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


Veye Pty Ltd (ABN 58 623 120 865) authorised representative (AR No. 001261006) of Vested Equities Pty Ltd which holds an Australian Financial Services License (AFSL No. 478987). Veye is authorised to share only generic financial views through its website, reports and newsletters without taking into consideration your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure the accuracy of the content and that the information is gathered and processed from reliable resources, it is recommended you seek professional advice from your financial advisor or stockbroker before acting on any of our recommendations. Veye Pty Ltd advises it’s users to pursue investing as a long-term goal. Stocks are subject to real time changes therefore all the information we share represents our views at the date of publishing and we request our readers not to interpret our reports as direct recommendations. Past performance is no indication of potential future performance. The securities and financial products we study and share information on in Veye Reports may have a product disclosure statement or other offer document associated with them. You should obtain a copy of these documents before making any decision about acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Veye Pty Ltd confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report (as mentioned on the website www.veye.com.au).