The Electro Optic Systems Hldg Ltd (ASX: EOS) share price is on watch this morning after the company released its full-year FY19 results to the market. At the time of writing, Electro Optic shares are down 4.7% to $7.10.
Electro Optic Systems is Australia's largest aerospace provider and the largest defense exporter in the southern hemisphere.
What did Electro Optic Systems report?
For the full year ending 31 December 2019, Electro Optic Systems delivered revenues of $166 million. This was up by a very significant 91% on the $87.1 million recorded in the prior year, driven by very strong customer demand.
Strong growth in the company's Defence segment was recorded as production capacity was increased to match contracted deliveries. Space satellite tracking services revenue also grew strongly.
Earnings before interest, tax, depreciation and amortisation (EBITDA) excluding foreign exchange (FX) gains came in at $26.1 million, a 225% increase on FY18. The company recorded earnings before interest and tax (EBIT), also excluding FX gains, of $21.7 million. This was up from $7.4 million in FY18, primarily due to plant utilisation moving above 50%.
The company commented that injection of new working capital made in late 2019 will enable EBIT growth for 2020 to be increased from 45% to 70%. This is anticipated to be driven by funding faster delivery of existing contracts.
Market scale increasing with a pipeline of new contracts
Electro Optic Systems noted that its Defence sector was already in formal competition for over $3 billion of contract awards within the past 3 years. The company further commented that this confirms market estimates that requirements will exceed $1 billion annually.
Electro Optic Systems' Communications sector was reported to already have preliminary commitments for $100 million of annual sales for its proposed mid-earth orbit (MEO) satellite constellation.
The company commented that its production capacity is now strongly positioned for further growth. With respect to this, Electro Optic Systems noted that supply chain testing to achieve higher volumes had been executed. In addition, globalisation of the supply chain has accelerated.
FY20 guidance and outlook
The company has reaffirmed its FY20 guidance of EBIT of between $36 million to $38 million (or roughly 70% growth on FY19) and EBIT margin of around 13.5%
In its Defence sector, the company will escalate production capacity towards $900 million by 2024. Additionally, its Communication sector is expected to provide $3 million of EBIT in 2020 and grow rapidly thereafter.
Commenting on EOS' FY19 results, CEO Dr Ben Greene said, "EOS is expected to grow robustly in FY2020 while simultaneously building a platform to further capitalise on opportunities in the rapidly expanding defence, communications and space sectors."
