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Research: Industrials
While working under the operational adjustments required by COVID-19, it is pleasing to see continuing business development activity at AAC Clyde Space. The award of a follow-on SEK8m contract from Orbital Micro Systems for a 6U satellite is due to the success of a 3U in-orbit demonstrator deployed in July 2019. At present, disruption to operations at AAC Clyde has been limited and we maintain our forecasts, although welfare measures for employees could have some impact if they extend into H220.
Written by
AAC Clyde Space |
GEMS shines amidst the murk |
Follow-on contract award |
Aerospace & defence |
6 April 2020 |
Share price performance
Business description
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Analyst
AAC Clyde Space is a research client of Edison Investment Research Limited |
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While working under the operational adjustments required by COVID-19, it is pleasing to see continuing business development activity at AAC Clyde Space. The award of a follow-on SEK8m contract from Orbital Micro Systems for a 6U satellite is due to the success of a 3U in-orbit demonstrator deployed in July 2019. At present, disruption to operations at AAC Clyde has been limited and we maintain our forecasts, although welfare measures for employees could have some impact if they extend into H220.
Year end |
Revenue SEKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
77.9 |
(38.0) |
(0.49) |
0.0 |
N/A |
N/A |
12/19 |
66.4 |
(38.7) |
(0.45) |
0.0 |
N/A |
N/A |
12/20e |
129.8 |
(14.7) |
(0.15) |
0.0 |
N/A |
N/A |
12/21e |
194.2 |
8.9 |
0.09 |
0.0 |
32.6 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
COVID-19 mitigation response
AAC Clyde Space implemented a plan on 13 March 2019 designed to mitigate the effects of COVID-19. The facilities in Glasgow and Sweden remain open and around 70% of staff are working from home using collaborative tools to progress engineering projects, provide services to customers and perform administrative tasks. The remainder are predominantly involved in manufacturing activities and these continue, although social distancing and other health and safety practices are being adhered to. The workflow through the main potential bottleneck these measures create, the clean room manufacturing space in Glasgow, is at a slower pace than will be required as projects mature in H220.
Business development continues
Travel has also been banned and client engagement is currently via electronic platforms. The award by Orbital Micro Systems (OMS) of a SEK8m contract for a 6U satellite on 2 April for its Global Environmental Monitoring Satellite (GEMS) programme indicates that commercial activity continues. The new satellite should be delivered next year with a payload from OMS designed to ultimately provide near real-time global weather monitoring using 3D passive microwave technology. The contract success follows from the in-orbit success of the 3U IOD-1 GEMS satellite that was backed by the UK Satellite Applications Catapult. The new direct contract transforms OMS’s proposed 48-satellite GEMS constellation into a commercial prospect with AAC Clyde well positioned to provide the platforms as they are progressively deployed over the next few years. The win also appears to be a further endorsement of AAC Clyde Space’s position in the New Space market.
Valuation: Positive FY21 EBITDA expected
The uncertainty caused by COVID-19 is unlikely to dissipate quickly, but at present management has adapted operations to execute the growth plan as well as possible, with a positive EBITDA still targeted for FY21.
Exhibit 1: Financial summary
SEKm |
2018 |
2019 |
2020e |
2021e |
||
Year end December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Net sales |
|
|
77.9 |
66.4 |
129.8 |
194.2 |
Own work capitalised and other operating income |
11.3 |
14.1 |
4.9 |
4.0 |
||
Group income |
89.2 |
80.6 |
134.7 |
198.2 |
||
EBITDA |
|
|
(28.5) |
(27.3) |
(1.2) |
26.0 |
Operating Profit (before amortisation and except). |
(30.8) |
(32.7) |
(7.3) |
18.7 |
||
Intangible Amortisation |
(6.9) |
(5.1) |
(7.5) |
(9.8) |
||
Exceptionals |
(5.2) |
(2.4) |
(2.4) |
(1.9) |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit |
(42.9) |
(40.2) |
(17.1) |
7.0 |
||
Net Interest |
(0.3) |
(0.8) |
0.1 |
0.0 |
||
Profit Before Tax (norm) |
|
|
(38.0) |
(38.7) |
(14.7) |
8.9 |
Profit Before Tax (FRS 3) |
|
|
(43.3) |
(41.0) |
(17.1) |
7.0 |
Tax |
0.9 |
0.5 |
0.9 |
(0.4) |
||
Profit After Tax (norm) |
(37.2) |
(38.2) |
(14.0) |
8.5 |
||
Profit After Tax (FRS 3) |
(42.3) |
(40.6) |
(16.2) |
6.7 |
||
Average Number of Shares Outstanding (m) |
75.4 |
84.8 |
96.2 |
96.2 |
||
EPS - fully diluted (SEK) |
|
|
(0.49) |
(0.45) |
(0.15) |
0.09 |
EPS - normalised (SEK) |
|
|
(0.49) |
(0.45) |
(0.15) |
0.09 |
EPS - (IFRS) (SEK) |
|
|
(0.56) |
(0.48) |
(0.17) |
0.07 |
Dividend per share (SEK) |
0.0 |
0.0 |
0.0 |
0.0 |
||
EBITDA Margin (%) |
-36.6 |
-41.1 |
-0.9 |
13.4 |
||
Operating Margin (before GW and except.) (%) |
-39.6 |
-49.2 |
-5.6 |
9.6 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
396.8 |
436.9 |
435.1 |
431.9 |
Intangible Assets |
392.6 |
418.6 |
421.7 |
423.8 |
||
Tangible Assets |
4.2 |
4.1 |
1.9 |
(1.0) |
||
Right of use asset |
14.2 |
11.6 |
9.1 |
|||
Investments |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
56.2 |
108.5 |
89.6 |
87.8 |
Stocks |
6.5 |
13.1 |
22.7 |
27.2 |
||
Debtors |
10.1 |
17.7 |
26.0 |
29.1 |
||
Cash |
12.2 |
52.4 |
26.4 |
32.4 |
||
Other |
27.3 |
25.2 |
28.6 |
29.1 |
||
Current Liabilities |
|
|
(35.6) |
(60.5) |
(72.7) |
(79.3) |
Creditors |
(35.5) |
(60.5) |
(72.7) |
(79.3) |
||
Short term borrowings |
(0.2) |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(2.4) |
(16.0) |
0.6 |
19.0 |
Long term borrowings |
(1.2) |
(0.8) |
(0.8) |
(0.9) |
||
Lease liabilities |
(14.1) |
(11.6) |
(9.0) |
|||
Other long term liabilities |
(1.2) |
(1.1) |
(1.1) |
(1.1) |
||
Net Assets |
|
|
415.0 |
468.9 |
452.7 |
459.4 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(49.1) |
(16.2) |
(12.6) |
22.0 |
Net Interest |
(0.3) |
(0.8) |
0.1 |
0.0 |
||
Tax |
0.8 |
0.4 |
0.7 |
(0.4) |
||
Capex |
(2.3) |
(13.1) |
(14.2) |
(15.7) |
||
Acquisitions/disposals |
(377.4) |
(2.8) |
0.0 |
0.0 |
||
Financing |
404.6 |
73.3 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net Cash Flow |
(23.6) |
40.8 |
(25.9) |
5.9 |
||
Opening net debt/(cash) excluding lease liabilities |
(35.2) |
(10.9) |
(51.6) |
(25.7) |
||
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.7) |
(0.1) |
0.0 |
0.0 |
||
Closing net debt/(cash) excluding lease liabilities |
(10.9) |
(51.6) |
(25.7) |
(31.5) |
||
Net financial liabilities including lease liabilities |
|
(37.5) |
(14.1) |
(22.5) |
||
Source: Company reports; Edison Investment Research estimates
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Research: Financials
Nürnberger Beteiligungs (NBG) continues to operate in a challenging interest rate environment limiting its net investment income and translating into higher additions to the Zinszusatzreserve (ZZR) despite the regulatory changes to its calculation introduced some time ago. Nevertheless, it was able to post solid results in FY19, with net profit ahead of management expectations. Consequently, management proposed a 10% increase in the dividend to €3.3 per share. Uncertainty around the impact of the coronavirus outbreak on the economy limits future earnings visibility.