Thrane & Thrane A/S

Management’s ReviewCobham SATCOM Group’s Management Review

Development in the yearIn 2023 the transformation of Cobham SATCOM has continued and significant improvement was realized in the year. After completing the legal restructuring at the end of 2020, the next phase of the transformation was initiated in 2021 and concluded in 2022 and 2023 was therefore the year, where the business was to operate on the new operating model, which included relocation manufacturing to the Asian region.The global shortage of electronic components dropped during the year, and the affect for Cobham SATCOM in 2023, was significantly less than in previous years. The freight rates have furthermore continued to drop as well, which secured a more stable and predictable pricing on the items, which led to more normalize earnings in 2023. In late 2022 the new Management was established, and they focused the business again, and led the company to a positive year.Financial Performance 2023The Group’s income statement for the fiscal year 2023 shows a net loss of USD 301 thousand (2022: net loss of USD 19,577 thousand) and the Group’s balance sheet at 31 December shows equity of USD 83,893 thousand (2022: 84,194 thousand).In 2023, revenue was USD 222,874 thousand, which was an increase of 10.4%, compared to USD 201,905 thousand realized in 2022. The increase in revenue was due to strong market focus as well as stronger supply chain, which had caused some difficulties in 2022.For the Parent company revenue increased by USD 15,953 thousand from USD 175,912 thousand in 2022 to USD 191,865 thousand in 2023.Maritime revenue showed an increase of USD 9,048 thousand (+6.8%) compared to 2022, due to solving previous years constraints in the supply chain, including strong performance in Maritime safety partly offset by the introduction of Starlink in the traditional VSAT space.The Land business generated an increase in revenue of USD 11,921 thousand, up with 17.2% compared to 2022, which is a result of the strong performance in TRACKER as well as the continued development in our Systems vertical.Cost of sales amounted to USD 148,129 thousand which resulted in an increase in gross margins of 16.5pp. The increase in gross margins is primarily a result of improvements in the supply chain as well as in the price of components and freight prices moving towards normal territory in 2023.Gross margins for the Parent company had also increased as cost of sales decreased by USD 16,257 thousand due to the above reasons, while the revenue grew compared to 2022.Investment in R&D continued its focus and resulted in new product launches and released numerous new technologies in 2023. In 2023 additional USD 7,637 thousand was capitalized as “Development projects” and USD 16,669 was completed during the year with a positive revenue stream already being generated. R&D projects are all clearly defined with functional prototypes, technical feasibilities, and sufficient resource allocation to meet the strong future market opportunity we foresee. Accordingly, the projects are recognized as intangible assets. Cost not defined to meet the criteria for capitalization due to being sustaining related was expensed off during the year.Distribution and administrative expenses amounted to USD 50,826 thousand (2022: 50,948 thousand), which is a decrease of USD 122 thousand compared to 2022, which reflects the ability to scale revenue without occurring additional costs. The TRACKER business located in California (US) continued the transformation and scaling up during 2023.Net cash outflow in 2023 is USD 18,567 thousand compared to inflow of USD 10,455 thousand in 2022. The cash flow is negatively impacted by repayments of group loans as well as timing in milestones received both in our Systems and TRACKER business, as recognition of revenue is in accordance with progress accounting.Overall, the 2023 result was on a satisfactory level and in line with the expectation set for the year.Outlook 2024For 2024 Cobham SATCOM expects a year of strong revenue and improved operating profit. We remain focused on investing in new product launches and innovative technology to create further value for business partners and end customers and drive future revenue. Furthermore, significant investments are made into improving operational processes, time to market and in streamlining delivery performance. The supply chain processes with contract manufactures and regional warehouses have been further developed during 2024.Cobham SATCOM expects an potential improved 2024 revenue in the range of USD 215-235m and operating profit USD 17-27m. Expectation of operating profit adjusted for special items is in the range of USD 30-40m.