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Currency in SEK
Last close As at 24/03/2023
SEK1.39
▲ −0.01 (−0.71%)
Market capitalisation
SEK287m
Research: Industrials
AAC Clyde Space’s Q1 report is encouraging, with a 60% increase in sales, modestly reduced EBITDA losses and a record order backlog of SEK183m. While the effects of COVID-19 lockdown measures are likely to be apparent from Q220, we expect these to be relatively limited so far. The management team is now working to deliver the increasing backlog, with rising activity through H220. AAC Clyde remains well positioned to participate in the growth of the New Space market given its leading positions in nanosatellites and subsystems.
AAC Clyde Space |
Starting to climb |
Q120 results |
Aerospace & defence |
18 May 2020 |
Share price performance
Business description
Next events
Analyst
AAC Clyde Space is a research client of Edison Investment Research Limited |
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AAC Clyde Space’s Q1 report is encouraging, with a 60% increase in sales, modestly reduced EBITDA losses and a record order backlog of SEK183m. While the effects of COVID-19 lockdown measures are likely to be apparent from Q220, we expect these to be relatively limited so far. The management team is now working to deliver the increasing backlog, with rising activity through H220. AAC Clyde remains well positioned to participate in the growth of the New Space market given its leading positions in nanosatellites and subsystems.
Year end |
Revenue (SEKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
77.9 |
(38.3) |
(0.50) |
0.0 |
N/A |
N/A |
12/19 |
66.4 |
(38.2) |
(0.45) |
0.0 |
N/A |
N/A |
12/20e |
129.8 |
(14.8) |
(0.15) |
0.0 |
N/A |
N/A |
12/21e |
194.2 |
8.7 |
0.09 |
0.0 |
36.7 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q1 results demonstrate progress
A sharp increase in satellite platforms activity in Glasgow, including completion of two projects delayed from FY19, and healthy growth in the subsystems and components segment drove Q120 group net sales up 60% to SEK23.8m. Group EBITDA losses were reduced modestly to SEK6.2m as gross margin fell due to a higher proportion of third-party sales. The performance was said to be in line with management’s plan as the refined growth strategy is progressively implemented. Management continues to indicate strong growth is expected in the current year, despite the unexpected emergence of the COVID-19 pandemic.
Encouraging development of the order backlog
The order backlog at 31 March stood at a record SEK183m despite the strong revenue performance during Q120. At the start of the year the company expected to convert SEK88m of the SEK169m backlog to revenues in FY20. With around SEK47m of new order intake year to date, we estimate order cover of our FY20 net sales expectation has increased to around 85%. While management will need to work hard on continued business development to meet expectations for the remainder of the year, the market seems to be continuing fairly normally despite the revised working arrangements under COVID-19 lockdowns. Management expects to deliver two satellites by Q320 with work commencing on another seven satellite platforms in Glasgow.
Valuation: Moving towards positive earnings
Management focus on cash flow continues, especially while the COVID-19 issue persists, with tighter controls on expenditure in place including delay of non-urgent investments. The balance sheet remains strong with SEK41.3m of net cash at 31 March 2020 and an undrawn SEK5.0m bank facility. Our forecasts remain largely unaltered and we still expect a positive EBITDA in FY21 as the volume ramp up gathers momentum.
Q120 results
As we have stated previously the timing of contract revenues and deliveries, especially in the satellite platform segment, can lead to quite lumpy quarterly performances. In part, the strong Q120 sales improvement reflects a return to more normal operational activity levels compared to 2019, which faced several project delays. The business mix led to a reduction in gross profitability with more third-party systems deliveries, but nevertheless the trends look favourable as anticipated volumes look set to increase as FY20 progresses. Key highlights of Q120 were:
■
Net sales rose 60% to SEK23.8m (Q119 SEK14.9m) with a strong increase in satellite platform revenues at Clyde and healthy growth for subsystems for AAC in Sweden.
■
Group EBITDA loss modestly reduced to SEK6.2m (Q119 SEK6.5m) as a slightly increased loss at Clyde was more than offset by a reduction in losses in Sweden.
■
The loss before tax of SEK9.7m was 4.5% lower than in Q119.
■
Net cash at the end of the period was SEK41.3m compared to SEK52.6m at the start of the year.
■
The order backlog increased to a record period end SEK183m, a rise of SEK14m from the year end despite the strong revenue performance.
Exhibit 1: AAC Clyde Space Q120 results summary
Three months to March (SEKm) |
Q119 |
Q120 |
% change |
By business unit |
|||
AAC (Sweden) |
7.429 |
9.969 |
34.2% |
Clyde (Scotland) |
7.509 |
13.865 |
84.6% |
Net sales |
14.938 |
23.834 |
59.6% |
By segment |
|||
Satellite platforms |
3.659 |
11.469 |
213.4% |
Subsystems and components |
11.279 |
12.365 |
9.6% |
Net sales |
14.938 |
23.834 |
59.6% |
Other operating income |
2.497 |
3.487 |
39.6% |
R&D capitalised |
0.927 |
1.785 |
92.6% |
Group revenues |
18.362 |
29.106 |
58.5% |
EBITDA |
(6.480) |
(6.227) |
-3.9% |
Depreciation and amortisation |
(3.451) |
(2.901) |
-15.9% |
EBIT |
(9.931) |
(9.128) |
-8.1% |
Net financial interest |
(0.158) |
(0.576) |
|
Profit before tax |
(10.161) |
(9.704) |
-4.5% |
Taxation |
0.081 |
0.221 |
172.8% |
Profit after taxation |
(10.080) |
(9.483) |
-5.9% |
Source: Company reports
In terms of the cost analysis for the quarter, the increase in raw materials and consumables appears to reflect higher platform work executed in Q120. The activity includes two delayed projects for 2019 that were delivered in January. We believe the deferrals are in part the reason for higher expenses, as excess costs to complete would appear to have been likely.
Exhibit 2: AAC Clyde operating expenses
Three months to March (SEKm) |
Q119 |
Q120 |
% change |
Raw materials & subcontractors |
(7.157) |
(12.860) |
79.7% |
Personnel costs |
(12.531) |
(15.641) |
24.8% |
Other external expenses |
(5.391) |
(4.966) |
-7.9% |
Other operating expenses |
0.237 |
(1.866) |
|
Total operating expenses |
(24.842) |
(35.333) |
42.2% |
Source: Company reports
The increase in personnel costs in part reflects the increase in staff numbers, with 95 staff employed at the end of the quarter, the same as at the start of the year but higher than at 31 March 2019 (88 employees). Management struggled to recruit appropriately qualified engineering and production staff last year. One benefit from the current economic disruption could be that areas of demand for UK engineering personnel may fall, for example in the civil aerospace industry.
The order book continued to benefit from strong order intake as can be seen below. The bulk of the improvement has come from strong growth in platform sales since the start of FY19 many of which are entering into production in H220 for delivery next year.
|
Exhibit 3: AAC Clyde Space net sales split by segment activity, Q120 |
Exhibit 4: AAC Clyde Space order backlog development (SEKm) |
|
|
|
Source: Company reports |
Source: Company reports |
|
Exhibit 3: AAC Clyde Space net sales split by segment activity, Q120 |
|
|
Source: Company reports |
|
Exhibit 4: AAC Clyde Space order backlog development (SEKm) |
|
|
Source: Company reports |
We have modestly changed our adjusted EBIT and PBT estimates for FY20 and FY21 to reflect the change to the allocation of intangible amortisation between acquired purchase price allocation (PPA) and internally generated intangible assets. The adjustment was made after restating FY19 data following greater disclosure made available in the recently released 2019 report and accounts.
Exhibit 5: AAC Clyde Space estimates revisions
Year to December (SEKm) |
2020e |
2020e |
|
2021e |
2021e |
|
|
Prior |
New |
% change |
Prior |
New |
% change |
By business |
|
|
|
|
|
|
AAC |
39.7 |
39.7 |
0.0% |
50.4 |
50.4 |
0.0% |
Clyde |
90.1 |
90.1 |
0.0% |
143.7 |
143.7 |
0.0% |
Total net sales |
129.8 |
129.8 |
0.0% |
194.2 |
194.2 |
0.0% |
By segment activity |
||||||
Satellite platforms |
36.6 |
36.6 |
0.0% |
76.9 |
76.9 |
0.0% |
Subsystems |
92.2 |
92.2 |
0.0% |
115.2 |
115.2 |
0.0% |
Licence and royalties income |
1.0 |
1.0 |
0.0% |
2.0 |
2.0 |
|
Total net sales |
129.8 |
129.8 |
0.0% |
194.2 |
194.2 |
0.0% |
Other operating income |
2.0 |
2.0 |
0.0% |
0.2 |
0.2 |
|
Own work capitalised |
2.9 |
2.9 |
0.0% |
3.8 |
3.8 |
|
Total group income |
134.7 |
134.7 |
0.0% |
198.2 |
198.2 |
0.0% |
Raw materials and subcontractors |
(48.0) |
(48.0) |
0.0% |
(68.0) |
(68.0) |
0.0% |
Personnel costs |
(62.2) |
(62.2) |
0.0% |
(75.1) |
(75.1) |
0.0% |
Other external expenses |
(25.6) |
(25.6) |
0.0% |
(29.1) |
(29.1) |
0.0% |
Other operating expenses |
0.0 |
0.0 |
0.0 |
0.0 |
||
EBITDA (company reported) |
(1.2) |
(1.2) |
0% |
26.0 |
26.0 |
0% |
EBIT (Pre PPA amortisation) |
(14.8) |
(14.2) |
(3.8%) |
8.9 |
9.3 |
4.6% |
Underlying PBT |
(14.7) |
(14.8) |
0.4% |
8.9 |
8.7 |
(2.3%) |
EPS – underlying continuing (SEK) |
(0.15) |
(0.15) |
0.4% |
0.09 |
0.09 |
(2.3%) |
DPS (SEK) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net cash/(debt) |
25.7 |
25.1 |
(2.3%) |
31.5 |
30.3 |
(3.9%) |
Source: Edison Investment Research
Exhibit 6: 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 amort. and except). |
(30.8) |
(32.7) |
(7.9) |
18.1 |
||
Intangible Amortisation |
(7.2) |
(4.6) |
(6.3) |
(8.8) |
||
Exceptionals |
(5.2) |
(2.9) |
(2.9) |
(1.4) |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit |
(43.2) |
(40.2) |
(17.1) |
8.0 |
||
Net Interest |
(0.3) |
(0.8) |
(0.5) |
(0.6) |
||
Profit Before Tax (norm) |
|
|
(38.3) |
(38.2) |
(14.8) |
8.7 |
Profit Before Tax (FRS 3) |
|
|
(43.6) |
(41.0) |
(17.6) |
7.4 |
Tax |
0.9 |
0.5 |
0.9 |
(0.4) |
||
Profit After Tax (norm) |
(37.5) |
(37.8) |
(14.0) |
8.3 |
||
Profit After Tax (FRS 3) |
(42.6) |
(40.6) |
(16.7) |
7.0 |
||
Average Number of Shares Outstanding (m) |
75.4 |
84.8 |
96.2 |
96.2 |
||
EPS - fully diluted (SEK) |
|
|
(0.50) |
(0.45) |
(0.15) |
0.09 |
EPS - normalised (SEK) |
|
|
(0.50) |
(0.44) |
(0.15) |
0.09 |
EPS - (IFRS) (SEK) |
|
|
(0.57) |
(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 |
-49.3 |
-6.1 |
9.3 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
396.8 |
436.9 |
435.2 |
432.9 |
Intangible Assets |
392.6 |
418.6 |
422.4 |
426.1 |
||
Tangible Assets |
4.2 |
4.1 |
1.9 |
(1.0) |
||
Right of use asset |
14.2 |
11.0 |
7.8 |
|||
Investments |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
56.2 |
108.5 |
103.1 |
116.2 |
Stocks |
6.5 |
13.1 |
22.7 |
27.2 |
||
Debtors |
10.1 |
17.7 |
26.0 |
29.1 |
||
Cash |
12.2 |
52.4 |
25.8 |
30.8 |
||
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) |
(13.4) |
(10.6) |
Long term borrowings |
(1.2) |
(0.8) |
(0.7) |
(0.5) |
||
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 |
452.2 |
459.2 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(49.1) |
(15.3) |
(13.8) |
20.8 |
Net Interest |
(0.3) |
(0.8) |
0.1 |
0.0 |
||
Tax |
0.8 |
0.4 |
0.7 |
(0.4) |
||
Capex |
(2.3) |
(13.9) |
(14.2) |
(15.7) |
||
Acquisitions/disposals |
(377.4) |
(3.0) |
0.6 |
0.6 |
||
Financing |
404.6 |
73.3 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net Cash Flow |
(23.6) |
40.7 |
(26.5) |
5.2 |
||
Opening net debt/(cash) excluding lease liabilities |
(35.2) |
(10.9) |
(51.6) |
(25.1) |
||
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) |
(25.1) |
(30.3) |
||
Net financial liabilities including lease liabilities |
|
(37.5) |
(13.5) |
(21.3) |
||
Source: Company reports, Edison Investment Research
|
|
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