Elbit Systems is poised to achieve a goal of doubling its business activities within the space of just two years, vindicating a decision to focus on domestic acquisitions, plus mergers and partnerships in numerous countries around the world, says chief executive Joseph Ackerman.
Israel's largest privately owned defence contractor broke the $1 billion revenue barrier in 2005, but this year expects to reach a new level of between $1.9 billion and $2 billion. If achieved, this will represent a significant rise from a 2006 performance worth $1.5 billion, which itself included record performances in sales, orders backlog and profit.
Heralding the success of a business strategy honed over the last decade, Ackerman says: "We have achieved our goals. We are the largest defence company in Israel and we are now the largest non-state-owned company. In Israel we have acquired all that is not state owned."
The Elbit group of businesses in Israel also includes 100% stakes in Elop and Tadiran Communications and a 70% holding in Elisra, which Ackerman describes as "among the top three electronic warfare companies in the world". Current consolidation efforts include a decision to integrate Elbit's land sector activities with those of Tadiran to create a single communications and intelligence entity, with the company last month announcing a related restructuring charge of up to $30 million.
Elbit now has 13 companies in Asia, Europe and the USA, and Ackerman says: "We continue to look to make acquisitions", especially in the latter two markets. However, with much key expertise already held in-house, he stresses: "The company that we are looking for is not to add technology to Elbit. Our barrier is market access."
Worth 40% of its revenues in 2006, Elbit's business in the USA is expected to be worth $700 million this year from a forecast order backlog of $4 billion. Its North American activities, which include Elbit Vision Systems and the Vision Systems International joint venture with Rockwell Collins, also account for around 1,600 of its 9,000-strong global workforce. The EVS design has so far attracted orders to equip about 100 FedEx Express aircraft, but Ackerman expects the technology to eventually go fleet-wide on about 800 freighters.
Efforts to establish overseas joint ventures and subsidiaries are intended to enable Elbit to win business from within the target nations, and have led to the company using an expression already coined by its UK unmanned air vehicle partner Thales: "multi-domestic". Elbit lists its other home markets as including Austria, Belgium, Brazil, Germany, India, Romania and South Korea, but Ackerman says more will follow. "We don't do exports," he says. "We do domestic business everywhere."
Elbit's activities in Europe were valued at just $104 million in 2005, but this jumped to $234 million last year and Ackerman expects to see this performance rise further. "I want to have 20% of our business in Europe," he says, calling for a 5% increase over its 2006 results. A recent example of this strategy came in the form of Elbit's £15 million ($30.8 million) acquisition of UK aerospace and defence engineering company Ferranti Technologies in late July.
The Ferranti deal means Elbit now has three UK concerns, also including UAV Engines and the U-Tacs venture with Thales UK, in which it holds a 51% stake. As well as developing the Watchkeeper UAV from the Israeli company's Hermes 450, U-Tacs is to deliver interim services to the UK armed forces under a £55 million deal signed earlier this year.
"The technology we have today enables the military to do a job without risk to soldiers," says Ackerman. Referring to the Israeli military's Operation "Change of Direction" campaign last year, he adds: "All that we had developed for the IDF [Israel defence force] was applicable to the war in Lebanon. It was a laboratory for testing technology."
Elbit currently invests 8-9% of its annual revenues in research and development, with this equating to around $115 million in 2006. "We truly believe that it pays back," says Ackerman. Current targets for investment expansion include homeland security systems and intelligence, surveillance and reconnaissance capabilities - growth engines that Ackerman says will deliver integrated intelligence solutions for years to come. "Due to our diversity we have a lot to offer," he says.
Source: Flight International
