AAC Clyde Space: Starting to climb – Edison

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.