Electro Optic Systems to raise $40m as backlog grows for defence and space contracts

Electro Optic Systems to raise $40m as backlog grows for defence and space contracts

Photo: EOS

Canberra-based Electro Optic Systems (ASX: EOS) is capitalising on a recent doubling of its share price and near-term opportunities for its remote weapons systems (RWS), announcing a $40 million capital raise following a year of record revenue and operating cash flow amidst conflicts in Ukraine and the Middle East alongside a boom in its space-focused tech business.

The company has announced a fully underwritten $35 million institutional placement at $1.70 per share, representing an 18.3 per cent discount to the last traded price of $2.08, to be followed up by a $5 million share purchase plan (SPP).

New shares to be issued under the placement represent 12 per cent of issued capital in Electro Optic Systems, at a share price that is more than 70 per cent higher than levels just shy of $1 at the end of 2023.

"The equity raising enables EOS to better capitalise on near-term growth opportunities by investing in long-lead items particularly cannons and other items," says EOS managing director and chief executive officer Dr Andreas Schwer.

"EOS has significant near-term opportunities in RWS and particularly those with counter-drone applications, driven by geopolitical uncertainty and the changing nature of warfare.

"EOS’ customer base has widened and this equity raising will support servicing market demand for EOS’ innovative products. In 2023, EOS delivered record revenue and operating cash flow as well as implemented a number of initiatives to focus on the acceleration of organic group."

At the end of February EOS revealed its revenue rose 59 per cent in the 2023 calendar year to $219 million, of which $105.9 million came from defence sales and $63.9 million was from the space segment where its expertise lies in optical surveillance capabilities for space domain awareness, space intelligence, and space control.

These services are provided through the EOS Space Technologies division applying its own optical sensors and effectors to detect, track and characterise objects in space, while the EM Solutions business 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.

EOS reported a statutory loss of $34.1 million in 2023 - an improvement on a $53.6 million loss in 2022 - but its underlying earnings entered positive territory of $5.7 million, with the group closing out the year holding cash reserves of $71 million.

To get a sense of how aggressively the group is spending to keep up with demand, following completion of the raise announced today its cash balance will have only risen by around $2 million to $73 million.

By the end of 2023, EOS had a backlog of contracted future work worth more than $600 million, including $181 million of conditional contracts to supply RWS to Ukraine.

The backlog also includes two Western European government contracts for RWS worth $52 million and $28 million, and a $28 million contract for R600 RWS unit spares to a customer in Southeast Asia. In January 2024, the group signed a €9 million ($15 million) contract to supply Slinger Counter-Drone Systems to Diehl Defence in Germany.

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