AAC Clyde Space — Progress as consolidation phase commences

AAC Clyde Space (OMX: AAC)

Last close As at 18/04/2024

SEK49.85

0.55 (1.12%)

Market capitalisation

SEK285m

More on this equity

Research: Industrials

AAC Clyde Space — Progress as consolidation phase commences

AAC Clyde Space has delivered a strong Q121 with revenue growth of 55% and a substantial reduction in EBITDA losses. The ongoing activities continued to develop, positively augmented by initial contributions from the 2020 acquisitions of Hyperion and SpaceQuest, both of which continue to deliver positive EBITDA. With Omnisys acquired in April alongside the SEK100m fund-raising, AAC Clyde Space remains well positioned to execute its growth strategy in the New Space market.

Andy Chambers

Written by

Andy Chambers

Director, Industrials

Industrials

AAC Clyde Space

Progress as consolidation phase commences

Q121 trading statement

Aerospace & defence

1 June 2021

Price

SEK2.66

Market cap

SEK490m

SEK11.7/£1, SEK8.3/$1, SEK10.1/€1

Net cash (SEKm) at 31 March 2021
(excluding lease liabilities)

36.8

Shares in issue

186.4m

Free float

97%

Code

AAC

Primary exchange

Nasdaq First North Premier

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

8.4

(17.3)

(35.5)

Rel (local)

6.4

(26.7)

(55.4)

52-week high/low

SEK4.3

SEK2.23

Business description

Headquartered in Sweden, AAC Clyde Space is a world leader in nanosatellite end-to-end solutions, subsystems, platforms, services and components, including supply to third parties. It has production and development operations in Sweden, Scotland, the Netherlands and the United States.

Next events

Q221 results

26 August 2021

Q321 results

25 November 2021

Analyst

Andy Chambers

+44 (0)20 3681 2525

AAC Clyde Space is a research client of Edison Investment Research Limited

AAC Clyde Space has delivered a strong Q121 with revenue growth of 55% and a substantial reduction in EBITDA losses. The ongoing activities continued to develop, positively augmented by initial contributions from the 2020 acquisitions of Hyperion and SpaceQuest, both of which continue to deliver positive EBITDA. With Omnisys acquired in April alongside the SEK100m fund-raising, AAC Clyde Space remains well positioned to execute its growth strategy in the New Space market.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/19

66.4

(38.2)

(0.45)

0.0

N/A

N/A

12/20

98.4

(26.7)

(0.26)

0.0

N/A

N/A

12/21e

217.8

(3.8)

(0.02)

0.0

N/A

N/A

12/22e

293.0

16.5

0.08

0.0

33.3

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Organic growth and transforming acquisitions

Ongoing activities grew revenues by 24% to SEK29.5m with the acquisitions of Hyperion and SpaceQuest adding SEK3.4m and SEK3.9m respectively in their first full quarter of consolidation. Clyde Space reduced its EBITDA loss by 90% to SEK0.5m (Q120: SEK5.4m) on sales up 23% at SEK17.1m. It grew platform (+35%) and subsystem (+103%) revenues, more than offsetting the absence of Space Data as a Service (SDaaS) sales (Q120: SEK2.4m). AAC in Sweden increased sales by 24% to SEK12.4m, boosted by platform revenues of SEK2.8m following the start of production in FY20 and SEK1.4m in licence income. Its subsystems revenues fell 18% against a strong Q120, but we expect the segment to progress positively for FY21. The EBITDA loss increased to SEK1.7m including licence income. SpaceQuest contributed positive EBITDA of SEK1.1m (margin 29.3%) and Hyperion EBITDA was SEK0.6m (margin 17.6%). The group EBITDA loss reduced to SEK0.5m (Q120: loss SEK6.2m).

Moving up the value chain

The order backlog reduced to SEK141.8m (FY20: SEK156.3m). Following the acquisition of Omnisys, which added SEK130m, the group backlog at 30 April 2021 was SEK260.4m. Management sees a strong pipeline of order opportunities across the group, which should convert during FY21. It expects FY24 revenues of SEK500m, which should also see the mix shift towards SDaaS sales (FY24: c SEK55m), which are expected to earn margins roughly double the 15–20% margins typically achieved for Space Products & Components and Space Missions (including satellite platforms). We expect SDaaS to be the dominant revenue stream by the end of the decade, improving earning quality and cash conversion.

Valuation: Heading towards profitable growth

Net cash of SEK36.8m at end-Q121 has been strengthened in April by the SEK68m net proceeds from the fund-raising after paying the initial cash consideration for Omnisys. AAC Clyde Space is well positioned to invest in further organic growth and value-enhancing acquisitions. Our capped DCF value remains at SEK5.6.

Q121 results

The highlights from Q121 are summarised below.

Exhibit 1: Q121 highlights

Three months to March (SEKm)

Q120

Q121

% change

Net sales

23.8

36.8

54%

EBITDA

(6.2)

(0.5)

-93%

EBIT

(9.1)

(4.4)

-51%

EPS (basic, diluted) SEK

(0.10)

(0.03)

-70%

Cash flow from operating activities

(6.2)

(20.8)

238%

Cash and cash equivalents

41.7

37.1

-11%

Order backlog

183.4

141.8

-23%

Source: AAC Clyde Space reports

The revenue, EBITDA and operating profit development during Q121 is as shown below. We note that the SDaaS revenue was generated by SpaceQuest in Q121, with the balance in Space Products. Hyperion revenues are entirely attributable to the sale of Space Products.

Exhibit 2: AAC Clyde Space revenue, EBITDA and OPBIT breakdown

Three months to March (SEKm)

Q120

Q121

% change

AAC

9.969

12.383

24.2%

Clyde

13.865

17.062

23.1%

Hyperion

3.406

SpaceQuest

3.932

Net sales

23.834

36.783

54.3%

SDaaS

2.437

2.014

-17.4%

Space Missions

9.081

15.109

66.4%

Space Products

12.316

18.279

48.4%

Licence income

0.000

1.381

Net sales

23.834

36.783

54.3%

Other operating income

3.487

3.476

-0.3%

Development work capitalised

1.785

2.185

22.4%

Group income

29.106

42.444

45.8%

EBITDA

AAC

(0.848)

(1.676)

97.6%

Clyde

(5.379)

(0.537)

-90.0%

Hyperion

0.598

SpaceQuest

1.152

EBITDA

(6.227)

(0.463)

-92.6%

D8A

(2.901)

(3.982)

37.3%

Expenses

Raw materials & subcontractors

(12.860)

(15.289)

18.9%

Personnel costs

(15.641)

(20.770)

32.8%

Other external expenses

(4.966)

(6.441)

29.7%

Other operating expenses

(1.866)

(0.407)

-78.2%

Total operating expenses

(35.333)

(42.907)

21.4%

Operating profit

(9.128)

(4.445)

-51.3%

Source: AAC Clyde Space reports

The order backlog has declined in recent periods, partly due to currency but also reflecting the absence of substantial incremental order flows We expect order intake to improve in the remainder of FY21. The addition of Omnisys’s SEK130m backlog space products has almost doubled the Q121 backlog level following its consolidation in April 2021.

Exhibit 3: AAC Clyde Space order backlog development

Source: AAC Clyde Space reports, Edison Investment Research estimates. Note: *Includes SEK130m Omnisys.

Exhibit 4: Financial summary

SEKm

2019

2020

2021e

2022e

Year end December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Net sales

 

 

66.4

98.4

217.8

293.0

Own work capitalised and other operating income

14.1

21.1

23.0

22.2

Group income

80.6

119.5

240.8

315.2

EBITDA

 

 

(27.3)

(17.5)

7.2

25.6

Operating Profit (before amort. and except).

(32.7)

(22.2)

1.6

19.6

Intangible Amortisation

(4.6)

(3.3)

(5.9)

(6.4)

Exceptionals

(2.9)

(12.1)

(11.8)

(4.4)

Other

0.0

0.0

0.0

0.0

Operating Profit

(40.2)

(37.5)

(16.1)

8.8

Net Interest

(0.8)

(1.3)

0.5

3.2

Profit Before Tax (norm)

 

 

(38.2)

(26.7)

(3.8)

16.5

Profit Before Tax (FRS 3)

 

 

(41.0)

(38.8)

(15.5)

12.0

Tax

0.5

0.5

0.8

(0.6)

Profit After Tax (norm)

(37.8)

(26.4)

(3.6)

15.6

Profit After Tax (FRS 3)

(40.6)

(38.3)

(14.8)

11.4

Average Number of Shares Outstanding (m)

84.8

102.3

175.3

196.1

EPS - fully diluted (SEK)

 

 

(0.45)

(0.26)

(0.02)

0.08

EPS - normalised (SEK)

 

 

(0.44)

(0.26)

(0.02)

0.08

EPS - (IFRS) (SEK)

 

 

(0.48)

(0.37)

(0.08)

0.06

Dividend per share (SEK)

0.0

0.0

0.0

0.0

EBITDA Margin (%)

-41.1

-17.8

3.3

8.7

Operating Margin (before GW and except.) (%)

-49.3

-22.5

0.7

6.7

BALANCE SHEET

Fixed Assets

 

 

436.9

523.0

561.6

595.7

Intangible Assets

418.6

494.3

536.1

573.5

Tangible Assets

4.1

16.2

15.7

15.2

Right of use asset

14.2

12.5

9.8

7.0

Investments

0.0

0.0

0.0

0.0

Current Assets

 

 

108.5

113.3

240.9

266.1

Stocks

13.1

12.8

41.5

49.8

Debtors

17.7

9.5

41.7

46.9

Cash

52.4

62.4

125.0

140.0

Other

25.2

28.5

32.8

29.4

Current Liabilities

 

 

(60.5)

(56.1)

(113.4)

(127.5)

Creditors

(60.5)

(56.1)

(113.4)

(127.5)

Short term borrowings

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(16.0)

(14.4)

(12.7)

(13.2)

Long term borrowings

(0.8)

(0.3)

(1.1)

(4.1)

Lease liabilities

(14.1)

(12.9)

(10.3)

(7.8)

Other long-term liabilities

(1.1)

(1.2)

(1.2)

(1.2)

Net Assets

 

 

468.9

565.8

676.4

721.2

CASH FLOW

Operating Cash Flow

 

 

(15.3)

(14.2)

3.4

26.7

Net Interest

(0.8)

(0.7)

0.7

3.4

Tax

0.4

0.4

0.2

(0.8)

Capex

(13.9)

(17.2)

(17.8)

(17.6)

Acquisitions/disposals

(3.0)

(113.8)

(41.5)

(33.1)

Financing

73.3

156.8

116.7

33.3

Dividends

0.0

0.0

0.0

0.0

Net Cash Flow

40.7

11.4

61.7

12.0

Opening net debt/(cash) excluding lease liabilities

(10.9)

(51.6)

(62.2)

(123.9)

HP finance leases initiated

0.0

0.0

0.0

0.0

Other

0.1

(0.8)

0.0

(0.0)

Closing net debt/(cash) excluding lease liabilities

(51.6)

(62.2)

(123.9)

(135.8)

Net financial liabilities including lease liabilities

(37.5)

(49.3)

(113.6)

(128.1)

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by AAC Clyde Space and prepared and issued by Edison, in consideration of a fee payable by AAC Clyde Space. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by AAC Clyde Space and prepared and issued by Edison, in consideration of a fee payable by AAC Clyde Space. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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