AAC Clyde Space — Record year and positive outlook

AAC Clyde Space (OMX: AAC)

Last close As at 24/02/2025

SEK56.60

0.50 (0.89%)

Market capitalisation

SEK334m

More on this equity

Research: Industrials

AAC Clyde Space — Record year and positive outlook

A strong Q4 performance has enabled AAC to report record results in both revenues and EBITDA for FY24. Management expects further progress in FY25. Strategically, the business is well positioned within the low Earth orbit space sector, in particular for the provision of data & services as its own satellite constellation and capabilities continue to develop.

David Larkam

Written by

David Larkam

Analyst, Industrials

Aerospace and defence

Preliminary results

25 February 2025

Price SEK56.10
Market cap SEK330m

SEK11/€

Net cash at 31 December 2024

SEK40.8m

Shares in issue

5.9m
Free float 88.0%
Code AAC
Primary exchange NGM
Secondary exchange OTCQX
Price Performance
% 1m 3m 12m
Abs 24.4 27.7 20.2
52-week high/low SEK59.0 SEK32.0

Business description

Headquartered in Sweden, AAC Clyde Space (AAC) is a world leader in nanosatellite end-to-end solutions, subsystems, platforms, services and components, including supply to third parties. It has production and development operations in Sweden, Scotland, the Netherlands, the United States and Africa.

Next events

Annual report

24 April

Q1 results

15 May

AGM

22 May

Analyst

David Larkam
+44 (0)20 3077 5700

AAC Clyde Space is a research client of Edison Investment Research Limited

Note: PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. These are Edison calculations. 12/24 reported PBT SEK(5.7m) and EPS SEK(1.0).

Year end Revenue (SEKm) PBT (SEKm) EPS (SEK) DPS (SEK) P/E (x) Yield (%)
12/23 276.6 (19.3) (5.31) 0.00 N/A N/A
12/24 352.9 18.7 3.02 0.00 18.6 N/A
12/25e 456.4 36.1 5.99 0.00 9.4 N/A
12/26e 644.3 60.6 10.10 0.00 5.6 N/A

Results overview

The group reported record FY24 results, with Q4 the stand-out quarter. Q4 sales increased 102% to SEK143m equating to 40.6% of annual sales with strong drop through leading to an EBITDA margin of 23.1%. Full year FY24 sales increased by 28% to SEK353m. EBITDA increased to SEK46.7m (including SEK2.6m of acquisition costs) from SEK1.0m in FY23. The EBITDA margin was 13.2%, up significantly from 0.4% in FY23. The FY24 EBIT loss was SEK4.0m, a significant improvement from the FY23 loss of SEK36.8m. Note FY24 included SEK9.1m of impairment and acquisition costs. The reported FY24 EPS loss of SEK1.0 was reduced from a loss of SEK8.7 in FY23. Gross cash at the year end was SEK49.7m with available liquidity of SEK70.8m.

Full-year divisional performance

The AAC Data & Services sales grew 51% with margins remaining strong at 47.1%, albeit down from 66.0% in FY23 reflecting additonal opex investment. AAC Missions sales increased by 293% to SEK114m and EBITDA turned positive to SEK1.7m. The AAC Products sales were down 2%, but profitability improved, generating EBITDA margins of 21.5% (from 16.5%) and EBITDA of SEK49.9m.

Outlook and forecasts

Management is guiding to ‘double-digit net sales growth, [and] continued positive EBITDA’ and FY25 has started strongly. However, reflecting the opening order position (SEK541m vs SEK620m) we have reduced our expectations for FY25. We have also introduced FY26 forecasts. For FY25, we forecast sales of SEK456m (from SEK600m, down 24%), EBITDA of SEK64.4m (from SEK75.0m, down 14%) and underlying PBT of SEK36.1m (from SEK44.5m, down 19%); and for FY26, sales of SEK644m, EBITDA of SEK87.6m and underlying PBT of SEK60.6m.

Valuation

Our DCF-based valuation (discount rate of 12% and long-term growth rate of 2%) gives a valuation of SEK250/share. While this is down from our previous valuation of SEK278/share, as we have been a little more cautious on the short-term numbers, it highlights the significant inherent value within the business.

Full-year results

Q4 sales increased 102% to SEK143m, equating to 40.6% of annual sales. Q4 EBITDA was SEK33m, a margin of 23.1%. Full year 2024 sales increased by 28% to SEK353m, from SEK277m in FY23. EBITDA increased significantly with a margin of 13.2%, up on 0.4% in FY23 and above the target range of 5–10%. The gross margin remains strong at 63.7%, with positive drop through to the bottom line from the additional revenue. The EBIT loss was SEK4.0m, a significant improvement from FY23’s loss of SEK36.8m. Excluding SEK6.5m of impairment from the loss of a satellite and SEK2.6m of acquisition costs, EBIT was positive at SEK5.1m. The reported EPS loss of SEK1.0 was an improvement from the loss of SEK8.7 in FY23. Note that our estimate of underlying EPS before all exceptional items and impairments comes to positive SEK3.00 per share, albeit we note that the full detailed financials are yet to be published. Gross cash at the year end was SEK49.7m and net cash SEK40.8m. Management reported available liquidity of SEK70.8m, which management stated is more than sufficient for FY25 expectations.

AAC Data & Services sales grew 51% in FY24, with the EBITDA margin remaining strong at 47.1%. Developing these high-margin, longer-term service revenues remain a key strategy for the group. Strategic development has seen AAC’s constellation expand to eight satellites with a further two satellites currently being commissioned. Also, we note the launch of the Earth observation satellite, which adds additional capabilities.

AAC Missions increased sales by 293% to SEK114m and moved into positive EBITDA in the period. AAC Missions provides turnkey solutions, hence the higher lumpiness and lower returns, but is key to the overall strategy of the group. Q4 sales were particularly strong at SEK52m and EBITDA was SEK7.4m, enabling the division to post a positive full year EBITDA of SEK1.7m.

AAC Products sales were flat (down 2%) with good profitability and EBITDA margin up to 21.5%, a positive result particularly given the issue that affected Q2. Along with the operational improvements, the key highlight in the year was the acquisition of Spacemetric, providing additional capabilities within the space data-as-a-service (SDaaS) activities and the testing of two-way VHF data exchange system (VDES) to enhance ship-to-land communications.

Order book and intake

The order book was stable over most of 2024, but declined in Q4, partially reflecting the strong sales delivered in the final quarter, to finish the year at SEK541m, a 14% reduction. Major new contract announcements in Q424 and into Q125 provide management with confidence. These include the following, with the European Space Agency contract offering particular upside:

  • 16 December 2024: AAC Clyde Space won an order for Sirius computers, GNSS receivers and related services. Sirius is AAC Clyde Space’s range of computers developed to cater for the command and data handling needs of small satellites. The contract has a value of €0.6m (approximately SEK6.6m).
  • 30 December 2024: AAC Clyde Space won a Launch Service Contract for the VOLT mission from Craft Prospect. This is a follow-up order from its first order for a 16U EPIC satellite for the same mission. The order value is €0.5m (approximately SEK6.0m).
  • 5 February 2025: AAC Clyde Space received an order from OHB Sweden for instrument components for the European Organisation for the Exploitation of Meteorological Satellites (EUMETSAT) within the planned Polar System Sterna (EPS-Sterna) programme. This programme’s space segment is based on the European Space Agency’s Arctic Weather Satellite, successfully launched in 2024, which aims to improve global and regional weather forecasts and contribute to climate monitoring. The order has a total value of €1.0m (approximately SEK11.7m).
  • 17 February 2025: AAC Clyde Space signed a contract worth €0.85m (approximately SEK9.5m) with the European Space Agency as the first phase of the INFLECION project, a transformative project for maritime domain awareness (MDA) through advanced satellite technology. The total value of the INFLECION project is estimated at €30.7m (approximately SEK350m).

Outlook and expectations

Management guidance for FY25 is for ‘double-digit net sales growth, continued positive EBITDA, and sustained positive cash flow from operating activities’. The group will also benefit from a full 12-month contribution from Spacemetric, acquired in November 2024. We have taken a somewhat more cautious view of the top line to reflect the order book at the end of FY24, but also a more positive view on profitability reflecting the strong financials evident in FY24, in particular in Q4.

Valuation

AAC remains a longer-term investment, reflecting its strategy to invest, particularly in its satellite constellation and SDaaS activities. Hence, we see a discounted cash flow (DCF) as the most appropriate valuation tool, rather than short-term, profit-based metrics. Our DCF is based on forecasts out to 2030 followed by a terminal growth rate. The table below highlights our DCF relative to the cost of capital, effectively the cost of equity, and the long-term, post 2030, growth rate.

We continue to use a discount rate of 12% and a long-term growth rate of 2%. This gives a valuation of SEK250 a share. While this is down from our previous valuation of SEK278 a share, as we have been a little more cautious on the short-term numbers, it also highlights the significant inherent value potential within the business.

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This report has been commissioned by AAC Clyde Space and prepared and issued by Edison, in consideration of a fee payable by AAC Clyde Space. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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