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Orbital Corporation Limited, delivering improved earnings and profitability

Team Veye | 01 Oct 2020 ASX - OEC
Orbital Corporation Limited, delivering improved earnings and profitability

Orbital Corporation Limited (ASX: OEC)

Full year audited financial results

Orbital Corporation Limited (ASX: OEC) (“Orbital”, “the Company”) on 28 August 2020 announced its full year audited results and publication of its Annual Report for the financial year ending 30 June 2020 (“FY20”).

FY20 Highlights

  • Delivery of $33.8M revenue and $1.9M net profit – top end of guidance range ($25M to $35M) and commitment to ongoing profitability;
  • Second engine model under the Insitu Inc. long term agreement into production, with the third engine in development;
  • Designated Primary Engine Supplier to Insitu Inc;
  • New contracts signed with Northrop Grumman and one of Singapore’s largest defence companies;
  • Visit from Australia’s Minister for Defence, Senator the Hon Linda Reynold CSC; and
  • First test flights of Orbital UAV engines in Australia.

 

(Chart source: TradingView)

Transition to sustainable underlying earnings

In FY20, Orbital brought its second engine model into production as part of the Long Term Agreement (“LTA”) with key customer Insitu Inc., a wholly owned subsidiary of the Boeing Company. The second model began shipping in January 2020 and contributed to operating revenue of $33.8 million and earnings before interest and tax of $2.6 million.

The LTA with Insitu was announced in October 2018 and forms the foundation for Orbital’s near-term revenue growth. The Agreement covers the delivery of multiple propulsion systems and services, to be applied across the Boeing subsidiary’s entire fleet of unmanned aerial vehicles (UAVs).

Financial results

The Company reported strong financial results for the year ended 30 June 2020 with revenue from continuing operations of $33,823,000 (2019: $15,253,000) and a net profit after tax of $1,857,000 (2019: loss of $5,906,000). (Data Source – Company Reports)

 

Veye’s Take

Building on the successful Insitu LTA and partnership, Orbital developed further growth opportunities in the global tactical UAV market during FY20. The two new engine development contracts demonstrate Orbital’s growing reputation as a world leading supplier of propulsion solutions and flight critical components in the global tactical UAV market. Orbital’s LTA with Boeing subsidiary Insitu remains the Company’s primary focus and forms the foundation for improved revenue growth in the near term. Under the LTA, the Company begins FY21 with two engine models in production, with the third in development. After some shallow correction, RSI and MACD have again turned bullish. It is already trading above monthly resistance. Ability to move above $1.36 with volumes can have the potential of it moving up strongly and can give good returns in short to medium term. Veye maintains a “Hold" on “Orbital Corporation Limited” at the current price of $1.21

Disclaimer

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