month from 2023,” said Ross Niebergall, president of Aerojet Rocketdyne.

Since closing on the deal to buy Aerojet, Niebergall said L3Harris has increased capital spending for the rocket motor unit by 84%. The company said it works with more than 70 sub-tier suppliers in Alabama, and spent $25 m to help increase productivity across a network of more than 300 suppliers.

Aerojet did not provide GMLRS motor production figures. But Lockheed Martin (LMT.N) the main contractor for GMLRS, was making about 4,600 per year before ramping up production in 2022. Lockheed’s GMLRS production is scheduled to rise from 10,000 deliveries in 2024 to 14,000 deliveries in 2025.

The strong demand has spurred new entrants into the U.S. rocket motor manufacturing business, but they do not have mass production capabilities.

Aerojet’s facilities around Huntsville, Alabama, have been built out with investments in large carbon-fiber winding devices to make advanced cases, new more automated presses for nozzles and fittings, and better quality control technology under L3Harris’ ownership since the deal closed just over a year ago.

The newly fitted-out building produces the critical casings for the most in-demand solid fuel rocket motors, like Javelin antitank weapons and GMLRS rockets as well as much larger rocket motors. (Source: Reuters)

30 Oct 24. IFS, the leading provider of enterprise cloud and Industrial AI software for the hardcore businesses that make, service, and power our planet, announces record growth for the third quarter, ending September 30, 2024. Global organic growth, supported by a strong partner community, underpins IFS’s strategy and robust financial performance.

IFS Q3 Headline Results:

Annual Recurring Revenue (ARR) increased by 30% YoY, further cementing the IFS position as a leader in industrial software solutions
Software revenue showed a strong 20% YoY growth
Customers adopting IFS Cloud in Q3 2024 grew 71% YoY helping to drive 46% YoY growth in Cloud Revenue

Strategic acquisitions

Q3 included the successful completion of two significant acquisitions: the CAN$1bn acquisition of Copperleaf Technologies Inc., a global leader in strategic asset management and asset investment planning (AIP); and the acquisition of EmpowerMX, an AI-powered aviation maintenance software provider, specialising in Airframe Maintenance Repair and Overhaul (MRO) solutions. These two acquisitions only contributed nominally to the Q3 results, given their closing dates.

Growth across all regions and industries

IFS saw increasing demand from all regions for its AI-powered and sustainability enhancing, industry-specific solutions. These include not only IFS Cloud, but also the broader IFS portfolio such as Ultimo, Poka, and recent acquisitions EmpowerMX and Copperleaf.

Over 90 new organisations became IFS customers in Q3, including: Ahrend, Avia Prime, Comcast, DCC Plc, Drayton Aerospace, General Dynamics Ordnance and Tactical Systems-Canada, HomeServe, ista SE, Quanta Services Australia, Rolls Royce Power Systems, Sureserve, Stertil Group, TDC NET, SNCF Gares & Connexions.

IFS CEO Mark Moffat said: “Our Q3 results reflect the IFS commitment to solving critical industry challenges through Industrial AI. IFS.ai is driving the next industrial revolution, and our continued growth is testament to the value we’re delivering to customers and partners alike.

“IFS’s clear vision is to become the undisputed category leader in industrial software. This latest financial performance shows we are on the right track to make this vision a reality.”

IFS Chief Financial Officer, Matthias Heiden, added: “The 30% growth in ARR demonstrates our success in driving predictable, profitable growth. We continue to lead with customer-focused solutions, strongly supported by our innovative global partner network.”

Recent Highlights:

IFS Cloud 24R2 was unveiled at IFS Unleashed, including IFS.ai-powered features and over 60 AI use cases to help customers drive Industrial AI adoption at scale
IFS and PwC partnered to create the new IFS Cloud Sustainability Management Module, to solve customer ESG disclosure challenges including CSRD
IFS was named a Customers’ Choice in the 2024 Gartner® Peer Insights™ Voice of the Customer for Cloud ERP for Product-Centric Enterprises
IFS Ultimo named a Leader in the Verdantix Green Quadrant®: Enterprise Asset Management Software 2024
IFS assyst recognised as a Leader and Fast Mover in the GigaOm Radar for IT Service Management

30 Oct 24. Fincantieri open to “any form” of collaboration with Thyssenkrupp marine arm. Fincantieri (FCT.MI) is open to all types of collaboration with the warship division of conglomerate Thyssenkrupp (TKAG.DE) but it is up to Germany to decide on a strategy for the unit, the CEO of the Italian shipbuilder said on Wednesday.

“Now is time for German institutions to understand what the best strategy is to give more value and strengthen (Thyssenkrupp Marine Systems). We are at their disposal for any possible forms of collaboration,” Fincantieri Chief Executive Pierroberto Folgiero told Bloomberg television.

Last week private equity firm Carlyle (CG.O) dropped out of a bidding process for Thyssenkrupp Marine Systems (TKMS), in a major blow to the German group’s restructuring.

The company did not say why Carlyle pulled out, but said it would now focus on a spin-off of the division, which builds submarines and frigates, and that it remained open to industrial partnerships.

Folgiero said the group would be interested in widening the existing commercial collaboration with TKMS or “creating new ones to be instrumental to their strategies”. (Source: Google/Reuters)

29 Oct 24. Leidos Reports Strong Third Quarter 2024 Results and Raises Full-Year Guidance.

Revenues of $4.2bn, up 7% year-over-year
Net income of $362m or $2.68 per diluted share
Adjusted EBITDA (non-GAAP) of $596m (14.2% margin)
Non-GAAP Diluted Earnings per Share of $2.93, up 44% year-over-year
Cash Flows from Operations of $656m; Free Cash Flow (non-GAAP) of $633m
Net Bookings of $8.1bn (book-to-bill ratio of 1.9 for the quarter and 1.1 for trailing twelve months)

Leidos Holdings, Inc. (NYSE: LDOS) today reported financial results for the third quarter of fiscal year 2024.

“Continued improvement in operating performance across all segments drove excellent revenue growth, record margins for net income and adjusted EBITDA, substantial earnings growth, strong cash flow, and robust bookings,” said Leidos Chief Executive Officer Tom Bell. “These results demonstrate clearly how our collaborative and innovative workforce is focused on consistent execution for our customers and shareholders. With a healthy balance sheet, improving business development performance, and emerging ‘North Star’ strategy, Leidos is well positioned to deliver robust and sustainable returns as we move forward.”

Summary Operating Results

With a net income margin of 8.6%, net income for the third quarter was $362m, or $2.68 per diluted share. Comparisons to the year ago period are not meaningful as the result of the $699m pre-tax, non-cash impairment and restructuring charge primarily associated with the Security Enterprise Solutions (SES) reporting unit recorded in the third quarter of 2023.

Adjusted EBITDA was $596 m for the third quarter, up 32% year-over-year. Record adjusted EBITDA margin of 14.2% increased from 11.5% in the third quarter of 2023. Non-GAAP net income was $396 m for the third quarter, up 40% year-over-year, and non-GAAP diluted EPS for the quarter was $2.93, up 44% year-over-year. The primary drivers of increased profitability were increased volumes on managed health services programs and improved program execution and cost control across the company.

Cash Flow Summary

In the third quarter, Leidos generated $656m of net cash provided by operating activities and used $23m and $257m in investing and financing activities, respectively. Net cash provided by operating activities was driven by strong EBITDA and collections performance. Days Sales Outstanding (DSO) for the quarter was 59.

Investing activities consisted primarily of $23m in property, equipment and software payments, which resulted in quarterly free cash flow of $633m. Leidos returned $254m to shareholders in the third quarter, including $203m in share repurchases and $51m as part of its regular quarterly cash dividend program. As of September 27, 2024, Leidos had $1,185m in cash and cash equivalents and $4.7bn of debt.

On October 25, 2024, the Leidos Board of Directors declared a cash dividend of $0.40 per share, which represents an increase of 5.3% over the prior quarter’s dividend amount. The dividend will be payable on December 31, 2024, to stockholders of record at the close of business on December 16, 2024.

Business Development

Net bookings totaled $8.1bn in the quarter, representing a book-to-bill ratio of 1.9. As a result, backlog at the end of the quarter was $40.6 bn, of which $9.1bn was funded. Included in the quarterly bookings were several notable awards:

Veterans Benefits Administration (VBA) Medical Disability Examinations (MDE) Regions 1-4 Option Year. The VBA MDE Office awarded Leidos the next option year on the existing indefinite delivery, indefinite quantity (IDIQ), firm-fixed price contracts that were originally awarded in November 2018. Leidos QTC Health Services will continue to provide MDE to meet Department of Veterans Affairs (VA) and Department of Defense (DOD) requirements for separating and retired service members.
Army Global Unified Network (AGUN). The Army Program Executive Office for Command, Control, and Communications-Tactical Global Enterprise Network Modernization (PEO C3T GENM-O) awarded Leidos a five-year, $331 m contract to modernize the U.S Army’s network in alignment with the Army’s Network Modernization Strategy and Army Unified Network Plan. Leidos will deploy AGUN to individual Army sites to deliver a standardized, orchestrated modern network architecture that supports the transition to a Zero Trust Architecture and aims to make applications, data, and enterprise services are accessible, trusted and interoperable across the globe.
Advanced Battle Management System-Digital Infrastructure (ABMS-DI) Network. The Department of the Air Force’s (DAF) Program Executive Officer Command, Control, Communications and Battle Management (PEO C3BM) awarded Leidos a five-year, $303 m contract to oversee the planning, analysis, and operations for the DAF ABMS-DI network. This contract extends Leidos’ collaborative role with the DAF to design, develop, and deploy modern Combined Joint-All Domain Command and Control (CJADC2) capabilities for the Air Force and Space Force.
Automated Installation Entry (AIE) Next Generation Support. The Army Program Executive Office for Intelligence, Electronic Warfare & Sensors (PEO IEW&S) awarded Leidos the AIE Next Generation contract to enhance security at 92 additional Army and select joint-service installation access control points located around the world. Under the six-year, $249 m contract, Leidos will continue to transform the Army’s enterprise physical access control system to a fully extensible, cloud-based solution with advanced biometrics modalities.

28 Oct 24. Godspeed Capital-Backed Special Aerospace Services (SAS) Announces Acquisition of Concordia Technologies. Special Aerospace Services (“SAS”), a Godspeed Capital Management LP (“Godspeed Capital”) backed platform, and a leader in space and defense engineering, hardware, and mission critical communications technology, today announced the acquisition of Concordia Technologies, an Alabama-based company renowned for its expertise in missile and hypersonic weapons defense, sensor design and evaluation, and modeling and simulation technologies. This strategic acquisition underscores SAS’s continued commitment to advancing national security space initiatives and bolstering its position at the forefront of cutting-edge defense technologies.

Concordia Technologies has a distinguished history in supporting missile and hypersonic weapon systems defense programs for the U.S. Department of Defense and other key government agencies including the Missile Defense Agency (“MDA”). The company’s specialized knowledge in modeling and simulation has been instrumental in developing systems critical to the nation’s defense.

Heather Bulk, CEO of SAS, emphasized the strategic importance of the acquisition: “Incorporating Concordia Technologies’ extensive experience in hypersonic systems and missile defense aligns with SAS’s mission to support and enhance national security space capabilities. The future of our defense strategy lies in the continued funding and development of advanced technologies such as hypersonics, which will play a pivotal role in ensuring our nation’s security in the coming decades. With this acquisition, SAS is better positioned to contribute to these vital efforts.”

Tim Johnson, Co-founder and CEO of Concordia Technologies, spoke about the potential that will be unlocked by this new partnership: “We are excited to join forces with SAS, a company that shares our deep commitment to supporting national defense missions. With SAS’s renowned dedication to national security & space initiatives and our expertise in hypersonics and missile defense, we look forward to advancing the collaboration and development of critical technologies that will shape the future of defense.”

Brad Vick, Co-founder and President of Concordia Technologies remarked, “Together with SAS, we will now be in a lead position to support our missile defense customers and their critical national security space missions.”

Nat Fogg, Partner, Godspeed Capital, said, “We are thrilled that the sophisticated team at Concordia Technologies has chosen to partner with SAS to help support them in this next phase of their growth trajectory. Together with SAS, we are excited by the opportunity to further invest in the platform and to have Tim and Brad as our partners.”

This acquisition further solidifies SAS’s position as a leader in missile and hypersonic weapons systems defense technologies and solutions, supporting U.S. space and defense related agencies in their efforts to maintain global superiority in missile defense and space-based security systems.

Latham & Wakins served as legal advisor to Godspeed Capital and SAS. Concordia Technologies was advised by Generational Equity.

About SAS

SAS provides engineering services, missile defense solutions, hypersonic weapons systems, mission critical communications technologies, and manufacturing support to NASA, the Department of Defense and related agencies, and the commercial space sector. The SAS team is committed to furthering humankind’s dreams and endeavors in space and strengthening our national security space and missile defense initiatives. SAS is headquartered in Huntsville, AL, with offices in Colorado and California. To learn more about SAS, please visit: https://sasaerospace.com.

About Concordia Technologies

Concordia Technologies, based in Huntsville, Alabama, is a leader in hypersonic weapons and missile defense systems technology and solutions. The company provides advanced engineering, modeling and simulation, and rapid prototyping services, delivering innovative solutions that support national defense and aerospace missions.

About Godspeed Capital

Godspeed Capital is a lower middle-market Defense & Government services, solutions, and technology focused private equity firm investing alongside forward-thinking management teams that seek an experienced and innovative investment partner with unique sector expertise, operational insight, and flexible capital for growth. While a typical investment will involve companies generating approximately $3m to $30m of EBITDA, Godspeed Capital has significant resources to complete larger transactions through strategic co-invest relationships. The firm focuses on control buyouts, buy-and-builds, corporate carve-outs, and special situations. For more information, please visit the Godspeed Capital website at www.godspeedcm.com. (Source: PR Newswire)

28 Oct 24. The Boeing Company [NYSE: BA] (“Boeing” or the “Company”) announced today the pricing of its previously announced separate underwritten public offerings of (i) 112,500,000 shares of common stock, par value $5.00 per share (“Common Stock”), of the Company at a public offering price of $143.00 per share (the “Common Stock Offering”) and (ii) $5 bn of depositary shares (“Depositary Shares”), each representing a 1/20th interest in a share of newly issued 6.00% Series A Mandatory Convertible Preferred Stock, par value $1.00 per share (“Preferred Stock”) at a public offering price of $50.00 per Depositary Share (the “Depositary Shares Offering” and, together, the “Offerings”). Boeing has granted the underwriters in each respective offering a 30-day option to purchase up to an additional (i) 16,875,000 shares of Common Stock and (ii) $750 m of Depositary Shares, solely to cover over-allotments, if any, in each case at the public offering price less the applicable underwriting discount. The Common Stock Offering is expected to close on October 30, 2024 and the Depositary Shares Offering is expected to close on October 31, 2024, subject to customary closing conditions.

The net proceeds from the Common Stock Offering will be approximately $15.81 bn (assuming the underwriters do not exercise the option to purchase additional shares of Common Stock) and the net proceeds from the Depositary Shares Offering will be approximately $4.91 bn (assuming the underwriters do not exercise the over-allotment option to purchase additional Depositary Shares), in each case after deducting the applicable underwriting discount and estimated offering expenses payable by Boeing. Boeing intends to use the net proceeds from the Offerings for general corporate purposes, which may include, among other things, repayment of debt, additions to working capital, capital expenditures, and funding and investments in the Company’s subsidiaries.

Holders of the Depositary Shares will be entitled to a proportional fractional interest in the rights and preferences of the Preferred Stock, including conversion, dividend, liquidation and voting rights, subject to the provisions of a deposit agreement. The Preferred Stock will accumulate dividends (which may be paid in cash or, subject to certain limitations, in shares of Common Stock or in any combination of cash and Common Stock) at a rate per annum equal to 6.00% on the liquidation preference thereof, which is $1,000 per share, payable when, as and if declared by Boeing’s board of directors (or an authorized committee thereof), on January 15, April 15, July 15 and October 15 of each year, beginning on January 15, 2025 and ending on, and including, October 15, 2027. Unless earlier converted, each outstanding share of Preferred Stock will automatically convert for settlement on or about October 15, 2027, into between 5.8280 and 6.9940 shares of Common Stock (and, correspondingly, each Depositary Share will automatically convert into between 0.2914 and 0.3497 shares of Common Stock), subject to customary anti-dilution adjustments, determined based on the volume-weighted average price of the Common Stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day prior to October 15, 2027. Other than during a fundamental change conversion period (as defined in the prospectus supplement relating to the Depositary Shares Offering), at any time prior to the mandatory conversion settlement date, a holder of 20 Depositary Shares may cause the bank depositary to convert one share of Preferred Stock, on such holder’s behalf, into a number of shares of Common Stock equal to the minimum conversion rate of 5.8280, subject to certain anti-dilution and other adjustments. Currently, there is no public market for the Depositary Shares or the Preferred Stock. Boeing has applied to list the Depositary Shares on the New York Stock Exchange under the symbol “BA-PRA.”

Goldman Sachs & Co. LLC, BofA Securities, Citigroup and J.P. Morgan are acting as lead joint bookrunning managers for the Offerings. Wells Fargo Securities, BNP PARIBAS, Deutsche Bank Securities, Mizuho, Morgan Stanley, RBC Capital Markets and SMBC Nikko are also acting as joint bookrunning managers for the Offerings. Credit Agricole CIB, MUFG, COMMERZBANK, Santander, Academy Securities, Loop Capital Markets, Raymond James and Siebert Williams Shank are acting as co-managers for the Offerings. BTIG is acting as a co-manager for the Common Stock Offering and US Bancorp is acting as a co-manager for the Depositary Shares Offering. PJT Partners is acting as Boeing’s financial advisor for the Offerings.

A registration statement on Form S-3 relating to these securities has been filed with the Securities and Exchange Commission (the “SEC”) and has become effective. Each Offering may be made only by means of a prospectus supplement and accompanying prospectus. When available, copies of the final prospectus supplements and accompanying prospectuses related to the Offerings can be obtained by visiting the SEC’s website at http://www.sec.gov or by contacting Goldman Sachs & Co. LLC, Attention: Prospectus Department, 200 West Street, New York, NY 10282, by telephone at 1-866-471-2526 or by email at ; BofA Securities, NC1-022-02-25, 201 North Tryon Street, Charlotte, NC 28255-0001, Attention: Prospectus Department, or by email at ; Citigroup, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717 or by telephone at 1-800-831-9146; or J.P. Morgan Securities LLC, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, or by email at and .

This release does not constitute an offer to sell or a solicitation of an offer to buy these securities, nor does it constitute an offer, solicitation or sale of these securities, in any jurisdiction in which such offer, solicitation or sale is unlawful.

28 Oct 24. Boeing has announced plans to raise about $19bn, as it seeks to bolster its balance sheet, which has been strained by a strike by its largest labour union. The company on Monday said that it would sell 90mn common shares, which total just under $14bn based on the stock’s Friday closing price of $155.01. Boeing also plans to sell $5bn of other securities that would convert into preferred shares. It did not say how much it hoped to raise in total from the offering. It said the money would be used for “for general corporate purposes”. Boeing this month announced plans to raise up to $25bn in new capital and agreed a $10bn credit facility. (Source: FT.com)

28 Oct 24. Kromek – There’s value in these volatile shares.

It will turn cash flow positive in the current financial year and is also a takeover candidate

Full-year revenue up 12 per cent to £19.4m
Cash profit of £3.1m well ahead of £1.2m market estimate
Underlying operating loss slashed from £6m to £1.4m
Forecast positive cash flow in 2024/25 financial year
New secured loan provides additional working capital

Sedgefield-based Kromek (KMK:5.65p), a radiation detection technology group, materially outperformed house broker Cavendish’s full-year cash profit estimate even though revenue of £19.4m was £1.6m shy of expectations due to timing issues.

Buoyed by the contribution from its higher-margin chemical, biological, radiological and nuclear (CBRN) detection business (revenue up 16 per cent to £7.1mn) and research and development activities (revenue up a fifth to £3mn), group gross margin of 55.2 per cent was seven percentage points higher than analysts had predicted and meant that gross profit increased 20 per cent to £10.7m, well ahead of £10mn forecast. A focus on cost control contributed to the result, too. Total operating expenses decreased by £2.6m to £12.6m, or £1.3mn lower than Cavendish had predicted, hence a £2m outperformance at the cash profit level and material reduction in operating loss.

Although a second-half cash outflow of £3.2m explains why net debt of £7.5m was £2.3mn higher than forecast, it’s a timing issue as receivables, which doubled from £5.5m to £13m, should be slashed to £9.7m by the 30 April 2025 year-end. Alongside the results, Kromek secured an additional £4.9m loan with an investment vehicle controlled by a major shareholder on the same terms as its exiting £5.5m secured loan. Both loans carry an interest rate of 9.5 per cent and are due for repayment on 27 March 2025, but they can be extended for a further 12 months.

Importantly, a raft of contract wins support expectations of another step change in revenue to £25.5m in the new financial year. They include more than £6mn of orders to supply Kromek’s cadmium zinc telluride (CZT)-based detector dirty-bomb detectors, which protect buildings and critical infrastructure against nuclear threat, to the European Commission, US federal entity and UK Ministry of Defence. The group also has multi-year contracts worth £10mn in revenue with both UK and US government agencies to develop biological threat detection systems. The two contracts should deliver cumulative milestone payments of more than £2.5m in the current financial year, says chief executive Arnab Basu.

In addition, having been selected as an approved supplier under UK government framework agreements for the procurement of £84m of radiological nuclear detection equipment (handheld, wearable and large volume static detectors), Basu expects Kromek to start delivering orders in the current financial year. He also highlights that Kromek has received its first orders from blue light operators in the UK (fire, police, ambulance and first responders) for its radiation detectors under another new UK government framework agreement. The uncertain geopolitical environment and heightened threat of terrorism both in home and overseas countries can only support higher demand for Kromek’s products.

Moreover, greater adoption of CZT-based detector modules for use in next-generation single-photon emission CT (SPECT)-based scanners is driving demand in the advanced medical imaging segment. Kromek has agreements in place with tier 1 original equipment manufacturers (OEM) customers. This part of the business also supplies key explosive detector components for security screening systems, a segment that is seeing increasing demand. New contract wins here include a $2.1m order with an existing US-based OEM customer in the homeland security market.

Value in the volatile shares

Shares in the £36.2m market capitalisation company remain as volatile as ever. Having rallied 46 per cent following my buy recommendation at 5.8p at the start of the year (‘Contract momentum builds at Kromek’, 30 January 2024), Kromek’s share price dipped back to that level post results.

It’s a harsh reaction given that the business is fundamentally stronger now than nine months ago, and there is the potential for margin gains to drive outperformance of Cavendish’s flat cash profit estimate for the current financial year. That’s not reflected in an enterprise valuation to cash profit multiple of 14 times, nor is the takeover potential given Kromek’s strategic value as the last independent supplier of CZT.

Cavendish’s target price of 28p may seem overly bullish at five times the current share price, but it is supported by its discounted cash flow valuation and values the equity at £179mn, or 14 per cent less than Canon paid for rival Redlen Technologies three years ago. Speculative buy.

(Source: Investors Chronicle)

28 Oct 24. Kromek Group plc (“Kromek” or the “Company” or the “Group”)Final Results and Publication of Annual Report.

Kromek (AIM: KMK), a leading developer of radiation and bio-detection technology solutions for the advanced imaging and CBRN detection segments, announces its final results and gives notice of the publication of its annual report for the year ended 30 April 2024.

Financial Summary

Revenue increased 12% to £19.4m (2023: £17.3m)
Gross margin improved to 55.2% (2023: 51.6%) due to further efficiencies and sales mix
Achieved positive adjusted EBITDA of £3.1m (2023: £1.0m loss)* ahead of market expectations
Loss before tax was reduced to £3.5m (2023: £7.3m loss)
Debt facility refinanced with new £5.5m secured term loan
Cash and cash equivalents at 30 April 2024 were £0.5m (30 April 2023: £1.1m)

*A reconciliation of adjusted EBITDA can be found in the Financial Review.

Operational Highlights

Advanced Imaging

Strong revenue growth with delivery under landmark contracts and other component supply agreements
Significant progress in medical imaging:

o Entered a collaboration agreement with a blue-chip technology solutions provider to develop detectors based on cadmium zinc telluride (“CZT”) for photon counting computed tomography (“PCCT”) applications in the medical imaging sector

o Commenced work under the landmark collaboration agreements with a recognised tier 1 OEM and with Analogic that were signed at the end of the prior year

o Received and largely delivered an order worth $1.4m from a new OEM customer that is an established player in the medical imaging sector in Asia

o Spectrum Dynamics Medical has launched the latest addition to its next-generation digital single photon emission computed tomography (“SPECT”)/computed tomography (“CT”) imaging portfolio, the VERITON-CT 300, which uses Kromek’s digital detectors

o Continued to make progress under the ultra-low dose molecular breast imaging programme funded by Innovate UK

Secured a new $2.1m order to supply detector components for the security screening systems of an existing US-based OEM customer in the homeland security marketplace

CBRN Detection

Geopolitical insecurity continued to drive strong demand in nuclear security with the winning and delivery of new and repeat orders, including:

o A £1.4m order to supply D3M detectors and associated networkable solutions for use in the rescEU stockpile being developed by the European Commission

o A contract, worth up to $2.9m, from a US federal entity for the provision of Kromek’s D5 RIID, D3M and D3S-ID detectors

o An order from a substantial global defence corporation, which the Group believes represents a significant opportunity for further sales

o Post year end, awarded a contract worth £2.0m from the Ministry of Defence for the supply of the Group’s D5 RIID along with its Alpha Beta probe attachment and ancillary products

o The majority of the above will be delivered in year ending 30 April 2025, giving the Group good visibility into the new financial year

Selected under two new UK government frameworks, each lasting four years, designed to enhance the UK’s systems and capabilities for ensuring public safety and security

Biological-Threat Detection

Continued to progress the development of a biological-threat detection system under a contract that had been awarded in the previous financial year by a UK government department
Awarded Kromek’s first contract in biosecurity from the US Department of Homeland Security, worth $5.9m, for the development of technologies focusing on an agent agnostic bio-detection system, under a four-year programme

Manufacturing and IP

Continued to execute on programmes for the expansion of production capacity and process automation, resulting in greater manufacturing productivity and cost efficiency
Applied for 3 new patents and had 7 patents granted across 6 patent families, with the total number of patents held being in excess of 210

Dr Arnab Basu, CEO of Kromek, said: “This has been a pivotal 12 months for Kromek where we recorded a third consecutive year of revenue growth and delivered on all our KPIs. We achieved record revenues, more than halved our losses and our positive adjusted EBITDA exceeded market expectations. We have actively enhanced our operational efficiencies and seen excellent progress in both advanced imaging and CBRN detection where demand remains strong across both market segments. We expect to be broadly cash neutral in H1 and are comfortable that we have sufficient capital to deliver further growth in 2025.

“Looking ahead, we anticipate demand for our CBRN products will continue to be driven by global geopolitical insecurity and the persistence of nuclear threats. Also, an acceleration in the development and commercialisation of SPECT, CT and BMD utilising CZT by major OEMs is expected to translate into increased collaborations, strategic partnerships and more contracts for the advanced imaging segment. Consequently, Kromek is well positioned to deliver future growth and value for shareholders.”

Kromek Group plc

Kromek Group plc is a leading developer of radiation detection and bio-detection technology solutions for the advanced imaging and CBRN detection segments. Headquartered in County Durham, UK, Kromek has manufacturing operations in the UK and US, delivering on the vision of enhancing the quality of life through innovative detection technology solutions.

The advanced imaging segment comprises the medical, security and industrial markets. Kromek provides its OEM customers with detector components, based on its core cadmium zinc telluride (CZT) platform, to enable better detection of diseases such as cancer and Alzheimer’s, contamination in industrial manufacture and explosives in aviation settings.

In CBRN detection, the Group provides nuclear radiation detection solutions to the global homeland defense and security market. Kromek’s compact, handheld, high-performance radiation detectors, based on advanced scintillation technology, are primarily used to protect critical infrastructure and urban environments from the threat of ‘dirty bombs’.

The Group is also developing bio-security solutions in the CBRN detection segment. These consist of fully automated and autonomous systems to detect a wide range of airborne pathogens.

Kromek is listed on AIM, a market of the London Stock Exchange, under the trading symbol ‘KMK’.

Further information is available at www.kromek.com.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Operational Review

This has been a pivotal year for Kromek. The Group delivered record revenue, which increased by 12% year-on-year to £19.4m (2023: £17.3m), but more importantly, Kromek has enhanced its operations and has signed milestone agreements that position the Group for strong, sustainable growth moving forwards. The Group continued to drive through operational efficiencies, particularly within the advanced imaging manufacturing process, which, combined with tight cost control, contributed to the Group delivering adjusted EBITDA ahead of market expectations at £3.1m (2023: £1.0m loss). In both advanced imaging and CBRN detection, Kromek has executed on its strategy and entered agreements with significant customers, including with a global blue-chip technology solutions provider operating in the medical imaging sector and, post year end, both the Ministry of Defence and Home Office in the UK. As the Group’s advanced imaging and CBRN detection segments continue to grow and mature, Kromek is working towards reporting on the basis of these two business segments rather than the current geographic segments.

Advanced Imaging

In advanced imaging, Kromek primarily operates in the medical imaging market with some opportunities in the security screening and industrial screening sectors. Kromek provides OEM customers with detector components, based on Kromek’s core CZT platform, to enhance imaging quality and enable better detection of diseases such as cancer and Alzheimer’s, contamination in industrial manufacture and explosives in aviation settings. During the year, the Group delivered strong revenue growth in this segment and, being the only independent commercial producer of CZT at scale, Kromek is well-positioned going forward.

Medical Imaging

This year, the Group achieved another important milestone in advanced imaging in entering a collaboration agreement with a blue-chip technology solutions provider that has over 100,000 customers globally for a range of applications, including healthcare. Under the agreement, Kromek will develop CZT-based detectors for PCCT applications in the medical imaging sector and will ensure production capability is available to support commercial demand ramp-up.

Kromek commenced work under the landmark collaboration agreements that it signed at the end of the prior year with a recognised tier 1 OEM and with Analogic to develop CZT-based detectors for use in their advanced imaging scanners. The agreement with the tier 1 OEM, which is a leading health-technology company, comprises a short development phase to integrate Kromek’s CZT-based detectors into the customer’s medical imaging scanners, with the agreement then transitioning to a longer commercial supply phase. With Analogic, who have been global leaders in CT detector technology for over 50 years, the Group is developing CZT-based detector solutions for PCCT applications in both the medical imaging and security screening sectors. The work under these collaborations is progressing well with key deliverables being achieved during the year.

These collaboration agreements, which are with significant global organisations, are both excellent validations of the Group’s technology and its strategy, and will be significant drivers of growth in this segment.

Kromek received and largely delivered an order worth $1.4m from a new OEM customer that is an established player in the medical imaging sector in Asia. This was for the provision of the Group’s CZT-based detector modules to be used in the customer’s next-generation SPECT systems in niche applications.

In addition to securing new customers and advancing Kromek’s relationships with OEMs, the Group continued to receive orders in its regular repeat business, deliver under supply agreements and progress development programmes. In particular, Spectrum Dynamics Medical, a long-standing customer, introduced the latest addition to its next-generation digital SPECT/CT imaging portfolio, the VERITON-CT 300, which uses Kromek’s digital detectors.

The ultra-low dose molecular breast imaging programme funded by Innovate UK, which is being undertaken in collaboration with Newcastle Upon Tyne Hospital and University College London, continues to deliver on all its objectives. This technology is aimed at paving the way for a new screening and diagnostic capability for the detection of cancer for women with dense breast tissue for whom mammography is not effective. Legislative changes that are in motion in the USA will be a key driving force behind wide-scale adoption of this technology, which will have a vital impact on the significant proportion of women who currently do not have a viable option for screening for breast cancer.

Security & Industrial Screening

In security screening, Kromek’s technologies are used in travel, primarily aviation, settings to enable the Group’s customers to meet the high-performance standards they require, and as demanded by regulatory bodies, to ensure passenger safety while increasing the convenience and efficiency of the security process. Kromek provides OEM and government customers with components and systems for cabin and hold luggage scanning. In industrial screening, Kromek provides OEM customers with detector components for incorporating into scanning systems used during manufacturing processes to identify potential contaminants.

During the year, Kromek continued to deliver under its existing component supply agreements and development programmes. The Group also secured a new $2.1m order from an existing US-based OEM customer in the homeland security marketplace. This was for the supply of key detector components for incorporation into the customer’s advanced security screening system for the detection of explosives. In addition, the Group’s collaboration agreement with Analogic, as noted above, will be for security applications as well as medical applications.

Harnessing Artificial Intelligence

For several years Kromek has been exploring the application of machine learning across its technologies, and has generated some significant IP and capabilities. During the year, Kromek entered a collaboration to enhance its expertise in this area and was awarded a grant of £1.3m under the UK Research and Innovation Horizon Europe guarantee scheme to participate in the Intelligent Radiation Sensor Readout System (“i-RASE”) project to develop a new class of radiation sensor powered by artificial intelligence (“AI”). The i-RASE project, to be led by DTU Space, is a collaboration between industrial and academic partners in Denmark, Germany, Norway and Italy to design, build and test a new class of radiation sensor based on CZT and other advanced technologies that leverages the latest developments in AI to facilitate the retrieval of comprehensive information on incident radiation to improve measurement accuracy and speed, while increasing energy efficiency.

CBRN DETECTION

In CBRN detection, Kromek provides nuclear radiation detection solutions to the global homeland defence and security market, which are primarily used to protect critical infrastructure, events and urban environments from the threat of ‘dirty bombs’. Kromek’s portfolio also includes a range of high-resolution detectors and measurement systems used for civil nuclear applications, primarily in nuclear power plants and research establishments. The Group’s revenue in this segment grew significantly over the previous year, driven by demand for its nuclear security products.

Nuclear Security

Geopolitical insecurity drove strong global demand for the Group’s products that contribute to ensuring public safety and security, and which are selected by governments and their agencies for their best-of-breed features and Kromek’s ability to deploy rapidly. This enabled the Group to enter, during the year and subsequently, several milestone agreements that represent significant strategic execution in nuclear security, receiving orders from customers in the UK, the US, Europe and Asia – from both public and private organisations – and most notably, from the UK Ministry of Defence.

In particular, during the year the Group received a £1.4m order to supply its D3M detectors and associated networkable solutions for use in the rescEU stockpile being developed by the European Commission to help safeguard citizens from disasters and manage emerging risks. Kromek was awarded a contract, worth up to $2.9m, from a US federal entity for the provision of Kromek’s D5 RIID, D3M and D3S-ID detectors. Another notable order during the year was one received from a new customer that is a substantial global defence corporation, which management believe represents a significant opportunity for further sales.

Since year end, the Group has made significant progress in nuclear security – building on its achievements of the year. Kromek was awarded a contract worth £2.0m from the Ministry of Defence for the supply of its D5 RIID along with Alpha Beta probe attachment and ancillary products. The Alpha Beta probe, that was launched at the end of the year, connects to the D5 to enable alpha and beta radiation to also be detected, allowing the single, small form factor upgraded device to detect all types of radioactive material. This contract was awarded after a rigorous tender process, providing excellent endorsement of the strength of Kromek’s solution as well as great validation of the new probe so soon after its launch.

Kromek has been selected under two new UK government frameworks, each lasting four years, designed to enhance the UK’s systems and capabilities for ensuring public safety and security. This includes being approved as a supplier under the Radiological Nuclear Detection Framework for the procurement of radiological nuclear detection equipment and supporting services for the Home Office. Kromek applied for three of the four framework categories, covering the supply of handheld, wearable and large volume static radiation detectors, and was successfully approved thereby becoming qualified to receive orders in these categories under the framework, which have a combined maximum procurement value of £84m.

Alongside this, Kromek’s D3M was selected for the UK Government Resilience Framework, being the only personal radiation detector to be named under the framework. This means that all blue light service operators in the UK, such as fire, police, ambulance and first responders, can purchase the D3M detector for projects under the framework. The Group has already received its first orders under this framework.

Civil Nuclear

Business in the civil nuclear market continued as expected, with regular sales through Kromek’s distributor network and direct to customer. In this sector, Kromek’s products are used by over 500 customers around the globe.

During the year, the Group was awarded a $1.5m contract by one of its distribution partners in Asia, which is for the supply of a new product that it had developed based on its existing technology. The development of this new product was funded by the partner.

Kromek launched Raymon, a new product that provides spectroscopic detection and identification capability in a wide range of civil nuclear applications. This product is a variation of the existing Raymon10, with two additional probes based on large volume scintillators and for the detection of alpha and beta particles. The product has already seen early adoption in international markets and has been well received within the distribution network.

BIOLOGICAL-THREAT DETECTION

Kromek is developing biosecurity solutions that consist of fully automated and autonomous systems to detect a wide range of airborne pathogens for the purposes of national security and protecting public health.

Major governments have continued to show a sustained focus on developing stronger and more resilient biosecurity and biodefence strategies, both in the wake of the pandemic and in the face of the reality that bio-threats pose a significant risk in a modern, geopolitically unstable environment. Both the UK and US have released updated national biosecurity plans since 2022. This was then further underscored by the announcement of a new transatlantic strategic dialogue on biological security released in January 2024. The solutions the Group is developing in this area have a vital role to play in supporting these initiatives as governments improve their readiness against these emerging threats.

During the year, Kromek continued to progress the development of a biological-threat detection system under a contract that had been awarded in the previous financial year by a UK government department. Under the three-year programme, which is worth a total of £4.9m, the Group will develop and supply the system, with the contract also including an option for extended maintenance services after the initial term. A significant advancement was made when the Group was awarded its first contract in biosecurity from the US Department of Homeland Security, worth $5.9m. The contract is for the development of technologies focusing on an agent agnostic bio-detection system, under a four-year programme. These programmes are continuing to deliver milestones and meet customer expectations. The Group is also pursuing several other customer engagements in this area.

MANUFACTURING AND IP

Kromek continued to execute on its programmes for the expansion of production capacity and increased process automation, with particular progress being made at its CZT manufacturing facility in the US. These programmes are resulting in greater manufacturing productivity and cost efficiencies, which made an important contribution to the Group’s EBITDA performance. Kromek has dedicated teams that are focussed on targeted improvements for every step in the manufacturing process, which directly contributes to yield and cost improvement.

In FY 2024, Kromek applied for three new patents and had seven patents granted across six patent families, with the total number of patents held being in excess of 210.

Financial Review

Revenue

Revenue for the year was £19.4m (2023: £17.3m), a 12% increase over the prior year and reflecting the highest ever revenue in both the advanced imaging and CBRN detection segments.

Gross Margin

Gross profit at £10.7m (2023: £8.9m) represented a margin of 55.2% (2023: 51.6%). The increase in gross margin, particularly in the second half of 2024, is attributable to the higher volume of products shipped in the year and a favourable change in product mix.

Distribution and Administrative Expenses

Distribution and administrative expenses decreased by £2.6m to £12.6m (2023: £15.2m). This decrease is substantially the net result of:

a credit of £1.0m relating to a US IRS Employee Retention Credit, which is netted off staff costs and is presented within other receivables at 30 April 2024;
a reduction of £1.0m in bad debt expense compared with 2023;
lower depreciation and amortisation of £0.3m due to assets coming to the end of their depreciable life;
a £0.2m Research and Development Expenditure Credit; and
a net decrease of £0.1m relating to all other expense items, which includes a favourable foreign exchange impact from translating USD denominated expenses to Pounds.

Adjusted EBITDA* and Result from Operations

Adjusted EBITDA was £3.1m for 2024 compared with a loss of £1.0m for the prior year as set out in the table below:

The significant improvement in the loss before tax for the year and adjusted EBITDA compared with the prior year, largely reflects the higher revenue and gross margin, and the £2.6m reduction in distribution and administrative expenses as outlined above.

During H1 2024, the Group recognised an exceptional charge of £0.2m relating to the cost of refinancing a £5.0m revolving credit facility with HSBC. That loan was repaid from the proceeds of a new secured £5.5m term loan facility provided by Polymer N2 Ltd, a significant shareholder in the Company.

Tax

The Group recorded a net tax credit to the income statement of £0.2m for the year (2023: £1.2m credit). The tax benefit in 2024 represented the net of a £0.4m R&D tax credit less a deferred tax charge in the year of £0.2m. In 2023, the tax benefit of £1.2m represented the R&D tax credit only as there was no deferred tax recognised in the prior year.

The Group benefits from the UK Research and Development Tax Credit regime as it continues to invest in developments of technology and exercises the option of surrendering tax losses in the years that qualify for cash credit, rather than carrying forward the tax losses to set against future taxable profits. The significant reduction in the R&D credit year-on-year is predominantly due to the UK Government’s changes to the R&D regime, effective from 1 April 2023. The changes meant that businesses claiming under the R&D SME scheme now receive a lower rate of tax relief, while larger, non-SME businesses, claiming R&D Expenditure Credit (“RDEC”) secure more generous rates. The Group mainly benefited in previous years from the R&D SME scheme rather than the RDEC scheme.

The Group’s deferred tax provision for the year was £0.2m (2023: £nil). The £0.2m charge reflects a deferred tax provision of £0.5m in respect of accelerated capital allowances and tax losses less the recognition of a deferred tax asset of £0.3m in respect of short-term timing differences and share-based payments.

Earnings per Share (“EPS”)

Due to the reduction in loss after tax, EPS for the year on a basic and diluted basis was 0.6p loss per share compared with 1.4p loss per share (after excluding exceptional items) in 2023.

R&D

The Group invested £4.6m in the year (2023: £4.8m) in technology and product developments that were capitalised on the balance sheet, reflecting the continuing investment in new products, applications and platforms for the future growth of the business. This expenditure was capitalised in accordance with IAS38 to the extent that it related to projects in the later stage (development phase) of the project life cycle.

During the year, the Group undertook expenditure on patents and trademarks of £0.3m (2023: £0.2m).

Other Income

The Group generated total other operating income of £nil (2023: £0.1m). The income recognised in the prior year related to a retrospective Customs Duty claim granted by HMRC.

Capital Expenditure

Capital expenditure in the year, comprising property, plant and equipment and investments in patents and trademarks, amounted to £0.4m (2023: £0.5m). The expenditure primarily relates to modest capital expenditure across lab and computer equipment, IT and manufacturing projects.

Financing Activities

The Group issued £2.8m of convertible loan notes (“CLNs”), largely to existing shareholders, in H2 2023. The loan notes had a term of 18 months, carried a coupon of 8% per annum and had conversion dates in January and February 2024. In H1 2024, three noteholders, holding £1.7m of the notes, each converted 15% of their holding to equity together with accrued interest to the date of conversion; the total amount converted being £0.4m, including £0.1m of interest. In H2 2024, four noteholders converted all of their residual holding, together with accrued interest to the date of conversion; the total amount converted being £2.7m, including £0.2m of interest. There was a remaining loan note liability of £34k at 30 April 2024, which, post year-end in H1 2025, was converted to equity, together with accrued interest to the date of conversion. As a consequence, the Group now has no CLNs outstanding.

At 30 April 2024, the Group had a £5.5m secured term loan provided by Polymer N2 Ltd. The facility has a repayment date for the principal sum of 27 March 2025, with an option by the lender to extend for a further period of 12 months. The lender has confirmed to the Group that it will take up its option of extending the period of the term loan for a further 12 months from March 2025 if the Group is not able to repay the loan at that time. The loan carries a fixed interest rate of 9.5%, which is payable quarterly, and Kromek has the option to pay the interest through the issue of new ordinary shares of 1p each in the Company at the trailing 10-day volume weighted average price of the Company’s ordinary shares on the date that payment falls due. As also announced today, Polymer N2 Ltd has provided the Group an additional £4.9m secured term loan that carries the same terms as the initial loan facility described above.

Cash Balance

Cash and cash equivalents were £0.5m as of 30 April 2024 (30 April 2023: £1.1m). The £0.6m decrease in cash during 2024 was due to the combination of the following cash inflows and outflows:

Cash used in operations, including changes in working capital, of £(3.9)m
R&D tax receipts of £1.1m
Investment in product development and other intangible assets, with capitalised development costs of £(4.6)m and IP additions of £(0.3)m
Capital expenditure of £(0.1)m
Net cash generated from financing activities of £7.2m (including £7.5m proceeds from the issue of shares, £1.2m net proceeds of new borrowings after repayment of the HSBC term loan, less £1.5m lease repayments and loan interest payments)

Outlook

With a number of key contracts won in FY 2024, its leading market position and the continued delivery of long-term contracts previously signed, Kromek expects to deliver another year of significant revenue growth and positive EBITDA in FY 2025.

Geopolitically, the world remains in turmoil and there is a real and pressing need for Kromek’s CBRN solutions. The award of the UK Ministry of Defence contract, being selected under two significant UK Government framework programmes as well as the completion of orders received from the US, Europe and Asia are expected to be the key drivers of growth in the CBRN detection segment throughout FY 2025.

Kromek is the only independent commercial supplier of CZT at scale, which is recognised as the enabling technology for next-generation medical imaging. In FY 2025, the Group expects revenue growth in the advanced imaging segment to come from continued delivery of its contracts previously signed with Spectrum Dynamics and a tier 1 OEM. Also, Kromek is actively engaged with OEMs to drive delivery of products and monetisation of the valuable intellectual property the Group has developed in this area. The Board is confident that these initiatives will benefit the Group and drive a significant increase in both revenue and cash generation in the second half of FY 2025.

Kromek remains very focussed on controlling costs across the Group and in increasing efficiency, particularly within the advanced imaging manufacturing process. This, combined with the collaborative opportunities being explored that are anticipated to accelerate growth in the second half of the year, is expected to result in Kromek becoming cash flow positive for H2 2025 and enable the Group to report a positive cash flow across FY 2025. The move towards cash generation, coupled with the continued support from Polymer N2 Ltd, means that Kromek is very well funded to drive further growth from what is a strong and growing revenue base.

As a result, the Board looks to the future with confidence.

BATTLESPACE Comment: The Stock market reacted to this delayed news with a whopping 14.5% markdown of the shares, the shares have since recovered. These results show three key facts:

CZT is now a proven technology for CBRN and military uses but the medical sector is taking longer to adopt the technology, hence the lack of large orders and more capital spend.
The company is not generating enough cash to another cash call is expected.
The share price will never reach the lofty heights predicted by Dr Basu and the Board on floatation and during Covid where some very lofty projections were made at a SP of 12p. Thus, there are a lot of disgruntled shareholders who bought the dream at 90p.
All the good news is in these Results so there is a limitation to a SP rise in the short and medium term.

Clearly Kromek’s Board and management are cash and resources stretched to manage expectations in the medical and defence/Police/CBRN markets, without even a dedicated Marketing Director and top heavy in technologists. This is reminiscent as BATTLESPACE has said before when Graseby succumbed to a bid from Smiths. So, the Bord should consider a trade sale of the proven defence/Police/CBRN segment to the likes of Teledyne FLIR and concentrate on the medical division. At the moment, the stretched finances cannot grow both divisions without a further cash injection and another share dilution.

21 Oct 24. ETL Systems acquires SpacePath Communications to Strengthen Global Satellite Communications Offerings. ETL Systems has acquired SpacePath Communications, a strategic move that enhances ETL’s position in the global SATCOM market. SpacePath’s team brings invaluable experience and a customer-centric approach that aligns closely with ETL’s mission. This collaboration will enrich the ETL team and the significant overlap in client bases and mutual commitment to innovation will also ensure a seamless integration.

The integration of SpacePath’s HPA product line into ETL’s portfolio positions the company to better meet the evolving needs of its customers. Furthermore, SpacePath’s clients will continue to receive dedicated support from ETL Systems as both teams work closely to ensure a smooth transition.

“By acquiring SpacePath Communications, we are thrilled to enhance our offerings and provide their customers with innovative solutions and new functionalities,” said Kevin Dunne, CEO at ETL Systems. “We are dedicated to maintaining the high standards of service that both our organisations value. This merger not only fortifies our leading position in the UK but also creates new opportunities for career progression for both SpacePath and ETL employees, expanding the organization for personal development.”

Newton Burnet, co-founder and Chief Technical Officer of SpacePath, said, “This acquisition represents a major milestone for SpacePath and ETL. It provides us with the additional resources and infrastructure necessary to access new high-value mm-wave transmitter markets, while still providing existing product lines and maintaining our core values of technical innovation, quality products and customer support.”

Colin Bolton, co-founder and Director of Business Development of SpacePath, said, “We are excited to join forces with ETL Systems, a company that shares our commitment to innovation and customer service. This acquisition presents a tremendous opportunity for our team and clients alike, as we combine our strengths to deliver even greater value in the satellite communications market.” (Source: Satnews)

28 Oct 24. Kromek Group plc (“Kromek” or the “Company”) Financing Update.. Kromek (AIM: KMK), a leading developer of radiation and bio-detection technology solutions for the advanced imaging and CBRN detection segments, is pleased to announce that it has agreed an additional £4.9m secured term loan (the “Additional Loan”). The Additional Loan is being provided by Polymer N2 Ltd (“Polymer”), an investment vehicle controlled by Dr Graeme Speirs, a significant shareholder and a current finance provider to the Company.

The Additional Loan carries the same terms as the loan facility previously announced on 28 September 2023 and has a repayment date for the principal sum of 27 March 2025, with an option to extend for a further 12 months. It carries a fixed interest rate of 9.5%, which is payable quarterly, and Kromek has the option to pay the interest through the issue of new ordinary shares of 1p each in the Company (“Ordinary Shares”) at the trailing 10-day volume weighted average price of the Company’s Ordinary Shares on the date that payment falls due.

Polymer and Dr Speirs hold an aggregate of 86,686,849 Ordinary Shares in Kromek, representing 13.51% of the issued share capital of the Company.

The Additional Loan with Polymer is a related party transaction for the purposes of Rule 13 of the AIM Rules. The Directors, having consulted with the Company’s Nominated Adviser, Cavendish Capital Markets, consider that the terms of the Additional Loan are fair and reasonable insofar as the Company’s shareholders are concerned.

——————————————————————————————————————————————————————————————————————————————————————————————————————————

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

———————————————————————————————————————————————————————————————————————————————————————————————————————————–

BUSINESS NEWS

Protek Selected By Dutch Armed Forces

PARLIAMENTARY QUESTIONS

MANAGEMENT ON THE MOVE