Investor Call Presentation - 31 January 2024
Released
Released
Announcement PDF
Investor Update
January 2024
Andreas Schwer, CEO & Managing Director
Clive Cuthell, CFO & COO
Approved for ASX release by CFO / COO Clive Cuthell
Important Notice and Disclaimer
CONTENT OF PRESENTATION FOR INFORMATION PURPOSES ONLY
This presentation has been prepared as at 30 January 2024. All information herein has previously been published on the Australian Securities Exchange (“ASX”).
Forward-looking Statements
This presentation may contain statements that are, or may be deemed to be, forward-looking statements. Such statements can generally be identified by the use of words such as ‘may’, ‘will’, ‘expect’, ‘intend’, ‘plan’,
‘estimate’, ‘anticipate’, ‘believe’, ‘continue’, ‘objectives’, ‘outlook’, ‘guidance’, ‘forecast’ and similar expressions. Indications of plans, strategies, management objectives, sales and financial performance are also
forward-looking statements. Such statements are not guarantees of future performance, and involve known and unknown risks, uncertainties, assumptions, contingencies and other factors, many of which are
outside the control of Electro Optic Systems Holdings Limited (ABN 95 092 708 364) (EOS). No representation is made or will be made that any forward-looking statements will be achieved or will prove to be
correct. Typically, EOS and its subsidiaries (together, the Group) operate in an industry where it can take an extended period of time (including up to, and beyond, twelve months) for opportunities to be converted
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Past Performance
Past performance information in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.
Information is Not Advice
This presentation is not, and is not intended to constitute, financial advice, or an offer or an invitation, solicitation or recommendation to acquire or sell EOS shares or any other financial products in any jurisdiction
and is not a prospectus, product disclosure statement, disclosure document or other offering document under Australian law or registration statement under the United States Securities Act of 1933 as amended
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The information contained in this presentation has been prepared without taking account of any person’s investment objectives, financial situation or particular needs and nothing contained in this presentation
constitutes investment, legal, tax or other advice. The information provided in this presentation may not be suitable for your specific needs and should not be relied upon by you in substitution of you obtaining
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Preparation of Financial Information
All financial information has been prepared in accordance with Australian Accounting Standards. Certain financial data included in this presentation is ‘non IFRS financial information’. The Company believes that
this non IFRS financial information provides useful insight in measuring the financial performance and condition of EOS. Readers are cautioned not to place undue reliance on any non IFRS financial information
including ratios included in this presentation. These measures have not been subject to audit or review.
2
Important Notice and Disclaimer
Presentation of Information
The financial data in this presentation is provided on a statutory basis but in a non-statutory presentation format (unless otherwise stated).
•
Currency: all amounts in this presentation are in Australian dollars unless otherwise stated.
•
Financial years: FY refers to the full year to 31 December, 1H refers to the six months to 30 June, and 2H refers to the six months to 31 December.
•
Rounding: amounts in this presentation have been rounded to the nearest $0.1m. Any differences between the amounts in this presentation and related announcements are due to rounding. Totals may not add
due to rounding.
Product Development
This presentation includes information about potential future product developments. Users are cautioned that new product development work can take up to five years & more for new products to be developed
and launched. Following the initial commercial launch, it can take a further two to three years and more for newly launched products to reach commercial maturity and achieve meaningful sales revenue. There is
no guarantee that it will be possible to achieve product development launch dates or meaningful commercial sales from new products.
Third Party Information and Market Data
The views expressed in this presentation contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the
accuracy, reliability, adequacy or completeness of the information. This presentation should not be relied upon as a recommendation or forecast by EOS. Market share information is based on management
estimates except where explicitly stated otherwise.
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with EOS’ other periodic and continuous disclosure announcements lodged with the ASX.
General Information
Statements made in this presentation are made only as at the date of this presentation. The information in this presentation should be read in conjunction with EOS’s other periodic and continuous disclosure
announcements lodged with ASX. The information in this presentation remains subject to change without notice. Circumstances may change and the contents of this presentation may become outdated as a
result. EOS may in its absolute discretion, but without being under any obligation to do so, update or supplement this presentation.
3
EOS Leaders
Andreas Schwer, CEO & Managing Director
•
•
•
•
Over 30 years in global Defence, Manufacturing and Space industries
Aeronautical engineer, PhD
German citizen
Airbus 14 years, Rheinmetall International 5 years
Clive Cuthell, CFO & COO
•
•
•
•
Over 15 years as CFO in global industrial businesses
Chartered Accountant 25 years
British / Australian citizen
Rinker Group / Holcim 9 years, Nuplex 3 years
4
Commenced
August 2022
Commenced
September 2022
Q4 Activity Update – Investor Call 31 January 2024
Contents
1. Market Update & Recent Business Wins
2. Q4 & 2023 Cash Flow & Current Debt Profile
3. Conclusion & Scheduled Future Announcements
Appendices – Introduction to EOS
5
Market Update
Ukraine conflict and increased geo-political tensions
are resulting in higher Defence spending
Market Situation
• Ukraine war
• Geopolitical tensions - including Middle East
• Significant increases in global Defence activity and planned spending
• Technology is a key differentiator
EOS Strengths
• Leading edge technology
• Focused product development and commercialisation
• Targeted business development
• EOS strategic discipline and capital allocation
6
Recent Business Wins
EOS has continued to diversify the product and customer base
Revenue
Timing
13 Nov 2023
R600 Remote Weapon System
Customer in South East Asia
Announcement - New $28m RWS contract for R600
A$28m
2024-26
27 Dec 2023
Remote Weapon Systems Follow-on order
Western European Government Customer
Announcement – New $25m contract for RWS supply
A$25m
2024
29 Jan 2024
Slinger Counter-Drone Systems
Diehl Defence in Germany
Announcement - New $15m contract for Slinger Counter-Drone Systems
A$15m
2024
7
Q4 Update - Cash Flow
Q4 Net Operating Cash Inflow was $34.5m for Q4 2023, up $48.4m on Q4 prior year
Key Cash Flows (Unaudited)
In(Out)flows
Clear Focus On Cash Flow
Q4
2023
Q4
2022
$m
$m
$m
Customer Receipts
105.4
40.7
64.7
Net Operating Cash Flow
34.5
(13.9)
48.4
Cash balance 30 Sep
71.0
21.7
49.3
• Focus on Customer Receipts
8
• Renegotiated key Middle East contract (Feb 23) &
reduced contract asset working capital
• Focus on Cash Positive new contracts
• EMS RAN contract (May 23)
• WEG RWS contract A$51m (Jun 23)
2023 Update - Cash Flow
2023 Net Operating Cash Inflow was $113.1m, up $164.6m on prior year
Full Year (Unaudited)
Cash In(Out)flows
Clear Focus On Cash Flow
• Operating Cash Flow
• Focus on Customer Receipts
• Contract discipline
• Cost Control – 2022 headcount reduction
2023
2022
$m
$m
$m
Customer Receipts
325.4
145.9
179.5
Net Operating Cash Flow
113.1
(51.5)
164.6
Net Investing Cash Flow
(34.7)
(28.3)
(6.4)
• Investing Cashflow
• 2022 SpaceLink Capex – ceased
• 2023 Growth – $31.8m in guarantee deposits
• Disciplined group capex
Net Financing Cash Flow
(29.0)
45.3
(74.3)
•
Cash balance 31 Dec
71.0
21.7
49.3
9
Financing Cashflow
• Equity raise & refinancing in 2022
• Debt repayment in Sep 2023
Debt Summary
The focus on Cash Flow ensured that the Sep 23 debt repayment occurred as planned
A$m
Principal
Term
Maturity
Total Rate
Repayment
Working Capital Facility
20.0
12m
Repaid Sep 23
19%
26.9
Working Capital Facility
15.0
18m
11 Apr 24
19%
20.5
Term Loan Facility
35.0
36m
11 Oct 25
26%
52.1
Total Remaining
50.0
72.6
Borrowing Facilities
• Set up in Sep/Oct 2022 with longstanding equity investor Washington H. Soul Pattinson (“WHSP”)
• First $20m (principal) facility repaid in September 2023, with $26.9m repayment
• Remaining $50m (principal) facilities to be repaid with bullet repayments totalling $72.6m, plus monthly interest
• Borrowing facilities include a 100% make whole clause for early repayment
• Lender fee dispute resolved in December 2023, pending approval from other financier (EFA) in Q1 2024
• Cash balance at 31 December 23 of $71m
10
Our Promises
We have delivered on our promises
We said…
We delivered…
Formulated new strategy
Focus on core businesses & strengths of point & track
Exit SpaceLink in 2022. Exit Australian Satellite Manufacturing proposal (2023)
2023 Capex focused on core business & seeking third party development funding
Increased efficiency
Company wide restructuring program
Reduced headcount by >100 FTE in 2022
Innovate & Launch core products
Slinger Counter Drone Product launched & sales secured
R150 lightweight RWS formal launch – marketing underway
R800 heavy calibre RWS launch – marketing underway
Grow & diversify sales
New contracts secured – Ukraine / Western Europe & Counter Drone
Grew EM Solutions with contract for up to A$202m
30 June 23 Backlog $645m (incl. conditional contracts)
Realise working capital
Amended customer contract in February 2023
Reduced contract asset from $164m (Dec22) to $67m (Dec 23)
Secured >$70m cash from new 2023 sales in 2023
Focus on cash + Repay debt
Increased cash - from $22m at Dec 2022 to $71m at Dec 2023
Repaid debt of $26.9m, as planned, in September 2023
11
Conclusion – Scheduled Future Announcements
Full Year Results
ASX Appendix 4E (including Income Statement)
To publish on 28 February 2024
• Q&A
• Thank You
12
Appendices – Introduction to EOS
Introduction
Product Range
Summary of Strategic Growth Outlook – Four Pillars
Financial Data - 2023 Half Year Results
• The 2023 Full Year Income Statement and Segment results will be published with full year results on 28 February 2024
• This Appendix includes the most recent Segment results published - for 1H 2023
13
Business Overview
STRATEGIC POSITIONING
OUR STRENGTHS
>75% export
revenue
Accuracy
and tracking
Global NonITAR market
(non-US)
Technology
and Innovation
Growing
market size
KEY PRODUCT AREAS
Established
>2,500 RWS
in service
14
RWS and Turrets
High Energy Laser Weapons
Space
EM Solutions
EOS Introduction – markets we serve
EOS has a strong position in three growing markets, with advanced technology
Defence
Remote Weapons and CUAS
•
Remote Weapon Systems (RWS) leader for over 30
years
•
Key product (R400 RWS) is well established and
recognised for accuracy and range – lightweight
system using 20-30 mm cannon
•
Widening product range to include smaller and larger
solutions and incorporating APKWS – Hydra rockets
and missiles
•
Recent launch of RWS Counter-Drone System
•
STRATEGIC growth opportunity from Directed Energy
products in development
•
Recent Revenue A$105 -185m (for 2022 and 2021)
Satellite Communications
Space Systems
•
Leading naval satcom terminal manufacturer
•
Space laser tracking and identification services
•
Acquired EM Solutions in 2019
•
•
Provides global satellite communications systems
and services to primarily navy / maritime customers
World leader in technology, using laser accuracy to
track objects in space
•
Directed Energy / Space Warfare capability in
development
•
STRATEGIC growth opportunity
•
Recent Revenue ~A$4m (for 2022)
•
Strong position in Australia, growing in Europe
•
Recent Revenue ~A$28m (for 2022)
15
Remote Weapon Systems Product Range
EOS is developing a wider range of RWS products to meet evolving needs
Sensor Unit
Ultralight RWS
R150
Light RWS
R400
Medium RWS
R600
Heavy RWS
R800
Common Range of Platforms and Applications
Truck
Protected Vehicle
UGV
Turret
T2000
Common Control Interfaces
CUAS
16
Light Turret
T1600
MLRS
Multi-Mission
Sensors
New Product Growth Opportunities
EOS has unique advantages in point & track technology
Revenue timing *
R150 Lightweight
System
Formal production launch in 2023
Suitable for light vehicles
Future UGV opportunity
2024-25
Counter Drone
Kinetic System
Launched “Slinger” in 1H 2023
Proven, world-leading accuracy
Initial evaluation order received
2024-25
Large R800 Remote
Weapon System
Continued to develop and test
Low cost and heavy firepower
Planned market intro 2023-24
2024-26
Unmanned Ground
Vehicle Weapon System
Growing demand
Lightweight & resilient
High accuracy
2025-27
* The global defence industry supports innovation – product development can take five years and more, with commercial launches taking two-three years or more to reach maturity.
17
R150 Remote Weapon System
Lightest system on the market capable of deploying
12.7mm/14.5mm heavy machine guns
Product
• Ultra lightweight system
▪ Under 150kg with 12.7mm machine gun and full ammunition load
• Can be operated remotely
• Non-ITAR
Wide Range of Weapons, including:
• 14.5 mm and 12.7 mm heavy machine guns
• 7.62 mm and 5.56 mm light machine guns
• APKWS laser guided rocket launcher
▪ Drone defeat at 4500m
Market
• Growing demand for lightweight protection systems
• Deployed to Ukraine in CUAS configuration
18
Slinger Counter-Drone CUAS System
The Ukraine conflict has realised the drone threat,
and created CUAS demand
Context
• Reported >10,000 Ukraine drone launches / month
• Limited defence options:
▪ technical requirements
▪ economic sustainability
Market Demand
• Global interest in counter-measure
EOS “Slinger” Product
• Traditional Kinetic drone kill
• High accuracy - proven US trials
• Initial evaluation orders received
19
R800 Heavy Calibre System
EOS recently launched a heavy calibre R800 system, with
an integrated counter-drone laser Dazzler
Product
• Turret-level, heavy-calibre hitting lethality
• Lightweight system
• Operated remotely
Wide Range of Weapons, including:
• 1 x Javelin or 2 x Spike (pod)
• Mk44S 30 x 173mm cannon
• 7.62 mm machine gun or chain gun
• Counter-Drone Laser Dazzler
Market
• Growing demand
• Low cost/weight vs armoured turret
20
Unmanned Ground Vehicle System
Western forces have started to test & deploy
Unmanned Ground Vehicles in different theatres
Product
• Lightweight system
• Operated remotely
Wide Range of Weapons, including:
• 7.62 mm and 12.7 mm machine gun
• 30 mm cannon
• APKWS laser guided launcher
• Laser weapon (future)
Market
• Growing demand
EOS Product
• On test deployment in Eastern Europe
21
21
Integrated Laser Dazzler
EOS launched an integrated
Counter-Drone Laser Dazzler in October 2023
Context
• Dazzlers can disrupt incoming drones
• Combines unique EOS capabilities:
▪ Integrated with existing RWS
▪ Advanced tracking & accuracy
• First to market
Launch Process
•
•
•
•
AUSA Trade Show October 2023 (Land)
IndoPac 2023 Trade Show (Maritime)
Significant inbound enquiry
Potential initial evaluation sales in 2024
22
New Product Growth Opportunities
High Energy Laser Weapon
EOS has developed a 36-54kW laser weapon and
demonstrated it during August 2023
EOS Prototype
• Currently available 36-54kW class (36kW in trial operation)
• Two test ranges – indoor and outdoor
• Class 1 and 2 drone capability and demonstration
• Fully owned IP
Product Development
• Investment required to fully develop 54kW product, ~US$15m
• Investment required to increase to 100-150kW, ~US$50-70m
• Seeking partner funding – based on Aug 23 demonstrations
• Lower power weapons 0 – 20kW
▪
Development in progress
▪
Evolving application
23
New Product Growth Opportunities
Space & Space Warfare
Space Warfare is a rapidly evolving military need,
and EOS has the key capabilities in house
Market Evolution
• Space Warfare is a significant growth market – growing need for capability to disrupt
enemy space operations
• National governments are seeking help to develop this capability - recent government
tender for US$80m development project
EOS Capability – EOS has significant private IP
• Space Domain Awareness – market leading identification and tracking capability
• Telescope construction for over 20 years
• High energy laser – EOS experienced in space operation
• Opportunity for fixed and mobile ground station development
EOS Next Steps
• Seeking product development funding partners
▪
EOS contributes IP and technology
▪
Commercialise expertise in growing market
24
Growth Opportunities - EM Solutions
EM Solutions is a market leader in Naval SatCom,
achieving strong growth in Australia and Europe
EM Solutions Business
• Multiband frequency
▪ Multiband Satcom (X, Ku, Ka Band Com, Ka Band Mil)
▪ Ship to Shore E Band (70/86GHz)
• Continued delivery and growth to six navies including Australia and Europe
• Manufacturing in Brisbane, Australia
Recent performance
• Revenue growth > 20% pa for 4 years to 2022, over 50% in 1H 2023
• EBITDA of 25% (in 2022)
• New sustainment contract for Royal Australian Navy, up to A$202m over
seven years (2023 – 2030)
• Targeting further growth opportunities incl. NATO in Europe
14
25
25
Summary of Growth - Four Pillars
EOS is product-led with growth focused in four key areas
RWS and Turrets
High Energy Laser Weapons
Space
EM Solutions
R400 Family
Titanis CUAS
Commercial Space Intelligence
Naval Terminals
World Market Leader
Grow in 2024
World Market Leader
R150 Family
HELW 36kW
Military Space Control
Market Leader
Land Terminals
Launch in 2023
Launch in 2024
Launch in 2024
Successful in Market
R800 Family
HELW 50kW
Space Warfare
Medium Size Terminals
Launch in 2024
Launch in 2025
T1600
HELW 100kW
Launch in 2025
Launch in 2025
Launch in 2024
Submarine Terminals
Launch in 2025
Launch in 2026
26
• The global defence industry supports innovation – product development cycles can take up to five years and more
• Commercial launch can take two-three years and more, with strong products realising growth potential over time
• EOS has substantial under-commercialsed IP and a program of product development and launch is underway
26
15
1H 2023 Performance Overview
Improved cash flow,
signed new contracts, and
launched new products
New products launched:
• Slinger Counter-Drone
• R150 lightweight production launch
Signed new contracts >$400m
incl. conditional Ukraine $181m
Focus on contract management
Net realisation $50m contract asset
$123m cash receipts in 1H 2023,
Up 65% from $74m in 1H 2022
Cash balance 28 Aug - $83m
EOS repaid $26.9m of debt, on schedule in Sep 2023
In accordance with debt agreements
27
1H 2023 Finance Results
Significant improvement in Revenue, Cash Flow and Order Backlog
1H
2023
1H
2022
$m
$m
$m
Revenue
74.3
53.8
20.5
Underlying EBITDA
(14.8)
(24.2)
9.4
Finance cost
(16.0)
(6.1)
(9.9)
Net loss before tax
(35.4)
(33.0)
(2.4)
Net cash flow from operations
30.7
(17.1)
47.8
Secured
464
323
141
Conditional
181
-
181
Total
645
323
322
Key Results
Order backlog 30 June
28
Defence
Solid revenue growth
with positive market outlook
Customer receipts
1H
2023
1H
2022
$m
$m
%
Revenue
50.7
38.2
33%
Loss before
tax
(17.5)
(25.7)
32%
Customer
receipts
109.3
52.7
107%
200
150
A$ Millions
Divisional
Results
% of Total EOS
Revenue
68%
100
50
2020
2021
1H
29
2022
2H
2023
Space
High growth EM Solutions naval satcom
activity, and Space data services
1H
2023
1H
2022
$m
$m
%
Revenue
23.6
15.6
51%
Loss before
tax
(0.4)
(3.4)
88%
Customer
receipts
13.9
21.8
-36%
Revenue
A$ Millions
Divisional
Results
% of Total EOS
Revenue
32%
45
40
35
30
25
20
15
10
5
-
2020
2021
1H
30
2022
2H
2023
New Order Intake & Backlog - 30 June 2023
Record order backlog provides a strong base
for future growth
Significant New Orders Secured
Millions
Order Backlog
• A$51m for RWS to Western Europe, delivered July 2023
700
600
181
500
• Up to A$202m EM Solutions for Australian Navy (2023-2030)
400
300
464
200
100
-
Jun21
Dec21
Jun22
Secured
Conditional
Dec22
Jun23
• A$181m Ukraine contracts, conditional on testing, approval and
customary wartime (cancellable) terms:
▪ First demonstration completed successfully
▪ Now awaiting firm orders
• An update on the 31 Dec 23 backlog will be included in the full
year results announcement
31
Our Approach
We will maintain focus
1. Manage Cash Flow
• Realise working capital
• Continue to repay debt on schedule in 2024 and 2025
Diversify Product Base
2.
• Maintain leadership in accurate pointing
• Commercialise technology
Diversify Customer Base
3.
• Go to market in Europe & North America
• Continue to grow sales orders
4.
Maintain Strategic Discipline
• Focus on the core – accurate pointing
• Secure product development funding
32
Recent Media Articles & Media Releases– Last 6 Months
Subject
Date
Article
New Slinger Counter-Drone contract
29 Jan 24
New $15m contract for Slinger Counter-Drone Systems
New customer contract – Western Europe
27 Dec 23
New $25m contract for RWS supply
Update re Lender Fee Claim
22 Dec 23
EOS Resolves Dispute with Lender WHSP
Update re 2023 Revenue Outlook
1 Dec 23
EOS Expects 2023 revenue of $210m to $230m
New customer contract – South East Asia
13 Nov 23
New $28m RWS contract for R600
Laser Dazzler
7 Nov 23
EOS showcases latest innovation for countering air and seaborne threats
Drone Warfare
25 Oct 23
Is Australia and its military forces prepared for drone warfare?
Smaller Powerful Weapons Systems
17 Oct 23
The evolution to smaller, more powerful weapon systems
Drone Killer System
2 Oct 23
Australian 'drone killer' system Slinger heading for Ukraine - EOS (eos-aus.com)
Counter-UAS market set for steep rise
18 Sep 23
Counter-UAS market set for steep rise - EOS (eos-aus.com)
How remote weapon stations are helping
13 Sep 23
Expanded Options | Armoured Vehicles Technology Report 2023 | Shephard (shephardmedia.com)
EM Solutions factory upgrade
10 Sep 23
Marking 25 years of innovation: EM Solutions Unveils Expansive Factory Upgrade - EOS (eos-aus.com)
ABC News article on recent demonstrations
2 Sep 23
Drone-killing laser gives glimpse into future AUKUS projects - ABC News
Slinger Counter Drone systems demo
31 Aug 23
EOS demonstrates counter-drone systems - Australian Defence Magazine
Slinger Counter Drone systems demo
28 Aug 23
EOS conducts live fire showcase for counter-UAV Slinger - Defence Connect
Directed Energy Laser demonstration
28 Aug 23
Silent and deadly: Australian directed energy pitched against hypersonics - Defence Connect
ABC News on EOS monitoring spy satellites
18 Aug 23
China deploys swarm of satellites to monitor military exercises in Australia - ABC News
Slinger Counter Drone system - Ukraine
2 Aug 23
EOS confirms first Slinger exports to Ukraine - Defence Connect
33
EOS Segments
Defence
Defence Systems specialises in technology for weapon systems optimisation and integration, as well as ISR (Intelligence, Surveillance
and Reconnaissance) and C4 systems for land warfare. Its key products are next-generation remote weapon systems, vehicle turrets,
high-energy laser weapons (directed energy), as well as fully integrated and modular Counter-UAS and C4 systems.
Space
Space Systems includes all EOS space and communications businesses and operates as two entities – Space Technologies and EM
Solutions.
Space Technologies specialises in applying EOS-developed optical sensors and effectors to detect, track and characterise objects in
space. It includes capabilities in the domain of space control and space warfare.
EM Solutions delivers world-leading RF and optical space communications technology. Its core product range centres around the
development and production of high-end, broadband radio transceivers for satellite communications as well as satellite communications
on-the-move terminals for defence and government customers
34
Glossary
Term
Description
Term
Description
1H
First Half of the financial year
IP
Intellectual Property
2H
Second Half of the financial year
ITAR
International Traffic in Arms Regulation (a
USA regulatory regime)
ADF
Australian Defence Force
MOD
Ministry of Defence
ASMH
Australian Satellite Manufacturing Hub
Q4
4th quarter of the financial year
CF
Cash Flow
RWS
Remote Weapon System
CUAS
Counter Unmanned Aerial System
SatCom
Satellite Communications
DE
Directed Energy
UGV
Unmanned Ground Vehicle
EBIT
Earnings Before Interest and Tax
Underlying
EBITDA
EBITDA before impairment and foreign
exchange gain/(loss)
EBITDA
Earnings Before Interest, Tax Depreciation
and Amortisation
FTE
Full Time Equivalent
HELW
High Energy Laser Weapon
35
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