EXAIL TECHNOLOGIES Press release
Paris, 19 September 2022 at 18h00
Building stronger operations & perspectives with the combination of ECA and iXblue
The first half of 2022 was marked by the acquisition of iXblue, a transforming operation for Groupe Gorgé. The combination of iXblue and ECA Group has created a French technological champion, leader in its markets. The group now has solid assets to support its ambitions: technological leadership, quality of teams, experience in the execution of major programs and ability to compete internationally. This is demonstrated by the orders received by ECA group during the first half of the year, with €60 million in new contracts, as well as the activity on major tenders on which the group is positioned. During the first half of the year, the preparation of the collaboration between the teams of the two companies has enabled to strengthen the execution of certain programs and the growth perspectives on the group's markets. The synergies between the two companies will allow this momentum to continue after the closing of the transaction, still scheduled at the end of September.
Contracts still well on-track, with execution improved by the combination with iXblue
Major milestones achieved in the Belgian-Dutch program this semester
The flagship program with the Belgian and Dutch navies, now representing a total of €500 million, reached important milestones during the first half of 2022. Following the customer's validation of the Critical Design Review in January, the first steps of the pre-production phase have been successfully taken: the sea trials of the Launch & Recovery System (LARS), one of the key points of the drones system, for the USV Inspector 125, took place in January; the inauguration of the new assembly site in Ostend, close to the mine-hunting training center for NATO countries, took place in June.
The combination between ECA Group and iXblue will also strengthen the technological developments on this program. As part of this contract, iXblue is providing several products integrated into the various ECA droness and ships: innovative FLS sonars (Front Looking Sonars), inertial navigation systems of various accuracies and acoustic positioning systems. The precise positioning of the different vehicles and the good communication between them are critical points of the demining system, which will be better managed by the integration of the two companies' teams.
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Successful execution of the modernization program for the Latvian Navy
ECA Group has won the international tender for the modernization of 3 earlier generation mine-hunting ships in 2020. Each of the ships will be equipped with a UMIS drone system consisting of one A-18 underwater drone, two SEASCAN identification drones, 10 K-STER consumable drones, as well as UMISOFT mission management software. As a complete system provider, ECA Group is also in charge of the modernization of the ship's architecture to integrate the new Mine Warfare Data Center equipment (communication, navigation system, autopilot, drone system controls).
The program is proceeding as planned and several major milestones were achieved during the first half of the year, following the validation of the Critical Design Review at the end of 2021. The customer has taken delivery of the Mine Warfare Data Center, followed by the successful completion of Factory Acceptance Tests (mine control, command and identification systems). Delivery of the ships and drone systems is scheduled for 2024.
The 3 mine hunters of the
Latvian Navy
The complementarity between ECA Group and iXblue also improves the operational performance for the Latvian Navy. iXblue was selected by ECA to provide compact inertial units for drones, acoustic positioning systems and a GECDIS data processing and display module for this program.
As with other programs, the size of this contract can be increased through various amendments, covering operational maintenance and other services or options not included in the base contract. Initially at €20 million, it could reach €25 million or more in total, illustrating once again the strength of ECA Group's business model, which consists of supplying complete systems and maintaining them in operational condition for several years, thus generating recurring revenues.
Results for the first half of 2022 by division: good profitability in the Drones & Systems division and slight deterioration in the Engineering & Protection Systems division
Profitability remains uneven between the Drones & Systems division (19% current EBITDA margin) and the Engineering and Protection Systems division (7% margin). The results of the previous first half have been restated to take into account the exit of the 3D Printing division at the end of 2021 and the withdrawal from the nuclear doors business.
Income from ordinary activities by division
(In € million) | H1 2022 | H1 2021 | Variation | |||||||||
Revenues | 62,9 | 58,8 | +7,1% | |||||||||
Current EBITDA1 | 11,7 | 12,1 | -3% | |||||||||
Drones & Systems | Current EBITDA margin (%) | 21% | -1,9 pts | |||||||||
18,7% | ||||||||||||
Income from ordinary activities2 | 5,4 | 6,5 | -1,0 M€ | |||||||||
Revenues | 34,2 | 32,2 | +6,2% | |||||||||
Engineering & Protection | Current EBITDA1 | -6,6% | ||||||||||
2,5 | 2,7 | |||||||||||
Systems | ||||||||||||
Current EBITDA margin (%) | 7,3% | 8,3% | -1,0 pts | |||||||||
Income from ordinary activities2 | 1,3 | +0,0 M€ | ||||||||||
1,3 | ||||||||||||
1 See the glossary in the appendix for definitions of alternative performance indicators
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Drones & Systems
The +7% increase in revenues in the Drones & Systems division is the combined result of:
- The strong increase in the naval and maritime field (>70% of Drones & Systems revenues): +16%, both thanks to the BENL program and to other robotics and integrated systems contracts.
- Growth in on-board equipment and associated solutions for the aerospace sector (c.20% of Drones & Systems revenues): +15% growth. It was driven in particular by a significant flow of orders for emergency beacons.
- The decline in other activities, particularly industrial, which account for less than 10% of Drones & Systems revenues: -41% (maintenance equipment, production tooling, etc.).
More details are available in the press release of July 27th.
The division's current EBITDA margin stood at 19% for the first half. It remains at a good level despite a drop of 2 pts and reflects:
- A slight improvement in gross margins, reflecting good execution and compliance with client delivery deadlines despite tighter supply conditions.
- The mobilization of significant resources on projects that are not yet generating revenue, such as responses to the several hundred million of euros of tenders in progress or the development of the AMR activity.
Amortizations have increased compared to last year, due to the increase in tangible and intangible assets on the balance sheet. As a result, the operating result of the Drones & Systems division amounts to €5.4 million.
Engineering & Protection Systems
This division now represents €34 million of revenues in the first half of 2022, generated by two activities: fire protection and consulting in engineering and technology. As a reminder, the technical doors business for the nuclear industry is now classified as discontinued operations (IFRS 5) and does not contribute to the published revenues, including in the historical data. Groupe Gorgé had previously announced during the 2021 annual results the plan to withdraw from this activity, which is still loss-making.
Revenue growth was driven by the continued development of the engineering consulting business, while revenues from the fire protection business were down slightly compared to the first half of 2021.
The current EBITDA margin of this division stands at 7%, down by 1 pt due to a temporary drop in the fire protection business. Operating income remained stable on a constant basis at €1.3 million.
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Consolidated P&L of the 1st semester 2022
(in € million) | H1 2022 | H1 2021 | Var | Variation | |||||||||
M€ | % | ||||||||||||
Revenues | 96,6 | 90,4 | +6,2 | +7% | |||||||||
Current EBITDA2 | -2% | ||||||||||||
13,9 | 14,3 | -0,3 | |||||||||||
Current EBITDA margin (%) | 14,4% | 15,8% | n.a. | -1,4 pt | |||||||||
Income from ordinary activities2 | 6,2 | 7,2 | -1,0 | -14% | |||||||||
Operating income | 4,5 | 6,7 | -2,1 | -32% | |||||||||
Financial result | -1,3 | -0,6 | -0,7 | - | |||||||||
Tax | -6,1 | -2,6 | -3,5 | - | |||||||||
Net income from discontinued activities | -2,8 | -3,1 | +0,4 | - | |||||||||
Net income | -5,6 | 0,3 | -5,9 | - | |||||||||
Net income in group share | -5,8 | 0,3 | -6,1 | - | |||||||||
Groupe Gorgé achieved organic revenue growth of +7%. Current EBITDA amounted to €14 m, close to the level of the 1st half 2021. Other non-current items of operating income increased by €1 m, almost entirely comprising acquisition costs of iXblue.
The tax charge is significant (€6.1 m) due to deferred taxes (€5.1 m) with no impact on cash. The forthcoming withdrawal of ECA Group from the Groupe Gorgé tax group, as a result of the structuring of the current operation with iXblue, significantly reduces the prospects of using the tax group's tax loss carryforwards.
Net income from discontinued operations (Baumert subsidiary) made a negative contribution of around €3 m, as this activity is still structurally loss-making.
All in all, Groupe Gorgé generated a net loss of €5.8 m, group share, penalized by discontinued operations and deferred taxes.
2 See glossary in the appendix for a definition of alternative performance indicators.
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Solid cash generation and healthy balance sheet
The cash-flow from operations3 of Groupe Gorgé stood strong in the first half of 2022, at €11 million, generated mainly by the Drones & Systems division. As a matter of fact, the cash-flowfrom operations of this division increased by 3% vs H1 2021.
Net cash flow generated by operations is up sharply due to the improvement in working capital requirements (+9 M€). This variation is notably linked to the payment milestones of the Belgian-Dutchcontract, whose payment cycle was unfavorable for the year 2021 alone.
Investments in the first half of the year were lower than in the first half of 2021 (€8.5 m versus €12.4 m) with the completion of the new drone assembly site in Ostend.
The group's debt has also decreased by €9 m, with nearly €10 m repaid in the first half. In the end, net debt will be €73 m at the end of June 2022 (compared with €80 m at the end of December 2021).
Perspectives
Mine-hunting: aging fleets in need of renewal in the coming years
The threat posed by underwater mines has increased this year, particularly in the Black Sea. A Romanian mine-hunting vessel was recently damaged after setting off a floating mine. The Latvian navy, which until now has been equipped with mine warfare ships built in the 1980s (as have Belgium and the Netherlands), will be the first navy to be equipped with a state-of-the-art robotic mine clearance system. Other navies, equipped with ships built in the 1990s, such as the Royal Australian Navy, have already started preparing renewal programs. Overall, of the more than 300 mine-hunting vessels in service in Europe, Asia-Pacific and the Middle East/North Africa4, more than 70% are more than 20 years old and are rapidly becoming obsolete.
Almost all navies concerned are expected to have launched modernization or complete replacement programs to equip themselves with robotic systems by 2030, representing a market worth several billion euros. ECA Group, a leader in this field, is already identified as a key player in future calls for tender and has gained significant recognition thanks to the program with the Belgian and Dutch navies, NATO references in this field. The quality of ECA systems will be strengthened by the acquisition of iXblue and supports the group's ambition to win a significant share of this market.
Distribution of the fleet of c.300 minehunters by decade of commissioning
in Europe, Asia Pacific and Middle East/North Africa
1970s | 6% |
1980s | 21% |
1990s | 47% |
Since |
2000 | 27% |
Several tenders are already underway, notably in Australia and the Middle-East, representing a total of more than €200 million in potential orders. Their results should be known within the next 18 months. These various tenders have mobilized large teams since the beginning of the year.
- Cash flow from operations after neutralization of the net borrowing cost and taxes and before change in working capital
- Representing ECA's addressable markets: Europe, Asia-Pacific, the Middle East/North Africa, excluding Russia, China and Iran
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Groupe Gorgé SA published this content on 19 September 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 September 2022 16:09:03 UTC.
