After 20 years, the War in Afghanistan is ending. In commemoration of today’s news, here are the top ASX-listed defence contractors.
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After 20 years, the War in Afghanistan is coming to an end. US President Joe Biden announced by 11 September all US troops will leave the central Asian country, the date marking the 20th anniversary of the Al-Qaeda terror attacks, which were the catalyst for the war.
“It is time to end America’s longest war,” President Biden said in a televised address from The White House.
Former President Donald Trump previously declared all US troops would leave the country by 1 May, therefore Mr Biden’s announcement was both delaying the withdrawal while also confirming it.
NATO commanders announced they would withdraw troops under their control from the war-torn nation by 11 September, in coordination with American forces. Australian Prime Minister Scott Morrison joined other leaders in saying Australia would also withdraw its remaining forces from the country.
39,000 Australian soldiers deployed to Afghanistan. 41 lost their lives in the battle. A report by Major General Justice Paul Brereton alleged Australian Special Forces committed war crimes while serving in Afghanistan.
In commemoration of today’s news, let’s look at three ASX-listed defence contractors, what they specialise in, their finances, and share prices.
Codan Limited (ASX: CDA)
Codan designs, supplies, and manufactures mining and communications equipment. It also supplies metal detection services. While focused mostly on the mining industry, it also supplies communication equipment to ‘Five-Eyes’ militaries and intelligence agencies.
In February, the company acquired US based Domo Tactical Communications (DTC) for at least $114 million. DTC provided communications equipment of at least 20 US government agencies. DTC’s products enable wireless transmission of data for its customers, including border control, first responders, broadcasters, military, and special forces.
For the six months ending 31 December 2020, the company recorded $194 million of revenue – up 14% on the prior corresponding period (pcp). Net profit was up 36% on the pcp to equal $41.3 million.
The company paid an interim dividend of 10.5 cents per share, fully franked, at the time.
Over the past 12 months, the Codan share price has increased by 230%.
Codan has a market capitalisation of $3.3 billion.
Austal Limited (ASX: ASB)
Austal is an Australian shipbuilder that designs and constructs commercial and defence vessels across the globe. The company considers many of the world’s leading ferry operators, navies and defence forces as customers, including the US Navy and Australian Border Force. Along with shipbuilding operations, Austal also provides vessel maintenance and management services, as well as vessel command and control systems.
Two weeks ago, the ship builder announced construction had commenced on a ship building facility in Alabama, USA. Ships built at the site will supply both the US Navy and the US Coast Guard.
A month ago, Austal delivered its ninth patrol boat to the Australian Department of Defence. The ship was gifted to the Papua New Guinean and navy and subsequently named ‘HMPNGS Rochus Lokinap.’ Two ships total have been shipped to PNG. Austal is contracted to deliver 21 ships to total to the Australian Navy. Some of these will be gifted to other Pacific nations. The government tender is worth $335 million and expires in 2023.
In its FY21 half year report, the company saw net profits grow 29% on the pcp to $52.4 million. Group revenue totalled $840.3 million in the period. While this reflected a 19% fall from the prior corresponding period, the company noted revenue was impacted by a number of factors. These included unfavourable currency exchange movements, a reduction in United States commercial shipbuilding and vessel support activities, as well as longer than expected commissioning of Australian ships.
The company paid an unfranked interim dividend of 4 cents per share.
The Austal share price increased 0.39% today to finish at $2.56. Over the past year investors have seen a negative 17% return on investment (ROI). Austal has a market cap of $915.1 million.
Electro Optic Systems Holdings Ltd (ASX: EOS)
Electro Optic is an Australian technology company. It develops and produces electro-optic technologies for the aerospace market. The group’s reportable segments are Communication, Defence and Space. It generates maximum revenue from the Defence segment.
The Defence portion of the business develops, manufactures, and markets advanced fire control, surveillance, and weapon systems to approved military customers. Geographically, it derives a majority of revenue from North America.
On 9 April, the company declared it had refined laser technology to track space debris and move it at faster speeds and lower altitudes than ever. In its statement at the time, the company noted approximately US$700 billion worth of global space infrastructure currently delivers essential services globally. These services, it said, are at risk from space debris ranging in size from rockets the size of buses, to flakes of paint measuring only 5mm. Even small debris can cause enormous damage because of how fast it travels in space.
For its final year results for FY20, the company declared a loss of $25.6 million. Revenue, however, was up 9% to equal $180 million. Investment into inventory saw a negative operating cash flow of $109 million. The report made clear that defence accounts for 80% of total revenue for the business. Its aforementioned space system is growing, however – up 27% on the pcp.
The Electro Optics share price finished the day up 1.50% to end at $5.41. Over the past 12 months, it has lifted by just over 13%. It has a market cap of $808.1 million.
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Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited and Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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