On a day when the S&P/ASX 200 (INDEXASX: XJO) fell by 14 points, the Orbital Corporation Ltd. (ASX: OEC) share price rose by 11.11%. Orbital is a Perth based defence contractor. In addition, it is the world leader in the design and manufacture of propulsion systems and flight critical components for tactical unmanned aerial vehicles (UAVs).
The company recently saw its share price rise by 19% after a visit from the Minister for Defence, the Hon Linda Reynolds. Moreover, this visit was two weeks after the launch of the Australian Government’s 2020 Defence Strategic Update and 2020 Force Structure Plan. This plan includes potential investment of up to $700 million in tactical UAVs over the next decade. As well as up to $1.3 billion in Maritime Uncrewed Aerial Systems between 2020 and 2040.
What moved the Orbital share price?
The Company yesterday announced it had achieved revenue of $33.8 million. This is an improvement of 121% on the FY19 revenue of $15.3 million. The figure is at the top end of the company’s market guidance range of $25 million to $35 million.
FY20 revenue grew due to the company’s agreement with Insitu Inc., a wholly owned subsidiary of the Boeing Company. In fact, it now has two engine models in continuous production for Insitu. The third of the five engine models is scheduled for production in 2021. Delivering on Insitu commitments remains the company’s highest priority. In addition, it is the most immediate opportunity to grow revenue in FY21.
Orbital UAV’s customer demand remains strong and existing business and projected outlook has not been affected by the coronavirus pandemic. In addition, the company has implemented a comprehensive response and production capacity remains robust.
Todd Alder, the company’s CEO and Managing Director said “Orbital UAV’s excellent progress against our strategic objectives during FY20 is reflected in our strong financial performance. Delivering revenue at the top end of guidance, in spite of the COVID-19 environment, is testament to the commitment of our people and our ability to effectively manage our global supply chain.”
In March 2020, the company signed a new MoU with one of Singapore’s largest defence companies. This was for the design, development and initial production of a multi-fuel UAV engine. In April 2020, it announced a new contract with leading aerospace company Northrop Grumman. This was to develop a hybrid propulsion system for a Vertical Take-Off and Landing UAV.
“The two new engine development contracts announced earlier this year demonstrate Orbital UAV’s growing reputation as a world leading engine manufacturer in the global tactical UAV market.” said Mr Alder. “We will progress these exciting engineering development projects in FY21 while continuing to focus on our production priorities under the Insitu [agreement],” he said.
Share price performance
The Orbital share price is up by 268.4% in year to date trading. It has a market capitalisation of $108.62 million and currently pays no dividends. The company provided guidance for revenue for FY21 of between $40 million and $50 million.
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Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Orbital Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.