EOS continues restructure with financing agreement

Defence, space and communications manufacturer Electro Optic Systems has given itself breathing space for restructuring announcing a financing agreement with major shareholder Washington H. Soul Pattinson.

The Canberra company has been under pressure in recent months with leadership transitions, a heavy call on investment dollars and a fall in its share price.

Now investment house Soul Pattinson has refinanced an existing $35 million loan and provided an additional $20 million working capital facility to support the restructure of core defence and space businesses.

Critically, this drops the previously announced focus on communications.

The financing was announced with the company’s first half results which saw the company report an operating loss of $98.9 million, with $54 million of that attributable to the impairment of assets in satellite systems company SpaceLink.

EOS said in a statement: “Nonetheless…the company continues to explore opportunities to realise value from the SpaceLink assets and, as at the date of this announcement, remains in active negotiations with potential partners and purchasers.”

SpaceLink, which plans a cluster of satellites in medium orbit to relay communications between satellites and Earth, has recently received R&D support form the US military.

Revenues for the half was down 45 percent on the previous corresponding period to $53 million and operating EBITDA was a loss of $34.7 million.

EOS ended the half with cash of $23.8 million.

The company said it was adopting a leaner structure prioritising existing profitable business lines and those that ‘respond to customer procurement activity rather than anticipating requirements through customer planning documents’.

This will bring full year cost savings of $20 million.

SpaceLink was a major drag on the company which involves operating expenses of $15 million. The development of laser weapons involved expenses of $3 million.

The company has determined that the development of SpaceLink can only occur with the participation of a strategic or financial investor.

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SECOND US DEFENCE R&D CONTRACT FOR SPACELINK

Picture: Electro Optic Systems