Kleos Space updates market with bad news
March 23, 2023
By Chris Forrester
Kleos Space has reported a modest revenue injection from a successful contract for its ‘Vigilance Mission’ but also warned the market that the business is at risk of “underperforming” financially.
Kleos is a space-powered defence and intelligence technology company.
The cautionary statement appeared in the Kleos annual report, and in a note from auditors Ernst & Young which stated: “Given the various technical anomalies encountered, there is a risk that the satellite equipment and assets under construction may not be able to meet their capability requirements as intended by the management,” Ernst & Young said. “The valuation of satellites might be impacted by events and unfavourable market developments that may decrease future revenues. Due to the size of the balance and the risk of impairment of satellites… we considered this area to be a key audit matter.”
The cash input comes from a deferred revenue which was worth €900,000 and flowed from its Vigilance Mission and which Kleos said was its “first major revenue event”.
The four-satellite Vigilance Mission cluster was only commissioned in orbit on February 17th. The Cluster has been expanded with a launch in April 2022 and January 2023 and these will be commercialised in Q2 and Q3 respectively. However, Kleos has warned that the satellites, which had a design life of five years in orbit, will actually only be in service for some 18 months.
However, Kleos needs fresh orders for its satellites and states bluntly that if orders do not materialise then it is contemplating various strategic options including a possible merger, sale or adjustment of its business model into what it describes as a “space as a service” model.
Kleos Space is registered on the Luxembourg and an Australian stock exchange. It has operations in Luxembourg, the US and UK.
Kleos reported an operating loss of €11.3 million on revenues (for 2022) of €272,000. Some 61 per cent of that revenue came from US government clients. Kleos added that it expects to raise €4.2 million euros in two tranches this year, some of which will be through a private placement that must be approved by shareholders during meetings scheduled to occur by April.